Apartment Construction Boom May Help Some Renters
Date Posted: August 3, 2023
Posted In: Discussion,
From KSDK: When viewed through a wide lens, renters across the U.S. finally appear to be getting some relief, thanks in part to the biggest apartment construction boom in decades.
Median rent rose just 0.5% in June, year over year, after falling in May for the first time since the pandemic hit the U.S. Some economists project U.S. rents will be down modestly this year after soaring nearly 25% over the past four years.
A closer look, however, shows the trend will likely be little comfort for many U.S. renters who’ve had to put an increasing share of their income toward their monthly payment. Renters in cities such as Cincinnati and Indianapolis are still getting hit with increases of 5% or more. Much of the new construction is located in just a few metro areas, and many of the new units are luxury apartments, which rent for well north of $2,000.
Median U.S. rent has risen to $2,029 this June from $1,629 in June 2019, according to rental listings company Rent, which tracks rents in 50 of the largest U.S. metropolitan areas. Demand for apartments exploded during the pandemic as people who could work remotely sought more space or decided to relocate to another part of the country.
The steep rent increases have left tenants like Melissa Lombana, a high school teacher who lives in the South Florida city of Miramar, with progressively less income to spend on other needs.
The rent on her one-bedroom apartment jumped 13% last year to $1,700. It climbed another 6% to $1,800 this month when she renewed her lease.
“Even the $1,700 was a stretch for me,” said Lombana, 43, who supplements her teaching income with a side job doing educational testing. “In a year, I will not be able to afford living here at all.”
Lombana’s rent is now gobbling up nearly half her monthly income. That puts her in a category referred to as “cost-burdened” by the U.S. Department of Housing and Urban Development, denoting households that pay 30% or more of their income toward rent. Last year, the average rent-to-income ratio per household rose to 30%. This March, it was 29.6%.
Lombana hasn’t had any luck finding a more affordable apartment. While South Florida is one of the metropolitan areas seeing a rise in apartment construction, the units are mostly high-end and not a viable option.
That scenario is playing out across the nation. Developers are rushing to complete projects that were green-lit during the pandemic-era surge in demand for rentals or left in limbo by delays in supplies of fixtures and building materials. Nearly 1.1 million apartments are currently under construction, according to the commercial real estate tracker CoStar, a pace not seen since the 1970s.