Why is Austin’s Apartment Occupancy at 95 Percent?
Austin’s rental housing market is getting tighter as people flock to the city. The apartment occupancy rate is now close to 95 percent and expected to get higher.
“The Austin metropolitan area continues to receive between 30,000 and 35,000 in-migrants each year,” City of Austin demographer Ryan Robinson said.
He said people are coming from places like California, Florida, Arizona and Michigan, “places that are devastated economically.”
“They may not have a job lined up in Texas, but their prospects for a job are far better than they are in these other states,” Robinson said.
Where do you live when you move to a new city and you don’t have a job? Robin Davis with Austin Investor Interest surveys the local apartment market. She asked Austin’s large property management companies who is moving into their buildings.
“The majority did indicate they were people that were moving into this area due to job transfers and/or it was cheaper to be unemployed here,” Davis said.
The same economic factors that drew people to Central Texas also made it harder for developers to build new apartment buildings. It was more difficult to borrow money for large projects because of the recession, but now that’s changing. Davis’ forecast is that construction will start on 10,000 new apartment units in the Austin-area this year.
“That is a huge amount. Just the number of completions for the upcoming 12 months totals more than we’ve had in the last two years,” she said.
But that’s still fewer than 4,000 units. That means rents, which increased by a yearly average of seven percent for the past two years, may continue to climb. However, the higher rent might push down apartment occupancy rates, as more people take a serious look at buying a home. Eldon Rude is with the real estate forecasting firm MetroStudy.
“As people in apartments begin to see pricing increasing in the for sale housing market, that’s going to result in them being more confident that buying a home is again a good investment,” Rude said. “And maybe a sense of urgency to buy – that prices are going to go up significantly, so we better act now.”
“There’s a bunch of things that they’re doing. They’re moving farther out, which they really can’t afford because [the price of] gas is going up. They’re doubling up with other people to share expenses,” Stark said. “Renting rooms is big again. It’s tough out there in the rental market.”
How tough it is depends on just where you are in Central Texas. San Marcos was one of the few areas that saw a decrease in both occupancy and rents last quarter, according to the Austin Investor Interest survey. The most expensive area in the region is – no surprise – downtown Austin. It costs more than $2 per square foot of apartment space to live there.
The fastest-growing rents anywhere in the region are in Round Rock, far from the buzz of the central business district, at an annual growth rate of almost nine percent.