A slew of new apartment developments is headed to Denton, but local brokers say they may not be enough to meet the demand the rental market is seeing.
Denton Grove, a 276-unit apartment community on South Loop 288 and Duchess Drive was granted a specific-use permit to begin work in September. Trammell Crow Residential, a Dallas apartment builder, is also planning a 378-unit rental community near U.S. Highway 380, and Denton City Council members approved in April a resolution allowing developer Pebblebrook Parkside to apply for a 4% housing tax credit program for its planned 216-unit build at McKinney Street and South Loop 288. In the latest plea to council to support new apartment construction, LDG Multifamily also sought “a resolution of no objection” in early May to apply for the same 4% tax credit for its planned 240-unit complex on Vintage Boulevard, Vintage Ranch.
The developments will help meet a growing demand for rentals in the area — a study by Reinvestment Fund and Atria Planning revealed that almost 9,500 rental and other units will need to be built over the next five years to keep up with growth, the Denton Record-Chronicle reported in February. Similar to the North Texas housing market, rental inventory has dried up, with renters struggling to find available units.
“There’s hardly any vacancy — a lot of places used to have vacancy in apartments, like they would maybe be booked 80% or maybe even like 70% but now a lot of places are booked 99% — they don’t have anything,” said Noreen Lodhi, real estate agent at Texas Ally Real Estate Group.
With housing prices in North Texas driven up by rock-bottom inventory many would-be homeowners may be forced into leasing until they can find a home, intensifying need — and prices — for new units. Apartment rentals averaged out at a record of almost $1,200 a month at the end of 2020, with new builds costing more, according to the Dallas Morning News.
“They (the rental units) will probably be a welcome sign in many cases for the folks that have been priced out in the housing market — it can help mitigate some of the effects for the folks who can’t find a house, or at least find the right property to buy at current prices,” said Aaron Layman, owner-broker of Aaron Layman Properties.
The developments are marketing themselves as affordable, with rent estimated at between $753 and $1,793 for the one-, two- and three-bedroom units at Pebblebrook and between $970-$1,500 for rentals at Vintage Ranch, which offers up to four bedrooms. The Trammell Crow apartments will be built under the Allora brand, with units designed to be “delivered at a lower price point” than the builder’s top-market communities, Trammell Crow senior managing director Matt Enzler told the Dallas Morning News.
The federal Department of Housing and Urban Development considers “affordable housing” a dwelling that a household can obtain for no more than 30% of its income. The median household income for Denton was $60,018 between 2015 and 2019 — meaning a property would need to cost no more than $18,005 per year, or $1,500 monthly, to be affordable.
But the pandemic brought economic troubles and unemployment for many Americans. One in four adults reported having trouble paying their bills since the pandemic began and 5.6% of Denton County residents were still unemployed as of March, compared to 4.2% last year — meaning affordability may look different for households in 2021.
“Developers will have metrics as far as the median that they’re using to collect those [tax] subsidies, but in a lot of cases from what I’ve seen, the metrics that they’re using might be dated so when they’re calling it affordable, it might not necessarily be reflective of the current market,” Layman said.
Another factor influencing the rental and housing markets is the increased price of lumber, which is up 340% from a year ago. Part of the reason for the increased cost is production hurdles brought on by the pandemic limiting supply. But the costs could also be a side effect of the $120 billion per month in asset purchases from the Federal Reserve, which are facilitating investor purchases that add to market instability, Layman said.
“The liquidity that they’re dumping into the system is all trickle-down, so all that liquidity goes to existing asset holders first, and then whatever’s left trickles down sometimes into the real economy, but not very often and not very well — that’s the problem we’re seeing,” Layman said.
Further contributing to low supply is the continued influx of people moving to Dallas-Fort Worth from other states, particularly during the pandemic. Without a rapid jump in both rental and for-sale properties, it is unlikely North Texas housing will truly be affordable anytime soon.
“I think when we have more inventory, then the prices will stabilize, [but] I don’t know if prices would ever go down,” Lodhi said. “If there is a huge influx of rental properties, the market might get better but that’s hard to predict because if there’s more people moving here from California and other places, we might be in a perpetual cycle of low inventory. I think a lot of people are expecting that rental prices or house prices are going to go down, and I just don’t think they will.”