The FWD #137
COVID-19 migrations drive rents down, but not for those who need it
This year, our blogs about COVID-19 have focused on the migration out of the cities and into rural areas, the real estate market heating up in so-called “Zoom Towns” with more isolated homes for well-paid white-collar workers, and the struggles the pandemic has caused for the nation’s low-to-middle-income renters.
One segment we haven’t examined much is the wealthier segment of the renter class. What has been happening with the folks renting in the country’s Upper West Sides, Georgetowns, and downtown San Franciscos?
Well, as it turns out, rich renters are also migrating out of cities. High-end apartments are seeing high rates of vacancy, and the lack of demand is driving average rents down. That should be good, right? Rents have climbed for a long time as wages have stagnated, so a drop in rents should be a welcome reprieve. But that decrease isn’t across the board.
Luxury apartments get more affordable while cheaper units get more expensive
According to the Joint Center for Housing Studies’ analysis of CoStar data, rents for high-end apartments shrunk by 2% this year. However, the rents for lower-end units continued to rise at the same 2% per year that they’ve been averaging for the past decade. That, combined with the fact that nearly half of all renters lost income this year, has led to the need for eviction moratoriums, rent relief, and calls for more cash aid.
The market right now heavily favors those rich renters migrating out and buying homes, as we’ve covered. The other side of that coin is that it has been very harsh on less well-off renters who can barely afford their current rent, much less a better place in the suburbs. This pattern is leading to what some are calling a “K-shaped” recovery, in which those with retirement accounts and stock portfolios quickly bounce back from the pandemic crisis while those living paycheck to paycheck come away with even more struggles.