Archive for Saturday, August 13, 2011

Landlords trying to fill growing number of rental vacancies

August 13, 2011


If you take a drive around Lawrence this weekend, you might notice more “For Rent” signs than you’d expect to see in August.

Even prime spots for students have rooms for rent.

“This will be my first year that I’ve had a vacancy,” said Quinn Miller of Second Wind Management. “It’s been an odd month.”

Miller has been managing properties in Lawrence since 2007 and noticed last year the renter pool seemed smaller. Then, he didn’t fill his last spot until July 31. This year, Aug. 1 has come and gone and he has yet to fill five of his 37 spots.

Last week in the neighborhood north of Memorial Stadium, where Miller still has a house to fill, there were seven “For Rent” signs in the 10 square blocks from Sixth and Illinois streets to 11th and Maine streets.

No one knows exactly how many rental vacancies Lawrence has because property management companies are reluctant to reveal those exact numbers. But real estate appraiser Tim Keller conducts an annual survey of property owners to try to find out.

“My estimates have shown the vacancy rates range from 6 to 10 percent depending on the part of the city,” said Keller, who has not yet released the results to this year’s survey.

That fits with the most recent estimates from the U.S. Census Bureau, which pegged Lawrence’s 2009 rental vacancy rate at 6.5 percent, with about 2,400 of the 37,900 rental units vacant. That’s actually lower than the 7.7 percent rate for the entire state that year. Nationally, the rental vacancy rate dropped to 9.2 percent in the spring, the lowest it’s been since 2004.

For landlords like Miller, lower student enrollment may be contributing to his unoccupied rooms. The head count on the Kansas University’s Lawrence campus declined by 600 from fall 2008 to fall 2010. KU’s latest enrollment numbers have not been released.

For landlords who cater to students, the decline has been felt.

“It’s been a lot of wait-and-see,” Miller said.

Development continues

There are also more apartment units. Since 2008, 997 apartment units have been built in Lawrence, with 55 built so far this year.

Tuckaway Apartments at 546 Frontier Road were completed in the spring, replacing the Boardwalk Apartments that burned down in 2005. Since becoming fully operational in June, about 35 percent of the 96 apartments have been leased.

Other projects in the works include a seven-story, 55-bedroom building on the corner of Ninth and New Hampshire streets and a 300-apartment complex on Sixth Street and Queens Road.

It might sound odd that there’s so much development in a town where there are more rooms for rent than there are renters. But for investors, it could make sense to build now.

“Construction costs will probably never be any cheaper,” Keller said. “Financing is not easy to get, but the interest rates are favorable.”

And while there are vacancies, Lawrence’s population did grow by more than 1,000 from 2006 to 2010. That growth may give investors the confidence that building now could pay off later.

“While there’s vacancy, there’s also growth the market can stand,” said Ted Haggart, president and CEO of Douglas County Bank. “There is never going to be zero vacancy.”

He said developers who build now may be able to sell their holdings down the road for a big payoff. That happened last December, when a New York-based company purchased two of the three Hawks Pointe apartments at 1421 W. Seventh St. for $12.4 million. The apartments had been owned by a Massachusetts-based company since 2004.

“Apartments are still a favored property to own nationwide,” Keller said. “That probably accounts for some of that significant investment from out of state.”

For landlord James Dunn, who still is trying to fill some of his properties, that development perplexes him. He is concerned the Lawrence rental market has become overbuilt.

“I do have places that really should have somebody living in them. A lot of them are fixed up with new things,” Dunn said. “I feel like I’m personally creating museums.”


RKLOG 6 years, 8 months ago

I am ready to move into one of them but can't afford the rent (hint, hint)...

Zac Hamlin 6 years, 8 months ago

I couldn't agree more Mark, I just got our rental occupied because I asked a reasonable rent, not a summer 2008 pipe-dream.

John Hamm 6 years, 8 months ago

What are the chances rental prices will drop a little? Ah, yeah, that's right not a chance of a snowball in Hell! This is, after all, Lawrence.

Graczyk 6 years, 8 months ago

I know of a rental company that drastically dropped the prices on certain units. I'm not talking about just a few bucks. I am not sure how they plan to get back to the "market rate," whatever that is, next year. They might have a difficult time if the economy stays bad and the rental stock stays high.

Graczyk 6 years, 8 months ago

I know of a rental company that drastically dropped the prices on certain units. I'm not talking about just a few bucks. I am not sure how they plan to get back to the "market rate," whatever that is, next year. They might have a difficult time if the economy stays bad and the rental stock stays high.

Graczyk 6 years, 8 months ago

Two postings with one click. I am good.

violetleaf 6 years, 8 months ago

What company and which building? I know people who are looking but can't afford the prices here so they're settling into roommate situations or commuting.

droppinplates 6 years, 8 months ago

The number of new apartments being built in Lawrence is absurd. Of course their are more sitting empty. The old ones don't just dissappear when the new ones are built.

Kookamooka 6 years, 8 months ago

Oh Goodie! This will result in two great things...1. developers will slow down on the multifamily housing projects they love to build in Lawrence and 2. The slum lords in the Oread will want to sell their properties and single family people can move in and rehabilitate the neighborhood. The landlords need to realize, however, that in order to sell those properties they'll need to put in the work and not just the sloppy cosmetic fixes. Otherwise, they will REALLY need lower their prices. Since those properties are notoriously out of code and often badly maintained, people looking to buy real estate to live in, should get good deals! I recommend buyers bid low and negotiate like sharks! It's WIN/WIN for the little guy and the big dogs will just have to write off their losses. (like Compton does every year with the Masonic Lodge!)

LadyJ 6 years, 8 months ago

From what I've seen, most of the people don't want anything they have to work on, they want "move in ready".

gl0ck0wn3r 6 years, 8 months ago

Waiting on a Merrill cut-and-paste of Kirk's nonsense...

Flap Doodle 6 years, 8 months ago

merrill's recent suggestion that landlords should not charge rent for the first three months of a lease is probably the most removed-from-reality thing he's posted in a long time.

Richard Heckler 6 years, 8 months ago

The city commission should consider a moratorium on new construction for awhile. This market is flooded which means all of the rental properties will NOT be paying back the taxpayers. This is resulting in higher fees and taxes for all of us.

Same with the flooded retail market.

Isn't it magic that we taxpayers are watching how expanding the tax base is more illusion than substance.

The one consequence that usually goes unmentioned - flooded markets are draining our pocketbooks and raising our taxes.

Flooded markets is the result of over five decades of subsidies paid for by the American taxpayer. These range from the obvious to the obscure and include big projects-like the billions we spend on new roads as well as smaller ones-like the tax-breaks that encourage businesses to move to the edge of town. What about that $100 million pork barrel sewage treatment plant?

We've subsidized reckless growth at such a basic level for so long, that many people believe the status quo is actually fair and neutral. This is false-what we think of as a level playing field is tilted steeply in favor of flooding market developments.

Flooding our local markets wastes tax money. It pulls economic resources away from existing communities and spreads them out over sparse developments far away from the core. Taxes subsidize millions of dollars worth of new roads, new water and sewer lines, new schools and increased police and fire protection at the expense of the needs of the core communities. This leads to degradation of our downtown and higher taxes.

Steve Jacob 6 years, 8 months ago

Don't think it's too hard to figure out, more rooms being built, and KU enrollment is about even or dropping. And the students are getting more bang for there buck at newer places.

Richard Heckler 6 years, 8 months ago

Simply because it may be the best time to build for local developers does not mean it should be done. That attitude is unfriendly to existing business and tax payers. Expanding flooded markets is dumb economics because all empty dwellings cost taxpayers money.

Once again flooded markets by way of expanding the tax base is draining our pocketbooks and raising our taxes. Quite the opposite to how taxpayers have been brainwashed for decades aka duped.

Erin Graham 6 years, 8 months ago

Soooo....STOP ruining neighborhoods with dense complexes and multifamily units! kthx.

xclusive85 6 years, 8 months ago

It would help if more places allowed pets. I had a really hard time finding a decent place to live that allowed pets.

Paul Dillman 6 years, 8 months ago

Exactly! I wanted to move into Lawrence but couldn't find a place that accepted dogs (they're both 50+ lbs but better behaved than most KU students). I moved to a house in Eudora where my kind was accepted.

irunsowhat 6 years, 8 months ago

I was actually talking to a woman on Friday while I was at work and she was complaining that she had three of her units empty and they had been occupied for years. I told her I was looking for a place to move and offered her a price that was 50% of what she was asking for and she said she'd take it. These landlords are desperate, especially with more and more developments being built, and this will hopefully make them see that their rates are outrageous.

Probably not, but it's worth a shot.

lunacydetector 6 years, 8 months ago

the vacancies are much higher than reported. who benefits by stating vacancies are lower? the banks and the appraisers. the banks are only concerned about repayment ability by their borrowers and overlooking the actual vacancies make life easier trying to explain why they made a loan if vacancies are high. of course, appraisers get the business to appraise new apartments, so it basically shoots their business in the foot if vacancies are high.

kernal 6 years, 8 months ago

Unless real estate appraising has changed 180 degrees in the last twenty years, real estate appraisers also do an income approach on proposed apartment complexes and they are supposed to know what the current vacancy rates are at the time they complete their appraisal. If they're not doing it, prudent lenders should take a look at that and file a complaint with the real estate appraiser(s) oversite organization.

lunacydetector 6 years, 8 months ago

that's only part of a 3 part equation....6-10% is what the article says. i hear it's more like 15%. but the power people in this town own apartments because that's what our progressive city says it wants. why else is there an ugly apartment complex on every good corner in town?

Richard Heckler 6 years, 8 months ago

And too think all of this over building receives the approval of our city government made up of business people who take advice from the Chamber of Commerce which is made up of primarily builders and developers also considered good business people. Hmmmmmmmmm business people without discipline and ability to say no.

So why does Lawrence vote in business people who proceed to bloat the markets at taxpayer expense. I imagine that over the past 25 years the cost of tax increases and user fee increases is in the thousands of dollars to each of us taxpayers.

Rent at $300-$400 per bedroom or more is as they say too damn high for Kansas. Bedroom communities typically are more expensive for no reason at all. Mostly because they lack the support of $100,000 salaries in every home and the employer.

Lawrence west side developers brought us an illusion aka duped.

Richard Heckler 6 years, 8 months ago

"Obama is getting ready to release bank foreclosed houses to the market."

Which is likely to drive market values down across the board which is not the fault of Obama.

It is the fault of the crooked real estate industry and crooked financial industry and the fault of the Bush regulators who turned a blind eye to this reckless "boom town economics" which in reality had a touch or two of monster fraud within.

BUT there should be some very hot deals available. If I were to come upon one of these my offer would be rock bottom knowing the real estate industry wants to get these homes off the market. KCMO metro may have some real good deals as the last I heard there were about 10,000 homes on the market. We'll see.

Bottom line for Lawrence,Kansas.... the rent is too damn high!

LadyJ 6 years, 8 months ago

So give us an idea what you think rents should be, dollar amounts, not just repeating over and over that rent is too damn high.

Cai 6 years, 8 months ago

The problem with that is that the dollar amount that is reasonable changes with the property - not just square footage, amenities, and w/d type things, but also the general overall upkeep of the apartments.

I looked at a 2 bedroom townhome that had greasy stained carpet and wallpaper that was peeled off in places. 745 sq feet. And the landlord company wanted $700 for it. I'd have paid $450 since the owners were unwilling to fix it, other than to provide receipts of an already done professional carpet cleaner.

I pay more for rent now without complaining about it because I get maintenance that actually does stuff, a place that doesn't look or feel like a run down apartment, and I don't get treated like just another dumb student, as I have in the past.

And the pets thing. I understand wanting an extra deposit, for a small dog, etc. But why, exactly, do they need more rent everywhere (especially when the same companies don't for cats).

In general, Rent should probably be about 80% of what it is, higher for well maintained places that have staff to support their tenants. Lower for beat up places that are just collecting income and not taking care of the place.

gl0ck0wn3r 6 years, 8 months ago

So it seems like your experience is a perfect example of how the current market works in the long run. You looked at a place that didn't meet your standards for the cost and so you went elsewhere. If enough people feel as you do, the owner will eventually fix the place or be forced to charge less. What's the problem?

Cai 6 years, 8 months ago

The problem ends up being two-fold. There's NOWHERE in Lawrence that has the cost of renting an apartment for the quality that matches the surrounding areas - so this idea of 'enough people feeling as [I] do' doesn't work, because eventually, we run out of places that meet market standards. Eg, this apartment I'm happy with now? booked 9 months in advance. Before Christmas, to move in during August. That's ridiculous - what other city do you have to find an apartment so far in advance?

Second, there's a problem with the city's definition of 'livable'. Kansas law states that, regardless of the lease, by making an apartment or home available for rent, the apartment must be in 'livable' conditions. I believe many of these problems would be fixed if the city would do more to inspect and/or actually enforce this rule. Is dirty carpet still 'livable'? maybe. But many conditions you'll find in apartments aren't.

Carol Bowen 6 years, 8 months ago

Property taxes might have some impact, but what about the "investors" themselves? Most of them do not purchase a house with a decent size downpayment. They rely on renters to cover a higher mortgage payment. Now, they cannot lower their rents. They have to cover their mortgage payments and other expenses.

gl0ck0wn3r 6 years, 8 months ago

But you wouldn't actually make any offer because you are all talk and no action... Sort of like how you want everyone to go green but you use polluting lawn mowers in your own business. If you know so much about land ownership, why not get in the business?

lunacydetector 6 years, 8 months ago

we must not forget that congested apartment buildings are promoted by the 'smart' growth people, so blame the city for caving in to the progressives who wanted lawrence to be a utopia. the apartment developers took full advantage of lawrence's naïveté.

kernal 6 years, 8 months ago

We shouldn't be ragging just the City for handing out more permits for apartment complexes when vacancies are high. Stockholders should be asking the banks where they own stock shares why they're granting acquisition and development loans for these projects. In a college town where the number of students enrolling has dropped and there are no large businesses moving here, requiring housing for employees, it's not making a lot of sense.

Seems to me It's that kind of bank mentality that helped cause our current economic woes.

Carol Bowen 6 years, 8 months ago

It looks like the housing market is leveling the supply and demand. (Liberty One, Where are you?) Unfortunately, waiting for the market to correct the supply of rental housing allows too much time for neighborhoods to decline.

onceajhawkalwaysajhawk 6 years, 8 months ago

I'm amazed that this is even a story....For years now the market has been glutted with new construction (from the same SOB's) who brainwashed all the neighborhood associations to fight for the residential housing regulations. (Which was just a move to create more customers for their complexes) If people would have just stopped for a second and think about who really needs to be regulated, it is the multifamily developments. Why? because they run their business on income vs. appreciation. What does that mean? They drain the income out of the units and sell the property when their CPA's say it's time to sell and careless about maintenance, they just build them cheap and let them go until they sell to seeder suckers....I mean owners. Examples?Oh, lets see Park 25, Gateway, orchard corners, chase court,crescent heights, fingers are getting tired.. The bottom line is - Everyone that support the rental housing regulation went after the WRONG group! Drive around and tell me these complexes are well maintained and a asset or our community.. Wow ,the sheep followed the wrong Shepard on this subject!

LadyJ 6 years, 8 months ago

Bingo. Most cities regulate all rentals. One group is not singled out. Single family homes are safer than apartment complexes and chopped up houses with substandard studios that really aren't studios.

MYOB 6 years, 8 months ago

All of you that think rent is "too damn high" in Lawrence have never dealt with the county appraiser's office in this respect. Guess what the county says that a one bedroom apartment should be renting for? $585! That's what our appraisals and thus property taxes are based on! And it doesn't matter that you can prove to them that your tenants are low income or that your 40+ year old property is competing against new units that provide all utilities included in brand new spaces, for less than $500! They don't budge! Our property doesn't command that much rent, yet we're taxed on it. How about griping that the county is over valuating, thus over taxing, thus causing landlords to charge too damn much?

violetleaf 6 years, 8 months ago

That is a really, really good point and it does seem like the logical place to start. I looked for weeks for an apartment "in town" and was absolutely shocked by the rent prices being asked for units that were literally disgusting, like barely a step or two above a squatter's hovel. One apartment I saw had exposed wiring and a naked bulb right above a jury-rigged shower head that had been installed in a vinyl shell crammed into a closet, with a toilet jammed right next to it. There were no baseboards on the wall, showing black mold growing an inch out of the gap between the floor and the wall. The "kitchen/living room" (this was in one of those chopped-up houses) was a room that had some plywood "cabinets" that had been painted with flat white, a sink, a rusted stove, and thin carpet that was about 20 years old. Rent: $650. It was literally insulting to be told that was what it would cost to live there and the woman did it with a completely straight face. Every apartment I looked at in town was in a state of blatant disrepair that really did remind me of squats, and they all cost at least $600 or more. I moved into a large loft-style studio out on 23rd which is beautiful, with a gorgeous new kitchen and brand new appliances (stove, fridge, microwave, and dishwasher), a clubhouse with gym and laundry, a swimming pool, all utilities included except electricity (and with the new energy efficient appliances and the brand new double pane energy-saving windows, my bill has yet to go over $50 even in this blazing heat), and good quality neighbors (there is a substantial background check and a crime-free premises clause in the lease), on-site recycling, half a block from a good little shopping area. $495. As far as I'm concerned, the landlords gouging students for ridiculous rents to live in abject hovels with ancient amenities that cause their utilities to be sky-high can suck it. I'm delighted that there is all this wonderful, affordable, high-quality housing available in Lawrence for accessible rental prices. If all the slumlord properties go vacant and those landlords go broke and have to sell those houses for next to nothing because the only people who will buy them are those who will pay 50K for it and invest 100K to turn it into a nice single-family house which will ultimately be worth 200K, so much the better. I honestly think that's the fate that all the Oread slum houses should face: the landlords should take the bullet which is their rich reward for years of abuse and exploitation, and that neighborhood can be gentrified. It's really pretty inevitable.

Cai 6 years, 8 months ago

Unfortunately, this doesn't do much to change my opinion.

Rent is STILL too damn high.

It DOES give me an example of one reason (of many, I'm sure. Lord knows I've never looked into the real estate business) that a landlord would choose to charge that much. And I agree that this should be looked into and changed.

So...Rent is still high, and still needs to be lowered. But the fault doesn't lie exclusively with the landlords. Okay. But rent is still too high.

Cait McKnelly 6 years, 8 months ago

It isn't just a matter of rents being "too high". Those rental apartments that are halfway "reasonable" are veritable slum properties that are 40 years old, built from Craker Jack boxes and were never maintained properly from the day they were built. They have crumbling dry wall, door frames out of plum, leaky windows and plumbing that's falling apart. Add in landlords that try to self maintain, use used parts cannibalized from other units and you have a recipe for disaster. But hey as long as they can slap on some paint and qualify to rent to Section 8, who cares?

onceajhawkalwaysajhawk 6 years, 8 months ago

Unless the regulations are changed to control and enforce compliance with the multi-family units people will start saying "WELCOME TO TOPEKA!"

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