If you're a renter, you might already know the bad news.
Rent is going way up and there seems to be no end in sight.
Over the last several months, people have reported getting slapped with shocking lease renewals. In most cases, rent is going up by hundreds of dollars if they sign a new lease.
Plano and Collin County in particular is becoming a hotspot for sharpest increases.
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“When you don’t have increases in salary and you have these price increases, it’s really scary. A $750 price increase is not sustainable,” said Courtney Humphries, who has lived in Plano for most of her life. "It’s scary and you basically have to figure out how to work through the problem."
You read that right. Humphries found out her rent was going up by $750 for a one-year renewal on her rental home, not including bills and additional costs.
"If you don’t have the availability to work more and you’re not getting increases at your job, then you’ve got a big problem. I mean $750 -- that to some people could be a paycheck," Humphries said.
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The single mom said she had no intention of moving because her son is still in high school and she didn't want to put him through starting over again.
“This isn’t just get up and move, just roll with the punches. There are other things involved. For example, people with children. Naturally, a parent wants their child to stay in the same school district,” she said. “I have a great support system. Do I have a family that’s just going to hand me $750 a month? No. So I have to look to my boss and I have to work harder, which means I see my kid less but what it means is my kid gets to stay in the same school district. So it is a challenge."
The rising rent is also hitting college students in their wallets. Students around UT Dallas have reported the struggle in finding affordable apartments as they compete with young professionals who are moving to the Plano and Richardson area for tech jobs and other high-paying positions.
The situation is a far cry from 2020 when renters saw rent reductions and landlords struggling to fill empty units and rental homes. But now, those landlords are hiking up prices as COVID-19 restrictions and eviction moratoriums end – and as housing demands spike.
As some renters figure out their next move, Humphries said she decided to move forward on loans to buy a house – something she wasn't quite ready to do but felt would be a better place to spend her money.
“I’ve been waiting for a couple of years thinking the prices are going to come down and so I continued renting but this rent increase was kind of the kicker," she said.
Humphries went from the crazy rental market to the even crazier housing market. She warned that every single house she looked at had offers well over asking price.
As she struggled with soaring prices in the housing market, Humphries got lucky – her grandmother was planning to move and sold her the house.
But most renters who are trying to navigate rent increases will most likely have to renew and pay more or develop a plan to move.
“The key thing is to not just freeze. You just have to move forward and navigate the new ‘new’. This is it,” she said. “I work for a real estate appraisal company and my boss says these prices aren’t going anywhere."
Why is this Happening?
The pandemic has sent people on the move, many of them to North Texas.
With thousands moving here all at once, they all need a place to live. It's driving rent up higher than people's paychecks can keep up with.
“The demand for apartments is relentless. Dallas is leading the country in the delivery of multi-family units,” said Julie Lynch, associate director of the Weitzman Institute of Real Estate at UT Dallas’ Naveen Jindal School of Management. "This last year, we delivered over 36,000 units and each of the prior five years we delivered 40,000 units each year. Despite the increase in how many units we're delivering, the occupancy levels are at an all-time high at 96.5%.”
Lynch has worked in real estate for over 30 years and has transacted over $10 billion of real estate in her career. However, even she seems shocked over the data that's coming out of the market in the past 18 months.
“We’ve never had the opportunity to look historically at a pandemic economic environment in the current day situation," she said. “It’s made for an interesting research time to look at the economic indicators to see what’s driving the market, how human behaviors are performing, and the implications to real estate."
According to Richardson-based RealPage, the Dallas-Fort Worth area had the most demand for apartments in the entire country between April and June 2021, with 15,400 people moving to the area during that time period. The report states that North Texas has been the country’s top apartment absorption center throughout the past several years.
“It is a layered conversation," Lynch said of the reasons behind the increases. "But the headline is the Texas economy is thriving."
Lynch said housing costs and demands were already rising before COVID – especially in North Texas – and the pandemic exacerbated the problem.
The Dallas area is breaking records with the number of people moving to the area, with Collin County representing the majority of new employment growth in DFW.
"As you know, many people want to live and work in the same area so the demand for multi-family as well as for-sale housing is at an all-time high in the Collin County area," Lynch said.
The housing crisis has become so complex that leaders in McKinney are developing a 'balanced housing plan' to address rapid growth and rising costs.
There’s an exodus of people flocking to Texas from the East and West coasts for a number of reasons, including corporate headquarter jobs, access to a booming economy, more affordable housing, and cheaper cost of living.
Additionally, while many homes are being snatched up and people are being priced out, would-be homebuyers are turning to renting while they wait to buy a house.
That simple formula of supply and demand is causing rents to skyrocket. The increasing costs of materials, electricity, natural gas, property taxes and other factors from the pandemic are also driving up rent.
“The whole country is experiencing these increases in rental costs and that’s really driven by the investment culture going to buy these high-performing assets, driving the values up after labor. Typically real estate taxes are one of your largest operating expenses in running a property. And that’s tied to the value of the real estate,” Lynch explained. “These increased cost and operations are nearly been passed through to the tenant, and it does boil down to the typical supply and demand equation, so that’s why you’re seeing these big increases in rents.“
This year, rents across North Texas have shot up by about 15% compared to last year. Collin County saw some of the steepest increases.
Lynch said currently, Plano has the highest median rents for a two-bedroom apartment at nearly $1,900 a month, followed by McKinney for nearly $1,700 a month. Forth Worth shows more affordable apartments at $1,260 a month.
“Relatively speaking towards the rest of the country, we’re still in an affordable environment to live in but at the end of the day, the double-digit rent increase is hard for anybody," Lynch said.
So what can renters do?
There are no Texas laws protecting renters from rent increases, but landlords are supposed to give a 30-day notice of a rent increase before it goes up.
You have the right to negotiate and if you have a few months left on your lease, experts say to start now to see if your landlord is up for such a discussion.
Lynch doesn’t have a crystal ball but she said her research shows some promising news for the coming new year.
“Based on the research I’ve been doing, we’re going to have a robust economy for the next 12 months at least. So I would anticipate continued increase in value," she said. "I think maybe we peaked out from a value perspective, which means the cost of the real estate taxes hopefully will have flattened out."
RealPage also reports that there are roughly 38,700 apartments under construction in Dallas-Fort Worth, which could help feed the demand for apartments.
