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Hampton Roads Rent Report
Rents are getting spooky. In September, the total average asking rent across all units in Hampton Roads was $1,820 / month. That’s up from $1,802 / month in August. September also posted a new record for asking rents in Hampton Roads, surpassing the high of $1,812 in June.
In Norfolk, occupancy remains solid at 93.3%. That’s a low that we haven’t seen since August 2018. The good news is that September saw rents fall across a few unit types. Studios, 1 bedroom, and 3+ bedrooms all saw rents drop. The average asking rent for each unit type:
The average rent for each unit type:
Studio: $1,366
1 bedroom: $1,525
2 bedrooms: $1,740
3+ bedrooms: $2,284
But wait, how can the average rent be up when prices for some units are falling? We gather our asking rent data from public listings. Sometimes, listings will be ambiguous. For example, a listing might say “1 – 2 bedroom: $1,560 / month.” We don’t know whether that rent is for a 1 or 2 bedroom, but we can still factor it into our total average.
Know Someone Who Should See This?
1. City by City
2. Are affordable neighborhoods making a comeback?
No. Over the Summer, we took a look at how affordable neighborhoods were being concentrated in some cities and disappearing from others. The number of neighborhoods where the asking rent for a 1 bedroom apartment averaging below $1,200 was slowly slipping, and cities like Suffolk and Chesapeake had zero neighborhoods where 1 bedroom apartments were listed for less than $1,200.
Checking back in on that trend, it’s starting to seem durable. In September, Hampton Roads only had 37 neighborhoods where the average rate for a 1 bedroom apartment was below $1,200 a month. Most of those neighborhoods are in Norfolk and Newport News. Chesapeake and Suffolk still have zero neighborhoods where the average asking rent for a 1 bedroom apartment is below $1,200.
3. Is the BAH to blame?
"Accend investors earn attractive current income from rents and also long-term growth in the value of the property based on the prevailing dynamics of demographic demand for housing"Travel in the housing circles long enough and you’ll likely hear that a major culprit of the rise in rents is the BAH, or Basic Allowance for Housing. The BAH is money the government gives service members to cover living off-base. Every time the BAH goes up, so the thinking goes, landlords raise the rent because they know military personnel can afford it.Anecdotally it sounds true. But there’s very little evidence to support the idea that rents in Hampton Roads reflect changes in the BAH, or for that matter that landlords even look at the BAH. For one, I don’t know anyone who would seriously suggest that rents would suddenly drop should we see a decrease in the BAH. Especially given the ever-increasing portion of rent that is going to service debt owed by investors on apartment buildings.Still, let’s look at Accend Investments. Accend is an investment firm that owns the Watermark at Talbot, in Norfolk, and Ellipse Urban in Hampton. With rents ranging from $1,500 to $2,700 for 1 bedroom apartments, Accend seeks “attractive risk-adjusted target returns for our investors,” by acquiring properties near military bases…This ensures our investors a steady demand for their housing solutions for many years to come.” Accend says that “[the BAH] forms the basis of an Accend’s investment thesis – target tenants who can afford rents priced at an attractive level to their income – which, in turn, grows every year to accommodate rental increases. Accend investors earn attractive current income from rents and also long-term growth in the value of the property based on the prevailing dynamics of demographic demand for housing.” Accend leaves little room to doubt the influence of the BAH .But still, we’re left with a question. If everyone were following Accend’s model of using the BAH to set rents, what would make Accend’s investment strategy so unique? Why would they go through great pains to write pages of prospectus to convince their investors this is a model that works if it’s already commonplace?If everyone's using the BAH to set rent prices, why go through the trouble to woo investors with a unique model that's already commonplace?
4. CityWork at the Royal Geographical Society
CityWork Director Alex Fella recently presented at the Royal Geographical Society on the financialization of housing and Norfolk’s climate adaptation plan. Why is affordability being concerted to neighborhoods that will be abandoned in the coming decades and where are renters supposed to go?
A special thank you to Matt for sponsoring this report.