Supply and Demand Continues to Drive Tampa Bay’s Apartment Market

Sparked by a pandemic-fueled rush of people to the region, and not enough housing options to accommodate this inflow, Tampa led national headlines just a couple of years ago for some of the highest increases in rent. Flash forward to today, and market fundamentals are again bringing a change to the rental market that is much more favorable to renters.

Latest on Tampa Bay Area Rents

According to ALN’s latest Tampa Market Report, which covers most counties in the greater Tampa Bay region, at the end of September, the average effective rent for market rate apartment homes stands at $1,815/month. More telling though is that rents have been fairly steady for over a year. ALN Apartment Data shows that effective rent rose only 0.1% since last September, well under Tampa Bay’s inflation rate of 5.9%. Further, apartment vacancies are at 11.1% while in a normal market it should be closer to 7%. The high number of vacant apartment homes has pushed nearly 1 in 5 landlords to offer discounts on rent – on average to the tune of over $1,000 on a new one-year lease.

Market Forces During the Pandemic

As most people living in the Tampa Bay region know, the pandemic accelerated what was already strong in-migration. A recent Markerr report found that in 2019 the Tampa MSA had a solid 39k in net migration gains, but in 2021 this ballooned to 51k. By December 2021 CoStar reported apartment vacancy at a record low of 4.4% for the Tampa MSA. This is despite the market adding over 5,600 new apartments at about the same time. By the end of 2021, RentCafe reported that there were 22 renter inquiries for every available apartment, making Tampa one of the most competitive rental markets in the nation.

Market Forces Now Keeping Rents in Check

The demographic shifts in 2021 that spiked demand in Tampa and other Sunbelt markets, coupled with then low interest rates, sparked the nation’s largest multifamily building spree in a generation. ALN’s Senior Market Analyst Jordan Brooks shared with BAAA that multifamily construction timelines have stretched to 18 months on average in the Tampa market, resulting in many projects started in 2021 and 2022 only recently being delivered or still forthcoming. For instance, ALN is tracking close to 9,000 new apartments set to open before the end of this year. This comes as in-migration has slowed from pandemic heights. Markerr shows in-migration in 2022 to Tampa at 33k, still strong but under 2019 figures. The greater supply and normalized in-migration show up in the latest RentCafe competitiveness report, which now shows only 11 renters making inquiries for each available apartment in the Tampa MSA.

Key Takeaways

As ALN’s Jordan Brooks further notes, “widespread deliveries from an active new construction pipeline continue to help take pressure off of rent growth for the region even with apartment demand remaining robust.” In other words, the demand and price signals in 2021 motivated builders to get as many new apartment homes to market as quickly as they could, leading to higher-than-normal supply coming to market at the same time net in-migration comes down from pandemic-era heights. As a result, rents have remained steady over the last year and will continue to be impacted by a supply wave in the short-term.

Local policy makers wisely rejected rent control proposals last year, understanding that the magnitude of rent hikes were a temporary phenomenon and that government regulation could negatively impact housing supply, driving rents up even more. Now the data not only backs up those decisions, but also highlights how important a focus on supply is to moderating rents. This insight is particularly timely since several local jurisdictions are contemplating changes to their comprehensive plans and local development regulations that will influence apartment supply long-term.