Apartment rents have risen because Houston has been a national leader in population and job growth demand since the recession of 2009.
For Houston apartment units, the average rental rate of $923 at the end of 2014 was 28 percent higher than the average rent of $721 in 2009.
According to Ryan Epstein, multifamily broker and executive vice president at CBRE, fourth quarter occupancy was 91 percent, highlighted by a 93 percent occupancy in Class C units.
The city’s average monthly rent was $1.05 per sf, Epstein said.
“If you look at the numbers, we are doing exceptionally well,” Epstein said at the CBRE first quarter press luncheon.
Epstein said a whopping 17,638 new apartment units were delivered in 2014 and 16,084 of those were leased up by year end.
He said another hefty dose of new construction, probably about 20,000 units will be completed in 20,000. But after that things construction will slow down and the supply of new units will be thin in 2016 and “zero” in 2017, Epstein said.
Houston apartment historicals: CBRE reports 5,159 new units were delivered in 2012 and 14,841 were absorbed in 2012. The next year, 2013, has 11,472 units delivered and 16,412 absorbed.
A new study released this week by the National Association of Realtors sais the gap between rental costs and household income is “widening to unsustainable levels” across the country.
Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, the Realtors reported.
“The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay,” says Lawrence Yun, NAR’s chief economist.
New York, Seattle, and San Jose, Calif., are among the cities where combined rent growth far exceeds wages, according to the survey.
“Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes,” says Yun. “With rents taking up a larger chunk of household incomes, it’s difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment.”
Meanwhile, those who were able to buy a home in recent years have been insulated from the rising housing costs since they were able to lock-in a low 30-year fixed-rate mortgage with a set monthly payment, according to NAR’s study. As such, home owners were able to grow their net worth as home values increased and their mortgage balances went down.
“The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year,” according to NAR’s study.
The markets that have seen rents rise by the highest amounts since 2009 are:
- New York: 50.7%
- Seattle: 32.38%
- San Jose, Calif.: 25.6%
- Denver: 24.14%
- Louis: 22.26%
“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” says Yun.
The key to relieve housing costs: Builders need to ramp up the supply of new-home construction, according to Yun. He estimates that housing starts need to rise to 1.5 million. Over the past seven years, housing starts have fallen far short from that historical average – averaging about 766,000 per year.
“With a stronger economy and labor market, it’s critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices,” Yun says.