Following years of whirlwind growth in lockstep with a construction boom and surging home and rent prices, Austin’s rents today have experienced some of the sharpest year-over-year declines in the nation. The downturn, partly due to an oversaturated housing supply, is empowering renters to negotiate favorable deals amid an abundance of apartment options at reduced costs, often complemented by generous rental concessions from landlords and property management companies.
The national median price of an apartment was $1,978, according to Rent.com’s November Rent Report. In Austin, prices stood at $1,948, marking a notable 10.9 percent year-over-year decrease. November’s declines in Austin come on the heels of an even more substantial 14.29 percent drop in October and a 7.85 percent decline this past September.
Today’s sharp rent reductions stand in stark contrast to the city’s remarkable growth in recent years, fueled by a humming tech sector and a surge in inbound migration amid the pandemic, which sent rent prices to all-time highs. Between October 2020 to October 2021, rent prices in Austin grew by a staggering 31 percent, from $1,708 to $2,239, marking a price difference of $531.
Digging deeper into Rent.com’s pricing data, Austin’s metro saw even bigger gains between February 2021 and July 2022, when bottomed-out rent prices rallied from $1,179 to $1,780, marking a monumental swing of 52 percent and a price uptick of $601.
Despite Austin’s current declines, prices remain considerably higher today than amid pre and early-pandemic lows. The recent drops, according to rental experts at Rent.com, are more indicative of growing pains associated with the city’s rapid expansion.
Investment dollars and supply growth
The city’s offbeat appeal, burnished by its thriving music and arts scene and small-town livability, has played a crucial role in the city’s skyrocketing growth, especially amid the COVID-19 pandemic, when a professional class of remote workers from pricy metros like Los Angeles, San Francisco and New York descended upon the Sun Belt, and in particular, Austin.
A total of 17 projects amounting to 5.54 million square feet were constructed in Austin’s downtown in 2022, and a staggering 8,260,873 square feet are currently under construction, according to a recent report from the Downtown Austin Alliance.
The city’s furious expansion, which extended into its suburbs, triggered a construction boom that was stymied by pandemic-related supply chain disruptions. As a result, bottlenecked housing inventory is now inundating the market all at once.
“People were very bullish on the market and we saw a lot of investment dollars coming into Austin. We’ve seen a lot of growth and construction in the multi-family space planned for the area,” Alvino Rosales, Senior District Sales Manager for Rent.com’s Austin metro area, said. “Today there has been this great collision where all of that investment and new inventory is hitting at the same time.”
Rosales sees Austin’s current rent declines as a sign of a market correction, emphasizing that they are not reversing the city’s extraordinary growth in recent years.
That growth has been over a decade in the making. Between 2010 and 2020, Austin witnessed a remarkable 36 percent spike in population – the highest of any major metro in the country – accompanied by the construction of over 90,000 housing units, according to City of Austin data.
Amid the pandemic, the city’s population grew from 1.98 million in 2019 to around 2.22 million in 2023. Currently claiming a population of approximately 2,352,426, Austin has surpassed San Jose, CA as the 10th largest metro in the U.S.
With four of the nation’s ten largest metros in Texas, Austin also claims the title of the Lone Star State’s fastest-growing city. Of the 1.6 million arrivals to the state since 2020, Austin has drawn the lion’s share, witnessing 7.2 percent growth, according to data from the Texas Demographic Center.
A pro-business environment
A factor in Austin’s boundless expansion has been an investment-friendly business climate which has reeled in some of the world’s most influential tech corporations. Within its rolling hills, computer manufacturer Dell has maintained its corporate headquarters since the 1990s.
In recent years, Austin, dubbed the “Silicon Hills,” has consecrated its status as a 21st-century tech mecca by welcoming heavyweights like Apple, Samsung, Amazon and Google. More recently, electric auto manufacturer Tesla and cloud computing upstart Oracle moved operations to Austin.
“It’s always been a very friendly business environment and an incubator for startups. The Austin market and Texas in general have been just really friendly to the business community, so it’s been a great opportunity for growth,” said Rosales.
All told, the region has seen a 32.2 percent increase in tech industry job growth in recent years. Low taxes and generous corporate subsidies are today drawing in multi-billion dollar investments in microchip and semiconductor manufacturing to the region.
While undoubtedly benefiting the city’s economy, the growth driven by a burgeoning tech sector has also exerted pressure on Austin’s housing market.
An influx of high-earning tech talent led to a surge in home prices, sparking an affordability crisis as home prices rose faster than incomes. Following 2022 peaks of $2,662, when a white-hot market was triggering bidding wars, Austin’s housing market has since tempered due to sky-high mortgage rates and other exorbitant home-buying costs. Additionally, post-pandemic return-to-office policies have contributed to a drop in demand from out-of-state buyers.
The median sale price of a home in Austin is now $545,000, according to market data from Redfin – dropping far faster than the national average.
Meanwhile, Austin’s market continues to see a deluge of multi-family housing stock, with the recent infusion of 24,000 units hitting the market, an estimated 37,000 units under construction, and an additional 28,000 proposed for construction.
Alvino Rosales highlighted that an oversupplied housing market will continue to drive rent declines at least through the first quarter of 2024. In the interim, he encouraged renters to take advantage of favorable deals.
“It’s a renters’ market. Do your research,” said Rosales. “There are plenty of deals and opportunities out there to take advantage of.”
