Carl Whitaker, Market Analyst, RealPage

Q&A With Carl Whitaker of RealPage: Miami’s Rent Growth Moderates Amid Wave of New Supply, But Market Remains Pricey

by Channing Hamilton

Developers have responded to Miami’s influx of well-heeled renters with a heavy Class A development pipeline and rents that rival some of the nation’s most expensive places to live. The city is also under the gun to create more housing for its low- and middle-income residents. Multifamily & Affordable Housing Business talked with real estate economist Carl Whitaker of RealPage’s data analytics division about rents, development and the Miami market’s unique ability to retain renters. 

MAHB: Could you share with us the most recent data on average effective rents, occupancies, deliveries and absorption and how that compares with the same quarter one year prior?

Whitaker: The average effective rent in the Miami market as of the fourth quarter of 2023 was $2,548, up from $2,484 in the fourth quarter of 2022. The average occupancy rate was 95.3 percent, down from 96.5 percent a year earlier.

Miami developers delivered 7,453 units in 2023, which was a 2.3 percent increase of existing stock. Miami’s annual absorption for 2023 was 3,286 units. Deliveries totaled 5,343 units in 2022, and absorption was 1,016 units. 

MAHB: As far as rent growth and occupancy are concerned, how does Miami compare with similarly sized Sun Belt markets?

Whitaker: Miami had been one of the nation’s most rapidly growing markets in the country from a rental rate perspective. At one point at the peak in 2022, Miami rents were growing about 24 percent year-over-year. That’s quickly slowed, however, landing just a touch above 1 percent as of the fourth quarter of 2023.

That 1 percent ranks 16th among the top 50 U.S. metros, so it is still well ahead of the national average of 0.3 percent. Further, Miami ranks third among major markets in the South region, with only Washington, D.C., and Virginia Beach, Virginia, ahead of Miami. But if you look at the Sun Belt alone, Miami still ranks No. 1 among the major Sun Belt markets. 

MAHB: Is Miami among the most expensive cities for apartment rental rates? 

Whitaker: Miami rents are not only well ahead of Sun Belt regional norms, but they’re also among the highest in the country. The average rental rate of $2,548 as of the last quarter of 2023 ranks 10th among major U.S. markets. Markets ahead of Miami include New York, the San Francisco Bay Area, Boston, SoCal, which includes Anaheim, Los Angeles and San Diego, and Jersey City. In fact, Miami rents rank ahead of Seattle, Washington, D.C., and Chicago. 

MAHB: Some recent brokerage reports state that income disparity is one of the main themes in the Miami market. If that’s the case, when we look at average effective rents, are we getting a clear picture of how much it costs the average Miamian (whose annual income is about $75,000) to rent here? Or are the figures mostly weighted toward Class A, high-end, luxury rentals? 

Whitaker: The Miami data does indeed show a large spread between asset class. Residents in Class B properties pay 24 percent less than Class A renters. That gap figure nationally is 28 percent, so the A to B spread is actually tighter in Miami than the national average. However, the Class A to Class C gap in Miami is 78 percent, which is larger than the 56 percent figure for the overall United States. 

Interestingly, Miami’s median rent-to-income ratio for all asset classes comes in at 24.4 percent. While that’s a bit above the U.S. average of 23.2 percent, that still appears relatively well balanced by national standards. 

The rent-to-income ratio jumps to more than 30 percent for Class C renters. Although that dataset is more limited than the overall market data, it does suggest that there’s a larger income disparity between Miami renters compared with many other U.S. markets. 

One last thing to note regarding rent-to-income ratios is that the data comes from RealPage’s lease transaction dataset. We look at the average household income of new lease agreements relative to the average executed rent, which is defined as the rent that is finalized on a rent roll, rather than an “advertised” or “asking” rent. 

Asking rent data is useful in its own right, but it’s a lot like an MSRP (manufacturer’s suggested retail price) sticker on a car. When you sign the final paperwork for a vehicle, it rarely ever matches what the sticker was, at least one-to-one. Still, it does give you an idea of where the price of the car is. Apartments are similar in that regard — the advertised rent is usually close to the final executed rent, but there may be some differences between the advertised and the final lease agreement.

So, this is a different rent-to-income ratio rather than the U.S. Census Bureau reported figure, which compares a different subset of the rental housing base. 

MAHB: How does Miami’s multifamily construction pipeline compare with other similar metros?

Whitaker: Miami’s construction pipeline is relatively aggressive with 25,100 units currently underway as of the fourth quarter of 2023. That accounts for nearly 8 percent of all existing inventory within the market and ranks 10th among major U.S. markets. 

But that’s still well below the figure in many other Sun Belt markets. For instance, Austin, Charlotte, Raleigh/Durham and Nashville all have more than 10 percent inventory underway. Miami ranks behind Jacksonville and effectively matches Orlando at 7.5 percent among its Florida market peers.

Within Miami, Downtown/South Beach ranks No. 1 with about 9,000 units under construction, accounting for 12 percent of that submarket’s existing units. Homestead and North Central Miami, however, have a larger share of inventory underway at 13 percent and 17 percent, respectively. 

Interestingly, all submarkets within Miami are currently seeing a decent amount of supply underway. At the bottom of the list is Miami Gardens with 3.5 percent inventory growth, while the top, North Central Miami, has 17 percent of its inventory underway. 

MAHB: What unique or surprising trends are you seeing emerge in the market that would be most interesting for apartment developers and operators to know?

Whitaker: Miami demand remains very strong, and the market’s occupancy rate continues to trend ahead of Sun Belt peers. Probably the most noteworthy occupancy trend within Miami though is the incredibly high resident retention rate. Nearly 60 percent of expiring leases were renewed in Miami during 2023, compared with about 52 percent within the U.S. overall. 

From that perspective, Miami can be seen as a market where renters are more likely to renew their leases. And while rent growth is moderating under pressure from new supply, the long-term Miami outlook remains generally favorable. 

Perhaps the largest unknown — especially in 2024 as revenue growth eases — is how significantly operational expenses will play into Miami’s net operating income (NOI). With insurance premiums in particular increasing an incredible amount, there are concerns that NOI could quickly erode as operating expenses increase and income/revenue decreases.

Compiled by Lynn Peisner.

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