In 3Q, multifamily Palm Beach County rents were up 28% year-to-year, as out-of-state newcomers and low inventory created lots of demand for too-few available units.
FORT LAUDERDALE, Fla. – With rents on the rise in South Florida, many are wondering when, if ever, prices will become affordable.
Rent in South Florida has increased astronomically over the past year. By the end of the third quarter in 2021, rents for multifamily buildings in Palm Beach County increased by 28% compared to the same quarter last year. Broward County rents rose by 17%, while Miami-Dade County increased by 14%, according to data from CoStar Group, a provider of commercial real estate information.
And rents won’t slow down any time soon, experts say.
Prices are projected to rise 8.9% in Palm Beach County, 8.6% in Broward County and 8% in Miami-Dade County by the end of 2022, a forecast from CoStar Group reveals.
“Let’s say you rented an apartment for $2,400 in the third quarter of 2021. We’re projecting that rent will increase 8% to about $2,600,” said Jay Lybik, national director of multifamily analytics at the CoStar Group.
Rents are increasing faster in South Florida than they are nationally, and by the end of the year, South Florida should be the worst place to rent relative to income, with renters devoting 40% of their incomes to rent, a forecast from Zillow predicted.
Meanwhile, rents rose about 11% nationally and are expected to grow 7% by the end of 2022.
Fueling the spike
A few factors are causing rents to spike: There’s been an influx of out-of-state newcomers lured by the South Florida lifestyle and no state income tax. Additionally, a heavy demand for housing has caused low inventory, thereby forcing would-be buyers into a limited number of rentals, experts say.
Some newcomers to the state are able to bid up because rents in South Florida are cheaper than those where they came from, said Dan Dratch, director of multifamily investments at Franklin Street.
Average asking rents in San Francisco, for example, sit at around $2,900 compared to $1,900 in Miami, according to CoStar Group.
“All of this just speaks to the desirability of living in South Florida,” Dratch added.
The trend dovetails with dropping vacancy rates across South Florida. The vacancy rate in Palm Beach County fell from 7.9% at the beginning of 2020 to 3.7% this quarter, while in Broward the rate dropped from 5.5% to 3.5% and Miami-Dade saw a drop of 6.8% to 3.5%.
According to Charles Foschini, senior managing director of Bekardia, a mortgage broker, supply chain issues are causing new buildings to be more expensive than projected, and the cost is being passed on to renters.
Realtors are seeing rent price growth happen in real time. Realtor Paige Coburn with Keller Williams Realty said she recently listed a condo in Pompano Beach for $2,900 a month. A year ago, the asking rent was only $2,000.
“Because we don’t have houses to put people in, they are stuck in the rental market. Landlords know that they can keep the rental rates high because the demand is there,” said Jay Granieri with ONE Sotheby’s International Realty.
With the spike in costs, some renters have been forced to live out of their cars, while others are dipping into emergency savings just to make it work.
Greg Allen of Delray Beach was renting a one bedroom, one bathroom townhome for $1,450 before a sudden $500-a-month increase to $1,910. He didn’t see it coming, and is now dipping into a rainy-day emergency fund to cover the costs. Once that’s gone, his future remains uncertain.
“Is it worth it to live in South Florida?” he said. “I don’t know what I am going to do after that.”
It remains to be seen when or if prices will taper off.
“I don’t see rents coming down anytime soon,” said Eli Beracha, director of the Hollo School of Real Estate at Florida International University. But, he notes that since the spike has been dramatic, he expects increases in the future to be slow-moving.
© 2021 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.
