RALEIGH – Housing affordability remains top of mind for folks across the Triangle, and was the first topic discussed at a gathering of business leaders and bankers hosted by the North Carolina Chamber of Commerce and the North Carolina Bankers Association on Friday.
Meanwhile, the latest rental market data from Apartment List shows that median monthly rental rates increased 20.9% in Raleigh compared to 12 months ago, even with a 1% decrease in the prior month. In Durham, the Apartment List data shows that median rental rates increased by 21.4%.
Currently, median rents for a one-bedroom apartment are prices at $1,321 per month and $1,512 per month for a two-bedroom apartment in Raleigh, the Apartment List analysis showed.
In Durham, rents increased by 21.4%, the Apartment List analysis found, with the median rental rate for a two-bedroom apartment of $1,385 per month and $1,155 per month for a one-bedroom apartment.
Statewide, in the 10 most populous cities, the highest median rental rate is in Asheville, at a rate of $1,790 per month for a two-bedroom apartment, according to the Apartment List data, and the lowest median rental rate occurs in Greenville, at a rate of $880 per month for a two-bedroom apartment.
Median rental rates in Cary are the highest of any Triangle city included in the Apartment List data set, at a median rental rate of $1,610 per month for a two-bedroom apartment.
More increases in rental rates predicted
A forecast from Realtor.com, published last year, expects rents to increase nationally in 2022, though at a rate not quite as steep as experienced in 2021. The Realtor.com forecast a national median rental rate price increase of 7.1% annually during the calendar year of 2022.
If the forecast is accurate, that would put the median rental rate for a two-bedroom apartment in Raleigh at about $1,620 per month for a two-bedroom apartment.
According to the latest data from the U.S. Census Bureau, which is displayed visually in a Raleigh DataUSA.io report, the median household income in Raleigh is $69,333 annually, or $5,777.75 monthly.
“Housing is considered affordable when total housing costs, including utilities, don’t exceed 30% of your income,” said Yolanda Winstead, President and CEO, DHIC, at the Economic Forecast Forum, a virtual panel event hosted on Friday by the North Carolina Chamber of Commerce and North Carolina Bankers Association.
At the medians, the ratio of monthly rental price compared to monthly median income, expressed as a percentage, shows that using the Apartment List and DataUSA data, 26.1% of a household’s monthly income would be allocated to paying the rent for Raleigh residents.
Yet most people don’t pay rent or earn wages exactly at the medians.
“Wages haven’t kept up with other costs,” said Winstead. “The Covid pandemic has exacerbated challenges for families at lower incomes.”
Winstead noted in answering a question from the panel’s moderator that another method of thinking about whether existing housing is affordable is factoring in the hourly wage of workers required to afford a median priced two-bedroom apartment.
“In our state, the housing wage, when we talk about what that is, it’s how much a full time worker needs to earn in order to afford a house without being housing burdened,” said Winstead. “About $18.56 or so, to afford a two-bedroom apartment,” said Winstead, across the state. But Winstead added that in more urban areas, like Charlotte and the Triangle, “the rate is more like $25 per hour.”
We have a shortage of supply, said Winstead. “It’s going to take us years to get out of this hole.”
Not the norm
But compared to a year ago, the median rental rate in Raleigh has increased by 20.9%, said Chris Salviati, a housing economist at Apartment List. In the period between December 2019 and December 2020, rents increased by 1.6%, Salviati noted, adding that since the start of the pandemic in March 2020, median rents in Raleigh have increased by 21.1%.
A report co-authored by Salviati that is published on the Apartment List website notes that “A slight dip in rents at this time of year is typical of seasonality in the market.”
Nationally, the report reads, for 2021, the “national median rent increased by a staggering 17.8%. To put that in context, annual rent growth averaged just 2.3 percent in the pre-pandemic years from 2017-2019.”
Housing costs are also affecting the labor market
“It’s not just a housing issue, it’s an access to talent issue,” said Brian Leary, COO at Highwoods Properties, another member of the panel at the Economic Forecast Forum. “What we’re hearing from so many of our customers who are competing for talent locally, and nationally,” said Leary. “Talent needs to be able to live near where they work.”
But there’s a significant lack of inventory across the entire housing market, not just in what’s for sale, but in what’s for rent, said Leary.
“We are underserved as a nation when it comes to housing,” said Leary. “We are about 1.2 million units short in this country, and you can imagine what it’s been like in our state,” he added, noting that “there has been an acceleration of folks coming here, and now there’s been a mismatch in supply and demand.”
“You’re seeing the losing of affordable housing units,” said Leary. “Not only can we add more affordable housing units, we’re losing them as well.”
The Triangle is losing its naturally occurring affordable housing, said Winstead, defined as housing that is affordable due to market pressures. Winstead noted that these properties are now being sold, due to the increasing home value appreciation in the region, and those sales are occurring much faster than the region can get new affordable housing stock built and completed. It can take as little as 10 to 14 days to close a real estate transaction, whereas developing, building, and completing new affordable housing units takes between 2 and 3 years, according to Winstead.
Leary advocated adding at least 10,000 market rate rental housing options within downtown areas of cities such as Raleigh, Charlotte, and Durham, in order to boost market competitiveness, to keep the monthly rental rates down.
“Our customers need that housing for their entire workforce,” said Leary. “Housing affordability is a really big deal for the folks who occupy office buildings,” he added.