How The Recession Affects Apartment Rental Rates

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Apartment rental rates fluctuate during economic recessions and booms. How rates will be affected in your local area is dependent on several factors. These could have either a positive or a negative impact on your search for an apartment (or how much you’ll end up paying for your monthly rent). Here are some of the indicators to look for in your city.

Property Tax Rates

If your city government is in the red, you can rest assured that local politicians will try to increase tax revenues. Property taxes are one of the first things they look at. Renters pay property taxes through their monthly rent price. The landlord simply increases the rents to make up for property tax increases on their end. If your municipal government wants to implement a large property tax increase, you can expect apartment rental rates to go up.

The Credit Check

Credit dries up during a slow economy. If you already have a bad or damaged credit rating, a recession can make it more difficult to get into an apartment. A credit rating that was acceptable to get into an apartment a year ago might not be good enough now.

Job Rates

If there are heavy job losses in your area, this can have a short-term positive impact on apartment rental rates. If the jobs have gone away in your city, many workers will move on as well. This creates a scarcity of renters in the short term, compared to the number of apartment units available. Landlords don’t make money if an apartment sits empty.

In order to fill apartment units in this scenario, landlords will start to offer great deals to renters. They may stop requiring a credit check or offer to let renters move in without paying a security deposit. Overall, rent prices will drop in the short term as landlords try to lure tenants in.

The long-term effect is that when workers leave a city, the local government will eventually respond by raising tax rates. This will cause rental rates to snap back in the other direction down the road, as landlords try to recoup their losses through their tenants.

Scarcity of Apartments

Another danger of the recession is that if it lasts long enough, it will lead to a scarcity of rental apartments. If landlords can’t keep their units filled, they’ll eventually be unable to maintain their mortgage and property tax payments. Once that apartment building is defaulted, all of the units are suddenly off the market for renters. If several apartment complexes go under in your city, it will cause rates on the ones that are left to go up dramatically as demand increases.

Those are just a few ways that the recession can affect apartment rental rates in your area. Renting during a recession is still a better deal than having a mortgage, especially if you’re faced with a sudden job loss. If you can predict what your local market is going to do, you can position yourself to take advantage of apartment deals.

2 Responses to “How The Recession Affects Apartment Rental Rates”

  1. September 09, 2009 at 6:58 pm, Kelly said:

    We have noticed many property managers call to drop rates on their listings, particularly since the recession. Prices almost always go down when they change.

    Reply

  2. May 15, 2010 at 11:38 pm, Anonymous said:

    i don’t know

    Reply

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