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The rent is too damn high

The Houston area isn’t such a cheap place to live any more.

BagOfMoney

A job boom bringing highly paid energy workers to Houston and a pronounced decline in the percentage of people buying houses have combined to drive up the cost of living all across the region. Rents here rose nearly 9 percent in the last year, triple the traditional growth rate, driven by occupancy rates that average more than 90 percent and the construction of pricier apartments in such outlying areas as Tomball and Fort Bend County.

Rents for lower-end apartments inside the Loop and in places like Alief are increasing at the fastest rate.

[…]

Analysts say that as the middle and working classes are pushed farther out, their pocketbooks take a second hit from higher transportation costs to get to their jobs. At the same time, developers are working to build a stock of high-end luxury apartments close in to attract the oil and gas workers moving to Houston.

Many of these newcomers turn to real estate agent Matt Vargas, who says his clients often receive housing allowances of $3,000 a month. Some companies give their workers as much $8,000 a month, reducing the incentive to scrimp.

“You would be amazed at what some of these newer properties have to offer, and even more amazed at the pricetag,” Vargas said. “No one in their right mind will spend that much unless they have a housing allowance.”

Developers building the high-end luxury options in Midtown, near Memorial Park and the Galleria are likely targeting these type of renters, he said.

Bruce McClenny, president of Houston-based Apartment Data Services, said a steady or average rate of rent increases in a market should be roughly 3 percent. Locally, that average hit 3.8 percent in 2011 and began to spike rapidly, from 5.5 percent in 2012 to 6.2 percent last year and now to 8.8 percent.

The apartments being built around the region are mostly high-end, driving up rents in those areas, McClenny said. But even Class C apartments, those roughly 30 to 40 years old and offering fewer amenities, have gotten about 8 percent more expensive as occupancy levels have grown to 94 percent.

“As the market prices itself higher, people have been readjusting what they can afford,” McClenny said. “We may just have to adjust the rental reality.”

You have to figure there will be a “correction” in the market at some point, and when there is it won’t be pretty. You also have to figure this is going to start to have an effect on the area’s job growth. Normally, the Houston area is exactly the kind of place where housing prices stay reasonable because there’s still plenty of open space for new construction and you can build highrises as easily as you can single family homes. It’s just that now all the apartment and condo complexes that are being built are top of the market luxury places. No one is building affordable places any more. I don’t think this is a stable situation, but I don’t see what can be done about it. At some point, one way or another, something is going to have to change.

Stephen and Jessica Seagraves say the rent hikes drove them out of state.

The couple – he’s a Sugar Land native and she’s from the Austin area – lived in Houston for six years. During that time, their rent increased time and again. The monthly bill for their most recent place, a two-bedroom apartment in the Heights, was set to soar to $2,100 per month, up from $1,400 two years earlier. It was double what they’d been paying for a two-bedroom house in the same area in 2008.

In July, they moved to Portland, Ore., and into a spacious downtown apartment that leases for $1,600 a month.

Could someone make sure Rick Perry and Ted Cruz see that? Thanks.

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One Comment

  1. Eastender says:

    Eventually, if not already, they will overbuild on apartments, especially top end ones. They will start having to run specials that make them more affordable & get them leased up and then people in the 5 year old complexes will migrate to the brand new ones. Then those will have to run more specials to regain tenants, making them more affordable, and the people from the “B” class properties will move up to the “A” class ones, it will trickle down the apartment food chain like that.

    What is kind of scary is if we have another significant downturn, especially in O&G, then you will see a lot of these areas where they have packed in apartments suddenly turn trashy. Those of us old enough to remember pre-80’s oil bust can remember the fancy swinging single apartment areas for young professionals of the 70’s, like Gulfton, Greenspoint, Fondren Southwest, Broadway Boulevard, Club Creek, etc. Once those areas went to pot in the 80’s, they never came back. Places like Eldridge, or all the big complexes on the northeast part of the beltway by all those new subdivisions, those will become the next slums if we hit a serious downturn.