Tri-Cities rent affordability indices for Q2 show small declines. On the surface that’s good news for renters. But much of those declines are likely a reflection of incentives being offered by apartment complexes to keep their occupancy numbers up as new inventory comes onto the market instead of rent reductions.
The Johnson City Metropolitan Statistical Area’s (MSA) median rent in Zillow’s all homes category was $926, down 2.42% from Q2 last year. The same metric shows the median rent in the Kingsport-Bristol MSA is $952 down 6.86% from last year. Kingsport-Bristol is seeing more rental market competition than the Johnson City metro area. That’s being driven by a larger number of big apartment complexes that have or will soon be online in Kingsport and Bristol.
Zillow’s parallel chained rent value indices tell the same story as the affordability indices. Both MSAs peaked in the third quarter of 2017 then began declining. The Johnson City quarterly median is down $53 from the peak, and the Kingsport-Bristol median is down $72.
Kingsport apartment complexes ramped up the competition during the last quarter as work on the Town Loft complex continues at a furious pace. Property management for that complex is pushing to begin moving tenants into the first phase before the first of the year.
Owners of Brand Mill, Allendale Falls, Crosscreek and The Landings on Silver Lake reversed their no incentives position and launched an aggressive move-in campaign in early summer.
The owners of Tuscany Villas are upgrading and will be targeting the mid-range market as the newer higher-end complexes slug it out for tenants.
A ribbon cutting for the Villas at River Bend in August marked the official introduction of that complex to the community. It opened with high occupancy and expectations.
Shane Abraham, Universal Design and Construction Co. principal, recently told Realtors at a meeting of the Northeast Tennessee Association of Realtors Commercial Multiple Listing Service that it would take 18 months to two years from the apartment market to sort its self out after all the expansion that has and continues. He described the market as being like musical chairs as the complexes compete. He also said the market balance in Washington County was the best he has ever seen. Since then Mitch Cox has moved forward with plans for a 300 plus unit complex in Johnson City.
The townhome rental market is also beginning feel the competition as tenants weight the option of resort-style amenities in the new apartment communities for about the same rent they are paying.
The increase of renters over homeowners isn’t just a local issue. According to a national analysis by Zillow, the number of renters vs. those who owned their home increased about 5% from 2006 to 2016. Unfortunately, Zillow only looked at top-tier markets, so the Tri-Cities market didn’t make the cut. But the 2010 – 2016 local Census data mirrors the analysis findings.
Kingsport city officials extended incentives to several of the new apartment complexes. Their strategy is to attract new residents from outside the Kingsport. The Bristol expansion, which also received incentives, brought a better market balance to that city, so it isn’t seen as much of a rental battleground as Kingsport.
Meanwhile, the new rental market and the lack of new single-family construction continues chipping away at county and the regional homeownership rate.