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Landlords Across the US Brace for Record-High Vacancy Rates

April 2021

Dealing with the Pandemic-Fueled Vacancy Crisis and Attracting New Renters

The COVID-19 pandemic has ushered in many changes. Social gatherings put on hold or canceled, social distancing even in grocery stores, mask-wearing, lockdowns – some of these may be with us for years to come. However, the impact of the disease has also been felt in virtually every industry, with real estate being one of the hardest hit. This is particularly true for the rental market.

The average vacancy rate for the US as a whole is 6.4%, according to the US Census Bureau. That’s lower than the average rate for principal cities, which was 7% at the end of 2020. Suburban areas fared a little better, with a national average vacancy rate of 5.5%. Landlords in urban and suburban areas are faced with a range of problems – sky-high unemployment means many renters cannot pay their bills, but the moratorium on evictions means that some property owners cannot evict non-payers and bring in employed renters.

The situation is complex, to say the least. Unemployment, underemployment, concern for the economy, even fear about going into public to tour an apartment before renting it – these all add fuel to the fire that’s rapidly burning down America’s rental housing industry. From Manhattan on the East Coast to fog-cloaked San Francisco on the West Coast, to Chicago in the Midwest, Atlanta in the Southeast, and even sunny, seductive Miami, the situation is strikingly similar, although a few cities stand as outliers.

However, that does not mean that it’s all bad news. In fact, some landlords are using new, powerful tools to fill vacancies faster. In this post, we will dive into key cities across the US, delve into the rent situation in each, and discover what landlords are doing to change the paradigm.

 

New York City

Snapshot

Pre-Pandemic Vacancy Rate: 1.95%

Post-Pandemic Vacancy Rate: 5.1%

 

How Is the City Attracting New Renters?

As of March 2021, New York City’s vacancy rate stands at a stark 5.1%, which is an increase of 0.8% year over year, according to The Motley Fool. That’s slightly down from what it was at the end of 2020, but nowhere near the city’s norm. In an attempt to combat that downturn and attract new renters, as well as to stymie plunging rental rates and buoy them up, landlords and the city itself have taken some specific steps.

The step that seems to have had the most impact on the situation? Dropping prices. In December 2020, the median net effective rents fell by 17%, reaching just $2,800 per month, according to CNBC. Other actions include:

  • Many landlords are offering the first two months of a new rental agreement rent-free.
  • Some are extending that offer beyond the first two months.
  • Some are keeping empty apartments off the market to prevent oversupply from becoming worse than it is.

Los Angeles

Snapshot

Pre-Pandemic Vacancy Rate: 5.8%

Post-Pandemic Vacancy Rate: 3.8%

 

How Is the City Attracting New Renters?

The state of California generally enjoys a better rental situation than most other states simply because, as a whole, rental vacancies have historically been low thanks to the ongoing, multi-year housing shortage. However, that does not mean that everything is perfect for Los Angeles landlords and property managers. They must deal with some of the most restrictive anti-eviction legislation in the country, which may contribute to the lower vacancy rates. In this case, those numbers may tell a misleading story, indicating that the market is solid when, in fact, landlords are struggling to pay their own bills because so many renters are suffering from below-average income or no income during the pandemic.

 

San Francisco

Snapshot

Pre-Pandemic Vacancy Rate: 3.55%

Post-Pandemic Vacancy Rate: 7+%

 

How Is the City Attracting New Renters?

San Francisco is known for having some of the highest residential rental rates in the country, but also for an ultra-competitive market. The 3.55% pre-pandemic vacancy rate is a testament to that. Today, property managers and landlords are still facing significant vacancies and they have adopted similar tactics to NYC landlords to attract new renters. These tactics include:

  • Reduced rental rates (although rent remains high compared to national rates)
  • Waived or reduced security deposits
  • No broker fees
  • Negotiating deals with renters unable to pay or seeking to pay a lower rate
  • Holding vacant properties off the market to prevent further price decreases

 

Chicago

Snapshot

Pre-Pandemic Vacancy Rate: 4.81%

Post-Pandemic Vacancy Rate: 9.2%

 

How Is the City Attracting New Renters?

The Windy City is one of the hardest hit in the US in terms of rental vacancies. Landlords across Chicago are facing ongoing vacancies and rental shortfalls, which put them in difficult financial straits. The same forces that have affected the rental industry across the nation also wreaked havoc on Chicago – unemployment, underemployment, disruptions to education, and the like. Keeping what existing tenants they could and attracting new tenants are challenging prospects, but landlords are trying to do so using familiar tactics, including:

  • Offering up to two months rent-free
  • Offering reduced move-in fees
  • Waived or reduced security deposits
  • Increasing lease length while decreasing monthly cost

 

Boston

Snapshot

Pre-Pandemic Vacancy Rate: 1.06%

Post-Pandemic Vacancy Rate: 5.44%

 

How Is the City Attracting New Renters?

While Beantown might not have the incredibly high vacancy rate that’s affecting Chicago, the city has still seen a 400+% increase in vacancies in a single year. That has left landlords and property owners scrambling to find ways to pay their own bills while attracting new tenants to their properties. To achieve that goal, landlords are offering:

 

  • Historically low rental rates
  • Multiple months with no rent
  • Reduced or no security deposits
  • Reduced or delayed move-in fees
  • Reduced or eliminated broker fees

 

Miami

Snapshot

Pre-Pandemic Vacancy Rate: 5.85%

Post-Pandemic Vacancy Rate: 4.7%

 

How Is the City Attracting New Renters?

Florida’s real estate industry as a whole has weathered the pandemic relatively well, thanks in large part to the state’s lax stance on the pandemic. No lasting lockdowns, no mandatory mask-wearing, and little in the way of other restrictions made the Sunshine State an attractive place for those looking to move away from states with stricter safeguards in place. Couple that with the near-constant stream of people moving to Florida, particularly South Florida, to get away from the cold, and it’s easy to see why the Miami-Fort Lauderdale-West Palm Beach metro area has seen little in the way of negative fallout from COVID-19. Miami in particular has seen a surge, with demand for rentals and outright purchases outstripping supply in many cases.

 

Atlanta

Snapshot

Pre-Pandemic Vacancy Rate: 6.2%

Post-Pandemic Vacancy Rate: 5.8%

 

How Is the City Attracting New Renters?

Like a couple of other cities in the country, Atlanta has bucked some of the downward economic trend. However, while the overall vacancy rate for 2021 is lower than it was before the pandemic, some of that is misleading. Like their counterparts in Los Angeles, Atlanta’s landlords face the prospect of an eviction moratorium, although the state is challenging the CDC’s right to impose such restrictions in the first place through a lawsuit. Atlanta also benefits from a relatively low supply of rentals in the first place, providing landlords and property managers with some leverage in terms of rent prices. In fact, five counties in the metropolitan Atlanta area have seen rent increases in the double digits since the start of 2021.

 

Hope for Property Owners

In many cities across the country, property managers and landlords are struggling to meet their own financial obligations thanks to a combination of increasing vacancies and tenants unable to pay some or even all of their rent. The good news is that the situation is changing, albeit slowly. Several factors will spur an eventual resurgence in tenant interest in those areas hardest hit by the pandemic.

 

Businesses Reopening

Even in states where mask-wearing has been mandated, businesses are slowly beginning to reopen. As they do, it will attract people to downtown areas once more. Not only will consumers come to shop and do business, but employment will spike again, and people will need to find housing near their places of work. As more and more businesses reopen, landlords will see a slow rise in applications from potential tenants.

 

Schools Reopening

It feels like a constant dance – two steps forward, once step back – for our schools. However, the fact is that more schools are open than closed now, and the pace of opening is only increasing. As schools reopen, parents are no longer forced to stay at home to provide childcare, allowing them to once more return to work. That ties in with the trend of businesses reopening, fueling more people’s ability to move into new properties.

 

Vaccination Programs

More so than any other factor, the Biden administration’s focus on vaccinating everyone as quickly as possible will spur rental industry growth. With vaccination against the virus, confidence in personal safety increases. People are willing to go out and about once more, resuming their normal lives for the first time in well over a year. That includes dreaming about moving to a new home, touring apartments, and signing leases. Couple this confidence with schools and businesses reopening, and it’s clear that there is a glimmer of hope for landlords and property managers.

Another important driver to note here is the impact that vaccination programs will have on intranational and international travel. While much of the world today is locked down, vaccination promises to spring that lock and allow people to travel for work, education, and pleasure once more. That knock-on effect will further spur interest in both short and long-term rentals across the United States.

 

Filling Those Vacancies

Much of the burden landlords and property managers have shouldered over the last year or so has been due to one thing – the COVID-19 pandemic. As we finally come to grips with that situation, things will slowly go back to something more closely resembling “normal”. However, that does not magically fill vacant properties.

Today and tomorrow, landlords are faced with a crushing problem: how do they fill vacant rental units? COVID-19 threw an enormous wrench in the works, and while the virus’s impact is slowly fading, that does not necessarily equate to an even flow of renters back to all property owners. How do you ensure that you’re able to get your properties noticed and attract qualified renters?

 

The Question of Rental Marketing

Marketing your rental properties is a time-consuming, expensive, often confusing process. Even while you’re paying for marketing, your empty properties are costing you money. There has to be a solution that doesn’t cost a fortune while still ensuring that you’re able to fill vacancies.

Enter referral marketing.

Not sure what referral marketing is, how it works, or why it’s the solution to your ongoing vacancy emergency? It’s actually very simple. Working with Cityhive, you transform your existing tenants into a powerful magnet that attracts new residents.

Our streamlined solution allows you to use your most potent asset to build your success. All you need to do is register your vacancies, choose the incentives you want to offer your residents, and then let them know what’s on offer. They take care of the legwork, referring friends, coworkers, and family members to fill your vacancies and ensure positive cash flow.

What sorts of incentives might your tenants value, though? Really, it can be almost anything. Free rent is often popular, but other options include cash, gift cards, discounted access to amenities like fitness facilities – you get the idea.

Why struggle with cash flow shortages? There’s no reason your rental units should be sitting empty, costing you money. Cityhive can help you connect the dots and leverage your current residents to attract more residents. It’s simple, effective, and affordable – get in touch with us today to learn more.

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