Why is one-bedroom rent so high?
Uncovering the Recent Increases in One-Bedroom Rentals
- How much rent rates have increased year over year
- Which cities have experienced the largest rent increases
- Why one-bedroom units are seeing a raise in rent
- What multifamily communities can do to retain tenants
It’s no secret that inflation has caused the price of many goods and services to skyrocket — and one-bedroom rentals are no exception. Multifamily communities all over the United States have seen significant increases to the rent rates for one-bedroom units, leaving many to wonder how they can retain tenants while remaining profitable.
By taking time to understand the reasons for rent increases, multifamily developers and owners can prepare accordingly by communicating clearly with tenants, optimizing their amenities, and innovating their living spaces.
Rent Rates Increase for One-Bedroom Units
According to Zumper’s April National Rent Report, one-bedroom rent rates have increased more rapidly in 2022 than during the same period in 2021. As of May 2022, the national average cost of a one-bedroom rental is $1,410 — up 3.2% just since January. By comparison, during the same period last year, rent rates only increased by 1.7%.
Where are One-Bedroom Rents Increasing the Most?
As can be expected, the nation’s largest metropolitan areas remained at the top of the list for highest-priced one-bedroom apartments, with New York City and San Francisco taking first and second place, respectively. However, smaller southern and midwestern cities throughout the United States are also seeing significant increases month-to-month. Most notably, Winston-Salem, NC and Columbus, OH are seeing monthly rental increases in excess of 5%.
Why the Raise in Rent?
There are many factors that have contributed to the sudden increase in one-bedroom rentals across the nation. Chief among them are:
Supply & Demand: As we’ve covered in previous articles, the multifamily sector is booming, with high-income households driving most of the growth in the rental population. Especially as the pandemic wears on and young adults are seeking opportunities to branch out from under their parents’ roof, the demand for one-bedroom units has never been higher. At the same time, however, plans to build to multifamily communities have stalled due in large part to supply chain disruptions. This classic case of high-demand, low-supply is a major factor in driving up the cost of rent.
Competitive Marketplace: The real estate market has never been more competitive, with the average cost of a single-family home costing a record $346,900. In fact, the National Association of Realtors estimates that nearly 1 million U.S. renters were priced out of the housing market last year due to the high cost of homes and increased competition among wannabe homeowners. As a result of these high home prices, multifamily communities have been given more leverage to increase rent rates for their tenants.
Wealthier Renters: With the pandemic allowing more people to work from home, many white-collar workers with jobs in high-paying industries now have the freedom to live wherever they want. This shift in work-from-home culture is one of the biggest reasons for the city exoduses seen across the nation. With wealthier renters coming into suburban areas with limited vacancies available, property owners have seized the opportunity to raise rates.
What Multifamily Communities Can Do to Retain Tenants
Raising rent for tenants is something that many multifamily owners and operators struggle with as it has the potential to contribute to tenant turnover. Remaining profitable is important, but that profit only comes if residents remain happy and are willing to pay the increased price for their living space. Striking the balance between increased profit and tenant retention isn’t easy, but there are a few steps that property managers can take to prevent against turnover:
It’s important to communicate clearly with residents before implementing any rent increases. Make sure to explain the reasons behind the decision to raise rent, and ensure all staff are fully updated on the issue so they can answer any questions or concerns.
This is also a great opportunity for property managers to update the communication systems used on site. In a recent study of over 1,800 tenants of varying backgrounds, residents revealed that they wanted an online community portal so they could more easily:
- Communicate with staff members
- Advise landlord and property managers of issues
- Extend leases
- Pay rent
Implementing a communications portal that can manage all of these tasks not only helps improve transparency when it comes to rent increases, but it also makes the community more marketable to future tenants.
One way that multifamily developers and owners can help alleviate the blow of a sudden rent increase is by announcing plans to install new amenities for their residents. In fact, many tenants are willing to pay higher rent rates if they know their community includes:
- Smart Upgrades: From smart locks for keyless entry to EV charging stations, residents crave smart technology so much, they’ll pay more to have access to remotely control their space.
- Preferred Parking: Offering tenants a designated parking space is critically important, especially if the multifamily community is located in a busy metropolitan area.
- Premium Amenities: Whether it’s in-unit laundry accommodations, stainless-steel appliances, or luxury countertops, tenants will happily pay more for premium, in-unit upgrades.
Along with in-unit, tenant-focused upgrades, multifamily developers and owners may want to consider innovating their space further by including unexpected community amenities. Today’s residents demand more from their living spaces, desiring not only a space that’s comfortable and homey, but also one that speaks to their larger values. For instance, a New York City transplant seeking quiet solitude in the suburbs of Winston-Salem might enjoy a community gardening area or access to an on-campus walking trail.
At SouthPark Interiors, our dynamic multifamily interior designs help create and cultivate communities that current and future residents actually want to call home. Enter in a new era of communication, accommodation, and innovation at your multifamily community by connecting with our interior design specialists today!