Austin Apartment Association Issues Second Annual State-of-the-Industry Report


(Austin, TX – January 28, 2021)   As the rental housing industry enters 2022, Austin Apartment Association today issued a State-of-the-Industry Report, including insights into the local economy, local and national housing and multifamily market trends and forecasts, area construction and development activity, and the state of employment and hiring in the rental housing industry.


Unprecedented market conditions across the nation, including Austin

Nationally and locally, the residential real estate market has reported record-breaking figures, including increased demand for all types of housing units, dramatic increases in single-family home pricing, as well as record occupancy rates in the multifamily and rental housing market. Nationally, rent growth has averaged 10 percent in 2021, but the latest forecasts anticipate the market to normalize in 2022 and onward, according to Sam Tenenbaum, Director of Analytics & Central Texas Economist for CoStar.


Bob Pinnegar, President and CEO of the National Apartment Association reports, “Nationally we saw apartment occupancy rates hit record highs at the end of 2021, reaching a national average of 97.5 percent. Such limited housing supply is uncharted territory for the industry and a manifestation of the housing affordability crisis that has been building in this country for decades. We have consistently not built enough housing to meet the demand.”


The multifamily industry is experiencing the impact of two years of pent-up household formation as a result of the pandemic, Pinnegar noted, as graduates finally move out of their parent's homes, roommates uncouple, and couples marry. Combined with a very active single-family resale market, there is even more demand for apartments. Pinnegar explains, “for example, large numbers of retiring baby boomers are selling their homes for retirement funds and are now moving into apartments.” 


Pinnegar cites rising inflation and supply chain issues as fuel for both the housing supply and affordability crisis, in addition to local governments restricting the industry’s ability to build lower-cost, more affordable properties, "putting us in a situation where we can only build Class A to repay investors who expect a return on their investment if they are to continue funding housing projects.  Further, with some 50 percent of the entire multifamily housing supply built before 1989, there’s a lot of work and investment needed to reposition these aging assets.”


According to Tenenbaum, over the past year, more than 700,000 apartment units were absorbed nationwide, far surpassing any year prior, which brought vacancies down by more than 2 percent last year.


In Austin and across the nation, inflation, supply chain issues and labor shortages have had a staggering impact on the overall housing market, causing delays in construction. Tenenbaum explains, “Most of the inflation we’ve seen over the past year stems from goods-based inflation, which is a result of the strong consumer demand driven by the pandemic recovery. Services inflation remains shy of 4 percent year-over-year, because services are easier to scale up and down in response to inflation than are manufactured goods, such as cars and home appliances.”


Further fueling the problem, rental property sales by independent rental owners affected by eviction moratoriums, increased 10 percent in 2020 and even more in 2021, with residency often shifting to owner-occupied rather than renter occupied. As a result, an estimated one million apartment homes in properties with under 25 units, or 2.4 percent of the overall rental housing supply, were lost from the nation’s rental housing stock.


“As a community, we must never forget the unintended consequence of eviction moratoriums on our precious housing supply in Austin,” reminds Emily Blair, Austin Apartment Association Executive Vice President. “In the future, we must remember rental aid programs that pay rent directly to rental housing providers whose residents need help, rather than programs that rely on renters to agree to apply for rental aid or that penalize housing providers for renters’ inability to pay, must be the short- and long-term solution.”


Austin leads the nation in economic and population growth

According to the latest U.S. Census data, Austin metro led the nation with explosive population growth of 33 percent between 2010 and 2020, followed by Raleigh, NC with 25 percent and Orlando, FL with approximately 21 percent. This extraordinary growth was fueled in equal parts by in-state and out-of-state migration, both driven by the continued job growth in the metro area. Out-of-state relocations from West and East Coast were additionally driven by lower cost of living, including lower taxes and relatively lower housing prices.


According to Tenenbaum, Austin’s economic rebound has been among the fastest in the nation. The city has reached its pre-pandemic employment level in August 2021, and has since surpassed it by an additional 4 percent, matched only by Salt Lake City. The nation is yet to recover all jobs lost to the pandemic, even though the national Gross Domestic Product (GDP) has recovered to pre-pandemic levels and has since reached the expected growth rate had the pandemic never happened.  


“The job gains in Austin haven’t been uniform,” Tenenbaum clarifies. “The leisure and hospitality sector, which includes not only hotels but also bars and restaurants, remains approximately 7,000 jobs shy of its pre-pandemic level.”  To date, Austin added the most jobs in the white collar professional and business services sector, as well as in the warehouse sector. The city has also led the nation in the fastest office-using jobs growth, with a more than 12 percent increase, followed by San Antonio and Memphis with approximately 8 percent.


Population and job growth, single-family housing shortage drive rental housing demand

Local data mirrors national trends, as the demand for housing in Austin continues to outpace the supply.  As the metro continues to attract major corporate relocations, such as Samsung and Tesla, the rapid population and job growth continue to add to the housing demand throughout the metro, increasingly so in the outlying suburban areas and new job centers.


According to Tenenbaum, while the U.S. is building more single-family housing since 2010, housing starts remain well below the early 2000s levels. At the same time, multifamily starts are higher than they have ever been, with just under 500,000 units started in 2021. Limited single-family construction has allowed single-family pricing to accelerate significantly over the past year across the country. Reflecting that trend, Austin experienced record levels of single-family home price growth in 2021. These significant increases mean that apartment renting has never been more affordable relative to buying a single-family home, translating into the highest demand for apartments Austin has ever seen.


Austin saw the second most apartment demand of any major market in the nation as a percentage of its inventory, with nearly 21,000 net new renters in the Austin metro, according to CoStar. With increased absorption, the occupancy rate increased by 4.4 percent in Austin, second fastest in the nation after Orlando with 4.7 percent.  This demand spike has resulted in an average rental rate increase of 20 percent in 2021, compared to 2020, when Austin experienced the largest rental rate decrease of the four Texas metropolitan areas since 2015.  Outpacing Austin’s year-over-year rent growth were Orlando, Tampa, Las Vegas, Phoenix, Ft. Lauderdale, and Jacksonville, with rental growth between 21 and 24.6 percent.


Analyzing Austin’s rental rate increases further, Tenenbaum notes that “while Northwest Austin, Southwest Austin, Pflugerville and Round Rock have seen their rents rise by more than 25 percent in 2021, Central Austin saw rents rise by only 7 percent year over year.”


Tenenbaum further adds that “All these factors have brought unprecedented investment volume to the metro area. In 2021, we estimate that more than $8 billion worth of apartments were sold, doubling the pre-pandemic level of just over $4 billion. Austin’s strong fundamentals, job growth and population growth continue to attract investor interest from around the world to the Austin metro. Such investment would improve the housing stock, make the apartments better, and improve the Austin housing experience.”   


Forecasting into 2022 and 2023, Tenenbaum says rent growth will subside largely due to new construction.  Austin now has the second-most multifamily construction of any major market in the nation behind Nashville, with more than 23,000 units underway, equivalent to 10 percent of the current inventory.  “Construction is occurring in every part of the Austin market,” Tenenbaum shared, adding that new construction will create a “pressure release valve.”


Tenenbaum also adds that “according to CoStar’s data, based on 100,000 rent observations captured every day in Austin, the city’s rent growth has already been flattening since August of 2021. CoStar anticipates the market to stabilize, with 4.7 percent rent growth in Austin in 2022 – well below the 2021 numbers and significantly lower than the anticipated increases of 6.5 percent in San Diego and 6.3 percent in San Francisco.”


While lower rent growth is projected in 2022, given the continued demand and significant increased operational costs, including insurance expenses, increasing taxes and government fees, and high construction costs, the multifamily industry will be challenged to revert to lower-than-average rent growth.


College housing & Single-family rental homes

CollegeHouse reports 4 percent year-over-year rent growth rate in Austin for the college housing
submarket. According to Charlie Matthews, CollegeHouse CEO, despite continued demand, there is no
shortage of student housing in Austin. The more than 6,300 beds in the development pipeline will
allow supply to track along with increased demand. As the costs of student tuition and apartment development continue to rise, affordability is a concern, especially as social distancing needs mean fewer
residents per student dorm room or suite. 


Coming out of the pandemic, student housing remains one of the most resilient commercial real estate asset classes across the U.S. Specifically in Austin, off-campus housing occupancy is up 6-to-7 percent with pre-leasing velocity ahead roughly 8 percent from January 2021. “It appears students remain committed to being at school and in the classroom as opposed to virtually learning at home,” Matthews says. “Based on the CollegeHouse data set, 4- and 5-bedroom units are occupied at roughly 95% and the average pre-lease for these larger units as of January 2022 is roughly 45 percent and 53 percent, respectively, which shows students are choosing to live with roommates.”


“Our business got thrust into the spotlight during the lockdown and it is here to stay,” says Mark Wolf, founder, and CEO of AHV Communities, discussing single-family rental homes. “People appreciate the combination of a single-family home, with more space, not-shared entrance but managed like an apartment community, with perks such as on-site maintenance.     In Austin, with both East and West Coast relocations of people who are conditioned to higher cost of living, our housing looks like a bargain. Our biggest challenge is matching the demand, as materials and labor shortages prevent us from building as fast as we’d like.”


Affordability concerns

Even though both in Austin and across the country the industry is expecting far lower rent growth than in 2021, the overall shortage of housing supply will affect future housing affordability.


“It is very hard to plan for this kind of growth, as it takes 2-to-3 years to deliver new apartment projects,” comments Tenenbaum. “Especially mid-pandemic, it was impossible to accurately project the demand and the significant vacancy depression we experienced.”


Furthermore, a spectrum of public policies across the nation, such as rent control initiatives, eviction moratoria and development restrictions are affecting housing affordability, as apartment owners and operators are experiencing increased annual insurance premiums of 25 percent or more, increased property taxes, new government fees, labor costs and price impacts of supply chain shortages, and rising inflation. These cost impacts, combined with the inability to collect rent or charge rental rates that cover rising costs, are causing investors and developers in some markets to reduce or walk away from multifamily opportunities and investment in cities where housing is most needed. 


“The multifamily industry is standing ready to deliver more housing – desperately needed housing – with investors at the ready,” said Katya Watson, president of Multifamily at The Guild and 2022 President of the Austin Apartment Association’s Board of Directors. “But a greater partnership with municipalities, counties, and elected officials is needed to strike a realistic balance between the housing needs of the community and the financial realities of building more apartment homes in our city.”


Labor shortages affect operations

The Austin apartment market has expanded, and occupancy rates have risen, fueled largely by Austin’s exponential growth as a city. This newfound opportunity to attract relocating renters has presented a challenge: management companies have had to decide how much staff is needed to service their residents efficiently, notes J. Turner Batdorf III, Senior Strategist for J. Turner Research. 


“The apartment industry is a vital part of Austin’s economy,” says Blair. “With more than 250,000 existing rental housing units, more than 23,000 units under construction, and thousands of additional proposed units, there is an ongoing demand for talented professionals to take care of residents. With comprehensive education and career development programs we provide, the industry offers well-paying job opportunities for people from all walks of life with varying levels of education.”


"Our data shows that in comparison to the rest of the Texas markets, Austin has done a good job of pay relative to responsibility, particularly at management levels of the on-site experience," adds Batdorf. 


J Turner Research’s recent study, The Internet Adventure III also shows that for 55 percent residents, “staff cares about me” was most the most important factor in deciding to rent at a particular apartment community, followed by 31 percent of respondents stating online ratings and reviews were most important, and only 14 percent selecting “other residents are like me.” Additionally, the majority of respondents identified “Interaction with Staff” prior to leasing as having the strongest influence on their leasing decision.


“It’s clear that on-site employee morale has a direct impact on ensuring our residents’ satisfaction,” says Watson. “The pandemic and last year’s winter storm both highlighted that our employees are our most important asset, making sure our residents have safe, well-maintained homes.


Last year, our property managers went above and beyond to help our residents when our communities were damaged by the winter storm power issues, ordering warming buses and portable restrooms for their residents,” recalls Watson. “Nationally and locally, while challenging, the pandemic has brought about a faster adoption of innovation and technology, to better serve our residents and create a better working environment for our staffs, from virtual tours, let-yourself-in technology, new scheduling tools for in-person appointments, and more.”


Looking forward

According to CollegeHouse’s Matthews, the industry will focus more on implementing technology to gather data to enable “a better understanding of the housing market, including student housing, allowing us to better gauge market demand for specific unit types and sizes, which will help the long-term sustainability of that market segment.” 


“Among trends we see, management companies have responded to the increased demand for remote work options, without affecting residents’ experience,” says Bruce Petersen, founder and owner of “Some management companies even offer reduced work hours to allow for greater work-life balance and increased flexibility, while maintaining and in fact increasing compensation. As AI technology becomes more mainstream, we anticipate its adoption in our industry, creating new career opportunities and shifting traditional roles. We must continue our efforts to up-skill our workforce to continue to thrive in these rapidly changing times. Investing in our onsite professionals’ soft skills is also a must, even as we move toward greater dependence on technology. Of course, our industry will always depend on building genuine personal relationships and being there for our residents when they need us.”   


“Defining affordability and affordability solutions ought to involve a bigger voice of rental housing providers in the community,” comments Watson.  “One positive outcome of the pandemic has been the increased collaboration among many stakeholders who care about housing needs in our community, as we’ve seen with emergency rental assistance.  Those who know how to build and operate rental housing have shared their knowledge with community leaders, government agencies and local charities.  And these conversations must continue at an even higher frequency.  It is vital that our federal, state and local elected officials utilize the rental housing providers’ knowledge and expertise to make informed policy decisions that advance meaningful actions to create the much-needed attainable housing without negatively affecting anyone.”


About Austin Apartment Association

Founded in 1964, Austin Apartment Association represents more than 1,000 diverse businesses that own, manage and service more than 290,000 rental homes in the Greater Austin area. Our mission is to advance the expertise and collective community impact of the rental housing industry. To learn more about the Austin Apartment Association, please visit our website at