Austin Rent Prices Have Dropped, Ever So Slightly. Some Renters See A Chance To Negotiate.
Just as the pandemic hit last year, Mary Martinez developed severe asthma. At times the 19-year-old struggled to breathe. One night she flailed around the house, gulping for air.
“I heard ... her knocking things down as she was trying to get to my room,” her sister Christian says. “It was really scary.”
Christian, who lives with Mary and their other sister Ana, ended up taking Mary to the ER twice.
The sisters decided Mary should leave her job at a blood bank because the risk of catching the coronavirus, which can ravage a person's lungs, was too great. Afraid of bringing the virus home, Ana also quit her job at Costco.
That meant Christian was suddenly the only one with a job. She’d been saving to buy a house, so she had money to fall back on. But when she and her sisters went to re-sign the lease on their three-bedroom town home in North Austin, their landlord wanted to raise the rent about $30 a month.
Christian was familiar with this dance; she’d spent several years hopping from apartment to apartment, shrugging off the rising rent that often comes with reupping a lease. But this time she pushed back, explaining how the family had been impacted by the pandemic.
To her surprise, it worked. Rent wouldn’t go down, but it would stay at the current rate of $1,700 a month.
“I finally felt like as a consumer, as somebody living in Austin and always having to deal with ... rents that are going up real fast, you finally had a bargaining chip,” Christian says. She estimates she saved $400 over the length of the lease.
“It’s modest savings, but it's still something,” she says.
You can count on some things to drop in Austin: pecans, grackle poop, new restaurant concepts. Rent is not one of these things. According to data from Apartmentdata.com, rent in the city has steadily increased since 2010.
But the COVID-19 pandemic reversed that — if only marginally. Since March 2020, the average price of monthly rent in Austin has dropped 4%, equating to about a $100 per month decrease.
“It's not a substantial drop in average rent, but the fact that we can measure any drop at all is a pretty significant milestone,” says Jeff Tucker, a senior economist with online real estate company Zillow.
The result is that some renters, like Christian, feel they finally have some leverage with landlords.
Why are rents going down?
If you’ve been following Austin’s for-sale housing market over the past year, it might surprise you that rents are going down. Home listing prices are doing the opposite.
To understand why, Tucker says, we have to first consider who has been hit hardest by the pandemic: low-income folks and people of color, who also tend to rent instead of own. Evictions in Austin and Travis County have been on pause for most of the pandemic, and the city provided roughly $14 million in rental assistance last year.
But if a tenant can no longer afford the apartment they’re living in, they may decide to move in with family or to rent a cheaper place — sometimes outside the city, Tucker says.
The result is that some people are leaving Austin’s rental market, and their former apartments are sitting empty. The city’s occupancy rate, or the percentage of rental homes that are currently lived in, dropped from 90% at the beginning of 2020 to 88% at the close of the year. Even a small decrease like this can bring rent prices down with it.
“When occupancy rates are going downward, the rental rates go downward to increase occupancy at the properties,” Emily Blair, vice president of the Austin Apartment Association, says. In addition to lowering rents to entice would-be tenants, landlords are offering more concessions — things like a free month or waived application fees.
At the beginning of 2020, roughly a fifth of rental listings on Zillow offered some sort of incentive; by the summer, months into the pandemic, concessions were being offered alongside nearly half of all rental listings.
“Landlords are struggling to fill units for the first time in years,” Tucker says. “The way they do that is they're lowering rent or offering concessions.”
Rent drop felt most in upper-end apartments
When Denise Melanson was furloughed from a talent agency at the beginning of the pandemic, she asked her property management company for a reduction in rent.
“You know what? I got time on my hands,” she thought. “It doesn't hurt to ask.”
It didn’t hurt — but it also didn’t work. The management company told her the only thing it could do was waive late fees if she was behind on rent.
To cover her bills, Melanson got help from family and friends, dipped into savings and racked up some credit card debt. Then, in October, she got laid off.
Around the same time the lease on her one-bedroom apartment in East Austin came up for renewal. When the management company sent Melanson the documents, her monthly rent was a bit lower — and this time, she didn't have to ask.
“I was really surprised,” she says. “I was like, OK, cool.”
KUT reached out to Melanson's apartment complex to ask why the rent was lowered, but did not hear back by deadline.
Her base rent, which excludes additional costs like pet fees for her dog and cat, went from about $1,900 a month to $1,755. It’s an above average rent in Austin, for an apartment complex that is about five years old and includes amenities like a gym.
Melanson’s experience illustrates another important point: that people living in high-end, or luxury, apartments, are seeing a bigger rent drop than others.
In rental market speak, some of the nicest units to rent are referred to as Class A apartments. According to data from Apartmentdata.com, the median monthly rent fell 7% during the pandemic for these upper-end apartments. At the same time, rent prices fell by just 3% for Class D units, or apartments that are older and rundown.
Tucker says the reason may be that people with higher incomes were more likely to stay employed during the pandemic. And while they, too, could be opting to move in with family or to a cheaper place, these tenants have another way out of the rental market: homebuying.
“Because they’re doing so well and maybe they need some more space and because they see record-low mortgage rates, they’re moving out to buy their first home,” he says.
But as home prices continue to balloon in the city — thanks to a lack of supply and a breadth of interest — Blair says we might see would-be homeowners take one look at what it costs to buy and renew their leases.
It’s possible the area is already seeing the effects of this. Median rents creeped up $24 per month between December and March. But whether that means Austin is once again a city where rents are always going up, it’s hard to say.
“We don’t have any recent examples of the country recovering from a major pandemic and what that does to the rental market,” Tucker says. “I think demand for rentals is going to rebound. The timing is really hard to pin down.”
Got a tip? Email Audrey McGlinchy at email@example.com. Follow her on Twitter @AKMcGlinchy.
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