Part One of Two Part Series
The US rental market is more active than it’s ever been. Millennial family formation. Gen Z’ers with first jobs and moves away from home. Pandemic renters still looking for more space, and those who left city centers and are headed back. With relocation authorizations increased by 100% versus 2021, the market has never seen more demand, or less supply. In our next two posts, we’ll explore what’s happening in the market and what kind of support renters need to be successful in their relocation. We’ll start with an update on market conditions.
Why are rental prices so high?
Like the title of a 2022 movie, the rental market in the US is ‘everything, everywhere, all at once.’ Where 2020 was the year of the great-fall off, move-out and price drop, and 2021 was all about adjustment as employees/renters experimented with new markets and extended work from home needs, 2022 has been a ‘surge year’ in almost every market in the US. National and metro-area vacancy rates tell only a portion of the story. Historically, the national rental vacancy rate has been about 6%, and now it is estimated at about 5%. The ‘macro’ number for a large metro market is irrelevant to the on-the ground experience in the thousands of neighborhoods and communities where the rental search is carried out every day. In some markets, whether New York, Austin, Seattle or Boston, rental bidding wars are commonplace and the reason is straightforward: across the US, demand for rental housing far exceeds supply. The National Apartment Association estimates that the US needs 4.6 million more rental units by 2030 in order to keep up with a renter population of 44 million and growing.
What should renters expect?
As the home purchase market is cooled by interest rate increases and more would-be buyers remain renters, rental vacancy rates will continue to decline, and rental markets will continue to tighten. Fewer renters are exiting their current leases, (further decreasing supply), while new renters are entering the market in record numbers. For relocation renters, it’s important to note that renters moving into a new home/apartment will typically experience a higher rent than those in an existing lease with a contracted rate of increase. Double digit increases for a new lease are not uncommon. Regarding supply, while new multi-family unit developments are being built at a record pace, particularly in Sunbelt cities, the timing of delivery has been impacted first by Covid slowdowns and now by meteoric demand, with developers scrambling for materials and labor.
For employees needing both short and long-term rentals, note that the same pressure applies for temporary housing. Furnished apartments for shorter term needs are typically sourced from the same housing inventory as long-term apartments. Serviced accommodations operators are managing through ‘comeback’ volume challenges the same as the rental market overall. Operators, like those in the Dwellworks Living supplier network, who are well established and who successfully navigated the pandemic, are actively building back their supply in order to meet demands ranging from 7+ to 30+ days for project work and relocation.
Whatever the rental need, customers moving into popular communities will experience limited options, intense competition, and higher prices. While the rate of inflation will likely continue to cool in coming months, actual rental rates will remain high so long as demand exceeds supply, at minimum into next year.
What’s the best way to secure a rental?
In a competitive marketplace, it’s best to be prepared. Get good advice on the local market and do the homework to be selected by a prospective landlord. Dwellworks and our Station Cities brokerage support thousands of rental moves each year across the US.
Here are our tips to ensure a successful rental search:
- Work with the realities of the marketplace – and be prepared to make adjustments whether for price, location, or amenities
- Be open to the recommendations of local experts for alternative options such as Hudson Heights vs Chelsea in NYC, Culver City vs Santa Monica in LA, or Queen Anne vs South Lake Union in Seattle
- Be the ‘best tenant choice' for prospective landlords, with a good credit and rental history, access to cash for move-in costs, and proof of employment
- Be available on demand for appointments
- Be aware that pets, especially multiple or large pets, will typically further limit housing options
- Do not expect to negotiate with landlords - most properties will have waiting lists of qualified renters
In our next post, we’ll look at the ‘relocation renter’ – their expectations, their critical contribution to employer talent planning, and the best programs to support an ideal renter customer experience.