Florida Real Estate Insider: Rising Rents Hit Smaller Cities Hardest

By Swapna Venugopal Ramaswamy

Remote work increased small-city demand, with two Florida ones in the top 10: St. Petersburg rents rose 56.7% for one-bedroom, Hialeah 49.2% for two.

ST. PETERSBURG, Fla. – Rents have spiked throughout the country in the last year, but smaller cities have been hit particularly hard. Topping the list for the highest rental increase for a one-bedroom apartment was Gilbert, Arizona, a town with a population of 267,000, where rent jumped 117% from September 2020 to $1,866 in September 2021, according to an analysis by Apartment Guide.

Seven of the top 10 cities that experienced the biggest surge in rents for one-bedroom apartments have populations of 300,000 or less. Other small cities in the top 10 include Spokane, Washington; St. Petersburg, Florida, Boise, Idaho; Birmingham, Alabama; Irvine, California; and Scottsdale, Arizona.

While rents continue to rise at a breakneck speed nationally, increasing by 20% from September 2020 to September 2021, renters in the top 10 cities experiencing the biggest rental hikes were shelling out at least 40% more.

Brian Carberry, senior managing editor for Apartment Guide, says the shift began during the pandemic when remote work options enabled more people to move out of larger cities.

“Smaller cities on a whole tend to not have as much inventory as larger cities, so when the competition increases, rent prices tend to go up as well,” he says.

He also said some smaller cities may be actively working to revitalize their downtowns to attract more residents, and as apartment buildings open, landlords may price them a bit higher as they are new and in popular areas. If a greater number of higher-priced rentals go on the market in an area, it will drive up average rent, he said.

Six of the cities with the biggest increases in two-bedroom rent prices year-over-year also have populations of 300,000 or less. They are Huntington Beach, California; Reno, Nevada; Hialeah, Florida; Irvine, California; Glendale, Arizona; and Scottsdale.

For example, in Huntington Beach, rents surged by 59% to $4,252 for a two-bedroom lease.

In October, shelter costs, which make up one-third of the consumer price index, increased 0.5% and are now up 3.5% year-over-year, contributing to the overall three-decade high inflation rate of 6.2% compared with a year earlier.

Rents will continue to be a persistent factor in rising inflation rates, says housing analyst Logan Mohtashami.

“We have a lot of people who weren’t able to buy a house because they’ve lost their bids in a very low inventory environment,” he says. “So you have some very well-to-do households that easily have the ability to pay these higher rent increases.”

The trend of rising rents is here to stay because millennials, the largest demographic group in the U.S., are entering their homebuying years, he says.

Rents for single-family homes rose 10.2% nationally in September, the fastest year-over-year increase in 16 years, according to a new report from CoreLogic. The rental rates for single-family units nearly quadrupled from a year ago, the report found.

“Strong job and income growth, as well as fierce competition for for-sale housing, is fueling demand for single-family rentals,” writes Molly Boesel, the principal economist for CoreLogic, who authored the report.

Miami topped the CoreLogic list with the highest year-over-year rent growth in September with an increase of 26%, followed by Phoenix at 20%.

The vacancy rates of single-family rental homes remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double digits in September.

“Rent growth should continue to be robust in the near term, especially as the labor market continues to improve,” says Boesel.

Cities with the biggest increases in one-bedroom rent prices year-over-year: