While the pandemic and economic downturn raged on this summer, US rents atypically dipped sharply. For example, these rents dropped 1.3% from March to June, while increasing approximately 2% in each of the three previous years, according to analysis by Apartment List.
And, high-priced coastal cities have taken the biggest hit. San Francisco, New York, Boston and other similar rental markets have recorded double-digit year-over-year rent declines.
But while rents have steadily decreased in the larger core cities of each metropolitan region, however, outlying suburban cities are not on the same track. Generally, rents in those areas have rebounded to pre-pandemic levels.
Apartment List outlines three distinct phases:
January to March: Not yet engulfed by COVID, rents increased consistently across both core cities and suburbs.
March to June: COVID’s wrath causes US rents to decrease in widespread fashion, even though rents declined faster in core cities than suburban areas.
June to September: Rents continue to freefall in core cities, but quickly rebound in the suburbs. By October, suburban rents are 0.5% higher than at the start of the year and slightly below the pre-pandemic peak in March.
Breaking down the numbers by metropolitan area indicates the widespread nature of rental decreases. In 27 of 30 large metros, core cities posted faster rent drops or slower rent growth than respective suburbs. And in 11 metros including major economic centers such as Atlanta, Dallas and Philadelphia, units are less expensive while at the same time, suburban properties are getting more expensive.
There are a number of reasons why rent trends in cities do not mirror those of nearby suburbs. One obvious point is that COVID’s effects have been more pronounced in cities than suburbs. Shelter requirements and business restrictions have halted many of the activities that draw people to cities: entertainment, bars, restaurants, festivals, etc. As a result, many renters are questioning whether city life continues to make financial sense.
Moreover, there are differences in the types of apartments available in each type of city. Urban cores are more likely to have more-expensive modern apartments but with increased vacancies and steeper rent declines during economic downturns. In contrast, the suburbs tend to have a bulk of less expensive homes that are attractive to cost-conscious renters.
In recent years, the suburbs have offered these types of housing options in exchange for proximity to a job center. But in 2020, this affordability gap is narrowing in many metros. The result could well be an uneven rental market recovery in the months to come.