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Rents in the Houston area are rising at the fastest pace in years, according to Zillow data.

The typical rent in the region in June, as measured by Zillow’s rent index, jumped to $1,477, 6.6 percent more than the $1,386 of a year before. It was the region’s highest year-over-year rent increase since 2015.

It is a change from 2020, when both an influx of new apartments and the pandemic, which pushed many renters to purchase their first homes, kept year-over-year rent growth largely stagnant.

Experts said the spike in rents is due to demand, pent up in 2020, finally returning to the market.

Before vaccines became widely available, jobs returned and workplaces that had gone remote started calling people back into the office, many people had moved back in with family or put off relocations to new cities.

“A lot of the moves that didn’t happen during the pandemic — that’s happening all at once,” said Nicole Bachaud, an economic data analyst at Zillow. “We’re seeing a lot of (people) move back into cities, which is putting a lot of pressure on the rental market all at once instead of spread out over a year.”

Adding to the sudden influx of demand in Texas cities is what Bachaud called the Great Reshuffling: “We’re seeing a migratory shift from people moving from more expensive areas like California to less expensive areas like Texas and the Midwest.”

That demand has pushed Houston’s apartment occupancy rate above 90 percent in May for the first time since 2019, according to ApartmentData.com, a multifamily market research firm. In June, occupancy had reached 90.7 percent. Higher-priced units in the city’s urban core, in particular, have recovered to pandemic-related vacancy levels.

But the impacts of what Ric Campo — chief executive of Camden Property Trust, which builds, owns and manages apartments across the country — has called the Houston apartment market’s “supply problem” can still be seen when comparing the Houston region’s occupancy rate to that of other Texas cities. The Dallas, San Antonio and Austin regions all have occupancy rates above 91 percent.

Zillow data also show that Houston’s 6.6 percent rent increase lags behind the rent growth in Austin, Dallas and San Antonio, which clocked in at 12.2 percent, 9.9 percent and 8.6 percent, respectively.

Developers have begun compensating for Houston’s “supply problem” by pulling back on the number of units that are under construction, which is already having an impact on the number of new apartment units added to the market. In the second quarter of this year, 2,800 rental units were completed, according to the commercial real estate data firm CoStar, a 44 percent drop from the 5,000 completed during the same period a year before.

The slowdown of new supply will likely last for years. “The first six months of the year saw the lowest amount of construction starts in a decade,” said Itziar Aguirre, a market analyst at CoStar. It typically takes two years to develop an apartment complex. “So we’re really going to see that push down the occupancy rate.”


Publication: Houston Chronicle

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