In the Triangle, apartment rents still rise in an affordability crisis and a pandemic
Apartment rents are continuing to rise in the Triangle despite the pandemic, exacerbating the region’s shortage of affordable housing.
While the increases were small in Raleigh and Cary in the months since the onset of the pandemic, Durham’s average rent for a one-bedroom apartment grew by 39% and for a two-bedroom by 25% from a year ago.
Durham’s one-bedroom average rose to $1,511, the largest increase in the state, according to Apartment Guide, a rental site. In the same period, Raleigh and Cary saw small rent decreases or negligible growth in average rents for one- and two-bedroom units.
Apartment Guide uses figures that its advertisers submit for rental properties and breaks them down by city instead of metro area.
“It is intended to show which areas of the country where rent prices have increased even with the pandemic,” Brian Carberry, senior managing editor of Apartment Guide, said in an email. “If you’re looking for a more immediate reaction to what rent prices are doing right now, this is the view you want to look at.”
In the Triangle area as a whole, rents haven’t actually increased terribly since a year ago. In the Raleigh-Durham metro area, which includes the entire multi-county Triangle area, average rents grew in September by just 1.4% compared to the year prior, at an average of $1,180 for apartments of all sizes, according to RealPage, a real estate data firm.
Is the pandemic the only cause?
Although rents have increased partly as a result of the virus’ economic strain, other longstanding factors are at play. In the Triangle’s high-demand rental market and with new, higher cost apartments coming on the market, rents were likely to rise this year anyway.
In 2019, before the coronavirus pandemic reached North Carolina, rent increases in the Triangle were already outpacing the national average. Rents rose by 4.5% in the combined Raleigh and Durham metro area in 2019, higher than the national growth average of 2.8%, according to RealPage.
“You’ve had a lot of newer apartments [in Durham] that run higher rents that have come online within the last year and certainly that has an impact on the average rents,” said Dustin Engelken, government relations director of the Triangle Apartment Association.
For example, for one-bedroom luxury units in the new Foster on the Park apartments in downtown Durham rents range from $1,770 to $2,890. At University Hill apartments, one-bedroom units range from $1,320 to $1,575 and at the new Cortland Bull City development they reach $1,754 a month.
Compared to Raleigh, Durham is a much smaller apartment market so the rent average is affected more by high-price, brand new apartment units coming on, Engelken noted.
“You also have scarcity in the lower price units... Even before COVID, [it was hard] to find that one-bedroom at 800 bucks or whatever. That hasn’t gotten any easier in today’s market.”
There’s also less money in many renters’ pockets now compared to January and February and there is less turnover in lower-income units for reasons that include eviction moratoriums, he said.
According to real estate services firm Avison Young, stay-at-home directives and job cuts at the beginning of the pandemic curtailed leasing activity.
“Turnover rates declined as economic uncertainty discouraged renters from moving. The unusually low rate of churn has helped owners and operators maintain occupancy and cash flows,” their June 2020 report said.
Rent collections were able to keep up through the spring, according to Avison Young. They estimated that the end of unemployment benefits for many would mean fewer people paying rent on time or at all.
Engelken said rent collections have decreased “dramatically” recently. Nationally, the National Multifamily Housing Council reports that 86% of apartment households nationwide paid rent this October, a four percentage point drop from a year ago. He points out that on the other side, landlords and property management companies have incurred more costs — purchasing more PPE for maintenance staff, adopting higher standards of facility cleaning, including hiring additional contractors for this work — even as rent collections are falling.
Affordability crisis for renters
The number of cost-burdened renters — meaning they spend a third or more of their income on rent — has returned to 2008 recession-era levels in the Triangle, according to a January report by the Joint Center for Housing Studies at Harvard University.
That report splits the Triangle between a Durham and Orange County metro area and a Wake County metro area.
It shows that a majority of low-income renter households classify as severely cost-burdened, spending over half of their income on housing. The number of those household types hasn’t grown significantly, but the Durham and Orange County metro area consistently has a higher percentage of severely cost-burdened households than Wake County.
COVID-19’s unequal impact on renters affected people of color more, particularly Latinos, who reported the highest rates of inability to pay rent and low confidence in making rent in an April 2020 U.S. Census Bureau housing survey.
In the pandemic, Black people and particularly Latinos, are more likely to be working in low-wage jobs most vulnerable to furloughs and layoffs, according to the Urban Institute.
This story was originally published October 15, 2020 at 2:38 PM.
