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Hurricane May Create Rising Apartment Rents and a “Short-Term Housing Shortage” in Houston Apartment Market

HOUSTON – (By Dale King) – Hurricane Harvey will place upward pressure on apartment rents in Houston and move the city toward the possibility of a “short-term housing shortage” as thousands of multifamily units were damaged or destroyed, according to the Yardi Matrix multifamily data firm.

The prevailing trends in many parts of the Houston apartment market have produced an era of softer rents, plentiful supply and higher  vacancy.

The storm has changed this scenario. Contacted by realtynewsreport.com once the hurricane had moved off into Louisiana, Jeff Adler, vice president and general manager of Yardi Matrix, said the storm and its historically heavy flooding would probably leave Houston with “a short-term shortage of housing.” The city eventually will return to normal, he said, but it could take 12 to 18 months.

Since late 2016 into early 2017, Houston has had to absorb a glut of apartments designed and planned before the oil and gas crunch lowered job stats and revised supply and demand estimates. Graphs supplied by Yardi Matrix shows Houston is one of the few communities in the U.S. with rent changes measured in negative numbers.

In the short run, Houstonians are dealing with a vast array of troubles left behind by a storm of biblical proportion that destroyed property on a wide scale. Adler says that “in the long run, the supply of homes and apartments will return. Almost all the fundamentals will be reset. There will be enough jobs and enough people to occupy homes.”

Just before Harvey’s flood waters raged into the city and surrounding neighborhoods, Yardi Matrix, a business development firm serving brokers, sponsors, banks and equity sources that underwrite investments in the multifamily sector, released a report suggesting that the removal of homes and apartments that are rendered unlivable by Harvey’s wrath will likely halt the community’s ongoing pattern of falling multifamily rents by diminishing the number of available apartments.

“It’s far too early to assess the damage,” said Adler. “But, if the past is a guide, multifamily fundamentals could benefit as damaged stock is taken off the market and residents scramble for places to live.”

“The Texas metro has underperformed due to the struggling energy sector and surging supply [of apartment units],” said the Yardi Matrix report issued on Aug. 31. “Now, it faces a test in the recovery from Hurricane Harvey.”

The document, largely prepared before the hurricane hit, predicted Houston’s year-over-year rent numbers would drop 2.5 from August 2016 to August 2017. It also said rents in Houston would fall another .7% by the end of the year.

In its examination of 121 metros, Yardi Matrix found that “delays in building new multifamily housing led to a flat August for U.S. rents. The national average rose a mere $1 from July’s figure to $1,352 a month. Rents were up in August on average, about 2.4%, compared to August 2016.

A critical shortage of construction workers is the principal reason for the slowdown, the report says. As a result, Yardi Matrix is “reducing our forecast for new deliveries in 2017 to 300,000, down from 360,000 we had expected.”

The document lays some of the blame for a worker shortage on the Trump Administration’s immigration crackdown.

Hurricane Harvey will have a similar effect in Houston, reassigning construction workers from new projects to the repair and replacement of damaged buildings. The extent of the destruction and the specific need for trained construction workers is yet to be determined, but estimates put damage to the city and its environs in the billions of dollars.

Adler said much of the company’s information about the storm’s impact and how Houston will fare in the future come from conjecture and examination of what has happened in the past.

The top year-over-year rent gainers in August, the report says, were Sacramento, Calif., Seattle, California’s Inland Empire, Phoenix and Dallas.

The document shows Dallas with a 3.1% increase in rent, year-over-year, from August 2016 to August 2017. The forecast for the rest of the year is for a further hike of 4.3%.

Sept. 3, 2017 Realty News Report Copyright 2017

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