“There are just too many open factors to call the 2021 apartment rental season accurately. There is no way to tell if we can fully recover by the end of 2021.” Source: Boston Pads
That is the summary of the market from BostonPads.com. What looked to be a robust rental market going into 2020 turned out to be any but that. In downtown Boston, vacancy rates are up over 2000% when compared to this time last year. Boston is not alone in feeling the crunch caused by the Covid-19 Pandemic. New York landlords currently give 15% discounts and more on apartment rent to entice renters to fill empty apartments. Rents in Los Angles are down 15% year over year. The same is true in most metropolitan areas in the United States.
Factors Shaping the Apartment Rental Market in 2021
1. COVID-19 – It may be obvious, but no other single factor is as responsible for the decline in the rental market as the Covid-19 Pandemic.
2. Virtual Classrooms – Metropolitan areas are often known as University towns where the summer population is significantly lower than in the cooler months. Boston, for example, has more colleges and universities than any other city in the world. 200,000 (+) students arrive in the city every September to attend classes. The year 2020 was an exception as many schools were opting for virtual learning. Half of all college students in the Boston area traditionally live outside of campus housing. These students were not renting in 2020 as they stayed at their parents’ homes for the most part. Multi-Housing News reports similar findings nationwide.
3. Urban Flight - Millennials have been deserting city centers and heading for more suburban and rural areas. Despite the higher than usual unemployment resulting from the Pandemic, housing prices are up nationwide by 10% year over year. Sales outside of metropolitan areas are much higher than average. If you can work from home and not have to commute to work, why not live where you can have a larger home and more outdoor space?
What is a Landlord Supposed to Do?
No one is clear on what the future will bring. People are asking what will be the new normal?
Many landlords offer incentives to entice tenants to rent their apartments and brokers to show their apartments in the short term. Lowering the rent charged, offering amenities like free parking, or even one or more months of free rent are commonly seen in the rental market now. Some landlords are paying the fee brokers charge when renting an apartment. While this is an option for some landlords, it is not an option every landlord can afford.
Many real estate experts predict that the rental markets will come back strong by the end of 2021. But what if they don’t. What if colleges and universities opt to continue virtual learning or expand it? What if the companies that filled downtown offices opt to continue work at home policies?
There appears to be no shortage of opportunities to sell your rental property. All one needs to do is drive by an open house at a multi-family home to prove this. Scores of couples and investors seem to be lining up to buy rent-producing properties.
If you own a rental property and would like to discuss your options with a knowledgeable real estate advisor, please contact us.