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$1,700, $2,900, $3,200 a month? What’s the real cost of rent in Austin?

Monday, October 10, 2022 by Audrey McGlinchy, KUT

The rent in Austin is too damn high. But how high?

Recently, Axios published data showing the median rent in Austin is a whopping $2,930 per month. (That includes rental homes of all sizes.) Another report from Bloomberg published in July, and which cites data from Rent.com, says a one-bedroom in Austin goes for $3,257 a month.

Which of these reports gives us the best sense of what people are actually paying in Austin?

Probably neither. Let me explain.

 

So, is it $2,930 a month?

This number comes from Dwellsy, a rental listing site launched in 2019.

In a recent report, the company used the listings on its site to calculate the median asking rent for a home of any size in the Austin metro. (This is an important note. The Austin metro stretches from Round Rock to San Marcos.) What did it find? The median rent for a place currently on the market was $2,930 a month – a number just $100 shy of the asking rent for places in New York City.

This data is limited, though. First, Dwellsy is pulling these numbers from its own listings; unless a landlord has posted their home on its site, Dwellsy doesn’t have the data. (This is true of other rental listing companies that publish data, including Zillow and Rent.com.)

Second, there are a lot more single-family houses for rent on Dwellsy’s site than represent the portion of single-family houses renters occupy in the Austin area. Roughly half of Dwellsy’s listings are single-family homes or townhomes; in the Austin area, roughly one quarter of renters live in single-family homes or townhomes, according to the latest census estimates.

CEO Jonas Bordo said he thinks Dwellsy's single-family home data could be skewing the numbers higher; because single-family homes are typically larger than apartments and sit on more land, they tend to rent for higher prices.

“I think we are oversampling single-family homes a little bit,” he said.

In the Dwellsy report, the company also notes that rent prices in Austin have risen 86 percent annually. That number measures listings from August 2021 against listings in August 2022. That's not a great way to measure price increases over time. For example, if the company had only small, cheap apartments listed for rent on its site one year, and then large, extravagant single-family homes the next, the percentage reflects a change in types of homes and not prices.

Economists agree the best way to get an accurate percentage is to compare the same apartments to each other year over year; this is called a repeat index.

Bordo called this criticism “fair.”

“What we're trying to do is give a renter's view of the world,” he said. “The renter who was looking for a place last year, during the same time period, what would they have seen in terms of availability in the market versus the renter who is looking this year? And how has that changed?”

OK, then. So, how did we get to $3,257 a month?

This number comes from a report published by Rent.com, another rental listing site.

According to the methodology posted online, the company is getting to this (very high) number by, again, using the listings posted on its site. If a landlord isn’t using Rent.com, the company is not gathering that rent data.

In that same report, which represents June 2022 data for the city of Austin (not the metro area), the company reports that rent prices more than doubled over the past year. In an email, Rent.com confirmed that it does not compare the same apartments over time (like Dwellsy), but simply averages the asking price of its listings one year and compares that to the average price the next year.

That raises the question: What kinds of units get posted on listing sites such as Dwellsy and Rent.com? Jake Wegmann, an assistant professor of housing and real estate at UT Austin who has written a paper on the lack of good rental data, said the internet is not where many renters find lower-priced homes.

This could mean the rent prices on listing sites are higher than what people are actually paying.

“It's not like only rich people are using Zillow,” Wegmann said. “But low-end rental units are less likely to be on something like Zillow. … A lot of more low-end rental units will get advertised via word of mouth or just a (for rent) sign.”

Others, including Bordo with Dwellsy, agreed with this characterization.

“A lot of those folks who are buying yard signs are not yet in our dataset,” he said.

Are there better measures?

KUT spoke with economists, real estate professors, rental listing companies and rent data firms for this story. Many people agreed there’s not a one-stop shop for comprehensive rent data as compared to data about what homes sell for.

For example, county appraisers calculate annually what every home in the region would sell for; the same is not done for rents.

“(Rental data is) less complete and it's more scattershot and it's measuring different parts of the market,” Wegmann said. “It’s sort of pick your poison.”

As for the "poison" of rental listing sites, Charles Heimsath, who runs Capitol Market Research, doesn’t even bother: “I just ignore them because they're nonsense,” he said.

A "poison" Heimsath won’t always ignore is rental data from firms that survey landlords. These firms call hundreds of landlords each month and ask: If one of your apartments were to be available right now, what would its monthly rent be? (KUT uses rent numbers published by data firms like these.)

That’s what people at Austin Investor Interests LLC do. Robin Davis, who owns the company, said one thing it includes when reporting rent prices are any discounts landlords offer.

“Let's say they're charging X amount for their market rent, but then they're offering one month free. That's going to annualize out at a much lower rate,” Davis said. “We only track what they're actually getting for their rents.”

But this data has its limits, as well. Many of these companies, including Davis’, only survey landlords who own 50 or more rental units. This leaves out small-time landlords, and in many cases, single-family home data.

Plus, landlords need to pick up the phone and answer the questions about rent prices truthfully.

“We sometimes have to call the properties 12 to 20 times to reach someone,” Davis said.

Given these limits, the rent prices these companies reported for this summer are much lower than the Dwellsy and Rent.com data. For example, Davis’ company found that for the third quarter of 2022 (July through September) someone renting in the Austin area was likely to pay $1,720 for a rental house of any size.

As for how much rent prices rose over the past year? Davis and other owners of data firms KUT spoke with put that closer to 10 percent – not 86 percent.

What's at stake if we don’t have great data?

Whichever "poison," or rent price tag, you go with could have significant consequences.

For one, people considering moving to Austin might see a number like $2,930 a month and choose not to come here.

"It could be harmful in the sense that other people thinking of moving here think, ‘Oh my gosh, I can't afford that. I'm not going to move there,’" Liz Mueller, a professor of community and regional planning at UT Austin, said.

Inflated numbers could also harm renters’ abilities to bargain with a landlord if or when they face rising rent prices. For example, if a renter believes rents have gone up 86 percent in the past year, they might think a smaller increase is a deal.

"It puts them at a disadvantage and leaves them not accurately understanding what they might be able to bargain for in their own housing situation,” Jeff Tucker, an economist with Zillow, said.

So, next time you come across big rent numbers here in Austin, take a breath. Ask where the data comes from. It could be that the price you’re seeing crumbles when held up to a smidge of scrutiny.

This story was produced as part of the Austin Monitor’s reporting partnership with KUT.

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