The multifamily sector has been one of the brighter spots during the COVID-19 pandemic. But that doesn’t mean it hasn’t suffered, too, since March.
A recent report from Apartment List highlights these struggles. According to the company, apartment rents in the city of Minneapolis are down 3.6 percent. Rents in nearby suburbs are down, too, though not by as much, falling 0.5 percent since the start of the year.
Of the 10 local suburbs for which Apartment List has data, all but one of them are experiencing higher rent growth than is Minneapolis. The Minneapolis suburbs with the fastest-growing rents are Burnsville, where rents have increased 5 percent since January, and Apple Valley, where they’ve increased by 3 percent.
Minneapolis’ experience isn’t unusual. Apartment List reported that rental markets across the country saw a dip in rent prices this summer. Nationally, rents fell 1.3 percent from March to June. This drop is especially significant when compared with rental activity for recent years. In the three years before 2020, monthly apartment rents rose an average of about 2 percent from March to June.
What’s especially striking is the difference between suburban and urban areas. Apartment List found that rents have declined steadily in the larger principal cities that make up the core of major metropolitan areas. Rents in the outlying suburban areas, though, have, for the most part, rebounded to pre-pandemic levels.
Why the difference? As Apartment List says, the pandemic’s impact on everyday life has been more pronounced in cities than in suburbs. Shelter-in-place orders and business shutdowns have taken away many of the amenities and events that attract people to cities. Many renters, then, are questioning whether it makes sense to pay higher urban rents if the amenities that make city living so enjoyable are mostly unavailable.
At the same time, the single-family home market has been hot since the start of the COVID-19 pandemic. This has encouraged renters to leave city apartment buildings and buy their own homes, leaving a larger number of vacancies in urban apartments. The shift to remote work has also blunted the annual inflex of new residents to big cities.
The takeaway? Apartment List says that rent rebounds will remain stronger in the suburbs than in cities, an uneven rental market recovery that will drag on as the pandemic maintains its hold on the country.