Study confirms tight rental market | SMI Commercial Real Estate

Analysis finds OSU growth impacts area housing supply

A new analysis of the Corvallis housing market has confirmed what hard-pressed renters and distressed civic activists have been saying for years: Vanishingly small vacancy rates are driving up rents, driving college students and families out of town, and driving high-density redevelopment in traditional neighborhoods.

The study, commissioned by Willamette Neighborhood Housing Services, was performed by a group of graduate students in Oregon State University?s School of Public Policy under the direction of Mark Edwards, an associate professor of sociology.

Jim Moorefield, the executive director of the nonprofit affordable housing development agency, said the 55-page report contained few surprises. But it provided reams of data to back up many of the commonly held assumptions about the local rental market, including the belief that OSU?s steadily growing enrollment has outpaced new construction, boosting demand for a dwindling supply of available units.

?We know what people are experiencing and what we hear anecdotally,? Moorefield said. ?But having the students go out and confirm it was helpful.?

Among the study?s specific findings and conclusions were these:

? Vacancy rates are low: There is a significant shortage of rental housing in Corvallis. In a check of advertised listings in April, the researchers found 257 openings from an inventory of about 11,000 rental units, a vacancy rate of 2.3 percent.

While that?s higher than a widely circulated estimate of 1 percent, the researchers called their figure a ?high-end estimate? that likely overstates the actual number of openings because many properties are advertised before becoming available.

? Rents are going up: Any vacancy rate below 4 percent is believed to drive up the cost of rent. Local rents have risen sharply in recent years, the study concludes, as Oregon State University?s rising enrollment and the ongoing foreclosure crisis have increased demand for rental housing.

? More increases are likely: Researchers found that survey respondents consistently reported paying less than the advertised rates for vacant units with the same number of bedrooms, suggesting that landlords are raising their rates as apartments turn over.

On average, survey respondents reported paying an average of $566 a month for a studio or one-bedroom unit in Corvallis, $775 for a two-bedroom and $1,172 for a three-bedroom. Meanwhile, vacant units were being advertised at $625 a month for a studio or one-bedroom, $847 for a two-bedroom or $1,295 for a three-bedroom.

? Rents are lower elsewhere: Rental rates in surrounding communities are significantly lower, going down more the farther you get from Corvallis.

For units with the same number of bedrooms, for instance, rents average $129 a month less in Philomath than in Corvallis. Rents are $210 cheaper in Albany, $272 less in Lebanon and and $436 lower in Sweet Home.

Some renters, the study concluded, are willing to commute long distances to work or attend school in Corvallis in order to save on rent.

? Students compete directly with other renters: Because college students value the same things as other renters when looking for housing ? location, price, number of bedrooms ? they are essentially competing with everyone else for the same housing supply.

But students can be more flexible in their living arrangements than families and may also have access to additional resources, such as financial aid and parental assistance, meaning they can afford to pay more per bedroom. That helps push up rents and fuels the conversion of single-family homes to rental properties.

? Corvallis needs more rental housing. The researchers found no reason to believe that demand for rental housing ? either because of declining enrollment at OSU or any other factor ? would go down enough in the near future to ease vacancy rates or force down rents.

?A major implication of this research,? the study says, ?is that an increase in the housing supply would be beneficial to Corvallis renters.?

Given recent tensions between neighborhood activists and students over parking, traffic, noise and other livability issues, Moorefield was surprised by one of the study?s findings: For the most part, Corvallis homeowners don?t mind living near student renters.

?Most homeowners don?t think students are a problem,? Moorefield said.

?Obviously, if you ask that question in certain neighborhoods, you?re going to get a different response. But, overall, 65 percent think students are just fine.?

As a member of the Collaboration Corvallis Steering Committee, Moorefield is actively involved in working on some of those livability issues, and he hopes the information from the new rental market analysis can inform those discussions.

?I think there are opportunities to create healthier neighborhoods and a healthier community as we accommodate OSU growth over time,? he said.

Source: http://smicre.com/study-confirms-tight-rental-market/

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