It’s no surprise that Connecticut’s rental market is competitive. But just how competitive is it?
Connecticut has the lowest rental vacancy rate of any state in the country, according to recent data from the U.S. Census Bureau.
Just 2.1% of Connecticut’s rental housing was empty during the second quarter of the year. In other words, only about 2% of rental units are vacant and available for renters looking for a new unit.
The national average is 5.6%.
“It's telling us that there's a shortage of units available for people to freely move around and make choices that are best for their lives,” said Nandini Natarajan, CEO of the Connecticut Housing Finance Authority. The agency is one of the biggest lenders for affordable housing development in the state.
Low vacancy rates open the doors to a competitive rental market where renters are often forced to pay more than they can afford. A recent study found that workers need to earn double the minimum wage to afford an apartment in the state.
Too much housing demand, not enough supply
What’s driving the vacancy rate to such low levels? The housing shortage.
“The vacancy rate is just a symptom of the problem,” Natarajan said. “The problem is really we don’t have enough supply.”
It doesn’t surprise her.
“We know that the supply of affordable rental housing, and for that matter affordable homeownership, has never really recovered from the financial crisis over 10 years ago,” she said.
While Connecticut used to issue more than 10,000 housing building permits a year before the 2008 financial crash, in recent years it’s issued around 4,000 a year, according to data from the state Department of Economic and Community Development.
Natarajan said there are plenty of obstacles to building housing. Recently, those issues include the high cost of land and construction supplies and not enough construction employees – all of which has been exacerbated by the pandemic. In addition, Connecticut zoning laws make it difficult to build different kinds of housing.
Natarajan said low vacancy rates are not unique to Connecticut.
“It’s just the flavor is different in Connecticut because it’s based on how the Connecticut economy functions and where people want to live,” Natarajan said. “Connecticut has a unique geography in the sense that our big cities tend to have the most population, and there are a lot of towns where there's a lot of single-family homes.”
Out of the 75 largest metropolitan areas in the country, three Connecticut metro areas rank in the top 15 in terms of the lowest vacancy rates: New Haven-Milford (1.3 %), Bridgeport-Stamford-Norwalk (1.4%) and Hartford-West Hartford-East Hartford (2.9%).
What’s being done to add housing?
The Connecticut Housing Finance Authority is working to increase the building stock, Natarajan said.
It can often take months to years for housing to be built, she adds. But new construction is key to alleviating the shortage.
“We invite developers every year to come and give us their pitch about what they think they can build and what town and what resources they need,” she said. This year they’ve had 50 applications for help with development. And CHFA has over 1,000 new units in the pipeline.
In addition, state officials are trying to make homeownership accessible. While housing costs continue to remain high, the state wants to help with down payment and closing costs.
Time to Own, launched this year, gives potential income-eligible homeowners forgivable loans. The program has over 300 interested homebuyers – more than half of the program's initial goal.
“It's really meant to expand access to homeownership in a significant way,” Natarajan said. “And it's the first investment the state has made in well over a generation to provide very deep down payment assistance dollars for an individual or a family hoping to become a first-time home buyer. As we continue to find ways to expand the supply, there's still demand, and we have to try to meet that demand with tools.”
