Home National Weather Tenants feel the pinch of fast-rising rents in Baltimore and elsewhere – Baltimore Sun

Tenants feel the pinch of fast-rising rents in Baltimore and elsewhere – Baltimore Sun

by DrewLUD
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Sallie Whitney had no plans to move from an apartment in a city neighborhood she loves for its walkability and access to transportation.

But when it came time to renew the lease on her one-bedroom unit in Brewers Hill, she was shocked to see her rent jump 15%, by $300 a month. With more of her retirement income going toward rent, she’ll be forced to consider other options. So far, she has found limited choices.

“I know I can’t afford to stay, but where can I go?” said Whitney, who is retired on a government pension and works part-time. “My situation is not dire, but because it went from quite comfortable to precarious in the space of a year, I can’t help but wonder what is happening to everybody else in Baltimore faced with these increases.”

Rental costs are soaring nationwide, helping to drive the overall rate of inflation to 9.1% in June, the U.S. Department of Labor reported earlier this month. The increase in the Consumer Price Index represented the biggest year-over-year jump since the end of November 1981, the Bureau of Labor Statistics said.

The rent portion of the index rose 0.8 percent from May to June, the largest monthly increase since April 1986 and was up 5.8% year-over year. Housing costs make up the largest component of the Consumer Price Index, which also includes categories such as food and energy.

With inflation at a 40-year high, landlords are raising prices to cover costs. At the same time, increased rental demand is coming from would-be homebuyers who can’t afford rising mortgage rates and need to rent.

“There is excess demand for housing, which causes the rents to go up by even more than the inflation rate,” said Karryl Leggio, a professor of finance at Loyola University of Maryland’s Sellinger School of Business.

“Once inflation comes down and interest rates come down and people put their houses on the market so there’s a supply in houses to buy, then rents might stabilize or drop a little bit,” she said. “At the moment, rents are incredibly high and continuing to increase.”

A surge in new household formation over the past year and a half has contributed as well to strong rental demand.

“In the earliest part of the pandemic we actually saw a contraction in the number of households, as a lot of folks, Gen Z and younger millennials, decided as they were working remotely to save on rents and move back in with parents,” said Chris Salviati, a senior housing economist for Apartment List. “Now all that has fully reversed itself. All of those folks have struck back out on their own.”

The supply of new apartments has failed to keep up and has not fully recovered from construction delays during the health crisis, he said.

“There’s a lot of households out there competing for a small number of vacant units,” driving price increases, he said.

Renters may have to downsize, split rents with roommates, move in with family or move to lower-cost areas, Leggio said. And they may be faced with landlords who won’t rent by the month or who require larger security deposits.

With low inventory and price increases, “we’re seeing renters now competing against other renters” to sign leases, said John Bailey, a real estate agent with Cummings and Co. Realtors who works with tenants.

Rental homes or apartments that are priced well and in desirable areas don’t last long on the market, with landlords sometimes getting multiple applications, Bailey said.

“It’s definitely a challenging market for renters,” he said, adding that he encourages clients to offer above-market rent in cases of multiple applications.

In an area of downtown Baltimore that includes Harbor East, Harbor Point, Little Italy, Federal Hill, Otterbein and much of Mount Vernon, housing occupancy rose to 95.2% last year from 93% in 2020, even as new housing units hit the market, according to a report released in May by the Downtown Partnership of Baltimore.

Rents for “Class A” apartments downtown ranged from $1,571 to $3,746, the report showed.

The recently completed first phase of Alta Federal Hill, an upscale apartment project on South Hanover Street that touts amenities and desirable views, commands rents that start at $1,875 for the smallest one-bedroom unit and rise to at least $3,750 for a 3-bedroom, 2-bath unit.

Whitney moved in 2020 to the Domain Brewers Hill apartments across from Canton Crossing shopping center, a building with one- and two-bedroom units with wood floors, washers and dryers, a business center and a fitness center. She had lived there one year when the landlord offered a renewal of just six months.

She believes the shorter term signaled a rent hike on the horizon, but she wasn’t prepared for the extent of it. Her $1,832 per month increased to $2114 on July 22. With add-ons for parking and a pet fee, she’ll pay $2,333. Her civil service pension is adjusted for prices, subject to budget constraints, but is sometimes capped.

Whitney said she contacted management about the increase and was told some rents jumped nearly 40%. She has not been able to find a comparable unit with adequate storage space, she said, and is concerned her next renewal will bring another rent hike.

“I have a part-time job, and I can wiggle things around, and I renewed the lease at the higher rate, but I know I can’t tolerate or absorb another rate increase like that,” she said.

Domain’s Denver-based owner UDR declined to comment on rent increases as the company is in a blackout period before releasing financial results later this month. The real estate investment trust owns, develops and manages multifamily projects across the U.S. including in Baltimore and Towson. The company recently described its future growth prospects as strong.

Growth will be driven by a “healthy demand for multifamily residences, seasonally strong market rent growth, record low resident turnover … and occupancy above 97 percent,” said Mike Lacy, UDR’s senior vice president of operations, in announcing the company’s first quarter results in April.

Rents may have been rising even more rapidly than the inflation figures suggest, by 14.1% year-over-year, according to a measure by Apartment List. The online marketplace of apartment listings uses a different methodology than the government, focusing on lease signings or renewals, which is when landlords typically raise rents.

“That’s definitely a staggering level of rent growth compared to what we would have expected to see before the pandemic,” Salviati said.

Before 2017, rents typically rose by 2% to 3% per year and they decreased during the pandemic, he said.

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In recent months, waiting lists have grown at Mulberry at Park, a 68-unit affordable housing apartment built in 2016 in downtown Baltimore, and Metro Heights, a 70-unit affordable housing project built in 2018 on Reisterstown Road near Mondawmin Mall.

The apartments, developed by Enterprise Community Development, offer capped rents for tenants who earn 30% to 60% of area median income. Fixed rents are possible thanks to federal housing tax credits used in development.

“The apartments turn over infrequently, so there is certainly demand,” said Christine Madigan, executive vice president and chief business officer for the Baltimore and Silver Spring-based nonprofit owner and developer of affordable homes in the Mid-Atlantic.

A waitlist at Mulberry opened in November with 75 people, with 60 new sign-ups in just the last month, according to Enterprise Residential, the apartment manager and a division of Enterprise Community Development.

The nonprofit faces the same inflation pressures as other landlords in navigating higher costs of utilities, materials and labor, Madigan said. Enterprise is studying now how to increase rents in response to those rising costs without putting undue stress on residents, she said.

The problem remains that millions of households need affordable housing and don’t have it, she said, with many paying well over a third of income.

“It makes making ends meet really challenging,” Madigan said. “People are already making difficult trade-offs between rent and other bills and food and medical care. That equation is all the more difficult as those housing costs go up.”



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Source: Baltimore Sun