New report spells out factors driving Alaska’s tight housing rental market

Medical assistant Desiree Hardman said she’s been scouring South Anchorage for months in search of a two-bedroom apartment that fits her budget. She’s coming up empty.

Prices have jumped sharply since 2020, and it’s difficult to find a decent place for less than $1,500 a month with utilities and pet fees, she said.

Then there’s the competition. Several dozen people can vie for the same unit, and property managers require application fees, sometimes $50, just to look at an apartment, she said.

“It’s pretty disheartening,” said Hardman, who lives in north Birchwood, where housing is more affordable. “It kind of felt like there was price-gouging on groceries at the start of the pandemic. But now it’s like price-gouging on the people who need a place to live.”

Hardman, who commutes more than 50 miles daily to her job in South Anchorage, isn’t alone.

A report issued this month by the Alaska Department of Labor and Workforce Development says Alaska’s housing market has tightened sharply, helping push rents higher.

The report expands on data issued by the agency in July. The agency cites several causes for the tight market, including extremely limited construction activity and a sharp increase in short-term vacation rentals.

[Rental prices for homes and apartments rise in Alaska, led by a sharp spike in Anchorage]

The report says rental vacancy rates in Alaska this year have plunged to their lowest level in a decade, hitting 4.3%, meaning few rental units are open. The rates hovered around 9% in 2020.

“Mat-Su and Anchorage had the tightest markets at 2.9 and 3.2 percent vacancy, respectively,” the report says.

The lack of available rental housing is having a big impact on average monthly rents, the report says.

Rents rose 8.2% statewide this year, to a median of $1,276 for a two-bedroom apartment, with the cost of utilities included.

Average rents were up more than usual in the state’s biggest markets, which include Fairbanks and the Matanuska-Susitna Borough, the report says. Leading the way, Anchorage had the highest increase at 14.2%, pushing average prices to $1,339. It was the biggest recorded increase in Anchorage in at least two decades, but if followed years of falling rents before the pandemic, the report says.

The report, based on surveys conducted in March, says rents are still relatively affordable, thanks to rising monthly wages.

Factors during the pandemic caused the housing market to begin tightening, according to the report.

Home ownership costs have soared, keeping many renters in their leases, the report says. And there were fewer evictions, thanks to federal assistance.

“While Alaska has no publicly available eviction data, more than 26,000 renters — about three in 10 — received a share of the $262 million in rental assistance distributed during the pandemic to help tenants pay back rent and utilities and offset future payments,” the report says.

[Alaska house prices jumped last year to a record $389,000]

Another key cause involves the lack of new construction activity, the report says.

Permitting for multi-family housing units has fallen for several years, and in 2021 it reached the lowest level in at least two decades. Well below 200 new units were permitted last year, the report says. Around three times that many units were permitted in 2016.

The factors also include a significant increase in the number of short-term rental listings, available to tourists on platforms like Airbnb. The number of listings jumped to about 7,000 statewide this spring, the report says, citing AirDNA, a firm that analyzes the short-term rental market. That’s up from about 5,000 last year.

Anchorage leads the short-term rental market with more than 2,300 listings, followed by the Kenai Peninsula with more than 2,100, according to the report.

Jonathan King, an economic consultant who owns Halcyon Consulting in Anchorage, has spent time looking into the details of the short-term rental market.

He said the growing short-term rental market can have significant consequences in Anchorage and other Alaska communities.

“We are undersupplied with housing as it is,” he said. “It doesn’t take much of an increase in the number of short-term housing rentals to affect the long-term housing rental market.”

One big issue is the risk of homelessness for people on the lower end of the market, he said.

“It can lead to higher rents, making it harder for people to find a place and people getting squeezed out of the market,” he said.

That may already be happening, he said.

Hardman said she saw the long-term rental market start tightening in 2020.

Property managers in Anchorage often didn’t want to show apartments in person, out of concern they might contract COVID-19.

She said she saw Anchorage prices jump sharply starting in 2021, thanks in part to the short-term rental market. Landlords of those rentals were offering leases to the traveling nurses coming to Alaska to help with the pandemic.

Now, Hardman is seeing short-term rental owners advertising their space to Alaskans, but only until next summer. That’s something she’s not interested in.

“No one wants to move that much,” she said. “This keeps me where I’m at.”