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People Are Still Moving to Houston. Remote Work May Accelerate That

Renter mobility across the U.S. came to a major halt during the early days of the coronavirus pandemic, but multifamily experts say that as people have adapted to the new normal, people are moving again.

That has benefited Houston, where search activity from people considering moving to the city has rebounded to prior levels. In particular, that interest has risen in the suburban markets.

As more companies embrace a permanent remote work model and workers are no longer tied to geography, that could entice even more people to move to the Houston region.

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The wave of shelter-in-place and shutdown orders across the U.S. in March and April caused a major slowdown in people looking to move, according to Apartment List housing economist Chris Salviati. The firm analyzes millions of user internet searches to understand where people are located and where they are looking to move.

“At that time, there was a big drop-off in apartment searching activity,” Salviati said. "A lot of folks were worried about whether it was even safe to be moving. … In a lot of places, the shelter-in-place guidelines were pretty explicitly telling people not to undertake moves at that time."

By early to mid-May, however, search volumes had returned to baseline levels of what Apartment List typically expects, and those volumes have trended steadily, despite a renewed spike in COVID-19 case levels across the country. There isn’t good data yet on how many actual moves to Houston have taken place since the pandemic began, though overall apartment leasing has accelerated significantly — over 5,000 multifamily units were absorbed in Houston during the third quarter, an increase of more than 150% year-over-year, according to Transwestern's Q3 2020 multifamily report — and Apartment List shows interest in moving to Houston specifically has returned to pre-pandemic norms.

That normal is pretty high. Population growth in the Houston metropolitan statistical area has been strong for the past decade. The Houston MSA had 7,082,222 people at the beginning of 2020, according to an estimate by the Texas Demographic Center. That is a 19.6% increase from the 2010 census count. Estimates are typically created using a combination of data points, including births, deaths, elementary school enrollment, vehicle registration and voter registration.

Texas migration data for the bulk of 2020 is not available yet, but Texas Demographic Center senior demographer Lila Valencia said that over the last decade, the state’s population has rapidly grown from both international and domestic migration, as well as a natural increase in births.

“For about five of the last 10 years, births have made up about a little bit over 50%. And then the other five, net migration has made up a little bit over 50%,” Valencia said. “Now, both of those things have been impacted greatly by the pandemic.”

People considering moves to Houston are often already based in Texas, with Dallas in the lead, accounting for 7.3% of all searches for housing in the city between July 1 and Nov. 24, according to Apartment List’s Q4 2020 migration report. New York and Austin came in second and third place, at 3.6% apiece. The company has also seen significant interest in Houston from people in Los Angeles, Miami and Chicago.

“A lot of these folks that are moving right now are, it seems, probably making downgrade moves, so looking to move into more affordable housing or looking to move back in with family and friends to get into a situation that they can afford,” Salviati said.

Amid Houston’s growing population, the city has continued to expand in virtually every direction, unfettered by major geographical constraints. That has allowed the Houston area to remain more affordable than many of the major cities on the East and West coasts.

“I do think that prior to the pandemic, we were starting to see some of these shifts, of folks who were getting worn down by the housing costs in places like San Francisco and New York and Boston [and] were increasingly kind of viewing the big Texas markets, I think, as a good alternative to that,” Salviati said.

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Some CRE execs are considering adjusting compensation structures to account for remote work.

Salviati said that the rise in remote work has made it more feasible for people in search of lower housing costs to move to Houston. In a post-pandemic world, many white-collar professionals may not have to find a new job in order to move.

“I think that if anything, these factors are probably providing ... a little bit of a tailwind and even sort of accelerating some of these trends that we were seeing prior to the pandemic,” Salviati said.

Apartment List data also found that more people are looking for short-term leases of six months or less. Salviati said that could reflect growing interest from people who want to move to another city but are not ready to fully commit. Instead, they may want to try it out for a few months first.

There has been a shift from urban to suburban apartments, Salviati said. Falling rents indicate that demand for housing in Houston’s urban Inner Loop has softened.

“A lot of that vibrancy of being able to go to bars and restaurants and museums, whatever it is, I think that's really taken a hit during the pandemic. And so, for those reasons, I think we are seeing folks kind of shift a little bit away from the downtown neighborhoods and more toward the suburbs,” Salviati said.

The move away from the urban core may translate to more multifamily construction in suburban areas. CBRE Senior Vice President Matt Phillips, who leads the firm’s Capital Markets Multifamily Group in Houston, said that during the past six months, he has seen more interest from the capital markets in suburban markets over the core infill markets.

“Interest in Houston, interest in multifamily in Houston has been really quite strong since June,” Phillips said. “August through November was probably the most active period, for sure, since the first quarter.”

The demand for suburban multifamily product has translated into rising rents in some of Houston’s growing areas. Though rent prices have decreased within the city of Houston over the past year, rents have risen in several of the largest cities across the Houston metro.

Phillips has heard of more developers starting to talk about how to address the ways in which remote work could affect the long-term needs of multifamily tenants.

“There could still be some sectors that are continuing to do work from home. A few developers are looking into designing more apartments as they go forward that might include studies, some type of work office space inside the apartment,” Phillips said.

He said that he expects to see more financing of multifamily development in Houston’s suburban markets moving forward, rather than in the urban core. That development will likely remain typical garden-style apartments but could translate to more mid-rise construction in higher-density areas like The Woodlands and Sugar Land.

“I don't expect a whole lot of new multifamily development to start in 2021, though. I think we will have to get through that and see how things look. We still have plenty of apartments to still get leased up for the next 12 months right now,” Phillips said.

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Growing interest in multifamily product in Houston’s outer suburbs is undoubtedly a consequence of the pandemic, but Valencia noted that a lack of affordable housing could also push people farther out of major metro areas across Texas.

“The housing stock just is not keeping pace with population growth, especially in those really fast-growing parts of the state,” Valencia said. "And then, much of the housing stock that is being added … is not quite housing that is more affordable housing, but it tends to be higher-priced housing where we are seeing the new construction taking place."

Those displaced people will have to compete with Houston’s current remote workers who are choosing to opt for a suburban lifestyle, as well as the possible influx of out-of-state remote workers who want cheaper housing.

To Salviati, the possibility of remote work becoming the norm could have a massive long-term impact on the multifamily sector. Employment choice has less of an impact on housing choice, meaning that people will potentially have less incentive to live closer to an office environment in the urban core.

“If that really does become something that's a norm in the long term and not just something that is sort of a temporary adjustment to deal with the pandemic, I do think that that would have a pretty big impact on what folks need out of their housing,” Salviati said.