Landlords and property owners are holding their breath as the entirely unexpected markets of 2020 wind down and the rental market of 2021 is on the horizon. What seemed like a "sure-thing" last year might be completely out of the question in the year to come. So how do you prepare for what we hope is a year of recovery?
Remember that people still need homes, and that includes rental homes and apartments. While many things have shifted, many other things have stayed the same. While there's no guarantee, trends are showing us a few things we may expect for the rental market in 2021.
Location, Location, Location
High wage urban workers are continuing to work remotely, and their housing choices are no longer specific to the location of the office. This change has the strongest effect on dense, urban cities that were previously experiencing a housing shortage and high rents. Describes City Monitor, "Six of the 10 highest-rent cities in the US posted year-over-year declines, including New York, Los Angeles, and Seattle."
But don't expect this market to bottom out.
This housing market is simply softening. The drops in rent for cities like San Francisco have been under 10%, with some cities actually posting small increases in the fall of 2020. Expect to see these results near the higher end of the market, as affordable downtown housing in major cities has always been in high demand. With new construction also halted during the pandemic, the availability of new properties has reduced helping to balance out many of these changes.
Suburbs Have Room to Grow
In addition to increasingly flexible work options, being stuck inside during the pandemic has brought many renters to the realization that they need more space. The suburban outlook for single-family homes and spacious apartments continues to grow. Single-family homes now account for 39% of the nation's 47-million-strong rental market and are expected to remain a hot commodity through 2021.
The top rental markets for these larger units are currently:
1. Charlotte – 12.15 Rent yield
2. Orlando – 12.8% rent yield
3. Baltimore - 19.8% rent yield
4. Cincinnati – 21.6% rent yield
5. Jacksonville – 15.6% rent yield
In addition to space, trends would indicate that additional community amenities such as proximity to parks or greenspace may also help increase this demand. People want the room to move.
Eviction moratoriums have been necessary for many cities to help the populous weather the storm that is COVID-19, but for small landlords, these regulations can be devastating. While eviction protection for tenants has been widespread, this protection often hasn't extended to the property owners. The most affected are small landlords.
Since small, individual owners represent 22.7 million properties in the country, the combined lack of income and lack of relief may have widespread repercussions. While eviction moratoriums are widely designed to have tenants pay back their missed rental payments, the timeline and surety of this future income aren't guaranteed. Stretched landlords and property owners may be forced to sell instead of rent, further reducing the number of available independent rentals, especially in markets that heavily favor tenant laws.
Rental Demand Fueled by Recovery
All property owners and agencies need qualified renters with a reliable income. That reliable income may be more difficult to find as the economy slowly crawls into recovery mode over 2021. The number of qualified and available renters may be highly tied to the unemployment rates and our economic recovery as a nation.
Potential setbacks such as growing virus infections or a delayed vaccine may set this recovery back again.
Political changes from party control to stimulus packages may also provide a boom or bust effect that can trickle down to rental incomes. Homeschooling has created increases in single-income families as parents are forced to stay home as full-time caregivers. Keep a close eye on economic changes to help predict the market of available renters in your area.
The 2021 rental market is far from doom and gloom, but it will be different. The economy and local laws in your area will be your greatest indicator of potential market changes, so keep a close watch on the local news.