Supply & demand, economy drive Raleigh's increasing apartment rental prices
Posted March 19, 2015
Raleigh, N.C. — It wasn’t difficult for Rhea Lidowsky to find a job in downtown Raleigh.
Finding a nearby place to live proved otherwise.
“It was either a super nice place for $2,000 or it was like oh wow, $900, you get there and it's just falling apart,” said Lidowsky, a waitress at Battistella’s, located in City Market.
A recent study by the National Association of Realtors found that rent in Raleigh and Cary increased 16 percent over the past five years, but the income of renters ages 25-44 only grew 4.88 percent during that span.
One reason for the rent increase is supply and demand, said John Wood with the Raleigh Regional Association of Realtors.
“Part of it also is there are people who struggled to sell their home and they had to have a short sale, or maybe a foreclosure three, four, five years ago,” he said. “Some of that hasn’t left their credit reports yet and they haven’t recovered, so they have to be a renter for another period of time.”
That means more people are vying for available apartments, especially in prime locations including downtown Raleigh, Cameron Village and North Hills, where monthly rents range from $800 for a 635-square-foot studio to $2,900 for a 1500-square-foot apartment.
The high demand serves as a negative for those on a fixed income, Wood said.
“They’re getting squeezed out,” he said. “There are areas of town that at one time were very reasonable rent, and those apartments areas or rental homes are being torn down and replaced. That’s really no different than what happened in this market 30, 40, 50 years ago, as it happened 10 years ago. As it happens in every growth area. If we didn’t have this growth, everybody’s values would be falling and our economy would really struggle.”
Raleigh’s increasing rents are also due to giving renters what they want, said Ken Bowers, interim director of Raleigh’s planning and development department.
“The new format for apartments, which are apartments wrapping a parking deck, had to have rents at a certain level because it’s more expensive to build units in a building like that than it is to build units in a building where parking is at surface,” he said. “But those buildings put a lot more units on an acre of land than if you had to park them without a parking structure. They’re going up in areas of high demand and they are getting significant rent premium for that type of building.”
Bowers expects rent prices to level off as more apartment buildings are built.
“It will probably have a moderating influence on rents compared to a situation where that new supply didn’t happen,” he said. “Apartments are like any other market, if you have more demand than supply prices go up, and if you have less demand than supply, prices come down.”
After a three-month search, Lidowsky was able to find an apartment within her budget and with a roommate.
“I live near where I work, where I play, where I want to create,” she said. “Driving is a little overrated. It’s nice to be able to experience people connecting and living in the same space like this.”