Spurred by an influx of new residents and ever-increasing home prices, rental rates in Chattanooga jumped by more than twice the national average and far outpaced the growth in wages for workers in the past year.
Chattanooga ranked among the top U.S. markets for apartment rent increases over the past 12 months, according to a new study by the housing website Zumper released Tuesday.
The price of a typical one-bedroom apartment in Chattanooga has risen 16% since July 2020 to an average $1,160 a month, Zumper said. Two-bedroom units, on average, rose an even greater 17.5% in the past year to $1,210 a month in the Chattanooga area.
Chattanooga's rental rate increases were more than double the 7% gain nationwide for one-bedroom units and the 8.7% increase in U.S. average rates for two-bedroom units.
"Rent in every part of the country is on the rise - and rapidly," said Jeff Andrews, a data journalist at Zumper who helped compile the report. "The first year of the COVID-19 pandemic caused home price appreciation to rise at unprecedented rates, as homeowners and prospective buyers flooded local housing markets in hopes of adapting to quarantines, working from home, and other pandemic-related lifestyle shifts. In the second year of the pandemic, the same thing appears to be happening in rental markets."
Despite the overall increase in average rates in the past year, Zumper found rents declined by more than 10% in the past year in some high-cost major cities like San Francisco, New York and Oakland, California as some workers left those cities and relocated to more affordable markets to do their remote jobs.
Top cities for rental rate rises
For a 2-bedroom rental unit in each metro area, the fastest growing rates in the past 12 months were in these cities:1. Cleveland, up 23.6% to $1,360 a month2. Detroit, up 22% to $1,100 a month3. Reno, Nevada, up 19.9% to $1,630 a month4. Scottsdale, Arizona, up 19% to $2,500 a month5. Gilbert, Arizona, up 18.4% to $1,800 a month6. Chattanooga, up 17.5% to $1,210 a monthSource: Zumper National Rental Report
The influx of such workers into Chattanooga, combined with land restrictions and rising home prices in Hamilton County, has kept many renters from becoming home buyers. The median price of homes sold the Chattanooga Realtors last month was up by more than 22% from a year earlier and that appears to also be raising rental rates in Chattanooga as a bigger share of residents choose to rent rather than buy their housing.
Outside investors lured by cheaper property prices in Chattanooga than in neighboring Atlanta and Nashville also have bid up the price of apartments with such investors spending nearly $500 million in the past five years to acquire existing multi-family facilities in Hamilton County.
Zumper noted that many Atlanta suburbs have seen a steady influx of population over the last decade, and, as a result, rents for two-bedroom units have jumped in Marietta and Duluth by 20% in the past year.
"Atlanta may not have been thought of as a pandemic destination, but that hasn't prevented it from posting some of the largest year-over-year rent gains in median rent in the country," Andrews said. "While the city of Atlanta itself has experienced relatively modest gains of .8 to 10.1%, the suburban area surrounding it has seen enormous growth."
But Zumper said the soaring market for apartments could quickly change if the delta variant of the coronavirus spreads and brings back the pandemic and its economic slowdown.
"If the pandemic spins out of control yet again, what happens in rental markets after that is anybody's guess," Andrews said.
Contact Dave Flessner at firstname.lastname@example.org or at 423-757-6340.