When the NASDAQ stock market crashed in early 2000, technology companies in Austin were hit hard and had to lay off many employees. Austin also had a large number of dot-com companies that went under in the tech bust, so all of their employees were laid off. Tens of thousands of Austinites lost their jobs. This put the Austin economy in a tailspin and the occupancy rate of apartment rentals plummeted down to around 87%. With the occupancy rates this low, rental rates also plummeted. With rental rates so low, all construction of rental property stopped and all planned projects were pulled. This was very shortsighted of developers.
From 2001 through 2006 almost no new rental property was built in Austin. The Austin economy though steadily improved during this time. Starting in 2004 the Austin economy really started to pick up steam. Austin became known as the place to be, and many people moved to Austin from all over the country. The Hi-Tech business also improved greatly and Austin tech companies started hiring again. The occupancy rate during this time period steadily climbed. Then in the fall of 2005 Hurricane Katrina hit the New Orleans area. Thousands of people from the New Orleans area moved to Austin and rented thousands of apartments. In a city the size of Austin, a thousand apartments being rented in a span of a few weeks, immediately increased the occupancy rate to 95% or 96%. The Austin economy as steadily grown since the fall of 2005 and now the occupancy rate is near 100% in certain areas, especially central and downtown Austin. Finally, new rentals are being planned and built, but this takes time. Also developers are targeting the high end market and the average new rental being built in central Austin is priced at over $1100 for a 1 bedroom apartment. With the occupancy rate near 100% in certain areas, it has turned into a landlords market, with landlords able to raise rent by hundreds of dollars per month.
Central Austin has seen the worst of the rental increases with many older cheaper apartments being bulldozed for new high end condos or remodeled and sold as condos. Some apartments on South Congress that used to rent for the mid $600's just a year ago are now sold as condos and renting for over $1000. There are actually thousands of fewer apartments in central Austin then there were just 2 years ago, and supply and depend means prices go up..
Last but not least is property taxes. Rental property has no exemption from property tax increases. (If it is your homestead, it can only go up 10% a year in Texas) Little shack houses in central Austin are now being appraised at $350,000 by Travis County Appraisal District. At the 2.5% tax rate, that means the property taxes are $8750 a year, or $729 per month! That does not include mortgage payments, insurance, PMI, repairs etc. I had someone the other day ask me why there are not any decent landlords willing to rent out their house in central Austin for $800 per month anymore. It is not because landlords are greedy, it is because they can't break even at that rental rate, and would have to take a big loss. The reason we don't rent houses is that even at $1200, houses for rent are usually in terrible shape.
Last thoughts on subject. Please don't blame us that rental rates have skyrocketed!! We have had a lot of people lately get angry at us about rental rates and get nasty. I wish we controlled the multi-billion dollar Austin rental market, but we don't. We can only show you the best options available in your price range in the Austin market. We are really here to try to help you, but can't change the market. If you are on budget, you might unfortunately have to consider living further from downtown than you are used to.
