Mount Pleasant renters and soon-to-be parents Adam and Hannah Erickson decided to shop around for a new apartment when they learned their annual lease renewal included another rate increase.
The 10 metro areas (of the top 79) where rents sought by landlords increased at the fastest rates from June 2013-June 2014:
San Francisco 6.7%
San Jose, Calif. 6.2%
Oakland-East Bay, Calif. 4.6%
Palm Beach, Fla. 4.5%
But the couple recently decided to stay put after finding that their options were limited. Other rental complexes they checked out in the town were asking even more than their current landlord. They discovered that some apartment buildings had waiting lists.
"The problem is, though, that in shopping around to see what else would be a possibility for us in the Mount Pleasant area, ... all complexes with two-bedroom units have extremely limited availability at similar, if not higher costs," Adam Erickson said.
The Ericksons are in the same boat as many other renters who are seeking to move, as a growing population has kept a tight lid on the availability of multifamily housing. Apartment rents are increasing faster in the Charleston region than in many other parts of the nation, a situation that housing experts say is largely fueled by this imbalance of supply and demand.
Many new apartment developments were mothballed during and after the last recession, which officially ended in 2009. Construction activity has been picking up in the region, and housing experts are predicting more conservative rent increases as a result.
That could be welcome news for apartment seekers in Charleston.
The real estate information firm REIS ranked the 5.9 percent rent increase in Charleston as the fourth highest in the nation, based on what landlords were asking, from June 2013 through June this year. That compared to a 3.2 percent average increase for all 79 metropolitan areas REIS included in the study.
The average asking rents in the Charleston region increased 0.8 percent to an average $847 per month between the end of March and June 30, mirroring the 0.8 national average, according to the REIS data.
Elaine Worzala, director of the Carter Real Estate Center at the College of Charleston School of Business, said rents are rising because of higher demand coupled with the influx of higher-paying employment opportunities.
"When you bring in higher-paying jobs, that is great, but it can have a huge effect, and that can change the marketplace pricing," she said.
Worzala said that the strain on supply is exacerbated by some retirees and other empty-nesters deciding to rent housing rather than buy.
For some newcomers moving from higher-cost markets, the rising rates in Charleston might not come as a shock.
"It can be tricky when you have those with different economic situations like these engineers and such," Worzala said. "They come in with a higher income bracket and if they decide to rent, they will push that envelope on rates."
The Ericksons, who moved to the area about three years ago from Fayetteville, N.C., had been looking to cut their rent payments to prepare for their first child. The couple said they love their current apartment, but costs keep climbing.
"I put the fault of the rising rent on Mount Pleasant, in general, as we're still lower than most complexes in the Mount Pleasant area," Adam Erickson said. "Our rent has gone up over $200 a month over the term of two lease renewals - a much larger increase than I've ever had in any other area I've lived."
Rising rents aren't limited to Mount Pleasant, said Catherine Hontz, senior market sales manager for ApartmentGuide.com. She said both new tenants and renewal renters are feeling the sticker shock.
"Renewals are getting increases anywhere from $50 to $140 a month. The renters are going out there and shopping the competition and eventually saying, 'Never mind, I don't want to move out,' " Hontz said. "They moved into these apartments years ago when rents were rock bottom, and they didn't know what new rates are until they go out and shop."
Hontz added that many apartment management firms use technology to gauge what prices the market can handle. Sophisticated databases can calculate vacancy rates, the total number of expiring leases and pricing at competing complexes. She said that helps explain "why prices can change daily in some cases," she said.
James Island renter Valerie Ivy, a 41-year-old single mother, said she was forced to shop around because her apartment complex is being converted into condominiums.
Ivy inquired about nearly two dozen apartments in the region and said it seemed nearly impossible to find an affordable place.
"I lived in Los Angeles for 10 years, and came back to Charleston thinking that I'd have a better time with housing costs as compared to my income, and I have not experienced that at all," she said.
Ivy said she would like to stay in the James Island area because it's close to her 7-year-old daughter's school.
But that may be tough since Ivy's apartment search has found that most compatible units are roughly $300 more than the $950 monthly rent she's paying for a three-bedroom apartment that also serves as an in-home office.
"I may have to resort to downgrading to a two-bedroom or moving in with my mother at 41 years old," she said. "Perhaps while I'm there I will have to share a room with (my) mom or daughter. That does give me more time to continue looking without the pressure of deciding right now, but that also means all my things will have to go in storage."
The strength of the local rental market has fueled more developments, which has helped push the region's vacancy rate to 5.8 percent at June 30 from 4.3 percent a year earlier. Experts like Worzala expect rents to start to level off as more units become available.
"This is a case of supply and demand," Worzala said.
Earlier this year, ApartmentGuide.com projected the Charleston area's apartment construction would increase 8 percent from 2013, which would be the highest growth rate in the nation.
Another report by the multifamily website projected that more than 9,000 apartment units will be built in Charleston, Dorchester and Berkeley counties in the coming years. That includes roughly 4,000 units currently under construction.
Some investors are already seeing the slowdown in rent increases.
Woodfield Investments is among them. It's developing several projects in the region, including a 280-unit apartment building behind James Island Shopping Center.
Woodfield partner Mike Schwarz said the Charleston market is attracting more than its share of investors because of employers such as jetmaker Boeing Co. He also said the increasing competition from new and existing apartments will mean "more supply and less pricing power the owner will have."
"Charleston has been a great owners market in the last several years, and those times are nearing an end," Schwarz said. "This new supply of apartments will have an impact on the ability of pricing of our products, and it's a typical supply and demand thing."
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