Rent Growth on the Rise for Multifamily Housing

The housing market is on the upswing, due in part to growth in the multifamily housing market. According to the Census Bureau’s quarterly Housing Vacancy Survey, the number of vacant rental units has shrunk from 10.6 percent during 1Q10 to 8.2 percent at the end of 4Q13.

Multifamily housing construction has expanded in the last two years to meet the demand for growing numbers of renters. In late 2009, the number of new construction multifamily housing units had fallen below 82,000 units. That number now stands at nearly 340,000. The upward trend is expected to continue this year and on through 2015, with an anticipated 363,000 new units constructed.

Increased demand for rental units has driven rental prices upwards over the last few years. In the past two years, rent prices have jumped more than 13.5 percent nationally. However, the real average growth since 2008 sits at just about 5.3 percent above the average rental rates at the height of the last upturn in prices. Rising rental prices have also continued to boom in multifamily development. Apartment buildings and condominium developments are more attractive to investors as rent prices increase. In Dallas, rent growth comes in at  3.6 to 3.9 percent with the average rental rate at $864 per month. The apartment occupancy rate for DFW is at 93.9 percent.

Though the national rent growth rate for both rent prices and multifamily construction may be on the rise, the number that really matters is the trend in your submarket. What is the demand for multifamily housing developments in your submarket? What is the percent of vacancies? What has the trend been in that market over the last four to five years? These are all questions to ask when considering development and rent prices in a specific city.

With rent increases at existing properties, residents want to know what improvements and upgrades are being made on their property. According to Barbara Gaffen, co-CEO of Illinois-based Prime Property Investors, rent increases are still best accepted by residents where there is visible evidence of continuous improvements and upgrades at the property. “You’ve got to keep on top of your common areas, building exteriors, and amenities, as well as pay attention to what you’ve got in your individual units.”

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