Low Apartment Vacancy and High Rents Continue for DC Area in 2011, Report Says

by Bryce Baschuk

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Rendering of apartments at 2400 14th Street NW

A word of advice for DC-area renters: Hold on to your apartment, hold onto it as long as you can.

As we have reported, trying to find a reasonably-priced rental in the DC area is no easy feat and according to Delta Associates year-end report on the region’s apartment market, it is only going to get tougher in the coming year. Here are some of the report’s highlights:

  • An oncoming shortage of apartment units in 2011 and 2012 means that vacancy rates in the region will continue to drop.
  • Rental rates have yet to peak and are steadily marching higher for Class A and B apartments.
  • Prevalent a year ago, rental concessions are now rare as demand grows.
  • Job growth in the region will ensure a stream of new residents looking for housing.

With national vacancy rates lingering at 6.6 percent, DC area vacancy levels for Class A and B apartments are at 3.4 percent, down from 4.3 percent a year ago, according to the report. In DC proper, vacancy rates are actually up slightly (3.8%) from last year (3.7%), but submarkets like Columbia Heights/Shaw have the lowest stabilized vacancy rate in the region at 2.8 percent. To compound the low vacancy rate, average rents for Class A mid and high-rise apartments in the District have increased almost 6 percent in 2010, and a tremendous 14 percent in the Upper Northwest submarket (which includes areas like Dupont Circle and Georgetown).

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Rental rate growth in DC Area. Courtesy of Delta Associates.

“Monthly rents in DC have gone up $324 a month on average in the last five years,” Grant Montgomery, a vice president at Delta Associates told UrbanTurf. “We think the region will see Class A rents increase 10 to 11 percent on average over the next 12 to 18 months.”

As rents increase and vacancy remains low, the days when 2-3 months of free rent or various electronics were dangled in front of renters to get them to sign a lease seem to be a thing of the past. Such concessions were widespread in newly leasing apartments at the end of 2009 and in early 2010, but the practice has become less prevalent towards the end of the year, the report said, noting that on average renters received only 3.5 percent concessions on annual rent in 2010 compared with 7.2 percent in 2009. (For context, a month’s free rent is equal to an 8.3 percent concession on annual rent in the DC area.)

“When renters get ready to renew next year they are more likely to see a much bigger jump [in their rental rate],” Montgomery said. “And those people that hop to a new project will see concessions declining from where they were a year ago.”

Further complicating things is the inventory of new apartments in the region. Montgomery explained that since the number of new projects peaked in 2009 construction has been steadily tracking downward until this year when construction ramped back up and developers broke ground on more than 5,000 units in the region. However, analysts at Delta Associates said that the new apartments will not hit the market soon enough. Stabilized vacancy rates for Class A apartments will continue to decrease in the next few years, potentially bottoming out at two percent by the end of 2012.

“The lag in supply in many submarkets is changing who is in the driver’s seat between renters and owners,” Montgomery said. “As vacancies decline and less product is on the market, owners can push rents more.”

This article originally published at http://dc.urbanturf.com/articles/blog/low_vacancy_rent_increases_and_few_concessions/2805

7 Comments

  1. Mandy said at 11:22 am on Wednesday January 5, 2011:

    I was just notified that my rent is being increased 15 percent over last year.  This seems really high, but is it against the law?  Can I file a formal complaint with the city if it is not a rent controlled apartment?

  1. Allen said at 11:52 am on Wednesday January 5, 2011:

    @ Mandy—

    A 15% increase certainly seems unlawful. I don’t know for sure, but I would contact a city agency to find out what the rules on annual increases are.

  1. Matt said at 2:49 pm on Wednesday January 5, 2011:

    Mandy,

    According to this link “The most common allowable increase in rent is an annual adjustment, based on the increase in the Consumer Price Index (CPI). For most tenants, the most that their rent can increase is the CPI percentage plus 2 percent, but not more than 10 percent.” Unfortunately I don’t know that first thing about CPIs.

    http://ota.dc.gov/ota/cwp/view,a,3,q,573352,otaNav,|33325|,.asp

  1. saladman8283 said at 3:06 pm on Wednesday January 5, 2011:

    @Mandy, the rent caps only apply if your landlord owns 4 or more rental units.

  1. Rob said at 5:55 pm on Wednesday January 5, 2011:

    The CPI hasn’t gone up much at all, so CPI plus 2% would be a very small increase.

    But as saladman8283 pointed out, that cap only applies to landlords who own 4 or more units.  And perhaps more importantly, many rental units are exempt (for example, if you’re in a relatively new building, you’re almost certainly not covered).

    I think the key point, though, is that Mandy said it’s not a rent-controlled apartment.  My understanding is if an apartment isn’t rent-controlled, then there’s no legal limit to how much her rent can be increased.

  1. K David Meit, CPM said at 12:13 pm on Thursday January 6, 2011:

    For rent controlled apartments in the District, CPI is currently .2%, so the increase ceiling is 2.2% (changes May 1). There is no increase ceiling for any property not rent controlled.

  1. Lauren said at 2:24 pm on Thursday January 6, 2011:

    I think others are correct that there’s nothing illegal about any amount of increase if your apartment isn’t rent-controlled. However, 15% does seem excessive, even with low vacancies. I would look around at other places, and then negotiate with your management assuming you see better deals. Or you could tell them you simply can’t afford the increase (assuming your salary did not go up 15% this year). It’s better for landlords to keep good tenants, so they have an incentive to work with you. But if they don’t seem willing, I would just move.

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