GRAND RAPIDS, Mich. (WOOD) — The COVID-19 pandemic helped fuel Grand Rapids’ rise to one of the most competitive markets in the country for rental housing, a new analysis concludes.
CONDITIONS BREED COMPETITION
Colliers West Michigan says the Grand Rapids market is the 12th strongest market for rental growth nationwide so far this year. While rental demand dropped nearly 1% nationally, the number of Grand Rapids-area renters jumped nearly 5% compared to the same time last year.
The real estate firm says the pandemic sped up millennials’ hunger to own a home in the suburbs and employees’ desire for more space as they work from home.
Compounding the issue is fewer available homes and apartments. Colliers said the largest market impediment was potential sellers who opted to stay in their homes and take advantage of low refinancing rates, “placing their tax-free proceeds into a war chest to pounce on their next acquisition when the time comes.”
Colliers says Grand Rapids’ housing inventory only grew 1.3% in the first quarter, which is half a percentage point lower than the national average. While developments within the last five years account for 8.3% of the Grand Rapids’ rental housing, nearly 79% of apartments in Grand Rapids are more than 20 years old, the report states.
Higher demand and lower supply are driving up housing prices, as News 8 reported last month. Monthly rent rose 2% to 5% from 2019 to 2020, with the median monthly rent for a one-bedroom in Grand Rapids now around $868, according to the 2020 National Rent Report from Apartment List.
HOT FOR HOW LONG?
Rising construction costs and supply chain issues are also hampering housing development — an issue Colliers expects will continue to curb housing development this year and beyond.
The Grand Rapids area’s growing population adds to the housing squeeze. Kent County is expected to need 5,000 more rental units in the next five years to keep up with its growing population.
Colliers International’s Ryan Pena expects the local housing market to remain hot well into this year until COVID-19 vaccines become more widely available.
“Gateway markets (like San Francisco) will continue to struggle, at the benefit of suburban, secondary markets like Grand Rapids,” the report states.