Study: is the Rental Crisis Coming to an End?
By Amber Bonefont | 01/24/2024Tags: Economics | Executive-Education | Finance | Press-Releases | Real-Estate
Categories: Faculty/Staff | Initiatives | Research
Rents across the country are on the decline, signaling that the rental crisis plaguing many cities in the United States could be coming to an end, according to researchers at Florida Atlantic University and two other schools.
Fifty-two of the measured metropolitan areas saw a drop in rents month-over-month, building on a trend seen the month before, according to December 2023 numbers from the Waller, Weeks and Johnson Rental Index.
Rents in Jacksonville dropped the most in the country at -.78 percent. In Greensboro, North Carolina, rents declined .71 percent; San Diego at -.67 percent; Austin at -.61 percent; New York at -.60 percent; Richmond, Virginia at -.56 percent; Denver at -.56 percent; Atlanta at -.55 percent; Provo, Utah at -.52 percent; and Sacramento, California at -.51 percent.
“It’s possible the decline in rents is a seasonal effect, but it is more likely a sign that supply is finally catching up with demand on the multifamily side,” said Ken H. Johnson, Ph.D., real estate economist in FAU’s College of Business. “It is too early to tell, though it does look like this trend will continue and rents will continue to flatten.”
The Waller, Weeks and Johnson Rental Index, part of FAU’s Real Estate Initiative, measures where the average rent is in the 100 most populated metropolitan areas in the United States and compares it to where rents should be based on historical, statistically estimated rental pricing trends. Johnson, along with fellow researchers, Shelton Weeks, Ph.D., of Florida Gulf Coast University, and Bennie Waller, Ph.D., of the University of Alabama, also measures average yearly increases, monthly increases and how much annual income the typical household needs to make to avoid paying more than 30 percent of their income toward rent.
Rents in Florida cities have also started to slow down, researchers noted. Rents in Palm Bay decreased .29 percent month-over-month, followed by Orlando at -.28 percent; Tampa at -.12 percent and Miami at -.11 percent. Other cities in Florida only posted small increases: North Port at.15 percent; Lakeland at .16 percent; Deltona at .40 percent and Cape Coral at .55 percent.
“Demand is still strong in Florida and rents are still higher than their long-term trends, though renters are finally able to catch a small break after years of astronomical rent hikes,” Weeks said.
Despite the decline in increases, renters are still paying a premium, or more than what rent should be based on historical pricing, suggesting that there is still an affordability crisis facing the entire county.
“As we come out of the rental crisis, we will enter a prolonged affordability crisis that will only be solved by building even more units and having wages catch up with costs,” Waller said.