Alaska Department of Labor September Trends magazine looks at how rentals and households have changed

Juneau, Alaska (DOL) - The March 2023 rental survey showed broad rent increases across Alaska areas. Rents went up an average of 7 percent from 2022.

Rents went up across Alaska, some significantly, according to DOL's March 2023 survey of land-lords in select areas.

Rent for two-bedroom apartments rose 7 percent on average over the year, which was the highest since at least 2011.

Over the last 12 years, rent has risen about 2 percent annually, on average. The second-highest increase was in 2012, at 4 percent.

Vacancy rates increased slightly from 2022 in several areas but remained tighter than average in many.

Area rent increases ranged from 3 percent to 16 percent

Median rent for a two-bedroom apartment — the most common type of unit surveyed — ranged from a low of $1,055 in Wrangell-Petersburg to
$1,600 in the Bethel Census Area.

Except for Bethel, all rents in this article refer to median adjusted rent. Adjusted rent includes the cost of all utilities, whether they’re included in the monthly rent payment or paid separately by tenants, which makes rentals more comparable across areas.

Sitka’s rent increase for a two-bedroom apartment was the smallest at 3 percent, while Ketchikan’s jumped 16 percent.

The larger markets fell into the middle of the pack, with rents up 9 percent in the Fairbanks North Star and Mat-Su boroughs, 7 percent in the Kenai Peninsula Borough, 5 percent in Anchorage, and 4 percent in Juneau.

For comparison, in each of the 10 areas DOL's surveyed historically (they added Bethel this year), yearly increases since 2011 have averaged between 1 and 3 percent.

While rents everywhere had increased more than average this year, only the Kenai Peninsula Borough and Ketchikan posted their largest increases since 2011.

Pace of recent rent growth has been similar nationally

Rapid rent increases have been a national phenomenon in recent years. Although the survey data is specific to Alaska, the U.S. consumer price index’s "rent of a primary residence" category allows DOL to compare the pace of rent growth nationally with urban Alaska.

While patterns for the nation and Alaska differed considerably for much of the past decade, rents grew at similar rates in 2021 and 2022. (Alaska’s CPI measures Anchorage and Mat-Su only.)

Alaska and the U.S. both recorded decades-high rent growth in 2022.

Both continued to rise faster than usual through June of this year, although Alaska’s increase slowed relative to the U.S. during the first half of 2023.

Above: Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, U.S. and Urban Alaska,
primary residence indexes

Below: Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, U.S. and Urban Alaska, primary residence indexes.

Note: Monthly percent changes are relative to the same month the previous year.

Reasons rent has gone up quickly

In 2021 and 2022, Alaska and the U.S. both posted their highest annual inflation rates in decades. In addition to general price inflation, when landlords' operating costs rise, they must raise rent to maintain the same level of income from their properties.

Maintenance, property taxes, and utilities are examples.

The price of heating oil specifically has climbed in recent years.

Availability is another factor, and vacancy rates have been low in recent years.

As the pool of rentals that are both vacant and available in an area shrinks, rents typically rise.

Landlords face less competition from other landlords while renters face more competition from other renters.

About the rental survey

DOL partners with the Alaska Housing Finance Corporation every March to survey Alaska landlords in selected areas.

In 2023, they added the Bethel Census Area to the 10 areas surveyed historically.

All rents and rent changes are median adjusted rents for two-bedroom apartments, unless otherwise noted.

Two-bedroom apartments are the most common unit type in DOL survey results.

Adjusted rent is the contract rent (the amount paid to the landlord) plus the costs of any utilities tenants cover separately. Using adjusted rent for one unit type makes rents more comparable across areas.

Because 2023 utility adjustments weren’t available when this article was published, DOL used 2022 utility adjustments.

Vacancy rates are for all units surveyed in an area. Vacancy rates represent the percentage of units that were vacant or anticipated to be vacant the week of Mar. 11.

Rental survey results since 2010 will be available on DOL's website by mid-September and will include average and median contract and adjusted rents, vacancy rates, and the percentages of units with utilities included in contract rent by area, building type, and number of bedrooms.

The survey combines the Wrangell and Petersburg boroughs because of their small sizes.

A note on Bethel, new to survey in 2023

In 2023, we added the Bethel Census Area to our survey and received responses for 220 units, including 94 two-bedroom apartments. Bethel had the highest median rent at $1,600 and the highest vacancy rate among all surveyed units by a wide margin.

Bethel’s median rent is based on contract rent only, because area utility adjustment data were not yet available.

However, even without the additional utility costs, Bethel’s contract rent was higher than the median adjusted rent in any other area.

While Bethel utility adjustments were not available, the survey included the types of utilities Bethel’s contractrents encompassed and which energy types were most common for heat, hot water, and cooking.

Among all types of units, Bethel's contract rent typically included heat, hot water, garbage, and snow removal. Including sewer and electricity (lights) was less common.

Oil was the primary heat source for 98 percent of Bethel’s rentals, and 98 percent used electricity to cook.

Electricity was also the most common source for hot water in 72 percent of units, and about 25 percent used oil.

Vacancy rates remain low

In our survey, vacancy rates are based on units that were not occupied, or were expected to be vacant, the week of Mar. 11. Unlike rents, vacancy
rates are for all unit types surveyed, not just two-bedroom apartments.

Less vacancy has been a common theme in recent years’ surveys, a pivot after a period of higher vacancy. Rates in 2023 ranged from a low of 2.9 percent in the Wrangell-Petersburg area to 17.3 percent in the newly added Bethel Census Area.

Fairbanks has had the highest average vacancy rate since 2010, while Anchorage, Juneau, and Mat-Su have had the tightest markets.

Not including Bethel, the average vacancy rate was 5.4 percent in March, up slightly from 4.8 percent in 2022 but well below the average of 6.8 percent since 2010.

This year’s rate was also lower than any other year from 2012-2021.

Changes by area varied.

Vacancy rates increased by less than one percentage point in Anchorage, Mat-Su, Juneau, Kenai Peninsula, and Ketchikan. Fairbanks’ and Chugach Census Area’s vacancy rates increased more.

Vacancy dropped about two percentage points in Kodiak, Sitka, and Wrangell-Petersburg, although the reasons for those three markets tightening weren’t clear from the survey.

Vacancy rates in most areas remained below their 2010-2023 averages, despite these increases. Rates were at least one percentage point lower than average in Fairbanks, Mat-Su, Kenai Peninsula, Ketchikan, Kodiak, Sitka, and Wrangell-Petersburg.

Juneau and Anchorage were close to their average vacancy levels, however, their historical averages are the survey's lowest.

Only the Chugach Census Area, which contains Valdez and Cordova, had much higher vacancy than average.

The reasons weren’t clear, although this is a small market, so changes to a modest number of units can sway the average.

Vacancy rates are also tight nationally.

Below: Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section, and Alaska Housing
Finance Corporation: Rental Market Survey

Factors keeping vacancy down

Although most of the pandemic relief programs and conditions that affected the 2021 and 2022 surveys by keeping more renters in their units were no longer relevant this year (such as eviction moratoriums and emergency rental assistance), several other factors appear to be keeping vacancy rates down.

It's important to note that the influences on vacancy rates are numerous and complex, and without holding other factors constant, it's impossible to
isolate the effects of any one of the following factors on rates.

• Alaska's long migration outflow has slowed
• Homes became less affordable
• Home-building low in recent years
• AirDNA shows more short-term rentals

Below: Alaska's new home construction declined. Notes: Single-family homes include houses that are attached. Multi-family units
are in buildings with two or more units in which units are stacked or share common utilities.
Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section and Alaska Housing Finance Corporation, New Housing Unit Survey

Gunnar Schultz and Rob Kreiger are economists in Juneau. If you have questions about this article, contact Rob at (907) 465-6031 or email rob.kreiger@alaska.gov. Read the full article here.

How our households have changed

An Alaska household looked quite different in 1960, just after statehood, than it does today. At that time, outside of the Alaska Native population, many people had only recently moved to the state, and most came for work.

The explosive population growth in the decades that followed reshaped the state and the housing landscape — both the
homes themselves and the people who occupied them.

While Alaska has an older and more established population today, the picture of Alaska households is still shifting. Census data from 1960 through 2020 show massive changes in Alaskans’ living circumstances over the last 60 years.

In contrast, over the same period, the national picture has stayed about the same in most household categories.

The number of homes went from 67,000 to 326,000

In 1960, Alaska had 67,000 homes available for a population of 226,000.

Over the next 10 years, Alaska’s housing stock grew 35 percent, with Alaska adding homes at twice the rate of the U.S. as a whole. Over the decade, the state gained 74,000 residents.

The 1970s were a time of rapid housing growth for both Alaska and the U.S. Alaska’s population grew by 101,000 as the construction of the Trans-Alaska Pipeline System drew in a flood of workers. At the same time, the large baby boomer generation was leaving home en masse nationwide, which drove up the need for housing.

Alaska’s housing stock jumped 79 percent over that decade while the U.S. added 29 percent.

Alaska’s population grew even more in the 1980s and reached 550,000 people by 1990. The number of homes increased by over 43 percent that decade (16 percent for the nation).

Some of that was likely catch-up after the population boom of the previous decade, but Alaska also gained more permanent residents in the '80s, as many who arrived in the '70s came temporarily for pipeline construction or the military.

Home construction slowed after that, as did population growth. Alaska added 12 percent more housing units in the 1990s and 18 percent in the 2000s. The latter bump came when the large millennial generation began to move out of their parents’ homes.

Housing growth has slowed considerably since 2010, both in the state and nationwide, partly due to the national housing bust of the late 2000s.

Alaska added fewer than 20,000 homes over the 2010-2020 decade, the smallest number since statehood.

Home construction still outpaced population growth, however, even at that greatly reduced level.

As of the 2020 Census, Alaska had a population of 733,000 and 326,000 housing units: 224 percent and 386 percent increases since 1960, respectively.

Group living common in Alaska, especially early on

Alaska has always had a significant share of the population living in group quarters: shared housing such as barracks, dorms, or prisons.

Group housing was especially common in the years following statehood because so much of the population worked in logging, seafood processing, or the military.

In 1960, 11 percent of the population lived in group quarters compared with just 3 percent nationally.

The differences between Alaska and the rest of the country were even more striking when broken down by age. At statehood, 28 percent of those in their 20s lived in group housing and in 1970 it was 22 percent.

For the U.S. it was just 7 percent in 1970.

Alaska’s share of young adults in group quarters fell considerably during the 1980s but remained double the national average as of 2020.

The decline in group housing has come with population growth and the increase in housing stock.

Among all ages, 7.4 percent of Alaskans lived in group quarters in the 1970s, and it fell to around 4 percent over the next decade, where it has remained since.

While the group housing graph above shows an uptick for Alaska after 2000, that's mainly a change in how the Census Bureau counts group quarters rather than a true increase.  Source: U.S. Census Bureau

For example, the thousands of oilfield workers in Prudhoe Bay weren't counted in group quarters until 2010.

Nationwide, the group housing percentage hasn’t changed much; it has remained between 2 and 3
percent since 1960.

Data for this article comes primarily from the decennial census short form.

More detailed breakouts by age rely on Public Use Microdata Samples from the census long form for 1960 through 2000 and then the Census Bureau's American Community Survey for 2010 and 2020.

David Howell is the state demographer. Reach him in Juneau at (907) 465-6029 or david.howell@alaska.gov. Read the full article here.

Listen to the Department of Labor discuss this month's Trends magazine on Action Line.