Texas freeze damage will likely cause a rise in apartment occupancy
Last week’s catastrophic Texas freeze and resulting burst water pipes are likely to cause an increase in apartment occupancy rates and rents in some of the state’s markets. With many homes and rental units damaged by the epic storm, displaced residents will be snapping up vacant apartments for housing, according to a report by Richardson-based RealPage. “Occupancy in the state’s apartment stock seems apt to bump up a little over the short term, reflecting that some of the stock is offline for the moment and that a few of those who had been living in single-family homes may move into apartments for relatively limited periods of time while damages to their housing are being repaired,” RealPage analysts say in a just-released report. “Also, the units that were about to be delivered at the state’s many new properties have been delayed.” Texas has a metropolitan area apartment inventory of more than 2 million units, with the largest number in the Dallas-Fort Worth area at about 804,000 apartments, according to RealPage. Hundreds of those apartments were damaged in last week’s freeze and thaw. “Texas apartment owners, operators and residents are now in cleanup mode after last week’s record cold led to massive power outages, frozen pipes, flooded homes, water system contamination and food shortages,” RealPage’s report says. Before the storm, statewide apartment occupancy stood at about 93%. And in the Dallas area, almost 94% of apartments were rented before the big freeze. “The increase in occupancy probably won’t be big enough to meaningfully change the general performances in most places, especially given that there are lots of available apartments in the existing local inventories,” according to RealPage. “Occupancy could go up a little more in the Texas stock of lower-priced Class C properties. “Most of these Class C projects were built in the 1980s or earlier, with product age making them more vulnerable to plumbing and other structural damages.” At the end of 2020, the average apartment rent in North Texas was just under $1,200 – up slightly from a year earlier. “Coming into 2021, RealPage was forecasting modest rent growth in most metros across Texas,” the analysts say. “While the state’s big metros all seemed poised to realize substantial demand, very sizable completion totals – especially in Dallas and Austin – pointed to competitive leasing environments for top-end product. Only Fort Worth was expected to register strong rent growth momentum.” The apartment industry – which was already stressed by the economic shakeout from the COVID-19 pandemic – is bracing for millions of dollars in damage from the freeze. “The cost of repairs to the rental stock will be huge, stressing budgets that were already stretched by increasing expenses at a time when revenue growth has been relatively weak in most cases,” according to RealPage.