A bottleneck is a scenario where something stops a process from occurring, which leads to a back up in that activity. At the start of the global pandemic, economies shut down, people stopped moving, and unemployment soared, causing a bottleneck for many production lines, economic activity, and real estate transactions.
Not only has it led to real estate prices rising faster than ever before, but it's also having a huge effect in the rental market. The Tampa Bay area of Florida recently became the fastest growing rental market in the country, with rental rates rising 15.6% in the first half of 2021, over triple the normal rental rate increase.
The stats behind Tampa Bay rents
The Tampa metro, which includes the four counties of Hillsborough, Pinellas, Pasco, and Hernando, now puts cities like Tampa, Saint Petersburg, and Clearwater at the top for rental rate growth. The area's explosive rents have even outpaced other hot real estate markets like Austin, Texas, which saw an increase of 15.3%, and Raleigh, North Carolina, which saw a 14.9% increase.
The average size rental for St. Petersburg, Florida, is 870 square feet. At the start of 2021, the average price per square foot in the Tampa metro area was $1.41, meaning a 870-square-foot rental property would run around $1,227 a month. Just six months later, the average price per square foot is now $1.63 per square foot, making that same unit run $1,418 or more. And it's likely rental rates won't cool anytime soon.
As a St. Petersburg native, I can personally speak to the insane rental growth the area is seeing. It's extremely difficult to find a rental property under $1,200 in a desirable or safe neighborhood, even for the smallest rental units.
Why are rents rising so quickly?
Several factors are coming into play creating the perfect storm of events. With the influx of low interest rates and a shortage of homes, real estate values are through the roof. The Tampa-St. Petersburg-Clearwater metro area saw a 21% year-over-year change in 2021, according to the National Association of Realtors metropolitan affordability statistics. This surge has put home affordability into question for many potential homebuyers, making renting marginally more attractive than the nosebleed asking prices for homes.
There is also the increased demand for housing in the state of Florida as now remote workers seek out a place that has warm weather where outdoor activities can be enjoyed year round and comparatively lighter COVID-19 restrictions are in place.
Many Realtors and residents of the area are feeling the pressure and acknowledge that income is not keeping pace with the significant cost of living increases. Many renters can't afford to renew or enter into new leases because of cost. Landlords are definitely benefiting from the boost in rental growth over the past year, but long-term sustainability is a growing concern. No one knows if and when the rental market will cool, and only time will tell if things will come down. But for right now, one thing is certain: The rental market in the Tampa Bay metropolitan area is on fire.