BROWNSVILLE, Texas (ValleyCentral) — Put simply, when rent came due in 2022, it came with a higher monthly cost for many people across the Rio Grande Valley.
In Hidalgo County, the average fair market value for rental properties increased 10.55% year-over-year during FY2022, and have increased by 7.34% year-over-year as of the end of 2022.
In Cameron County, the average fair market value increased by 6.64% year-over-year in FY 2022, and have increased by 11.21% year-over-year as of the end of 2022.
In general, fair market values for rentals ended 2022 at 12% above pre-pandemic rates. Finding a single cause for higher rents might prove elusive as inflation in 2022 drove up property values—and most prices in general—across the United States.
But rental increases can pose an urgent problem for many families in the Valley, considered a cost-burdened region by federal housing standards. A region whose average population spends 30% or more of personal income on housing and utilities is designated as “cost-burdened.”
Typically, renters are more likely to be cost-burdened than people with mortgages.
According to Federal Reserve Economic Data, Cameron County had been making gains against this designation since 2010, when the number of burdened households exceeded 37%. At the end of 2021, burdened households accounted for slightly more than 30% of the community.
Hidalgo County also saw a five-year improvement to its share of burdened households between 2010 and 2021, with 31% of households burdened in 2021, down from about 36.5% in 2010.
However, inflation and rental increases could have the effect of erasing these recent gains.
“If you look back, in 2019 we were at $770 [for a 2-bedroom home] as the average, so to go up to $863 — basically that’s a $100,” said Daniel Elkin, director for policy, impact and innovation for Come Dream Come Build, a nonprofit community housing development organization in Brownsville.
“[With] COVID-19, you had an upward increase in housing prices across the board,” Elkin said. “And of course, that always has a trickle down effect on rental prices.”
In a hunt for affordable housing, Brownsville residents might have been competing with newcomers to the region–which would have the effect of driving rental prices up in recent years. However, the data for that phenomenon isn’t easy to track.
“We’ve been trying to figure out how best to track that,” Elkin said. “We have new employers, so we assume there are new employees coming in–but to track that number, we don’t really know. But our experience tells us that yes, we have got an influx of people, whether it’s through SpaceX or some of the new downtown developments and things like that.”
In theory, an influx new residents would have the effect of increasing the local rental prices for everyone.
“We see these numbers going up,” Elkin said. “I think it’s exactly what you said, they get here, they’re kind of scouting out for the first year or two and be renting, and I think that’s part of it.”
Regardless how many “higher earners” might be moving to the Valley, another recent trend might help explain some recent increases.
“One of the things we’ve noticed and been tracking is that there has been some outside investors buying up some of the local rental properties,” Elkin said. “If you track on the Cameron County CAD site, who’s kind of buying up our like rental, especially apartment complexes, you see it’s like LLCs from Austin, where that wasn’t necessarily the case before [because] maybe they were locally owned.”
Many residents attribute much of real estate price increase to SpaceX CEO Elon Musk, who famously encouraged outside investors to buy property in the Valley with a tweet in 2021.
“Please consider moving to Starbase or greater Brownsville/South Padre area in Texas & encourage friends to do so!” Musk wrote on March 30, 2021. “SpaceX’s hiring needs for engineers, technicians, builders & essential support personnel of all kinds are growing rapidly.”
A year after that tweet, in spring of 2022, National Public Radio wrote prices in the region had been “sent sky high,” and Bloomberg reported prices had been “supercharged.”
Outside investors who saw promise in Valley properties might have been relatively more common in 2022. However, the trend has noticeable for few years now, Elkin suggested.
“And I think a lot of times when you see that change in new management [of rental properties], you tend to see the prices increase a little bit — again, it’s kind of market driven,” Elkin said. “I would say 2022 is where we saw more of it, but it’s probably been happening the last two or three years, OK, which again fits kind of with the increases.”
Yet Elkin is adamant that it’s not the only reason rents have been on the rise.
“Now, to be clear, I’m not saying that [outside investment] is a sole driver of it, but it’s definitely one of the factors,” Elkin said, acknowledging inflation across the United States. “Rent is a huge part of the inflationary cycle.”
