COVID Pandemic Has Led to Significant Changes in Housing Affordability

the staff of the Ridgewood blog

Ridgewood NJ, one of the overlooked consequences of the pandemic is some very significant changes in housing affordability . According to a new study from Zumper, a real-estate rental trends blog , the pandemic, social unrest , draconian lockdowns and remote work technologies caused a significant number of people to move out of expensive, urban markets . This migration dramatically changed the picture for American renters and housing affordability in 2021 ( https://www.zumper.com/blog/how-2020-changed-housing-affordability/#full-data ).

The data demonstrated the most popular destinations for these urbanites were to move to less expensive, less-urban, neighboring locations, like the North Jersey suburbs .These destinations saw substantial increases to housing costs due to the influx of new demand. Meanwhile, the urban markets that people fled saw substantial housing cost decreases.

In the rental markets , like New York City , the more expensive city pre-pandemic rent was, the more likely it was to decrease. Inversely, the cheaper a location was pre-pandemic, the more likely rents went up. This relationship can be visualized by comparing median rent prices in each city right before the pandemic (February 2020) to the growth in those median prices since the pandemic.

Ridgewood blog readers would consider most of Bergen County to be a fairly expensive place to rent an apartment , yet compared to New York City it’s a bargain .In 2020 the median monthly gross residential rent in Bergen County NJ was $2100 for a 1 bedroom. Ridgewood’s new high density housing construction is asking rents from  $2900 – $5015 to live in the Central business district near the train station.

Traditionally rental prices are highly correlated with income levels and study data suggests expensive cities were where rents dropped the most are also some of the most affluent cities in the country. Conversely, cheaper cities where rents increased have less affluent populations in general. Thus, 2020 gave rise to a divergence between rents and income, which likely led to an aggregate decrease in housing affordability in the US.

The Zumper Study collected data for all counties in which Zumper had sufficient coverage which means at least 50 listings in February 2021 and February 2020. The result is a sample of 410 counties across the USA, which represent about 70% of the US population. Zumper’s listings have a tendency to skew toward urban areas, so many less populous, rural counties are missing in the data. However, a vast majority of Americans are represented since there is ample coverage in populous counties, and a significant amount of non-urban and rural counties represented .

The study reveals  there was a clear inverse relationship between income and rent growth in 2020- less affluent counties tended to see rents grow while more affluent counties tended to see rents decline. Counties where rents declined tended to skew more urban while counties where rents increased tended to skew less urban.

The study pointed out that , “a cluster of counties with median income levels below $70,000 that benefitted from urban price declines in 2020 such as Cook County, IL ($69K, -4%), Miami-Dade County, FL ($55k, -7%), and Bronx County, NY ($41K, -4%). Similarly, there were some very wealthy suburban counties that saw rents increase, such as Loudoun County, VA ($152K, +8%) and Suffolk County, NY ($106K, +6%).”

The Zumper Study notes that ,”outliers to the relationship between rent growth and income can be explained by the “neighboring cities” effect. This effect is a 2020 migration pattern where people who moved out of hyper-expensive regions generally moved to nearby places that were relatively cheaper. The neighboring cities effect in New York City, for example, explains two significant and opposite outliers to the above trend: Kings County, NY and Nassau County, NY. Kings County is essentially the borough of Brooklyn while Nassau County is the wealthy, suburban portion of western Long Island that borders Queens. Kings County, in line with the rest of New York City, experienced a large outward migration in 2020. A significant amount of people that left NYC moved to suburban places like Nassau County that had relatively cheaper rents, despite incomes being higher there, on average. The result is that people abandoned an expensive, urban, less wealthy area (Kings County), for a cheaper, suburban, more wealthy area (Nassau County).”

Bergen County, New Jersey, which the study considered a “Large fringe Metro” ,suffered from the “neighboring cities” effect.  The median one bedroom rent in Bergen is $2,100 an increase of  2.40%, the median household income  $108,827 and a county population of  932,202.

Despite these additional phenomena, the takeaway from the data is clear: a large portion of lower income Americans saw their rents go up in 2020 while many more affluent Americans saw their rents go down. 

As mentioned above, rent growth in 2020 differed in urban and non-urban areas. Many people moved out of dense, expensive, urban areas to relatively cheaper, neighboring locations. In addition to cheaper prices, popular destinations also typically offered more space per dollar than places that people left. The increased demand for more space at a lower price was likely related to expanded work from home policies, particularly in urban areas. As employees started commuting to workspaces less and began both living and working in their homes or residences , they searched for living spaces that would accommodate these new live work needs.

It seems the laws of supply and demand were not suspended during the pandemic .In general, as many workers and families who could migrate did migrate to the suburbs and more rural parts of the country, this caused rent raises in these regions to significantly outpace rent increases in urban areas.

The study concludes that the coronavirus pandemic and subsequent recession had a much higher impact on lower income Americans than it did on higher income Americans. 

Higher income and more mobile skill level Americans could more often work or learn remotely and often moved to escape the pandemic, social unrest , and draconian lockdowns.  These Mobil skill professionals gentrified areas they moved to .  Similar to situations in large cities like New York where significant areas of Brooklyn were gentrified ,driving up rents and driving  out lower income residents and replacing them with first “young urban professionals(yuppies) ” and then “Hip Stylish Professionals”( Hipsters).

Housing has become less affordable for lower income Americans and  the pandemic left lower income Americans worse off by systematically altering rent prices across the country- leaving more rural and suburban renters facing substantially higher rents.