Rents remain stable through turmoil

In a volatile economy and real estate market, Rhode Island rents have been a source of stability.
Unlike sales prices, rents in the Ocean State did not plunge after the housing bubble burst or, like in Boston or New York, soar during the recovery.
They’ve risen 1.7 percent statewide since 2008, according to survey data from Rhode Island Housing, and 8 percent according to the U.S. Census Bureau’s American Community Survey.
The state has gained roughly 10,000 renter households since the recession and lost about the same number of homeowners, according to Rhode Island Housing.
Those new renters have kept vacancy rates low, but landlords haven’t been able to leverage tight supply into higher rents because incomes rose a paltry 0.4 percent since 2006, a decline when adjusted for inflation.
The phenomenon of formerly separate households combining in a single space, prevalent nationally, has also helped prevent the decline in home ownership from translating into higher rents.
“The big-picture messages coming from the data are that rents have remained high,” said Amy Rainone, director of intergovernmental relations at Rhode Island Housing.
That inability to pass costs along to tenants is why many multifamily properties went into foreclosure in the recession, some of which lenders then abandoned instead of repossessing.
Carrying high debt-service costs from the bubble, owners were unable to sell or refinance when the sales market collapsed.
Combined with property-tax increases – Providence raised taxes to 175 percent of owner-occupant rates before scaling them back to 160 percent this year – it also helps explain why high vacancy rates have not created a surge in apartment construction as they have in other areas.
The state also appears to be still working off over-construction during the subprime mortgage years.
Between 2005 and last year, the state’s population declined by 16,405 people, according to American Community Survey estimates. Over that same period, the number of total housing units in the state rose 3.1 percent, or 13,848 units.
Many of the new units had their origin in the boom years and since 2011 the state has actually lost 3,083 units with construction stalled and many vacant foreclosures officially removed from inventory.
Last year rents, including utility costs, declined 1.9 percent compared with 2012, while pure unadjusted rents rose 3.9 percent, according to Rhode Island Housing.
In the first six months of 2014, the average two-bedroom, utility-included rent rose 2 percent and pure rent rose 3.1 percent.
Formerly focused on passage of state affordable housing bonds, affordable housing advocacy group HousingWorks RI, now affiliated with Roger Williams University, this year began extending its interest further into market-rate housing.
“We still believe a public investment is necessary, but we know that more needs to be done to address housing affordability,” said HousingWorks Executive Director Nicole Lagace.
In its 2014 Fact Book, HousingWorks reported that the number of communities meeting state targets for affordable housing – five – had not changed from 2012.
Keith Fernandez, a board member of the Providence Apartment Association, which represents landlords, said at least in the city, the migration of some residents into renovated buildings downtown has had a moderating effect on rents elsewhere.
Some of the new downtown properties, which Fernandez noted are aided by tax treaties that the association opposes, are taking tenants who may have otherwise lived on the East Side.
East Side landlords feel they then have to keep rents below the downtown properties, with West Side landlords staying below the East Side, and so on down the line of neighborhood exclusivity, he said.
“Occupancy has stabilized citywide, but you hit that equilibrium rent and can’t go above that without maxing out what tenants can afford,” said Fernandez, who owns nine buildings with 30 units.

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