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Why is rent so high in Dallas

Why is rent so high in Dallas?

The average rent in Dallas costs more than half a minimum wage earner’s salary. Dallas rent costs an average of $1,568 per month while the minimum wage only gives $2,687 a month—but why is this the case?

Dallas rent is expensive because of high construction and homeownership costs, the abundance of amenities throughout the city, and the supply of rental properties that can’t keep up with the demand.

These make rental properties more attractive, allowing landlords to raise rent prices at low risk.

Let’s dive further into this.

Dallas is a booming city.

Dallas is a booming city's Homepage

Dallas is the 5th fastest-growing US city of 2022 according to CNBC and has a GDP of $682B, the second-highest on their list. 

Having a booming economy means Dallas landlords can afford to raise the rent above the national average. 

In 2021, for example, Dallas rent for a one-bedroom apartment averaged $1,095/month, while the national average was $1,017/month.

Part of the reason for the higher-than-average rent is that Dallas is home to a strong and vibrant economy, thanks to the large number of businesses based in the city. Some of these are AT&T, Texas Instruments, IBM, and Lockheed Martin. 

The bustling business climate gives Dallas a high standard of living. It’s home to many large hospitals, shopping centers, job opportunities, and vibrant nightlife.

It’s worth noting though that the average Dallas rent from January 2021 to December 2022 grew by a staggering 24.4%. This is huge compared to the 2.88% average growth from January 2014 to January 2020. 

This is because Dallas experienced a spike in unemployment in 2020, rising from 4.9% in March to 11.9% in April. The spike caused many tenants to miss out on their rent dues, forcing landlords to lose money and reduce their rent.

Employment has since recovered and gone back to the normal 3% range, and landlords have responded by marking up their prices. 

Many landlords are still trying to make up for their losses from 2020 by increasing rent by hundreds of dollars, although the increase rate has begun to decrease at an average of 0.2% per month since September 2022.

Given all this, Dallas is a very attractive place for many people, meaning there’s a high demand for homes. 

In addition, maintenance and property management fees also get more expensive the richer a city gets. Dallas property managers typically charge 10% to 15% of the rent, while the national range is around 8% to 12%.

There are plenty of high-paying jobs in Dallas.

There are plenty of high-paying jobs in Dallas' Homepage

There is generally a positive correlation between high wages and the cost of living, which includes rental rates. This is because people who have high-paying jobs often have higher incomes and can afford to pay more for housing.

MyPlan ranks Dallas as 57th out of 300 American cities with the highest average income. In addition, MoneyGeek puts Dallas as the 5th best city in the US for job seekers.

Since Dallas has a strong local economy and plenty of high-paying job opportunities,  it’s very attractive as a place of residence, making demand for services like food and accommodation increase, and making rent more expensive.

Neighborhoods like South Side and Deep Ellum take advantage of these high-income workers since they’re also located near important business centers. 

Since these kinds of neighborhoods give their residents convenience, they have enough justification to raise their rent compared to more isolated areas.

However, being isolated, or far from the main city, does not automatically mean that rent will be affordable. Highland Park is an example of a neighborhood that, while isolated, still has some of the highest rent prices in Dallas. 

The general income bracket of Highland’s residents is in the six-figure range, allowing landlords to raise prices compared to lower-income, isolated neighborhoods like South Dallas.

You can also see this correlation between rent and wages happen in New York and San Francisco, where the abundance of Wall Street businessmen and tech workers led to greatly inflated rent prices.

Dallas welcomes an average of 40,000 migrants per year, driving up housing demand.

Dallas welcomes an average of 40,000 migrants per year, driving up housing demand's Homepage

In recent years, Dallas has seen an influx of new residents due to its thriving economy, expanding job opportunities, and diverse cultural attractions. These migrants are mostly young professionals from Southern California.

From 2010 to 2022, Dallas experienced strong population growth with more than 1 million new residents moving into the area. 

Within that time period, the population grew at an average rate of 1.9% but slowed down to 1.5% from 2018 to 2022.

This surge in population has helped to create a strong and vibrant economy, which has been further strengthened by the addition of numerous businesses and corporations.

The job opportunities brought by big corporations are one of the reasons why Dallas is attractive to movers—especially young professionals. 

From 2015 to 2020, working-age adults aged 20 to 34 were the largest age group of Dallas’ in-migrants. The domestic migration rate in Dallas also experienced a surge from 3% in 2018 to 5.5% in 2021.

As of 2022, there are 600,000 migrants living in Dallas, bringing the total population to 6,488,000. Since there are so many people moving into Dallas, the demand for housing increases. 

Landlords raise their rent because there’s a big enough market that they won’t run out of potential tenants.

They can also afford to raise their rents since there’s a sizable chunk of the population with big salaries from big companies. After all, people who migrate for work wouldn’t do so if the new employer’s salary wasn’t competitive.

As of September 2022, there is a 92.9% occupancy rate for Dallas apartments, meaning there aren’t enough houses to accommodate the rising population. 

Construction costs are expensive in Dallas.

Construction costs are expensive in Dallas' Homepage

The cost to build new apartments and homes in Dallas is 6% higher compared to the national average. Construction costs consist of the prices for planning, materials, labor, permits, and taxes.

Luxury homes are the most expensive to make and have built-in HVAC systems, costing an average of $431.44 per sqft in Dallas. The average rent for a luxury home in Dallas is $3797 per month.

Meanwhile, a good standard home costs $100.33 per sqft in Dallas. These homes are usually made with mid-grade materials and have an average rent of $2,007/month.

For reference, here are the average costs for constructing each type of home in Dallas.

Type of HomeAverage Cost per Square Foot
Minimum Standard Home$79.16 per sqft
Average Standard Home$100.33 per sqft
Good Standard Home$123.71 per sqft
Best Standard Home$168.16 per sqft
Semi-Luxury Home$262.20 per sqft
Luxury Home$431.44 per sqft

Taxes are also a factor in the cost of construction in Dallas. The city’s property tax rates are higher than the state average.

As of 2022, the property tax rate for Dallas sits at 2.22% while the Texan rate is 1.6% of the assessed home value. Meanwhile, the national average is 0.99% of the assessed home value.

All these costs make building and owning a home expensive. Landlords raise their prices to help make up for the construction costs and to cover any potential future damages to their property.

High homeownership costs are forcing potential homeowners to rent.

Contract, Mortgage Document,Signing, Writing, Model Home
Contract, Mortgage Document,Signing, Writing, Model Home

Mortgage rates have been declining from 2000 to 2020, but it’s faced a massive jump from November 2021 to December 2022. 

As of December 2022, the 30-year fixed rate mortgage average in Dallas is 6.383% with a 6.478% APR. 

The problem is especially acute among those with lower incomes. There are income and credit score requirements for applying for a mortgage, but the rates are so high that it’s often not worth the effort. 

As a result, many are ending up renting instead of buying. Renting in Dallas provides more flexibility and affordability, but it is subject to volatile increase rates, which we’ll discuss in more detail later. 

Since many potential homeowners are forced to rent, it further increases the demand for rental properties that Dallas is already struggling to keep up with. This gives landlords more reason to raise their rent to maximize their profit.

There aren’t any rent stabilization laws.

There aren’t any rent stabilization laws' Homepage
20144915 – symbol of law and justice in the empty courtroom, law and justice concept

Rent prices in Dallas are volatile, making it hard to predict how much rent will increase in the next year. Texas does not have any rent stabilization laws and neither does Dallas. 

The lack of rent regulations in Dallas means rent increase rates can vary by up to 10% between years, making it hard for tenants to prepare their finances. In 2021, rent increased from the previous year by 15.3% while it rose by 6.8% in 2022.

Rent increases typically occur after a lease is renewed, and there is no limit on how much a landlord can increase it. 

Increases usually happen to either renovate the property, cover the cost of repair for rowdy tenants, match the current market price, or just increase profit.

What is the average rent in Dallas?

The average rent in Dallas is $1,568 per month, but the range varies depending on the neighborhood. 

Brighton Lofts and Grammercy Place both breach the $3,000 mark, while Casa Loma and Garden Heights are some that stay below $1,000. 

Here are the top and bottom 5 neighborhoods, ranked by average rent.

Most Expensive NeighborhoodsAverage Rent
Brighton Lofts$3,166/month
Grammercy Place$3,166/month
Caruth Hills$2,803/month
The Shelton$2,803/month
Least Expensive NeighborhoodsAverage Rent
Frazier Fellowship$993/month
Arbor Ridge$926/month
Casa Loma Estates$926/month
Garden Heights$926/month
South Oak$926/month

Will rent prices in Dallas go down?

Rent prices in Dallas are predicted to continue increasing from 2023 onwards, according to WFAA. 

Dallas apartments have already reached 92.9% occupancy but its population is still increasing by at least 15,000 people a year, forcing rent to increase.

Can you negotiate rent in Dallas?

You can negotiate your rent in Dallas with many landlords, but your success will depend on your financial stability, the current demand for rental properties, the length of the lease, and the condition of the rental property.

Why doesn’t Texas have rent control?

The Texas Constitution contains provisions that protect the right to private property, which may be seen as incompatible with rent control laws that place limits on how landlords can use their property.

Freedom over their property also motivates landlords to improve their maintenance services.

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