Construction of new apartments is on track to break a record in the U.S. this year with more than 500,000 new units built.
Locally, the Tucson market is contributing to that growth and has opened, or will open by the end of the year, more than 1,000 units for rent.
The demand is being driven by necessity, people who can’t afford to buy right now and new residents who rent while they get to know the Tucson market and decide where they want to put down roots.
A third driver, however, is a growing number of renters who choose the maintenance-free lifestyle of renting with the flexibility to move around.
And, for the moment, renting is cheaper than buying.
Rental prices, after rising dramatically after the pandemic, have stabilized in the past year, while the cost of a new home and high interest rates have increased the cost of ownership, according to Bankrate’s Home Affordability Report.
Nationwide, the typical home costs nearly 37% more to buy than to rent on a monthly basis, the report says.
“Monthly mortgage cost on a typical home bought today is more than double that of one bought in 2019,” the report says.
The influx of new apartments, which typically average about 350,000 a year, should be considered a good sign for renters who have endured major rent increases since the pandemic.
“It’s very good for consumers because it gives them more options and decelerated rents,” said Doug Ressler, an analyst with Yardi Matrix, which compiles data on apartments. “During the pandemic it was double digit increases, now rents are growing around 1 or 2%.”
The average apartment rent in Tucson is around $1,300 a month, with some luxury complexes commanding over $3,500 a month.
Overall rents have gone up more than 40% in the past four years, yet Tucson is still considered very affordable, especially by newcomers.
“Tucson has a lot of things going for it and its population and employment numbers have been positive,” Ressler said. “It’s a great retirement community.”
In fact, many of those retirees are contributing to the rise in apartment construction as they downsize and seek flexible living.
“Some people don’t want to own anymore,” Ressler said. “They would rather live in a luxury setting without the maintenance.”
As Arizona’s secondary market, Tucson also offers a “friendlier” environment for developers.
The market was undersupplied with new apartments and less expensive than the Phoenix area for everything from land purchases to permitting.
The 1,029 units that have or are expected to open in 2024 represent a robust growth, but not aggressive, Ressler said.
Local apartment developer HSL Properties recently opened its newest complex, Encantada Twin Peaks, near Interstate 10 and Twin Peaks Road.
The 272-unit complex is almost leased up, said Omar Mireles, president of HSL Properties.
“It was a record lease-up,” he said. “There’s a lot of demand.”
Rents there range from $1,464 to over $2,300 a month.
Another project under construction, Encantada la Estancia, near I-10 and Wilmot Road, opened for leasing last month and has received a lot of interest, Mireles said.
The 320-unit complex will have a lagoon lounge area with cabanas and TVs, a 30-person movie theatre and a dog ranch.
Rents range from $1,600 to over $2,100 a month.
Mireles said rent increases over the past few years have eroded Tucson’s reputation as affordable, but the area is still among the cheapest in the region.
The average rent in the Tucson area required about 17% of the average income in 2017 and now requires about 22% of income, a tie with Salt Lake City.
By comparison, the average rents in Las Vegas cost 27% of the average income and 35% of the average income in San Diego.
“We are still relatively affordable,” Mireles said.
He said HSL complexes are seeing a combination of renters by choice and new residents.
“For some people, they like the flexibility of not being tied down with maintenance,” Mireles said. “But quite a few folks, who are new to the market, like to move into a rental situation to get the lay of the land.”
HSL Properties has built 11 apartment complexes in the Tucson area with 3,301 units in the last 10 years. It also owns and operates more than 30 complexes with 10,000 units in southern Arizona.
Downtown Tucson has changed over the years with the construction of apartment buildings and hotels. Take a flight over the area. Drone video by: Mamta Popat, Arizona Daily Star
