Rents dropping in rich areas, rising in poor ones: UNLV report

Low-income renters in Las Vegas are feeling the pain due to a rare market phenomenon, according to a new study from UNLV’s Lied Center for Real Estate. Director Shawn McCoy, the author of the study, said one graph tells a compelling story.

Rents are primarily dropping in wealthier neighborhoods across the valley, and either rising, or staying stagnant, in poorer parts of the city, according to McCoy’s latest Apartment Market Trends report, which draws its data from Moody’s Analytics.

Rental rates at $2,114 or higher in the Las Vegas Valley dropped 6.7 percent from the fourth quarter of 2022 to the first quarter of this year, the report shows. On the flip side, rental rates under $815 a month rose 0.68 percent during the same time period.

Though, the data only looks at the change in price from one quarter to the next, McCoy said it is compelling, as prior to that rental rates changed uniformly across all socioeconomic demographics from 2021 to 2022 but decreased quarter over quarter last year.

McCoy said 2023 is definitely a shift. Inflation and high-interest rates have played into what is an incredibly statistically perplexing housing market, and he said the best way to look at it is through a migratory lens.

“When renters’ residual income is strained, there may be a tendency to respond by substituting away from high-priced rentals towards lower-priced units,” he said. “If so, rents at once ‘higher-priced’ apartments may fall while rents at once ‘lower-priced’ apartments may simultaneously fall less, not fall at all, or even possibly rise.”

Nevada Legislature assemblywoman Shondra Summers-Armstrong, who represents District 6 where rents are predominately rising, said she is on the frontlines of this issue. Summers-Armstrong was at the North Las Vegas Justice Court early last Tuesday where eviction notices — two months after eviction protections were lifted — were being handed out by the dozens.

“The simple answer is people are being priced out because their incomes can’t keep up,” she said. “There is this quote that I heard years ago, and it’s always stuck with me: ‘Being poor is expensive.’ ”

Summers-Armstrong said one of the most “frightening” parts of the UNLV study, and what she sees in her district is “no-fault” evictions, where landlords raise rents in neighborhoods to capitalize on market-induced profits, so a lease ends and the rental rate jumps substantially because the owner knows the market is hot. She said there are people in her district who are spending half of their monthly paycheck on rent alone, and virtually all of them make well below the median income for an individual in Las Vegas ($33,363).

“So what this means is they are one life event away from not being able to afford rent, and then they are into their cars, or out on the streets. And these are people with jobs, who work hard every day, but their income is not keeping up.”

Understanding the numbers

Now that the real estate market appears to be returning to normal after a frenzy of home sales and skyrocketing prices and rents during the pandemic, McCoy said there is some “wobbling” that is taking place. For example, the median home price across the U.S. rose for the first time in five months, however, home prices in Las Vegas were one of 19 metros across the country that saw a drop, showcasing a dichotomy between regional and countrywide trends fueled partially by macroeconomic migration trends.

One of the other key points of McCoy’s report is that areas in Las Vegas that are primarily inhabited by white residents saw on average a 3.24 percent drop in their rent from the last quarter of 2022 to right now, whereas predominantly black neighborhoods saw only a 1.4 percent drop.

McCoy said he’s clear to point out this study isn’t implying racial discrimination, however noting clear disparity between certain neighborhoods in the Las Vegas Valley.

“There’s two types of work when you look at race. There’s work that looks at racial discrimination, and there’s work that looks at racial disparity,” he explained. “And there are two entirely different things. Racial discrimination is a situation where a landlord says ‘I have two applicants, one’s white, one’s black, and I’m gonna try and charge that black guy more money.’ ”

Is there a fix?

McCoy said several mechanisms could help tamp down this phenomenon and get Las Vegas back to a more healthy rental market, and there is one type of housing that could help.

“One of the most powerful drivers of rent decreases is increases in the supply of new multifamily developments,” he explained. “The data shows that rents generally fell in low-income neighborhoods which experienced large increases in the supply of new apartments.

“Additionally, these decreases were similar to the levels of rent decreases we saw in high-income neighborhoods. In contrast, rents generally stagnated and in many cases rose in low-income neighborhoods where new multifamily construction was limited.”

Summers-Armstrong said lawmakers tried to introduce measures to help renters this legislative cycle, including a bill that would allow an eviction to be paused while local governments distribute rental assistance, however, it was vetoed by Gov. Joe Lombardo along with a number of other bills designed to help renters she said.

“So as a legislator, I feel extremely disappointed and hurt,” she added. “We were stymied by the veto process. We tried but we couldn’t get anything through no matter what our effort. And so I’m hopeful that in the interim there will be some local solutions that could help folks. But we have a significant problem right now.”