• Sun. Jun 23rd, 2024

This Sun Belt State’s Apartments Command Among Highest US Rent Premiums

Bynewsmagzines

May 8, 2023
Miami apartments still command premium rents. (Enrique Rios/CoStar)

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Rent growth may be slowing in one of the top Sun Belt rental markets, but those tenants still are paying among the highest premiums in the country.

Four Florida cities ranked in the Top 10 for U.S. rent prices that exceed what renters should be paying based on historical trends, according to the latest Waller, Weeks and Johnson Rental Index. The index was created by researchers at the Florida Atlantic University, Florida Gulf Coast University and the University of Alabama.

The U.S. territory of San Juan, Puerto Rico, topped the March index, based on the latest available data. Renters in San Juan paid the highest premium at 19.21%.

Developers and investors, however, focus on the mainland. The Cape Coral-Fort Myers metropolitan area had the second-highest rent premium at 15.44%, followed by Miami’s 11.56% and North Port-Sarasota-Bradenton’s 11.31%. Tampa was ninth with renters paying a premium of 7.81%.

Stockton, California, is the only metropolitan area of the 100 the index tracks where renters are paying a discount, However, it’s a small one at minus 0.12%.

The index, which analyzes data from all residential rental types, illustrates how soaring rents in 2021 and into 2022 have slowed considerably to bring down the premium renters are paying.

“It was absolutely necessary for rents to moderate because the annual increases were creating a housing crisis for many American consumers living paycheck to paycheck,” FAU’s Ken H. Johnson said in a statement.

Miami, Tampa and other Florida multifamily markets benefited from domestic in-migration to the state, the highest in the country last year. Miami-Dade County’s metropolitan area sat at the top of the index for premium prices a year earlier at 18.16%. Tampa was at 17.08%.

Miami has 32,504 apartment units being built, equal to 17.7% of the existing number of units. It’s the highest percentage among the largest apartment markets in the country.

Tampa has 18,174 units under construction, or 8.5% of existing units. But Tampa’s pipeline has brought on 8,014 new units over the past 12 months, 366 more than Miami, according to CoStar data.

Cape Coral and North Port are unique because they are still feeling the effects of Hurricane Ian that destroyed more than 5,000 homes and severely damaging another13,000 in late September. Lee County, where Cape Coral and Fort Myers are located, took the brunt of the impact. Displaced residents moved north to the neighboring North Port area.

The hurricane acerbated a market where renters were already paying premium prices. Cape Coral-Fort Myers was second to Miami on the index a year ago at an 18.16% premium.

“More supply in the months and years ahead will help ease the rent crunch in Florida, but the state’s popularity as a destination means renters and buyers aren’t likely to find many housing discounts,” Shelton Weeks with Florida Gulf Coast University said in a statement.

The surge in home prices in Florida has helped the state’s apartment market. Nine Florida cities are among the Top 20 highest premiums buyers are paying above historical trends, according to a different index from FAU. Cape Coral, Tampa, North Port, Lakeland, Florida’s Space Coast and Jacksonville dominated the Top 10 with premiums of more than 40%. Miami was 14th at 39.38%.

FAU’s Johnson said buyers arriving in Florida “need to be wary of the current climate because those who buy now could end up having to hold onto the properties for years before values rebound enough for owners to fetch an acceptable profit in a resale.”

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