Rents in Austin have been falling for nearly two years. Here’s why.

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DALLAS – Austin rents have skyrocketed during the COVID-19 pandemic as thousands of new residents flock there and the region’s job market booms.

Today, Austin is one of the only major US cities where rents are falling.

Austin rents have fallen for 19 consecutive months, data from Zillow show. The average asking rent in the capital city was $1,645 in December, according to Zillow — above where rents stood before the pandemic but below where they peaked amid the region’s hot growth. .

Nearby suburbs such as Round Rock, Pflugerville and Georgetown, which have seen rents rise by double-digit percentages amid the pandemic’s growth in the region, have also seen rents decline. Rents haven’t fallen as quickly as they did during the pandemic’s rising costs, but there are some areas in the Austin region where rents didn’t fall last year.

The main reason behind falling rents in Austin, real estate experts and housing advocates say, is a massive apartment building boom unmatched by any other major city in Texas or elsewhere. part of the country. Apartment builders in the Austin area went into overdrive during the pandemic, resulting in thousands of new apartments hitting the market.

On average, builders in the region obtained building permits for 957 apartments for every 100,000 residents between 2021 and 2023, a Texas Tribune analysis of Census data shows — far more than other major metropolitan regions in the country. Among major Texas metros, the San Antonio-New Braunfels region was the closest with 346 new apartments allowed per 100,000 people during the same period.

That boom resulted in part due to a changing the political culture around new housingAustin City Council member José “Chito” Vela said.

As in many other major cities, there are homeowners and neighborhood groups who oppose allowing more housing to be built for decades with Austin City Hall wielding significant power. But the forces have fallen out of favor amid rising housing costs in the city during the pandemic. Austin voters have elected City Council members — including Vela — who are more friendly to housing development.

“We’ve worked under the premise for several decades here in Austin that if we don’t allow new construction, that will help preserve neighborhoods and contain costs,” Vela said. “That has just been shown to be false, and that the opposite approach is true.”

Amid growing competition, landlords are fighting to attract new tenants and keep existing ones. That means keeping rents flat or cutting rents to convince existing tenants to renew their leases. For new tenants, this means that landlords may offer several months’ worth of free rent to convince them to move in.

That competition has driven down rents across the market, numbers from the robust MRI ApartmentData show. New apartments and older, cheaper apartments alike saw rents fall last year.

“If you introduce a lot of new apartments, your rent will go down because of the competition,” said Cindi Reed, director of the company. “Supply and demand.”

One result of the city’s falling rents: Austin is no longer the most expensive major city in Texas for renters. The region’s population and job growth slowed as apartment construction continued. As Fort Worth overtakes Austin in be in the state fourth largest CITIESits rents also surpassed Austin’s.

San Antonio, Dallas and Plano also saw rents drop — but they didn’t drop as fast as Austin.

Although rents have dropped, the cost of housing in the Austin region remains high. It’s unclear how long the downward trend in rents in Austin will last. While nearly 17,000 apartments have been built, according to MRI data, builders are pulling back on new projects amid the glut.

Austin rents sit about 17% above pre-pandemic levels, Zillow figures show. Nearly half of renters in the Austin-Round Rock region are “cost-burdened,” according to a report last year published by Harvard University’s Joint Center for Housing Studies — meaning they spend more than 30% of their income on rent and utilities, leaving little money in their pockets to spend on other essential needs like groceries, clothing and transportation.

Of those households, nearly a quarter put at least half of their income into rent and utilities, which means they are “severely” cost-burdened.

“Affordability has a technical meaning, and it’s paying 30% or less of your rental income,” said Ben Martin, director of research for Texas Housers, a research and advocacy group. “And for a lot of people in Austin, that wasn’t the case before the pandemic, and it’s not the case now.”

Faced with high housing burdens and prices, it is very difficult for the average family to make the transition to home ownership. Austin home prices have topped $500,000 for some time, making it nearly impossible for the average family to transition into home ownership while staying within the city limits. A potential home buyer in the Austin area would need to make more than $140,000 to afford a home at the median sales price, according to Harvard.

There are many signs that residents are struggling with high housing costs in the region. Landlords are filing more evictions than before the COVID-19 pandemic, figures from the Eviction Lab show. And the number of people experiencing homelessness grew in Austin last year, according to estimates was released in December of the US Department of Housing and Urban Development.