Apartment Vacancies Hit 10-Year Low
Nationally there's a boom for apartments and Milwaukee is helping to lead the way.
Apartments under construction.
Why does your rent keep rising? It’s all about supply and demand. Few apartments are available as the rental vacancy rate in Milwaukee is the lowest its been in a decade.
Milwaukee’s apartment vacancy rate is more than a percentage point below the national average according to the United States Census Bureau. In the fourth quarter of 2015, the Milwaukee metro area recorded a rental vacancy rate of 5.6 percent, while the national average hovered at 7 percent.
Rental Vacancy Rates in Milwaukee
As the graph here shows, the rental vacancy rate can jump back and forth but has mostly declined over the last decade, except for a spike upward to 17 percent in the fourth quarter of 2012. The vacancy rate plunged to as low as 2.8 percent — the seventh lowest rental vacancy rate in the nation — in the third quarter of 2015. The region averaged a vacancy rate of 4.55 percent for all of 2015, exactly matching its performance from 2014; both figures are the lowest in at least 10 years.
Milwaukee, in line with the rest of the nation, has seen a steady decline in the apartment vacancy rate since 2005. This comes at the same time thousands of apartments have recently opened in Milwaukee and the rest of the region. Yet, as we’ve reported, thousands more apartments are still coming to the market and the Census Bureau figures suggest the still booming demand will absorb the new units quickly. This is in line with individual buildings we’ve profiled, including The North End, which is 96 percent occupied and the Brix Apartment Lofts which is 100 percent full.
Where are all these renters coming from? Certainly the Great Recession and the foreclosure crisis that came with it was a big factor, but the changing demographics and preferences caused by a wave of Millenials coming of age is also a contributing factor.
Also at play in Milwaukee is a low rate of homeownership relative to the rest of the country. Renters are nearly as prevalent as home owners in the region, with 45.6 percent of residences being rented, versus 55.4 percent being owned. According to survey data for the fourth quarter of 2015, the only metro areas with a lower rate of homeownership than Milwaukee are Las Vegas, New York City, San Diego, Los Angeles and San Jose.
About the Data
The rate is compiled as a single figure for the four-county, Milwaukee metropolitan statistical area, which includes Milwaukee, Waukesha, Washington and Ozaukee counties. The population for this region according to a July 1, 2014 release from the Census Bureau is 1,572,245, a 1.05 percent increase from the 2010 census reported amount of 1,555,908.
For those that love a good spread sheet, the Census Bureau makes all of the data publicly available.
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Any thoughts on why the Milwaukee area has such low rates of home ownership? It’s really odd to be among some of the priciest cities in the country, especially considering the cost of area real estate. Are area wages or rates of saving really that low? Is our population unusually transient/unwilling to settle down here?
@Devin – That was definitely something that stood out to me as well. A bit beyond the scope of the article, so I had left it out for the time being.
I just went digging into the data and found that in 2005, Milwaukee ranked 22nd lowest in home ownership. All of the cities that have less than Milwaukee now had less than Milwaukee then. Without a really valid statistical validation (or other evidence), I would guess the metro area got hit pretty hard by the foreclosure crisis than others AND was already at a lower ownership rate.
Knowing that rentals are often denser than owner-occupied single family homes, I would suspect Milwuakee’s position as the 14th densest city in the country (by population-weighted density) is also a factor. Milwaukee might just have more rental style units per capita than other cities for a variety of historic reasons.
Without any stats to back me up, I think there are several reasons Milwaukee has a higher rental rate.
1) Duplexes. As noted on this site previously, Milwaukee has one of the highest duplex rates in the country.
2) Forclosures. Forclosures hit, and continue to hit, Milaaukee pretty hard wiping out a lot of home ownership that we did have.
3) Neighborhoods. A lot of neighborhoods in Mulwaukee are still struggling. Lots of new transplants (especially if they are young and/or white) look to live in the corridor from bay view to shore wood which is dominated by apartments and duplexes.
In addition to what Michael (#3) said, I’d add that Milwaukee also has a pretty decent stock of studio apartments (the small and inexpensive ones, not just the expensive ones) compared to a lot of cities. These are important rental options for students, younger folks, and single people with lower incomes. Many southern and western cities do not have as many studios because they’re more common in older, denser cities.
Also, if I recall correctly, Milwaukee has a relatively high level of college students in its population. There are lots and lots of UWM and Marquette renters, in addition to those from the smaller schools. I don’t think those numbers are quite so high per capita in some other large cities. Take Oklahoma City, San Antonio, Charlotte, Jacksonville, Kansas City, Albuquerque, Phoenix, Indianapolis for example.
Milwaukee has some of the highest property taxes in the country. Combine high taxes with low/flat growth in home prices for the past decade and renting tends to be the better option financially [0]. This would explain Milwaukee’s relatively low rate.
[0]: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0