The demand for multifamily rentals across Richmond remains high, with no signs of slowing down. Last year, developers took advantage of the region’s growing population, which increased by 12.8% over 10 years according to the U.S. Census Bureau, by building new units to help satisfy the increasing popularity of rentals. When the dust settles, where will Richmond’s rental market stand in 2022?
Millennials Fuel Demand
The majority of Richmonders are renters, with 56% of the region’s occupied housing in 2019 listed as rented, according to census data. Competitive higher education options and jobs paired with a flourishing food culture and outdoor recreation opportunities make the area an appealing choice for those looking to find a perfect balance of work and fun.
“I think the rental market in the city of Richmond in particular is being fueled by the millennial generation,” explains Laura Lafayette, CEO of the Richmond Association of Realtors. “You’ve got lots of young professionals who are choosing to make Richmond their home.”
On the opposite end of the spectrum, Lafayette says some older couples who have become empty nesters prefer the downsized, lower-maintenance living that rentals offer, freeing them from tiring yardwork and expensive home repairs.
“I think the rental market in the city of Richmond in particular is being fueled by the millennial generation.” —Laura Lafayette, CEO, Richmond Association of Realtors
Aside from the perks, Lafayette says many homebuyers had difficulties purchasing homes in a competitive real estate market. The limited supply of homes in 2021 often led to buyers paying an average of about 3.5% above asking price. Houses were also leaving the market at a record pace, with homes averaging 14 days on the market in 2021, compared to 20 days in 2020, Lafayette says.
“There are some people who became frustrated by the purchase market and have chosen to stay in the rental market,” she says.
With more people tapping into that market, the development of multifamily rentals across the city surged, perhaps most noticeably in neighborhoods such as Manchester and Scott’s Addition. CoStar, a property analytics firm, reported 2,400 finished units in metro Richmond in 2021, with 5,400 units under construction at the start of 2022.
Vacancy Rates Low
Drew Wiltshire, principal at Thalhimer Realty Partners, predicts that new development will continue. The firm’s most recent local projects include the Overlook at City View in Manchester and Westhampton Commons in Westhampton. The mixed-use apartment buildings hold more than 140 and 120 units, respectively, combined with restaurants and retail below, a popular model for newer multifamily buildings.
Despite the growing number of new units, Wiltshire says vacancy rates among Thalhimer Realty Partners multifamily properties have remained relatively low, averaging around 5% in 2021.
Better collaboration with local governments has also helped speed development. Wiltshire says: “The city of Richmond specifically has taken measures … to promote higher-density housing through zoning changes.”
Wiltshire says the combination of high-density zoning, low vacancy rates and steady renter demand will help encourage developers to continue to invest in building more multifamily rentals across the city. “I think it’s giving developers the confidence to continue on the path of delivering and developing more of these projects,” he explains.
A Magnet for Relocation
With more available units on the horizon, Richmond positions itself as a city likely to see more relocation from out-of-towners, Greater Richmond Partnership CEO and President Jennifer Wakefield predicts.
“Housing is a critical factor that companies take into consideration when making decisions on where to locate or relocate their operations,” she explains. Greater Richmond Partnership, a nonprofit, is the lead regional economic development organization for Chesterfield, Hanover and Henrico counties and the city of Richmond.
In addition to the ample opportunities and attractions Richmond has to offer, Wakefield says the region’s affordability makes it appealing to those looking to relocate from larger cities.
“We are a key beneficiary of talent relocating from major metros like Washington, D.C., and New York City,” she says. “Residents who relocate here find they can afford a much larger, nicer house and better quality of life.”
Larger businesses looking to expand often follow where the talent is moving, Wakefield explains. In turn, more outside relocations into the region could signal positive economic growth for both the workforce and associated industries.
Affordable Housing Needed
Despite the region’s relative affordability compared to larger markets, limited affordable housing and rising rents are still a concern for some of Richmond’s current residents. According to CoStar data, the average price of monthly rent in Richmond has increased between 2020 and 2021, with one-bedroom units rising from $1,087 to $1,208 and two-bedroom units increasing from $1,197 to $1,333.
Interim Chief Executive Officer Stacey Daniels-Fayson of the Richmond Redevelopment and Housing Authority says developers have the option to offer affordable options alongside market-value units.
“Developers who would like to have an affordability component to the project may submit a proposal to RRHA for Project Based Vouchers,” Daniels-Fayson explains. “These vouchers provide subsidies for specific units for low-income individuals, seniors and families to reside in.”
RRHA also collaborates with private developers to revitalize and build multifamily rentals that provide 100% affordable housing. Their most recent collaboration with Enterprise Community Developers focused on senior housing.
Overall, Lafayette says, incorporating affordable housing and keeping a consistent supply of rental units will keep Richmond’s rental market going strong into 2022.
“I think we’re just going to see more of the same,” she says. “I have been amazed for many years at how strong the demand is in the Richmond region for rental.”