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Why apartment vacancies are rising
A sign advertising apartments for rent is displayed in front of an apartment complex in San Francisco, Calif.
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Kai Ryssdal: There was an interesting tidbit about the housing market that hit the newswires today. And as we've become accustomed, it was sort of counter-intuitive. According to a real-estate research company, apartment vacancies hit 8 percent in the last quarter. That is the highest apartment vacancy rate in 30 years.
And so here's the disconnect: With so many people losing their homes, you'd figure more people would actually be moving into apartments, right? Not out. We asked Marketplace's Jeff Tyler to find out what's going on.
JEFF TYLER: Apartment developers expected to see an increase in the number of renters, so they started building a couple of years ago.
Victor Calanog is with the commercial real-estate research firm, REIS.
VICTOR Calanog: Basically, rentals were supposed to benefit from the housing bust, since people would not be buying homes anymore. Developers could still get financing in 2006. Rents really grew in 2007. So a lot of projects were begun in 2006 and 2007.
He says 120,000 new apartments came on the market last year. But there was less demand. People are sharing apartments with roommates or moving back in with their parents. Calanog says that's created a renters' market.
Calanog: If you're a landlord, and you're operating an older building, suddenly across the street a new building comes in, 50 percent vacant, with much better amenities willing to offer three months off, what are you going to do to attract or retain tenants? You're probably going to have to match that kind of competition.
Renters are finding some deals in northern Virginia.
Shaun Pharr is with the Apartment and Office Building Association of Metropolitan Washington D.C. He says landlords are offering incentives.
SHAUN Pharr: Waiving a security deposit. And then, thereafter, granting free rent in whatever increment is deemed necessary to get the lease signed.
He says renters in northern Virginia are negotiating one, two, and even three months of free rent.
I'm Jeff Tyler for Marketplace.
The authors ignore the biggest reason:
In almost every foreclosure, the lawyers for the mortgage holder initiate an "unlawful detainer" action, better known as an eviction. Even if this action is dismissed by the court, the rental check agencies put it on their records. Even a dismissed eviction action will earn an automatic rejection from many if not most apartment managers, and those that accept you in spite of it will want a double deposit.
Even if you get the court to expunge the case from their records, you have to contact each individual rental check agency to petition them to re-verify the info before they will recheck the court in question and pull it off your record.
Fortunately, these records are subject to the Fair Credit Reporting Act. Unfortunately, that means your record is stained for 7 years.
In some markets there are also a lot of unsold condos being converted to apartments. Condo developers got caught with their pants down when the bottom fell out of the housing market, and have to do *something* with the units that they can't sell.
I can tell you why there are rising vacencies. Most landlords won't rent to folks that have more than 1000 in bad credit. First they want you to pay it off, then they will lend to you. If someone lost their house and went bankrupt, they won't survive the Aparement Credit Check. That is what happend to us. I was shocked. We make five times the apartment rent in monthly income, but they said no.
So staying with family and trying to catch up on bills first.
