Apartment rent data from private providers tell a more dynamic story. Carrollton, Texas–based MPF Research recently did a special analysis of rental trends and found that while there is considerable regional variation, nationally, investment-grade apartment rents today remain, in terms of dollar value, 2.6 percent below the previous peak level (mid-2008).
And unlike the for-sale housing market, rents never underwent a bubble in the first place. Since the 2001 recession, the biggest annual pickup in same-store rents nationally was only 4.4 percent (achieved in the third quarter of 2006).
To look at the MPF data another way, the NMHC constructed an index going back to 1994. This approach has some drawbacks. In particular, although it’s theoretically a “same-store” analysis, the set of “same stores” changes over time, so the 2011 universe is quite different from the 1994 universe, due to new construction, demolition, and an increased share of apartments responding. However, this approach is broadly similar to the “chain” indexes used in calculating GDP and is a valuable tool.
What’s interesting about the NMHC/MPF index is that the inflation-adjusted numbers seem to matter. While apartment rents rose a little faster than overall inflation in the 1990s, they have trailed inflation since peaking in the first quarter of 2001. Real rents are up a slight 1.1 percent, total, since their trough but remain 13.7 percent below the 2001 Q1 peak.
The Upshot
Thus far, there is no evidence that rising rents are responsible for any housing cost burdens renters might be currently shouldering. Might that change in the near future, given the widely anticipated rent increases to come? A significant pickup in rents is indeed likely to materialize, with demand growing and supply limited. Capital markets are improving, however, and, barring a further constriction, new apartment construction is likely to ramp back up to needed levels. This will moderate future rent increases.
Overall, it’s clear that rents aren’t the real problem. The data indicate they have not skyrocketed. The real problem—indeed, the elephant in the room—may be something else, and income stagnation from a jobless recovery is the first that comes to mind.
Mark Obrinsky is the chief economist for the National Multi Housing Council in Washington, D.C.