Feb. 15, 2022

The city’s historically tight market for apartments isn’t budging much. Meanwhile, rents are increasing – in some cases as much as $200 per month, compared with last year.

The semiannual vacancy report from the South Dakota Multi-Housing Association that was released recently from a January survey found an overall vacancy rate of 3.1 percent, with more than 18,000 units reporting.

That compares with 6.65 percent a year ago and 3.25 percent in July.  The vacancy rate is the lowest in a decade, the association said.

“This continues to be an extremely tight real estate market with limited choices to rent and purchase,” the report said. “With the occupancy, though great for property owners, the lack of supply is pushing rents higher for the residents.”

A market-rate two-bedroom unit averaged $1,023 in January, up from $821 at the same point last year and $836 in July.

A three-bedroom unit was $1,174, up from $926 a year ago and $1,159 in July.

And that’s if you can find one. Vacancy in conventional rent properties was 2.88 percent, and that doesn’t mean even those units are actually available for residents looking for a place to live.

“So it could technically be lower,” said Jill Madsen, president of Bender Midwest Properties and chair of the association’s board of directors.

“We will hold a unit 30 to 45 days, but in this market it’s really hard to do because there’s somebody else who wants it now.”

Within her portfolio, “you would probably just have a few units to choose from,” if looking today, she said. “Even though a unit might be vacant, it’s already spoken for. So there are a very limited amount of units that are unrented.”

At Lloyd Cos., the story is the same.

“We’re still continuing to see record occupancy numbers,” said Ashley Lipp, vice president of residential property management.

“One of the biggest trends we’ve seen is our affordable housing portfolio year over year has taken a significant jump in occupancy, which is amazing, so really all sectors are performing well right now.”

Tax-credit apartments dropped to 5.14 percent vacancy, compared with 7.4 percent in July and 9.1. percent last year.

“I think it’s the sheer volume of people moving here,” said Lipp, who has experienced the same movement in her portfolio. “I think there’s just been a lot of people moving here from all backgrounds and that support all levels of housing. Rent prices are increasing as well, so this provides an affordable option for people that maybe a conventional apartment may be out of their budget.”

HUD properties reported a 1.35 percent vacancy, or three units, compared with 0.43 percent in July.

“This could just be the time of year or that the application process is ongoing, so the unit sits open awaiting approval,” the report said.

Rents are pushing up across the board. The most affordable on average would be a studio in the 57105 ZIP code at $503, but there aren’t any available. The next least-expensive option is a one-bedroom unit with a 57103 ZIP code averaging $663. The top of the market, at four and even five bedrooms, starts at $1,280 for a four-bedroom unit or $1,445 for a five-bedroom unit in 57104 in terms of what’s available.

“We understand that people have limited incomes, and for our current residents, we’re trying to minimize (increases), but we are having to do larger increases than in the past,” Madsen said, adding the useful approach is to adjust to market rate when a new tenant moves in.

“But this year, we’ve had to to do larger increases because the market is demanding it and because of increased costs across the board. It’s not just taxes. It’s utilities, labor, materials, appliances.”

COVID-related strain on the supply chain isn’t helping, added Lipp, who experienced similar increases.

“Pretty much every supply or labor chain out there” has been impacted, she said. “With increased costs comes increased rent prices as well. It is basic economics, supply and demand. You’re seeing home prices increase and alongside that rent prices increase too.”

While her company and others have hundreds of units in development and under construction, in many cases “those have been renting upwards of 90 days in advance from when they come online, so my best advice is you have to plan ahead.”

Those looking for an apartment right away should be prepared to move fast, she added.

“Rent concessions and specials are kind of a thing of the past, so don’t wait thinking you’re waiting for a special. There’s just not inventory out there right now,” she said. “If you find something you like and you need a place to live, you’ve got to snag it because odds are it won’t be available the next day or even the next hour. We have people filling out applications (online) for the same apartment, and it’s whoever hits submit first.”