The Days of Discounted Pandemic Rents Are Over

The pandemic hit at the worst time possible for apartment owners. As spring leasing season was picking up in 2020, the word went into lockdown.

Apartment List’s national index hovered around 4% below its projected level for the remainder of the year when that happened.

But things turned quicker than expected. After a strong 2021 performance, that gap has been eliminated. In May 2021, the national median rent price hit $1,189, just above the projected price of $1,185.

With the national story is one of a strong rebound, all real estate is local. So not surprisingly, local markets are recovering at different rates. While almost every city saw rent prices fall at least 1% below seasonal projections at any point from April to Dec. 2020, recoveries vary.

However, in nine cities, Arlington, Texas, Lexington, Kentucky, Norfolk, Virginia, Spokane, Washington, Tucson, Arizona, Tulsa, Oklahoma, Wichita, Kansas, Greensboro, North Carolina, and El Paso, Texas, rent prices rose throughout the pandemic.

These were outliers, however. Most cities experienced rent decreases in 2020. But in most of those metros, prices have bounced back and now exceed pre-pandemic projections. Apartment List says this category includes some smaller cities, relatively affordable metros, like Reno and larger cities like Atlanta, where prices fell sharply for a year before a fast rebound in the past several months.

In another category are 24 of the nation’s largest and most expensive markets where rent prices fell the steepest and remain below pre-pandemic projections. In these cities, where housing is most expensive, rents are rising but have a long way to hit projected increases if the pandemic hadn’t happened. Apartment List points to Seattle, where there is a 17% gap between actual and projected prices.

In some of these 24 cities, the discount between where rents are and where they would have been is negligible. This includes Omaha, Nebraska, San Diego and Irving, Texas, where actual rents sit less than 1% below projections.

However, there remains a significant gap in other cities like San Francisco, Seattle and New York. While San Francisco has seen a rental price rebound, rents are still 18.5% below projections. The same situation exists in other Bay Area locales, like Oakland, San Jose and Fremont and Seattle. On the East Coast, the cities between Boston and Washington, DC, also have that lingering gap between actual rents and projections.

A recent Realtor.com report echoes these findings. It said that the big cities battered by the COVID shutdowns, specifically New York and San Francisco, still need to see rents grow an additional 9% to 12% to return to prior peak pricing. Year-over-year rents fell 8.3% in San Francisco and 7.3% in San Jose. They were flat in New York.

Meanwhile, cities like Denver, Pittsburgh, Nashville and Austin, have a smaller gap, but Apartment List expects it to disappear within the coming months. Some of these cities are among the largest tech hubs.

Realtor.com found that in the nation’s 10 largest tech cities, rents declined only 2.3% in May. That was an improvement over the 6.6% decline earlier this year. Austin, Texas and Denver stood out, posting increases of 6.4% and 5.5% in May, respectively.