Finding apartments in Austin for tenants is how Yasmine Acebo earns a living. They haven’t been difficult to locate in recent months.
The Texas capital saw one of the largest rent hikes in the country in 2021, with prices rising a startling 25% amid a pandemic-era population boom. However, new rules that encourage housing density and a boom in development have caused vacancy rates to skyrocket. Landlords are currently having difficulty filling shiny new complexes and are enticing newly empowered renters with steep discounts.
According to Acebo, an agent with Pauly Presley Realty, almost every apartment building in Austin is offering some kind of move-in deal. For instance, a client who was looking for a one-bedroom apartment in South Austin recently chose a unit at Perch Apartments, which is roughly 20 minutes from the city center. Normally, it would have cost $1,420 a month, but she was given two months of free rent, a $600 credit, and a waived administration fee in exchange for applying the day after her visit and leasing for at least 13 months.
Acebo stated that once you saw how many apartments were being built, it was unavoidable.
The Texas capital has become the face of advocates who argue that the only way to address the country’s housing crisis is to build more homes. The crisis is so bad that it became a wedge issue in the presidential election, contributed to some of the fastest inflation in decades, and made it nearly impossible to recruit teachers, firefighters, and restaurant employees to high-cost areas. Additionally, Austin has loosened rules to expedite development, while other progressive cities like San Francisco and Chicago are criticized for having burdensome permitting procedures. It seems to have been successful.
According to Redfin, rentals in Austin have dropped more than anywhere else in the nation, currently 22% below their August 2023 peak. In less than three years, the median asking rent has decreased by $400 to $1,399 per month.
Austin was formerly known as the nation’s slacker capital, and its standing as an affordable city was already beginning to decline before the pandemic totally upended it. However, with rents skyrocketing, the situation has shifted once more, to the point where the capital city is no longer the most expensive rental location in Texas. The drop has spurred new discussion between Nimbys, the derogatory term for people who oppose change, and Yimbys, shorthand for pro-development, Yes-in-my-backyard activists.
According to Cindi Reed, director of sales at MRI Apartment Data, this is basically just supply and demand; it’s economics 101.
As pandemic-era corporate relocations increased and remote workers came to Austin in search of cheaper taxes, sunny weather, a multitude of tech startups, and a thriving social scene, Reed refers to 2021 as the year of extremes. It usually takes two years for builders to get from purchasing land to renting out apartments, and as their cranes rose into the sky, the newcomers crowded into the available supply of apartments.
At 91.7%, the rental occupancy rate was at its highest point since 2015. Businesses were concerned that expensive flats may undermine the city’s reputation as a cost-friendly destination, therefore housing emerged as the main issue in the mayoral contest.
As Kirk Watson stated during his successful 2022 mayoral campaign, “There is no question that we are in a cost-of-living emergency in this town.”
The influx of new units followed. According to Fannie Mae data, developers poured about 50,000 rental units into the city in 2023 and 2024. The supply increased by 14%, which was the most percentage gain for any major U.S. metro area.
According to Habitat Hunters’ owner and seasoned Austin broker Jody Lockshin, the rental market is oversupplied. She has witnessed buildings give new residents three months free and lower rates to retain existing tenants, demonstrating that landlords have virtually little negotiating power.
AtX Tower, a posh residential and business complex in the center of downtown, developers Tishman Speyer and Ryan Cos. are giving away rent for up to eight weeks. The building, which has roughly 370 apartments, has some of the most extravagant amenities in the city, such as a co-working space, an indoor movie theater, and a pool on the 20th floor with a view of Republic Square Park. Prices range from $2,352 for a studio to nearly $8,000 for a three-bedroom apartment.
The management and development company RPM Living is giving away four to six weeks at its upscale rentals, such as The Bowie and The St. Mary, where guests may lounge in poolside cabanas and get tanned.
It will take some time before Austin landlords recover control, according to managers at some of the largest real estate investment trusts in the nation.
In a recent earnings call, Mark Parrell, the CEO of Equity Residential, one of the biggest apartment REITs in the nation, stated that the supply situation is extremely difficult and that it might take a year or so before we can sort of get back into that market.
At the beginning of the year, Camden Property Trust provides letter grades to each of its markets according to their anticipated performance. Austin received a C-minus, placing it last in its class. Although the company says the supply glut must first resolve itself, it anticipates that rent growth will eventually resume.
Building at speed
The city council canceled the latest major building code reform attempt, CodeNEXT, in 2018 after five years and $8.5 million were spent on a rewriting that failed. However, a new political agreement developed in Austin as it grew more difficult to obtain reasonably priced housing.
Everyone saw the severity of the situation after years of delay, according to Zo Qadri, a Democrat elected to the municipal council in 2022. The biggest problem was housing. It was the inability to afford it.
Watson, who had served as mayor during the dot-com boom, took up the position again that year. The city loosened regulations that restricted the height of buildings within 540 feet (165 meters) of single-family homes, and he concentrated on cutting down on permission delays. Additionally, Austin was the first city in the United States to abolish parking requirements.
By lowering the minimum lot size from 5,750 to 1,800 square feet and permitting developers to construct up to three units on lots that were previously limited to one home, Austin has more recently concentrated on increasing the availability of single-family homes. About 350 applications for homes under those two initiatives have been received by the city.
According to Cody Carr, a homebuilder who has finished two projects that capitalize on the three units per lot modification and is working on four more, the shift in winds from a housing standpoint caught everyone in the building and development business off guard.
While apartment rents are still significantly higher than they were before the epidemic, home prices have also fallen from their peak, falling 23% since May 2022 as interest rates have increased. Redfin reports that the median sale price last month was $515,000, which is almost 34% higher than the median of $383,380 that purchasers paid in January 2020.
As conservatives in the state legislature, which is controlled by the far right, support some of Austin’s initiatives with comparable state-level measures, the drive for better affordability has also created odd bedfellows.
Developers who have been waiting a long time for permits can now obtain clearance from other towns’ officials or any professional engineer according to a bill that was put into law last session. The state Senate’s leader, Lieutenant Governor Dan Patrick, stated that one of his main goals for this session is affordable housing. Numerous measures have already been presented to lower parking minimums, promote accessory housing units, and cut minimum lot sizes.
Citing state lawmakers’ attempts to prevent cities from passing more liberal laws in sectors like labor and finance, Qadri stated, “I think the lege does a lot of horrible stuff.” However, there are occasionally these rays of optimism and constructive work that may be done, at least in relation to housing.
— Bloomberg News’s Joe Lovinger
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