The Recession’s Over, But Rental Housing Market Shows No Signs Of Stopping
PHOTO/Jacquelyn Gutc
Timothy MacLeod, manager at Hilltop Garden Apartments in Leominster, has seen consistently high demand for apartments over the past few years. Now, he said, more tenants want studio units.
Statistically and anecdotally, all signs seem to point to a growing rental housing market both across the United States and in Massachusetts, and much of the movement within the industry this year can be traced back to the Great Recession.
According to the U.S. Census Bureau, the number of occupied rental units in Worcester County grew nearly 12 percent between 2008 and 2011, to 104,421 units. Meanwhile, the U.S. homeownership rate plunged 65 percent in the first quarter of this year to its lowest level in 18 years.
Sherri Way, president of MetroWest Property Owners Association, and a Realtor in Framingham, said demand this year is better than in 2012. And she thinks the economic downturn played a role in that. Way said demand for rental housing is coming after months of declining foreclosures because many people left the state or moved in with family members during tough times. Now, they're ready to rebuild.
“I think there (are) people that are just waiting for the market to come back,” she said. “They're not ready to buy, but they want to buy. Others have to fix their credit before they can buy because there are higher standards” for buying a home than there … were.”
In Leominster, at Hilltop Garden Apartments, Property Manager Timothy MacLeod said the occupancy rate at the 120-unit site has consistently been around 97 percent since he arrived in 2011, but demand for studio apartments has increased. He credits that to people looking to downsize or save money and said that while many tenants are college students, others are dealing with foreclosures and bankruptcies.
Case By Case
MacLeod said his company understands that people can fall on hard times, and looks at prospective renters' backgrounds beyond their credit to determine whether to lease.
“For folks who have entered into bankruptcy or foreclosure I look at why,” he said. “Is it due to medical (bills), job loss, divorce or over spending?” MacLeod said he looks at what their income was prior to foreclosure or bankruptcy, as well as past-payment history, seeing how declines in personal credit compare over time.
“Typically, by this stage, you can gauge whether the prospective resident was living beyond their means … or if they really did fall on hard times,” he said. “You try to give people a break.”
But in some cases, giving people a break can prove bad for the landlord, according to Sandra Katz, president of the Worcester Property Owners Association and owner of Quality Property Management Services, which manages rental properties in Worcester.
Katz said the challenge for her and the landlords she works with is an influx of low-income people who receive government assistance for housing and want to rent.
She said there have been many instances when she has had to go to court with a landlord because of unpaid rents. She says that state laws make it difficult for landlords to win judgments.
When there are several people vying for an apartment, Katz said, the landlord is more likely to consider a candidate with higher income and better credit.
Amenities & Employer Needs
In Marlborough, Bell Wheeler Hill paints a brighter picture. It stands out with offerings like garden views, soaking tubs, private balconies, a movie theater and Starbucks coffee offered at the clubhouse café. It's also one of 247 communities nationwide owned by Bell Partners Inc. in which tenants can transfer leases to, say, another community in another part of the U.S..
Adrienne Smith, regional vice president of operations for Bell Wheeler, wrote in an email that it has experienced high demand over the past three years, with a 96-percent annual occupancy rate. And she said more employers have returned to a pre-recession practice of renting apartments for employees rather than putting them up in extended-stay hotels.
She said the average length of a tenant's stay has also grown in recent years as people become “renters by choice,” renting because of the lifestyle rather than to save money for a mortgage. That has expanded the average renter's time at the community from a year or two to three to five, Smith said. “People are becoming 'renters by choice' due to several factors,” Smith wrote. “They enjoy the hassle-free living experience where they don't have to mow the lawn, shovel snow or pay for repairs. They also like the fact that they have the freedom to move to a different state if their job situation changes.”
Rents Rising 6-8% A Year
Smith said rents have an annual growth rate of 6 percent to 8 percent, which varies based on market conditions.
Katz said rents at her locations are rising this year as well, in an effort to bring in higher-income tenants and help landlords raise more cash for bills and property improvements. She said rent at one went up $100 and no one moved out. (She declined to name the property.) Others, meanwhile, saw their rents go up by $25 to $50 a month.
Way said rents are gradually increasing as inventory declines. For example, she said, an apartment in Worcester rented for $775 a month last year and went up to $795 this year. She said that while there is available inventory, people's hesitation to move is stopping new inventory from becoming available.
Effect On Multi-Family Units
Another thing she noted is that it's not just the homeowners-turned-renters who were negatively affected by foreclosures, but some landlords of multi-family units as well. Way said many multi-family buildings were foreclosed on, taking rental units off the market until a new buyer is found and able to rent them.
However, where multi-family rental units may be missing, single-family homes are coming on the market, according to Katz. She said this has been fueled by homeowners moving for various reasons and being unable to find qualified buyers for their homes, so they choose to rent their homes rather than sell. Katz said the people who are renting often don't qualify for a mortgage, but they do qualify for a lease.
“For some people, going from a house to a three-decker is a culture shock,” Katz said. “(Some) make the transition from losing their house to maybe getting into a smaller house, but it still gives them that privacy.”
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