Declining rents due to rising vacancies around the country hold a lesson for Minnesota policymakers
I recently wrote about how a decrease in housing supply coupled with an increase in demand for houses during the crisis has pushed up housing prices. This is an example that points to how the interaction of demand and supply affect prices in the housing market, and helps us understand why increasing housing supply is a sustainable approach to solving the affordable housing crisis that is crippling many American cities like Minneapolis.
This is not the only example we can point to for evidence. Just recently, Reason ran an article summarizing the many cities that are experiencing rent declines due to increasing vacancies.
San Francisco has also seen the largest price declines. Rents for studio apartments there have declined by 31 percent year over year there, according to a new report from Realtor.com. Rents for one- and two-bedroom units declined by 24 percent and 20 percent respectively.
Nearby San Mateo and Santa Clara counties have seen price declines of 12 percent for one-bedroom units, and around 10 percent for two-bedroom ones.
It’s not just California, either. Other dense urban areas have seen steep price declines as well. King County, Washington (which contains Seattle) has seen rents fall 12 percent for studios and 10 percent for one-bedroom units.
In Manhattan, rents have declined by 15 percent for studios and 10 percent for one-bedroom apartments. Washington, D.C., and Boston both also report double-digit rent drops.
The trend, if not the individual figures, matches reports from other listing websites. A recent report from Apartment List found median rents had declined 20 percent year over year in San Francisco, 12 percent in New York City, and 9 percent in Seattle.
Emily Hamilton, a researcher at George Mason University’s Mercatus Center, notes that data for short-term changes in rent prices are notoriously hard to come by, and much of what is available is skewed toward the higher end of the market. Lower-priced units, she says, have likely seen much less significant price declines.
Nevertheless, she says that the massive rent declines in the country’s most expensive cities vindicate those who rightly say that supply and demand set housing prices.
“As vacancy rates are rising as a result, landlords are responding by lowering prices or offering incentives like a free month of rent or free parking,” Hamilton tells Reason.
A lesson for Minnesota policymakers
Minnesota has been facing a housing crisis for a while, and it will likely be exacerbated by the Covid-19 crisis. For the most part, solutions to solving the shortage of affordable housing have centered around increasing government funding for affordable housing projects. However, this trend is again another piece of evidence that increasing the housing supply is the more sustainable approach to solving the housing crisis.
Unfortunately, however, so many obstacles exist when it comes to increasing the housing supply in Minnesota. High fees and onerous regulations, and building codes make housing projects expensive and restrict the supply of new housing. It is high time that these obstacles are reformed if this crisis is to be mitigated.