18 April 2022
RALEIGH – It’s not just home prices that are increasing at blistering rates. The price of rent is increasing, as well, and a new report finds that in the Raleigh area, the median monthly price of renting an apartment has increased by 23.1% in the last year.
Overall, the median monthly rental price in the Raleigh area is now $1,591, the Realtor.com report found. That’s an increase of 23.1% year-over-year, according to the data.
The price of a studio apartment has increased 22.5% in that time, and is now $1,452, the report found. Meanwhile, the cost of renting a two-bedroom apartment has increased by 20.7% and is now $1,750 in the region, the report found. And for one-bedroom apartments, renters can expect to pay a median rent of $1,471 monthly, an increase of 24.7% year-over-year, according to the report.
And while there were 2,000 apartments “delivered” in the first quarter of the year, meaning construction was completed and they became available to rent, the region’s vacancy rate is 5.8%, according to Brett Cox, a research analyst at JLL. That’s down 1.6% year-over-year.
Renters are squeezed
“I almost moved to Durham in 2010,” said Alicia Snyder, a clinical nurse at the Duke Heart Communications Center. “We could not believe how much house you could get for your money here.”
However, Snyder chose to stay in the area. She would go on to work for the World Bank.
A decade later, Snyder and her partner were divorced. Snyder’s sister encouraged her to move to the Triangle, so she could be a resource and help Snyder from time to time with her school-age autistic son.
“I didn’t realize what we were walking into,” Snyder said.
Snyder said she looked at some three-bedroom homes, which was her preference, but received some resistance from landlords, including an institutional landlord, who did not accept an application because the household only had one income.
“I ended up renting, in an apartment complex,” Synder said. “That went okay, for a year, but we learned the rent was going to be raised more than $200 per month.”
It didn’t fit the budget.
“We just couldn’t do it,” she said. “We couldn’t find anything in Durham that was affordable.”
“It’s not just Durham, it’s spreading outwards, and it’s a matter of time before this hits other counties as well,” Synder added.
Noted Gunter: “Renters are facing rising rents.” And if those renters ever hoped to own a home of their own, that’s becoming increasingly more difficult as home prices continue to soar across the region.
“It is becoming more difficult to get into a rental situation that allows you to save up for a down payment,” he added. “Because more and more of your income is now used on rent.”
Take Synder’s current boyfriend, who became a renter for the first time in 25 years following a divorce.
“[He] is also new to the renting game after over 25 years,” Snyder said. “But only because even with his sizable down payment, he kept getting outbid.”
Now, his landlord has raised his rent, too, Snyder said.
As home sale prices increased, so too have rental rates. While they’re not directly correlated, there is some correlation, Gunter said, because the underlying challenges are the same.
“There is a supply challenge, across the board, given the growth that we’re seeing in the area. Baring some drastic economic downturn, I don’t see an off-ramp right now,” he warned. “Given that reality, supply is a challenge, so prices are up.”
Housing inventory remains low. According to data from the Triangle Multiple Listing Service, inventory was 2,093 across the entire region in March 2022, enough for just two weeks of housing market activity.
The reports from TMLS show just 774 homes in Wake County, nearly 40% lower than at this time last year.
And prices were up, with a median price of homes in Wake County in March 2022 at $450,000. That’s up nearly $90,000 from the prior year.
When it comes to reasonable home prices, those days appear to be over.
“Traditionally, the Triangle has benefited from being home to diverse communities that offer a wide array of affordable housing options,” said John Quinterno, a professor at Duke University, in an interview with WRAL TechWire last month. “Even before the pandemic, however, that was changing.”
That change was coming as the region saw an influx of people moving from other areas of the country and businesses began to announce economic development projects in the region.
“[There are] too many people moving here, not enough [housing] being built, and add in rising interest rates, and you have another force keeping people renting versus buying,” said Brian Leary, the COO of Highwoods Properties, in an interview with WRAL TechWire.
The role investors play
Then, Quinterno noted, there’s also a part of recent history that relates to “the pure financialization of the housing market.”
Such a change has “turned housing into an asset class that attracts larger investment flows that allow for operations to occur on a large scale in the hope of generating outsized returns,” Quinterno said. “In many cases, aspiring homeowners aren’t bidding against other similarly situated aspiring homeowners for a home but against syndicates that can bring totally different levels of financial resources to bear.”
One in five homes in Durham are bought by investors and one in four homes in Raleigh are bought by investors, a recent analysis found.
“It’s an anecdotal thing, but we have neighbors who just moved in,” Gunter said. “Their landlord is an Apple executive, who bought the house sight unseen.”
Public housing not an option – nor is naturally-occurring affordable housing
The Wake County Housing Authority is not currently accepting applications for public housing or the housing choice voucher program, according to a prerecorded voice message that plays when a call is connected to the organization’s main phone number.
And Gunter noted that there are fewer and fewer rental options in the region that are considered naturally affordable. While those homes are often lower quality and in need of capital improvements, their rental rates tend to be lower and more affordable for those with lower incomes, Gunter said.
“A lot of housing is getting flipped and redeveloped,” Gunter said. “It’s just the reality that some housing is cheaper.”
But these types of homes are no longer available, Gunter said.
“If you are low-income, it has always been hard to afford housing,” he said. “At no place in the country, in any county, can you work a minimum wage, full-time job, and afford to live in the median housing in the market.”
But now, what’s happening, Gunter said, is that this crisis of housing affordability is “creeping further and further up the income ladder.”
“It is really bleak out there,” Gunter said. “It’s what renters are facing, potential homebuyers are facing, and anyone who moved here for work, but then had kids, and now their house doesn’t work for their family anymore.”