By now you are probably already feeling the pinch. As more and more people move to Texas, the least surprising thing is happening in Dallas: rents are skyrocketing.
The Texas Realtors 2021 Relocation Report found that between 537,000 and 582,000 people moved to Texas in 2019, and the state ranked second in relocation activity in the same year. But with this influx of new people comes the problem of where they will live, and the demand now outstrips the supply.
“The influx of people moving into our area is a big part of our increased demand and sustaining continues to be a struggle,” Phil Crone, executive director of the Dallas Builders Association, said via email. “For example, we’re building between 20 and 25,000 apartments a year fairly consistently, but occupancy rates are still very high, around 95-96 percent.”
In May, according to Dallas-based real estate technology firm RealPage, the average rental price in North Texas was up 17.5% year-over-year, as reported The Dallas Morning News. In Dallas, the average rent was $1,526 per month.
However, Texas doesn’t just attract people; businesses are also settling there. And institutional buyers, which include businesses and corporations, bought 43% of homes sold in Dallas County last year, according to a report by the National Association of Realtors.
According ForbesTexas has some of the “most business-friendly policies in the United States” and in 2021, “some 62 companies moved their headquarters to Texas from 17 states and three countries.”
Meanwhile, builders can’t keep up with demand in part because of ongoing supply chain issues.
“[Getting new materials] is a huge industry-wide problem, and it feels like we’re always playing mole with it,” Crone said. “The prices of wood are improving as well as those of household appliances. However, siding products are in allocation, builders are waiting six months for windows, and some brick and siding products are in allocation. If you can get them, they might have to be shipped across the country with $6 a gallon of diesel.
“The biggest victims here are the tens of thousands of families who are no longer able to find new, accessible housing in any form.” – Phil Crone, Dallas Builders Association
When building new apartment complexes costs more than usual, landlords charge higher rates to tenants to recoup those costs.
The Real Deal, a Texas real estate news site, reported that bidding wars for rent prices are currently unfolding across the state: Landlords are asking applicants to submit their best offer in order to get the highest possible rents for properties.
Ian Mattingly, one of the owners and managers of the Greater Dallas Apartment Association, said problems in the supply chain can affect the costs of providing safe, quality rental housing.
“We buy a lot of the same kinds of products that developers buy, builders buy, single-family homeowners buy,” said Mattingly, who is also president of property management company Luma Residential. “It is currently the same types of products that are most affected by supply chain disruptions. So that’s it, refrigerators, dishwashers, lumber, drywall, light bulbs, all those sorts of things that we’ve seen, really, really significant cost increases.
Mattingly added that the record cost of energy, which began to climb during the 2021 Texas freeze, also explains the price increases. “All of this contributes to this record growth in what we would call our operating expenses,” he said.
The costs of building materials and energy are not the only ones to increase. Property values in Texas are skyrocketing, driving up property taxes. Because rental properties are taxed like commercial properties, they are not eligible for exclusions for single-family homeowners.
“We have some of the highest per capita property taxes of any state in the country,” Mattingly said of Texas. “Property taxes can be 20 to 25 percent of our entry costs, so you know, if eight or nine cents on every dollar is profit…20 to 25 cents on every dollar is just going to pay the local tax authorities.”
But regardless of the issues, rental property prices in Texas are rising, and it’s becoming increasingly difficult for renters looking for accommodation to find something affordable.
Although Crone thinks “the days of runaway property values” may be over, he worries that development companies are using up available land too quickly for project approvals to follow.
“The pandemic era has made it go from bad to worse,” he said. “The biggest victims here are the tens of thousands of families who are no longer able to find accessible new housing in any form. This market has thrived on being more accessible than others, so I would say these Pricing and supply issues hurt DFW more than anywhere else.