Rental rate slump?

By: J. David Chapman/January 4, 2018

I’ve been thinking about the residential rental market in Oklahoma City this holiday season.

I own and manage several residential rental portfolios. In 2016, my portfolio rents peaked, leveled off, and now have decreased. I have had the feeling that OKC metro area renters are getting a bargain. So, I was not surprised by recent research showing that OKC offers renters the most space for their money of any large American rental market.

I have mixed feelings about this reality. I am an advocate of affordable housing; however, I also know landlords have to have adequate margins to continue investing and providing safe and adequate housing options.

According to the research, the average renter paid $953 for an apartment with 962 square feet. This works out to about $0.99/SF. This made OKC the only large American city with an average rent under $1.00/SF. In nearby Dallas, average apartment renters pay $1.53/SF, proving Oklahoma City offers renters a good value for their money, even regionally.

Another measure of affordability in the rental market is how much the average renter pays for housing as a percentage of income. As expected, OKC renters seem to be the big winners here as well. Average renters can limit their housing budgets to about 20 percent of income. At the other extreme, average renters in New York City pay 44 percent of income for rent.

Oklahoma was the only one of the 50 biggest rental markets that did not enjoy rental rate growth in the last few years, and in fact, experienced a decline of 0.6 percent. In 2017, we had an oversupply of residential rental units and lackluster demand in the metro market, leading to occupancy issues and rental rate challenges.

Landlords, don’t despair; 2018 should bring rental rate increases to the market. Even though some property owners may have struggled with stagnant rental prices, it’s fair to remain optimistic that the rental market in the city will begin to get stronger.

Many new rental developments that came on the market recently, and found themselves competing for occupancy, are filling up. Of course, the strength of the rental market in the city may be mostly influenced by our economic situation, so it’s a good idea to keep an eye on employment predictions and other indicators.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).