As Residents Flock to the Sun Belt, Affordability Concerns Rise
The Sun Belt was already benefitting from a strong labor market, low tax rates, and lower overall cost of living relative to other parts of the country before the pandemic. However, the region's popularity has only increased during the past two years as workers became more mobile and able to take advantage of the lower cost of living in cheaper metros. Increases in home prices amid strong household balance sheets and constrained home-for-sale inventories have converged to create an influx of rental housing demand in the Sun Belt.
A Chandan Economics analysis of properties managed by independent landlords using data from RentRedi*, a property management software, adds to a growing body of evidence that the region’s strong migratory patterns are increasing rental costs. Average rents have grown 16.8% across all property sizes in the Sun Belt, while only increasing 5.1% for other areas of the country between January 2021 and January 2022. Rent increases for single-family rentals (SFRs) are particularly acute for properties nationally. Average rent charges in SFRs rose to $1,400 in January 2022 up from $1,200 in 2021. The Sun Belt's 16.7% increase in SFR rent charges is notable, but so is the rapid 7.5% growth outside of it.
Rising rental charges are part of a larger story of price increases within the Sun Belt. The Bureau of Labor Statistics’ January 2022 release showed year-over-year inflation as high as almost 10% in Sun Belt metros Atlanta and Phoenix. St. Louis had the fastest year-over-year inflation among non-Sun Belt metro at 8.3% – over a percentage point less than the two leading Sun Belt metros but a still shocking rate compared to pre-pandemic trends.
Increases in rental costs and the overall cost of living within the Sun Belt is likely straining affordability and has contributed to a reduction of on-time rent payments throughout 2021 and into 2022. On-time payments in Sun Belt metros underperformed other areas of the country in 8 of the last 13 months. Chandan Economics’ first estimate of January 2022 on-time payment rates showed 79% of units in the Sun Belt paid on time as opposed to almost 81% in non-Sun Belt areas. Given the long-term housing supply shortage and strong demographic fundamentals, Chandan Economics expects rents to continue to climb through 2022 – furthering affordability issues.
*RentRedi, a property management software, partnered with Chandan Economics to provide valuable rental performance data for individual landlords not previously available in the real estate market industry. For landlords, RentRedi provides all-in-one web and mobile apps to collect rent, list & market vacancies, find & screen tenants, sign leases, and manage maintenance & accounting. RentRedi has partnered with platforms including TransUnion, REI Hub, Plaid, Latchel,TSYS, Sure Insurance, and Realtor.com, and Doorsteps to create the best experience possible.
For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to credit bureaus, prequalify & sign leases, and submit maintenance requests.