Apartment

Despite the active construction of apartments, rent increases are expected to continue

In the first six months of the pandemic, Glastonbury-based apartment builder and investor Trio Properties priced rents among its roughly 3,000 units “conservatively” due to concerns about continued tenant capacity. to pay.

Jeremy F. Browning, chief executive of Trio, said it quickly became clear that tenants were managing to keep their jobs and stay put thanks to record lease renewals. Demand was high and rents rose accordingly, including an 8% to 10% jump over the past year, he said.

Industry-wide, typically about half of tenants renew their leases. Since the pandemic, Trio has seen 70% to 85% renewals at various properties in its portfolio, which Browning attributes to growing demand and low availability.

“As we realized that people were still working, maybe differently, but still having gainful employment and paying rent, we were able to get back to our normal flow of market pricing,” said Browning said. “And this trend continued for 18 to 24 months. A really good, strong and sturdy rental cycle.

Connecticut continues to have many housing projects underway, including hundreds of new apartments expected to come online in downtown Hartford this year. But the pace of new construction slipped in the state last year, led by a sharp drop in the number of new building permits drawn for multifamily development. Builders and housing advocates don’t see enough new apartments coming online to significantly slow rising rental costs — a phenomenon happening nationwide — any time soon.

According to online housing market Dwellsy.com, the median monthly asking rent for Connecticut apartments rose about 10% in February from a year ago to $1,700. Rental costs for single-family homes jumped 16.4% from $1,800 to $2,095 over the same period, according to Dwellsy.

Analysis of MLS data by real estate broker Redfin shows rents jumped 15.5% nationwide, from $1,646 to $1,901, between February 2021 and February 2022.

The number of building permits for single-family homes issued in Connecticut continued its strong three-year rise in 2021, according to US Census Bureau estimates, but multi-family construction has been hit hard.

In 2020, Connecticut saw permits withdrawn to build 2,959 multifamily housing units (two or more units), according to census estimates. That fell by nearly half, to 1,610 multi-family units in 2021, according to preliminary census estimates.

Matthew Gilchrist, first vice president of the Home Builders and Remodelers Association of Central Connecticut, said government building codes and energy efficiency requirements combine with supply chain issues to drive up costs of construction.

“Right now we have unprecedented costs to build anything,” said Gilchrist, chairman of Southbury-based builder EG Home. “There is a problem of supply and demand; a scarcity problem in the economy and the government is constantly making building codes and energy codes more and more stringent. This will only make the problem worse. It will get worse until we find a way to ease supply chain restrictions or government restrictions. »

Many factors are propelling rent increases

The pandemic-driven phenomenon of remote work has increased demand for rental housing, one of the factors pushing rents up, said Kolie Sun, senior research analyst with the Connecticut Department of Economic and Community Development.

Additionally, the number of building permits for apartments and condos withdrawn in Connecticut has fallen for two years in a row, Sun noted.

Supply isn’t the only factor driving higher rents, Sun said. Inflation and interest rates also play a role.

Kiley A. Gosselin, executive director of housing advocacy group Windsor Partnership for Strong Communities, said supply is not expected to catch up with demand and temper rental prices anytime soon.

Connecticut municipalities have long resisted housing density, especially multifamily development, through restrictive zoning, Gosselin said.

“The challenge for Connecticut is to have a multi-family so underbuilt for so many years, there was already a supply and demand issue before the pandemic poured gas into it,” said Gosselin.

Young renters are competing with people trying to sell their homes and downsize. Gosselin said the housing shortage and high costs have a direct impact on the available labor force and Connecticut’s ability to grow its economy.

“If we don’t build housing for all types of people, our economy will continue to struggle to grow,” Gosselin said. “We’re still focused on building single-family homes on larger lots.”

It can take years to design, license and build large multi-family projects, Gosselin said. So even if policy changes are coming or incentives for multifamily construction improve, it will take a long time for supply to meet demand.

“We’re not building enough to meet the growth in demand, let alone the deficit we were in,” Gosselin said. “It will take decades to get out of this because we have hurt the multifamily market so badly in this state.”


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