People choose to rent for many reasons. Whether it be because of a career relocation, temporary housing before a more permanent solution, or because it may just fit someone’s lifestyle. There will always be a demand for space within the rental market.
The market has steadily grown over the past couple of years. Renting has become more common, even in age groups and families that would typically own single-family homes, according to a study done by the Joint Center for Housing Studies of Harvard University (JCHS). The single-family rental market has become more attractive to higher-income households because of opportunities in new construction and homes that have undergone modern renovations.
We have put together a rental market report for the Des Moines Metro in 2020. The data has been pulled from JCHS, Des Moines Register, Business Record, and the U.S. Census Bureau, and RPM Iowa‘s own statistics. This report will cover COVID-19 impact, current supply and demand, overall market data, and future opportunities within the market.
COVID-19 impact on the Des Moines rental market
The COVID-19 pandemic has created challenges for renters across the country. The three biggest factors for renters are rent payment, evictions and maintenance.
The biggest problem in the rental market throughout the pandemic has been the inability to pay rent. According to JCHS, 12.1 million renter households have at least one worker in an at-risk industry. They define the at-risk industries as: services, retail, recreation, transportation and travel, and oil extraction.
This is reflected in the numbers for RPM Iowa, although at a smaller scale than bigger city markets like Chicago and New York. Usually non-payments sit around 5%. This has increased to 15% during the pandemic.
However, the number of rental applications have also increased. The ability to work from home has become a reality for thousands of employees across the country. Remote work will increase the movement of Americans. Anywhere between 14 to 23 million people are planning to move because of remote work, according to a study done by Upwork.
The CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law on March 27,2020. It provided aid to individuals who were eligible for unemployment benefits. Each state was responsible for determining the eligibility for and the amount of unemployment benefits. The CARES Act also had an eviction moratorium and mortgage protection. The initial CARES Act expires December 31st, 2020 for most of the criteria.
Although limited to certain federally supported properties, the moratorium and mortgage protection has been crucial in helping people stay in their homes. There has been some discussion about a second CARES Act, but nothing has been put into motion yet.
We have remained in consistent contact with our residents in order to help as best we can. “The pandemic has affected people’s jobs and income. We want to work with them so they have one less thing to worry about,” Resident Relations specialist, Angela Canelos. She along with the rest of the leasing team have an ongoing list of resources they can provide for tenants in need.
The biggest impact on maintenance occurred within the first 60 days after the declaration of the pandemic. RPM Iowa followed a strict emergency-based rule. No maintenance requests were completed unless it was deemed necessary.
“Emergency maintenance during the height of the pandemic were life-and-death situations only, like water damage or loss, locks, or no AC or heat. Anything else was scheduled with the resident when we were able to access homes again,” said Taylor McDonald, RPM Iowa’s Maintenance Coordinator.
The maintenance team took plenty of precautions. Masks and gloves were required for house visits. In most cases, residents were asked to be away from the home or in a different room than where the issue was located.
Supply and demand in the Des Moines metro
The Des Moines metropolitan area (DSM Metro) population has grown 2.3% in the past two years. Polk, Dallas, Guthrie, Warren, Jasper, and Madison counties make up the Des Moines metro. Roughly 683 new people move to the area per month.
The DSM metro consists of 296,946 households. 92,000+ of those are rentals. Of those renters, 48% go back on the open market in search of a new residency after a year. Roughly 3,600+ rentals are leased per month.
According to Zillow, there are 170 rental properties available on the market as of November 28, 2020. 72 are condos or townhomes and 98 are single-family homes. Apartments make up about 85%+/- of the rental market.
There are not too many options in the market as far as single-family homes. The real estate market has remained highly competitive due to high demand and low interest rates. However, there is plenty of opportunity in new construction for investors.
Overall rental market data for RPM Iowa
The chart in this section mirrors average rents by city and number of bedrooms (per single-family home). The average rent in the DSM metro for RPM Iowa sits at around $1,464.16. Rental rates have increased over the past couple of years and we have followed the trend, as our numbers below will reflect.
RPM Iowa rents broken down by city and bedroom:
Ankeny – $1,550
- 2 Bedroom: $1,067
- 3 Bedroom: $1,484
- 4+ Bedroom: $2,031
Des Moines – $1,252
- 2 Bedroom: $1,006
- 3 Bedroom: $1,319
- 4+ Bedroom: $1,573
West Des Moines / Clive / Waukee / Urbandale – $1,561
- 2 Bedroom: $1,213
- 3 Bedroom: $1,523
- 4+ Bedroom: $2,376
Ames – $1,290
- 2 Bedroom: $900
- 3 Bedroom: $1,375
- 4+ Bedroom: $1,846
Future opportunities: What’s hot right now
“Two market areas come to mind when we think of rapid growth,” said Ben Flurey, General Manager at RPM Iowa. “Bondurant and Grimes have grown by about 80% since 2010 per the Des Moines Register.” Johnston has also grown by about 31% during that same timeframe.
Bondurant & Altoona
Some of the growth is due to the brand-new Amazon facility in Bondurant which created 1,000 new jobs. On November 4, 2020, the Business Record reported that Amazon is building a $55 million warehouse one mile west of their fulfillment center. Project Omega will be the third Amazon facility in Iowa.
The Outlets of Des Moines opened in 2017 and have boosted Altoona’s economy by creating jobs and plenty of foot traffic. With new jobs comes more housing opportunities. Buying in the Bondurant / Altoona area will appreciate over time as the area continues to develop.
Grimes & Johnston
“Amazon has been very popular in these growing cities. Grimes opened an Amazon Delivery Station this year that brought on full-time job opportunities,” said Flurey. The city of Grimes is also constructing a $250 million mixed-use sports complex. It will be the largest turf sports venue in the Midwest, as stated by the Grimes Chamber and Economic Development. It is expected to bring 1.5 million visitors a year. The sports complex will encourage other investors to build restaurants, housing accommodations, and retail shops.
Johnston is going through their own renovations, too. An estimated $27-31 million City Hall and community site is being built on the east side of Merle Hay Road between NW 62nd Avenue and NW 63rd Place. Commercial buildings will open some time later after the new City Hall.
The DSM Metro is growing!
The pandemic has had some impact on the rental market. Fortunately, the rental properties managed and owned by RPM Iowa have not experienced the same level of impact as other property management companies. Through communication we have remained on top of the problem and continue to create tangible solutions for our residents and investors.
The Des Moines metro is growing fast because of the state of the art facilities and business fulfillment centers and warehouses. There’s an opportunity to expand your wealth along with the development of these cities. The opportunity zones mentioned above are a great place to start. Investing in real estate is a great pathway to financial freedom – so if you’re looking to start your portfolio, we’re ready for you. Schedule a consultation with our Real Estate Investment Advisor or Business Development Manager, whenever you’re ready!