Chart of the Day: US Vacancy Rates versus Asking Rental Price

Via the People’s Policy Project, here’s a chart from a new Harvard study on rental housing in the US. It shows trends in vacancy rate for new apartment construction separated out by price point (rental rates).

Voila:

 

Here’s what Chapter 4 says about the above chart:

Newly constructed high-end apartment properties became more difficult to fill last year. According to the Survey of Market Absorption, 10 percent of rentals completed in 2015 and priced at more than $2,450 remained vacant after 12 months. In contrast, only 2 percent of units with rents below $1,250 were still unfilled within one year. Apartment absorption rates fell most in the principal cities of metro areas, where most new supply has come online. In contrast, absorption rates were up in suburban and non-metro markets, where fewer new rentals have been added.

There’s a basic logic at work here about price and demand. Also, most new construction is at the high end of the market, and that’s how new construction works in general.

Given these rates, it might be interesting to brainstorm ways to reduce the costs for new construction projects, e.g. by removing parking minimums from multi-family zoning. Cutting down on costs by getting rid of the $30,000 cost of an underground parking spot makes apartments more affordable, even if they’re new.

4 thoughts on “Chart of the Day: US Vacancy Rates versus Asking Rental Price

  1. Casey

    Another method would to be to stabilize current affordable and lower rent apartments from raising rents. With the property tax and utility (heating costs) increases many properties must raise rents to cover these costs. Most tenants in a unit that is $850.00 and under are unable to afford rent increases at these levels. The city should find a way to preserve naturally occurring affordable housing instead of pricing them out.

    1. Anon

      Rent-control (stabilization) is poison to naturally occurring affordable housing. If you want less affordable housing, then make subsidized-housing less profitable. If you want more affordable housing, then build more, or make it more profitable to build, or help people afford it.

      1. Casey

        I did not say anything about rent control. I mentioned property taxes. If the city would like to preserve naturally occurring affordable housing, a good start would not to increase property taxes 15-25% every year.

        1. Andrew

          In some states, large rental properties can be assessed using an income method rather than a value method, which could help address the problem as you’ve stated it. I wonder if Minnesota allows this (googling shows that it’s used for utility assessments, at least), and what the hurdles are for a small property to be assessed in this manner.

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