Apartment rents in the greater Triangle region were growing at one of the highest rates nationally until COVID-19 caused them to gradually decrease.
While rents are expected to start rebounding soon in the Triangle at higher rates than other metros nationally, they aren’t expected to immediately return to their pre-pandemic highs.
As the pandemic’s economic strain affected renters’ incomes, many landlords and property management companies lowered their monthly rents or kept them flat in an effort to keep their tenants.
“[National] rents dropped dramatically in the first half of 2020, but because they were so high in Raleigh-Durham pre-pandemic, they barely went negative,” said Adam Couch, an analyst with RealPage, a housing data firm.
The current average rent in the Raleigh-Durham market is $1,179 per month, which is $230 below the U.S. average, according to RealPage. The highest it’s ever been was an average of $1,182 a month during the last three months of 2020.
The pandemic ultimately didn’t stop or reverse their growth, but instead reduced how much they were growing by. The average rent a year ago in the Triangle was $1,173, roughly the same it has been so far this year.
Rents in the third quarter of 2020 (July through September) did decrease year-over-year, but only by -0.05%.
The data looks at the Raleigh-Durham market, which encompasses Wake, Durham and Orange counties as well as surrounding ones.
Quarterly rent figures from RealPage show the virus halted an upward trend. In the first three months of 2020, average rents were 4.1% higher than 2019. Once the country went into lockdown in the second quarter, year-over-year rent growth dropped drastically to just 0.3%.
The rent growth rate rose to less than 1% (0.72%) in the fourth quarter, or last three months of 2020.
“We’re not expecting that the rent growth will go back to the pre-pandemic norm by the end of this year,” Couch said. “And that’s just because there’s been a sustained level of supply of new deliveries for the apartment market in recent years.”
Rents to slowly rise again
Raleigh and Charlotte, as well as Nashville and Atlanta, are apartment markets in the Southeast slated for rent growth due to their strong economies.
“We feel like we hit a low in terms of (rent) performance for many markets throughout the nation, and that includes the Raleigh-Durham area, and we feel that by the end of this year, rents will return pretty well,” Couch said.
RealPage projects rents’ quarterly rent growth rates will rise to 0.8% year-over-year in the first quarter of 2021 and up to 3.1% by the end of the year in an upward trend. RealPage cites positive economic factors ahead for the Triangle, including the area’s universities, business activity and population growth.
“A lot of what will determine the rent growth performance in the next few years is the return of jobs and how that would translate to apartment demand,” Couch said.
However, economic recovery is a “double-edged sword,” he said, since it also will increase housing costs over time as conditions lead to more financially stable renters.
While lower rents may pose relief, landlords and apartment companies face struggles too, says Dustin Engelken, government affairs director at the Triangle Apartment Association.
“You’ve got a dual hit from a lot of people who are not paying rent and then people who are, but are paying a lot less than they would have otherwise, less than you would have been anticipating,” said Engelken. “You’re taking revenue hits on your paying customers and you’re getting a lot of unpaid hits, so it’s a really difficult situation.
While rents may have dropped or stabilized, thousands were forced to seek rental assistance from the state to avoid evictions.
Since last March, the majority of calls to the NC 211 hotline, an information and referral service provided by United Way of North Carolina, requested housing and shelter assistance. More than 65% of those calls specifically sought rent assistance through the state’s Housing Opportunities and Prevention of Evictions (HOPE) Program, according to NC 211 call data. Durham is in the top 10 counties statewide whose residents have requested rent assistance help.
That rental assistance, plus unemployment benefits, contributed to “better-than-expected” rent collections in 2020, according to a recent report by real estate firm Avison Young. Payments for market-rate apartments were received from 94.2% of renters in December in the Triangle market, and rent collections have been stronger in the area’s upper-tier and mid-range apartments.
“Looking at the horizon, we’ve seen during the pandemic that migration has not changed and may have actually picked up some as people were fleeing the larger metros,” said Engelken. “I would guess that we should be poised for another really strong year of people moving to the region, and that obviously puts pressure on the housing market.”