Apartment Overbuilding Tips Balance In Favor Of Renters
Houston is becoming a renter’s market, both in apartments and in the rental of single-family homes.
A mid-year report from the Greater Houston Partnership indicates apartment occupancy is at about 90 percent. Rates below 90 tip the balance in favor of renters, and occupancy is expected to fall into the mid-80’s. This is as developers are adding 25,000 more units over the next two years. Things were going well with job growth until last year.
“Job growth was, I guess in 2014 it was around 100,000 jobs and all of a sudden in 2015 it fell off the table,” said Bruce McClenney with ApartmentData.com. “We got caught in a development stage and the job growth kind of ran out on us. So there’s more supply than demand right now, which would be a definition of overbuild.”
The inventory of single-family homes for rent has increased over the past year, and especially in the past 30 to 60 days. The market is forcing property owners to absorb increased property taxes and insurance costs.
“So we definitely have a pressure on the rent from the market, and the pressure is to keep the rent — it must stay low, despite the fact that the taxes have gone up and insurance rates have gone up as well,” said Wojciech Kic with ManageRentHouses.com. “Property owners have to absorb the difference between what the expectations were, perhaps, and where the market is today.”
But Bruce McClenney is optimistic.
“Oh, absolutely! And this is just a short pause in the life of an apartment developer or apartment management company,” he said.
The Greater Houston Partnership says apartment owners and developers are more likely to see crude oil hit $70 a barrel before Houston returns to a landlord’s market.
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