KNOXVILLE, Tenn. — Rent prices in Knoxville have been going up for over a year. The cost is getting so high that it is pricing out people who have called Knoxville home for decades.
The reason? Rental housing is in high demand. Economic and real-estate experts agree the market conditions are ripe for rental activity.
"What's different about the rental market is you have a lot more fluidity, you have a lot more people moving in moving out, just moving through life and don't want the burden of a mortgage," said Don Bruce with the Boyd Center for Business and Economic Research.
According to data collected by Apartment List and the Knoxville Area Association of Realtors (KAAR), the average rent has increased by more than 30% compared to prices listed just one year ago.
In May, KAAR estimated nearly 17 households are moving into the East Tennessee region per day. That huge influx of people led to a boom in both the housing and rental market.
Additionally, U-Haul ranked Tennessee the number one state for U.S. net migration gains in 2020 for the first time -- meaning more people are moving to the Volunteer State than leaving compared to any other place in the U.S.
The most popular places people are moving from are New York City, Chicago, Los Angeles and Washington D.C., according to data collected by KAAR.
"We're importing people by the hundreds who just have been here, they fall in love with this great place, and they want to live here," Bruce said.
With them, they're bringing their checkbooks.
"We are seeing people from higher-cost metros, like California and New York, coming to Tennessee because they can afford a lot more like a nicer rental apartment or home," said Hancen Sale with KAAR.
This trend has led Knoxville's rent prices to grow faster than other cities in the U.S. In fact, the Scruffy City grew faster than the U.S. as a whole, according to Zillow's Observed Rent Index.
This trend is new for the city of Knoxville.
"It was very shocking because Knoxville's always been that sleepy little town that has always kind of been behind the national trends," said Nikki Kritner.
Kritner grew up in Knoxville. When she got older, she moved away and then came back as a renter in West Knoxville. She was surprised to see prices changed so much.
"It was definitely a little shocking to see Knoxville end up in that position," Kritner said.
Sale said Knoxville passed the national housing demand trends during the pandemic.
"Those trends for rent and home sale prices in Knoxville has completely reversed. Both are growing much faster than the US overall and you know, much faster than some comparable cities," Sale said.
However, Knoxville's housing and rental market isn't currently set up to house all the newcomers. The city has a fixed supply of apartments and homes for rent.
"We were already underbuilt coming into this," Sale said.
This comes at a time where the highest level demand to live in Knoxville meets the lowest level of apartment vacancy.
According to the U.S. Census Bureau, only 4.5 % of apartments in Knoxville have leases available. For perspective, the Knoxville Apartment Guide lists 372 available apartment units as of November 19. The total amount of rental units in Knoxville is around 8,300.
That lack of availability allows landlords and apartment managers to raise the price of rent, which maximizes their profit. With the competitive nature of the market, some renters are willing to pay the price.
"If I'm a landlord, and I've got a line out the door of people willing to pay 50%, more than I'm charging, I might be interested in talking to those people," Bruce said.
Kritner experienced the rise in rent first hand. She and her husband were renting a three bedroom apartment at $1,800 per month. The renewal price for that apartment jumped by $300.
"Which was pretty astronomical because we were already paying a ridiculous amount," Kritner said.
As of September 2021, the average price of a three bedroom apartment in Knoxville is $1,500 per month. A two bedroom is $1,262. A one bedroom is $1,007. A studio is $875.
The increased rental prices are proving to cause strain on people who have called Knoxville home for their entire life.
"We're pricing out many of our essential workers, the people who live and work in Knoxville, and maybe their kids won't be able to live here some day," Sale said.
"People are literally being out priced now from homeownership and from being able to lease a place," Kritner said.
While people moving to Knoxville is a big part of the rental price increases, economists and real estate experts agree it's not the only reason.
"Stimulus checks and household income actually rose pretty dramatically once stimulus checks are sent out," Sale said, "And lots of people put that money toward housing."
"The whole point of that actually was to get people to spend that money," Bruce said.
An unprecedented amount of people chose to invest that money into Knoxville's housing market, according to Bruce.
Additionally, the rate of inflation has gone up.
The latest BLS data for September 2021 showed a CPI of 5.4% for all items as compared to last year. Home mortgages and rentals are included in that CPI.
That means that average expenses for most Americans increased in price by 5.4% since September 2020.
According to data collected from KAAR, More than 1 in 3 registered voters in Knox County indicated housing affordability in the Knoxville area as a very big problem.
Additionally, 1 in 4 registered voters in Knox County indicated the availability of housing to buy or rent is a very big problem.
Kritner also experienced the pressure to find a place.
"I can't tell you how many places that we inquired about that, you know, somebody leased it literally within minutes of it being posted," Kritner said.
Due to the lack of options, she settled with her $1,800 three bedroom apartment.
"As a consumer, it was frustrating," Kritner said.
However, the problem isn't going away any time soon. Knoxville has to develop new complexes and housing units if it wants to keep up with the demand.
"It's not possible to just wave the magic wand and have 100 more apartments for rent. It takes time to build these things," Bruce said.
After getting approved, an apartment complex could take anywhere from two to four years to come into fruition. However, due to the supply chain issues in the current economy, it could be much longer.
"Right now, Knoxville is getting the green light to a lot of projects, but it still takes two or three years for that supplier to catch up," Bruce said.
Experts know the booming rental market isn't a forever problem, but they can't predict exactly when the price upticks will end.
"Those growth rates have to moderate at some point," Bruce said.
But, when they do, they likely won't go back to how they used to be.
"It's a new higher normal. our baseline is much higher than it was previously. That's just what happens when you're a growing and desirable city," Sale said. "But, I don't think we're going back to where we were five years ago. We've kind of lost that."
During this time of rental increases, if you are at risk of being evicted, there are resources to keep you in your home.