City Hamstrung as Renters Face Crippling Costs

Rent increases have cooled some in Austin but remain some of the most severe among all U.S. metros -Source: Rent.com, updated Aug. 22

A spate of new data continues to illustrate just how serious the rent affordability crisis remains in Austin, though it's cooled slightly since the spring. In July, the average rent for a one-bedroom apartment increased by more than 28% over July of last year, per Rent.com data – more than in any large city in the U.S. with the exception of Phoenix. In June, as Bloomberg reported, Rent.com found that the average rent for a one-bedroom in Austin had spiked to $3,257 (a 108.23% year-over-year increase from June 2021), which seems to demonstrate either how wild rent is in Austin or how hard it is to accurately keep track of.

The average rent in Austin also remains higher than anywhere in Texas except Frisco, a Dallas suburb with nearly twice the median household income of Austin and a fraction of the rental stock.

"It's amazing to me that landlords and property managers are expecting people to be able to afford a place to live while their rates are going up, but people are getting paid the same thing they were 10 years ago," said Chas Moore, executive director of the Austin Justice Coalition.

Remarkably, this latest data from Rent.com qualifies as relatively good news: It shows Austin's rental market cooled somewhat this summer following a spring of even more dramatic price increases. Between April of this year and April of last year, for instance, Rent.com found the average one-bedroom rent more than doubled. Certain neighborhoods have been more greatly affected than others: Average rent in Central Austin is up a whopping 250% from this time last year, while average rent in Hancock is up 79%. Meanwhile, Northeast Austin is seeing similar rents to last July and Bouldin Creek's average rent has only risen 13%.

The housing market in Austin has been similarly hot, but the correlation between the rental and housing markets remained strong last month. According to the Austin Board of REALTORS, the year-over-year rate of increase in sales prices dropped to single digits in July for the first time in more than two years as the price of the average house in the Austin metro area rose just 8% to $515,000.

Of course, stable housing at those price points remains out of reach for many in Austin – including many longtime, nonwhite residents of the city who have seen their neighborhoods gentrify and dramatically increase in price. It has also badly affected younger people. According to data from the U.S. Census Bureau, the median annual wage for millennial renters in Austin is $41,885. With rent for one-bedrooms costing $1,503 on average in July, per Rent.com, the annual wage required to afford a one-bedroom rental without spending more than 30% of income on rent is $54,108.

"We're still seeing the struggle," Nora Linares-Moeller, executive director of HousingWorks Austin, said. "[The market] has cooled a little bit, but not enough. There's still a crisis based on inventory, based on increases of housing costs, based on the issue of some of the houses being bought up by corporations to be used as investments ... I think we're seeing all of those things still happen."

Austin City Council's new budget for fiscal year 2023 (beginning Oct. 1) made several concessions to the exorbitant cost of housing as well as high inflation in general, including a significant minimum wage hike for city workers and a pay increase for the council members and their staffs. In June, Council approved sending a $350 million affordable housing bond before voters in November – more than what affordable housing activists had initially sought.

But the question of how to lower rents in the city remains complicated, particularly as Austin is only at the forefront of what is very much a national problem. The median rent for a one-bedroom apartment nationally went up 25% in the last year, with Sun Belt cities seeing some of the biggest increases, while inflation-adjusted wages fell by 2.4% and were lower at the beginning of 2022 than they were prior to the onset of the COVID pandemic.

Austin in particular is hamstrung in its ability to comprehensively respond to the rent crisis by its state government. Texas has no law limiting how much landlords can increase rents from lease to lease, and bars municipalities from enacting rent control except under a very narrow set of circumstances and with gubernatorial approval. Not every city struggling with high rents is similarly encumbered. Voters in St. Paul, Minn., last November passed a sweeping rent control measure that capped annual rent increases at 3% regardless of inflation, and the results have been significant: While rents in neighboring Minneapolis increased on average 7.8% in the second quarter of the year, rents in St. Paul increased just 2.9%. At the same time, developers unhappy with the new law have largely stopped building new housing in St. Paul – a stasis that has the city council weighing significant changes to the law.

In Austin, City Council has approved $8 million to launch a new rental assistance program modeled on a program, which ended last November, designed to assist renters facing eviction due to the effects of the pandemic. The city has also set aside funding to establish a new tenant relocation fund, with the existing program out of money amidst various administrative and legal concerns.