For years, residents of the Midwest have been hearing accounts from friends and family members in major coastal cities about the eye-popping cost of rent in those places: In 2019, the typical apartment cost more than $3,000 a month in San Francisco and more than $2,500 in New York — both much higher than the roughly $1,500 per month it costs to rent an apartment in the Twin Cities, according to Zillow.
That changed with the pandemic. Suddenly, demand for apartments in New York and San Francisco dropped, and rents there went down.
Not so much in the Twin Cities. Data from Zillow show rents in the Twin Cities metro, which have been on a slow and steady rise for a decade, did stall during the pandemic, but have begun to rise again.
A drop in rents
In February of 2020, just before the pandemic forced the closure of much of public life, the typical rent in San Francisco was $3,091, according to Zillow, while the typical rent in New York was $2,689. (Typical rent is a measure compiled by Zillow designed to capture the overall rental market, taking into account changes in the rental prices of units regardless of their size.)
By the end of 2020, the typical rents in both San Francisco were down by nearly $300, to $2,800 in San Francisco and $2,412 in New York.
A mix of pandemic-related factors drove the drops, said Nicole Bachaud, an economic data analyst at Zillow.
Some of those factors were common across cities: young people moved back home with parents as colleges shut down or jobs were lost. People doubled-up as they lost jobs — plus, renters were more likely to have lost jobs in the first place.
Other factors were more pronounced for big cities like San Francisco and New York. These cities, which typically draw lots of people for jobs and lifestyle attractions, didn’t see much in-migration during the pandemic.
“Either there are no jobs or the jobs that people were moving for are remote now, and the amenities were not operating at full capacity, so there was less of a draw to move into these areas,” Bachaud said. Some of the residents who remained even managed to re-negotiate their rents down, something that would have been unheard of a few years ago.
At the same time, there was out-migration from them. For those able to keep their jobs and work remotely — as lots of tech and other white collar workers in these big cities could — many relocated out of the city, whether to suburbs or to other parts of the country. That increased vacancy in these cities, putting downward pressure on rents.
Conversely, some Sunbelt cities, like Phoenix and Tampa, where rents are relatively affordable — especially if you’re coming from the coasts — saw rents increase during the pandemic.
“If everything’s closed right now maybe moving to Phoenix is a good option for a lot of people,” Bachaud said.
The decline in rents in New York and San Francisco was driven by decreases in the upper end of the market, Bachaud said, which makes sense given the workers with the luxury to work remotely and move elsewhere — and it doesn’t do as much to help people in lower income brackets who were hardest hit by the pandemic.
Now, rents are starting to come back up in these places, and there’s evidence that whatever exodus happened from big cities was a temporary one as things reopen and people move back to enjoy the perks of big city life.
“Amenities are opening in cities again,” Bachuad said. “Those changes are going to draw a lot more people back into the cities that were kind of depressed during the pandemic, and so that’s going to help create a stronger rental market.”
What happened in the Twin Cities
In the Twin Cities, rent prices didn’t pull a San Francisco or a Phoenix. Instead, on-the-whole, they flatlined, or declined very slightly in some months. This was a departure from the slow increase that had been happening over time before, but it wasn’t a big drop.
“We didn’t really see a lot of the lack of in-migration or excess of in-migration that was happening in these other places,” Bachaud said.
Some of factors putting downward pressure on rents everywhere — young people moving back in with parents, and people doubling up — seemed to be at play here in Minnesota, said Minnesota Housing Commissioner Jennifer Ho.
Data from Minnesota Housing show average rents relatively flat over the pandemic as well, something researchers attribute to vacancy rates around 5 percent during the pandemic in the Twin Cities metro. According to Minnesota Housing researchers, when the vacancy rate is below 4, as it was for many of the years prior to the pandemic, rents tend to increase. When the vacancy rate is above 6 percent, rents decline.
Housing supply has also been increasing in recent years, something that may have contributed to higher vacancy rates during the pandemic than in years prior, Ho said.
However, as in other cities, Ho said she suspects rent declines tended to happen in the higher end of the market, and not in more affordable housing, where demand is very high for a limited number of units.
In the end, any aggregate dropoff in rents here wasn’t all that big. From before the pandemic to the bottom of the market, according to Zillow’s measure, there was only about a $30 difference in rents.
“I don’t really consider that a significant drop in prices,” Bachaud said.
One thing data do show in the Twin Cities, as in many cities, was concessions, like a free month’s rent, a waived security deposit, or free parking, which landlords sometimes offer tenants instead of rent reductions. From before the pandemic to the peak of concessions, the share of listings with concessions had doubled.
Now, data show Twin Cities concessions dipping again and rents back above pre-pandemic levels.
As for what the future holds, Ho says it isn’t clear: many people are now used to working remotely, and we don’t know how that will affect choices about where they want to live in the future. We also don’t know what will happen when the eviction moratorium currently in place ends. Another factor is whether more housing – particularly more affordable housing — is constructed that could help the rental supply better fit the economic profile of renters.
“There’s just a lot of factors at play right now,” Ho said.