With Phoenix becoming a destination for people moving from out of state for lower taxes or job opportunities, the Valley’s rental market is quickly becoming unsustainable for longtime residents.
According to Realtor.com’s monthly rental data report, Phoenix ranked No. 10 for monthly rental increases in November, putting it behind first place winner Miami. The median rent in the Valley is now $1,785, which is a 27.6% year-over-year increase from November 2020. Median rent for a studio apartment in the area was just $919 in November 2019; it’s now up to $1,400.
“Rent growth across the country kept hitting record highs in November, up 19.7% year-over-year,” the report said. “It is the fifth straight month with double-digit growth and is over six times as fast as the growth rate seen just before the pandemic hit in March 2020. Although seasonality normally causes prices to cool down during the winter time, the national median rent in November has reached $1,771, higher than any of the previous months in our data history.”
Though the city’s population and home prices are growing at a similar rate, Phoenix is still a more affordable option when compared with nearby Los Angeles or Seattle and has more room for development, according to local experts.
“On a macro level, most of the metro is expanding and seeing new job announcements,” said Chris Roach, vice president of Multifamily Investments for the Colliers Cooke Multifamily Team in Phoenix. “The outfill parts of the Valley have available land that is being developed and the infill parts have older housing stock, which is being remodeled or repurposed into higher density housing.”
Roach said areas such as downtown Phoenix, Kierland and Old Town Scottsdale are seeing more vertical construction with luxury finishes and amenities fit for urban living. Areas such as Goodyear, Gilbert, Queen Creek and North Phoenix are growing single-family and lower density multifamily housing, appealing to families and in close proximity to new job centers along the Loop 303.
The Valley’s hot multifamily sales market is also pushing up rents as developers invest millions of dollars in older complexes. Roach said it is “very common” for apartment complexes or landlords to raise the rent anywhere from $500 to $800 a month after making cosmetic improvements to units.
“Often multifamily property owners may spend anywhere from $10,000 to $25,000 per unit in renovations so they can bring an outdated apartment up to modern standards of living and subsequently increase the rents,” said Roach. “This capital helps improve the curb appeal of the property and the lifestyle of the renter.”
Increased construction costs, materials delayed by the pandemic’s supply chain issues and high demand for housing also contribute to skyrocketing rents and leave little room for affordable housing as people search for quality housing to move into.
Multifamily housing is also often changing hands in massive, million-dollar sales. According to data from Vizzda, a visual data system that tracks all commercial real estate sales in the area, at least 15 multifamily properties in Maricopa County were sold or proposed for sale in December. Of them, three were over the $20 million mark, and sales occurred from Goodyear to Gilbert.
Roach sees the interest in Phoenix from national investors as a positive thing for the Valley.
“Phoenix is an exciting place to be right now and on the investment sales side, we have seen a wave of investor capital moving from both East and West coast metros that want to be in Phoenix due to our high growth, business- and tax-friendly climate, and quality of life,” he said.
Doloras Aguirre, a Phoenix- based Realtor and property manager, manages one eight-unit complex and approximately 87 single-family homes, condos and townhomes across the Valley. The average rent at her properties range from $1,695 to $1,950, she said.
“Rents have increased at an average of $400 to $500 a month,” said Aguirre. “It seems like it’s increasing $50 to $100 more as each month goes by. I think rents could probably go up another $100 but are starting to level off. If they go up any more we will see multiple families having to live in one home or roommate situations.”
Unfortunately, she said, renters are at the mercy of landlords as we enter 2022 and likely encounter an even more difficult rental market.
“You might have to save a little more money this year,” she said. “We can’t control the rental market and if your owner does not want to sell their house they will definitely want to increase the rent. Legally, all the owner has to do is give you a written 30-day notice to move.”
Author: Lindsay Walker