Anyone who has anxiously awaited the local newspaper to scan the classified listings knows that the rental market in most areas can be as brutal as an MMA match with opponents wearing brass knuckles. Generally speaking, it’s not a walk in the park to find a quality, affordable rental that fits all the criteria you’re searching for.
The foreclosure wave that kicked many from their homes and back into the rental market changed more than just mailing addresses for many people. As former homeowners scrambled to find a place to lay their heads at night, the demand for rentals increased as the inventory remained relatively static.
According to data collected by Fannie Mae, a government-sponsored enterprise chartered by Congress to keep money flowing to mortgage lenders, to help strengthen the U.S. housing and mortgage markets, and to support affordable homeownership, the faltering economy has yet to show strong signs of recovery, the effect of which has trickled down to the rental market.
Further, Fannie Mae, citing US Census Bureau data, estimated that the foreclosure crisis will have sent 3 million former homeowners to rent single-family homes by 2015. This data calculates a representation of three out of four homeowners who lost homes to foreclosure or other mortgage distress.
Pat Coons, owner of Oakdale Realty and F Street Property Management for the past 35 years, said, “So many people have lost their homes that we carry so few vacancies. When one empties, it is filled within a few days.”
Coons said a majority of their single family rentals are rented by former homeowners who were swept up in the foreclosure tidal wave that swamped so many local residents. Currently, they manage 70 units.
Because of this, Coons and many property management companies, have had to adjust the way they have historically vetted potential renters.
“We reduced all our rents when so many people lost their homes. We also don’t look as strongly at credit reports as we used to because if people have lost homes or property their credit report is going to be horrible. We look more closely at if they have stable jobs and income rather than their credit score.”
However, she added that usually former homeowners are good renters who tend to take care of the rentals they’re in.
“We’ve found that people who have lost their homes to foreclosure are so tickled we’ve done what we could to help them, that they are very good renters,” Coons said.
Although the rental market in the single family home properties has been robust, lost jobs and lowered wages are a common thread weaving its way through many communities, which has made it a challenge for those in the apartment rental market to find qualified renters without making adjustments to the requirements.
To that end, some rental property owners, such as Farrell Jackson, former Mayor and current City Council candidate, have taken creative measures to fill units.
“The rental market is better than it was last year,” Jackson said of his apartment rentals. “But we’ve had to adjust the rent and give incentives to make it work. People have the jobs but they’re making a lot less money than they were before.”
One of the ways Jackson has made it work is by lowering the income to rent ratio, which historically has always been the “3x” rule (income must be three times the amount of rent).
“Like any business person, I do what I can to fill units,” Jackson said. “My vacancy rate is about 5 percent. At times it’s been as high as 10 percent but that’s not what you want.”
Jackson said, in the past he’s used incentives but he’s been gradually been using them more frequently since the economy faltered.
“People are just making less at their jobs,” Jackson said. “I do think the economy is picking up but in the meantime, you do what you have to, to stay in business.”