Austin Apartment Occupancy Rises

Occupancy rates for apartments in Austin has surpassed 95% and all indications predict the rental market to grow even tighter. Why?

The reasons for higher occupancy rates are numerous and Austin is experiencing a “perfect storm” of sorts. Not only is demand higher due to a continuous influx of newly arriving residents seeking employment in a nationally respected job market, but also the number of new apartment units being built is far less than the expected population increase. According to a recent story on, Austin continues to receive 30,000 – 35,000 new transplants a year. In past years, the amount of lending and speculation for multi-family rental units was tightened significantly, slowing down the pipeline of new projects. As a result, the number of new units coming on the market today is far less than the number of people moving to the area. Only 4,000 units have been added in the past two years.  As many as 10,000 new units are breaking ground this year, but most will not be ready for occupancy for two years or more.

In addition, many renters are renting for longer. The housing market has tested confidence levels and the job market has left many fearing a long-term financial commitment as large as a house. So apartments stay full for longer, further driving up occupancy rates. More significantly, higher occupancy rates lead to higher rents. This is a simple supply and demand equation. When occupancy rises, that leaves a smaller supply of available units. As people move in, that leads to a higher demand for available units. High demand and low supply drives up prices. Thus, renters in Austin are currently faced with regular rate increases and should plan to continue to absorb those increases until occupancy rates drop back down.

The real estate market is keyed in on this dynamic. As rents rise (and the threat for future increases looms), apartment living becomes less attractive. Eventually, many renters will reach a point where owning will become more desirable. The specific situation in Austin right now is going to increase housing demand as rents will continue to climb, occupancy rates will creep further upwards, and renters will want to increase the value of the money they spend on housing. The result should be an uptick in residential home sales, especially for as long as mortgage interest rates remain near historically low levels.

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