Where Did Rents Increase the Most in 2020?

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One of the biggest real estate stories to come out of COVID-19 is what many are calling a “mass exodus” from expensive urban centers. In places like San Francisco and New York City, the kinds of renters who were forking over $2,000 a month for a cramped one-bedroom have moved to greener pastures—often literally—packing up their tiny apartment in favor of more affordable living with room to spread out.

Across the country, demand for multifamily rentals has fallen—especially in buildings with shared elevators. According to a recent Realtor.com report, rents for one-bedroom apartments were falling year-over-year in 37 of the 100 largest counties in the United States.

But it’s not all doom and gloom for landlords right now. Nationally, the market for single-family rentals with outdoor space has soared, and in some cities rental prices have actually increased since the start of the pandemic. 

“In rental housing, we are seeing a shift away from high-cost urban downtowns toward suburbs and affordable mid-sized towns,” says George Ratiu, senior economist for Realtor.com. “For many renters, proximity to a large employment center remains important. However, remote work has extended the commute circle outward from the city center to a one–to-two-hour distance. For example, while San Francisco has topped Realtor.com’s list of steepest rent declines, Sacramento and Fresno have experienced rent growth.” 

From more affordable metros and Sunbelt cities to popular big towns across—normally pretty warm—Texas, here’s where rents have gone up since the start of the pandemic.

More affordable metros

Portland, Oregon, was known for its hipster vibe long before COVID-19 got just about everyone on the planet dutifully caring for sourdough starters, decorating focaccia, and buying out vegetable seeds. That sort of back-to-nature, DIY ethos has been attracting new residents to Portlandia for the past couple of decades. According to the U.S. Census Bureau, the population has grown by 12.2%.

New housing, on the other hand, has not kept up with the city’s constant flow of newcomers, which has been pushing up rents in spite of the pandemic. Over the past year, rental prices have risen by 17%.

As in most places, the monthly rents are down in densely packed downtown neighborhoods. But in north, northeast and southwest Portland, suburban-feeling areas with lots of single-family housing stock, demand has skyrocketed for homes with yards.

Chicago, which has seen a 15% rental increase year-over-year, is also experiencing a similar phenomenon. The lofts and apartments in the Loop and neighboring downtown neighborhoods that were the most coveted pre-COVID-19 have fallen out of favor with white-collar workers who used to walk the office—back when they had to physically go to work. Vacancies are so high in those kinds of units, recent research from Integra Realty Resources has shown that downtown multifamily occupancy has plunged to 89.2%.

Yet many of those current remote workers haven’t left town. Instead of the elevator buildings with the fancy gyms, they’ve been clamoring for townhouses, duplexes, and single-families with yards and direct entry from the outdoors, which has been pushing up prices in different neighborhoods.

Kind of like Portland but without all the eccentric hipsters, Oklahoma City is another one of those growing, affordable metros that has been unfazed by the steep drop in rental prices seen in bigger, pricier metros. Even apartments seem to be doing fine. Rent collections have been mostly unaffected. Occupancy remains steady. Rents are rising (12% year-over-year) and investors are still looking to buy units, according to The Oklahoman.

Sunbelt cities 

There’s a reason “snowbird” has become a well-known phrase. As the days get shorter and the temps get colder in the Northeast and Midwest, there have always been a number of residents (often older retirees) who flock south to warmer, sunnier places. This year with so many folks working from home, the southward migration has grown and gotten younger.

St. Petersburg, Florida, which overlooks Tampa Bay, has seen a surge of homebuyers and renters from places like Illinois, Minnesota, and New York. Homesellers are getting near ask and rents are rising, up 14% year-over-year with some of the sharpest increases just before winter. 

With stunning mountain views, seemingly endless sunshine, and average winter daytime temperatures in the 70s, Phoenix has become an increasingly popular place to live year-round. The population has grown by a hopping 16.2% over the past decade. And it’s been growing even faster since COVID-19, which has led to low inventory for buyers and increasing rents, up 12% year-over-year. That’s why many local real estate experts, like Asher Cohen, founder of Scottsdale-based BUYAZRE, suggest holding on to local properties rather than selling regardless of the desert city’s hot seller’s market.

“There’s a large number of renters who aren’t able to find a place to live because rental inventory is low,” he wrote in a recent article for AZ Big Media. “The average rental home in the Phoenix metro area currently rents for over $2,000 a month and in some neighborhoods, well over $2,500 a month. In many cases, it makes sense to keep your home and rent it out. There are ways to use the equity in your current home in order to buy your next home without selling it.”

Scottsdale, Arizona, where Cohen is based, is in the same position. Rents are not up quite as high as in nearby Phoenix, located just 25 minutes away; however, the gorgeous desert town already has a high price to rent ratio—23 according to recent analysis—and monthly rents have jumped 10% in the past year.

The Lone Star State

The Texas real estate market has been through the roof over the past several years and has only grown stronger with the low interest rates and high work-from-home rates of 2020. And that crazy seller’s market has driven up home prices, which has, in turn, lowered the price to rent ratio to 19, making it harder for some renters to buy into the real estate market. And that has increased the cost to rent in many cities across the state.

Rents in Houston have risen more than any other metro in the United States according to BiggerPockets data, up 19% year-over-year. While occupancy of big apartment buildings has fallen drastically—Camden Property Trust reports that occupancy in Houston has dropped to 93.8%, the lowest of any of its markets—the large single-family market has been thriving.

“In the final months of 2020, single-family rents posted the highest increases in over four years,” said Molly Boesel, principal economist at CoreLogic, in an analysis of the year. “However, single-family rent price reaction to the pandemic and resulting recession differed greatly across metros.”

That is certainly true all across Texas. Four of the ten places highlighted in our data are located in the state.

Dallas, which ranks in at number three, has seen a 15% jump for similar reasons. Home prices are expected to keep rising in the Big D through 2021, with growth in home sales that is slated to surpass all the other Texas metros. As the cost to buy a home continues to increase, so will rents.

Already one of the most expensive and desirable real estate markets in the state, Austin was a tough place for renters to find an affordable place well before the pandemic. And now that tech giants like Tesla, Hewlett Packard Enterprise, and Oracle have announced they’ll be opening up shop in the city, home prices have become even further out of reach for many renters who want to buy in. So it’s not surprising that many renters in the city, who like many other remote workers want more space at lower prices while weathering the pandemic, have decamped from downtown to nearby ‘burbs.

Round Rock, 25 minutes north, has seen rents grow by 12% year-over-year. And Killleen, home to Fort Hood and just an hour and a half north of Austin, has seen a respectable year-over-over increase of 10%, earning the tenth spot on the list of places where rents have increased the most.

Demand for rentals may have fallen across the country, but that doesn’t mean rents have uniformly decreased. In fact, COVID-19 has increased rents in a number of metro areas across the country. It will be interesting to see if this trend continues as the pandemic slows down.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.