The news reports that Austin, Texas, has been named one of the ten best places to buy rental property in the U.S. Also, Austin area rents are at record highs. The question is, how does the Austin rental market stack up to San Francisco’s–the second most expensive place to live in the U.S. next to New York City.
This analysis looks at three dimensions not commonly evaluated. First, I look at the number of establishments in industry code (NAICS) 53111 in Travis County Texas as a percentage of the number of establishments in San Francisco County between 2005 and 2016. I also look at the number of employed persons in NAICS code 53111 as well as the annual payroll, controlled for cost of living differences, between 2005 and 2016.
Austin is the seat for Travis County and spills over to Hayes and Williamson counties. San Francisco refers to both the city and the county. NAICS code 53111 is defined as: “This industry comprises establishments primarily engaged in acting as lessors of buildings used as residences or dwellings, such as single-family homes, apartment buildings, and town homes. Included in this industry are owner-lessors and establishments renting real estate and then acting as lessors.”
The headline result is that the number of establishments leasing residential dwellings in Austin is growing faster than the number of establishments in San Francisco. However, the number of people employed in this industry in Austin is growing at a slower rate than in San Francisco. Also, the annual payroll in this industry, adjusted for differences in cost of living, is growing at a slower rate than in San Francisco, too.
Turning first to the number of establishment in NAICS code 53111, Chart 1 shows the number of establishments in Travis County as a percentage of San Francisco County. The percentage is 50% in 2005 and rises to a high of 70% in 2015 and 2016. The chart shows that after 2011, there has been a steady rise in the number of lessors in Travis County as a percentage of San Francisco County.
Next, I turn to the topic of employed persons in the NAICS 53111 industry. Chart 2 shows that the number of paid employees in Travis County as a percentage of San Francisco county fell between 2005 and 2016. The percentage began at 80% in 2005 and, for a few years, grew faster than San Francisco and then fell in 2011 to a low of 51% before climbing back to 75% in 2016.
Finally, I turn to the topic of annual payroll in NAICS 53111. Chart 3 below, shows that wages in San Francisco County are rising faster than wages in Travis County–even after adjustments for differences in cost of living. In 2005, annual payroll in Travis County as a percentage of San Francisco County was about 75%. However, by 2016, the percentage had fallen to 51%. Therefore, wages in Travis County have not kept up with wages in San Francisco County.
Putting the pieces together paints a picture where lots of small new entrants are entering into the Travis County leasing market for residential dwellings. However, the more mature establishments in San Francisco County are hiring more and paying higher wages than in Travis County.
Source: https://www.statesman.com/news/20190807/roaring-rents-austin-area-apartment-rents-hit-record-highs, https://keyrenteraustin.com/why-austin-is-a-great-rental-market/, https://www.investopedia.com/articles/personal-finance/080916/top-10-most-expensive-cities-us.asp, https://www.bls.gov/cpi/data.htm, https://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml