Apartment rents on the rise in Vancouver
Portland metro area has limited supply, as well as a low vacancy rate
Saturday, March 31, 2012
Paying the rent just keeps getting tougher for Michelle McLaughlin, one among thousands of Clark County renters faced with a rate hike this year.At $699 per month, her rent is fairly low for a two-bedroom apartment in Vancouver’s Orchards area, she admits. But it’s about to nudge higher, said McLaughlin, who received notice of a $20 increase this month. She also just learned her $250 pet deposit is no longer refundable.
It’s been less than a year since she and her 18-year-old daughter, Cora Hall, moved into the apartment, one of 334 units at Meadow Wood Apartments, a sprawling complex on the east side of Northeast 121st Avenue. Now, it has gotten to the point where McLaughlin, 42, dreads the newsletters that arrive in her mailbox from Meadow Wood’s management.
“They say, ‘friendly reminder,’ but they are anything but friendly,” said McLaughlin, a compliance clerk for Evergreen School District’s special education department.
Her experience is not unusual. Housing experts say rent concessions are all but nonexistent as the supply of rental units tightens in Portland and its suburbs. Local rents are expected to rise through the year, pushed by Vancouver’s low vacancy rate of 3.6 percent and the Portland metro area’s overall vacancy rate of 2.5 percent.
The metro area rate is low compared with other West Coast cities, according to a survey released in February by the National Association of Realtors.
Portland tied with Minneapolis for the second-lowest rate in the nation, coming in just behind New York City’s 1.8 percent rate. All three cities were well below the national average of 4.7 percent.
In Vancouver, a shortage of new apartment construction is making matters worse for renters, said Phillip Barry, a real estate broker who specializes in apartment building transactions with Joseph Bernard Investment Real Estate in Portland.
“That’s what’s contributing to rate hikes in Vancouver,” he said.
Those hikes could ease as construction of new multifamily projects takes off. Permitted projects increased 10-fold in 2011 from a year earlier in unincorporated Clark County, according to the county’s community development department. In 2011, developers secured permits to build 22 multifamily buildings, with at least 189 units, valued at more than $16.1 million. That’s an increase from $1.5 million worth of projects in 2010, when just two apartment buildings with about 18 units were permitted.
“When you have as low a level of vacancy as we’re seeing right now, you begin to see the developers recognizing an opportunity,” said Glenn Crellin, associate director of housing research at the University of Washington’s Runstad Center for Real Estate Studies.
Barry said the impending apartment construction boom could be helped along by the still-sluggish single-family housing market. According to his research, the percentage of residents who own homes in the four-county metro area, which includes Clark County, declined from 69 percent of the population in 2006 to 64 percent this past year.
In addition to facing stricter lending standards, many prospective buyers have cold feet. That drives up the demand for rentals.
“You have a younger generation that has seen the residential bubble pop,” Barry said. “The concept of homeownership is not necessarily something they’ve had at the top of their list.”
At the same time, landlords are seeing more renters enter the market as newcomers to the Portland-Vancouver area. Many belong to the generation, an age group born from around 1981 forward.
“Portland is more affordable than other West Coast cities,” Barry said.
Even with new construction, the demand could push Clark County rents higher, especially in downtown Vancouver, where apartments are scarce within walking distance to offices, shops and restaurants. Such areas are favored by many in the millenial generation.
The strong demand has translated to a higher return on investment for developer Aaron Jones, who this month put seven refurbished apartments on the market as part of a $700,000 redevelopment of a two-story building at Northeast Ninth and Washington streets.
“In five days, they were all leased,” Jones said.
The apartment rents ranged between $900 and $1,100 for a one-bedroom unit and between $1,200 and $1,500 for two-bedroom units. The return on investment was significantly higher than expected by Jones, a Portland developer with Ludesher Development LLC. His company plans to hold the building as a long-term investment.
“We were extremely surprised,” Jones said.
Editor's note: A portion of the pet deposit is refundable, according to Marylyn Dean, property manager at the Meadow Wood complex. With deposits, "There is a non refundable portion and a refundable portion, based on the condition when they move out," she said. "The form we sent out was stating the deposits are owner held, meaning the (Meadow Wood) owners have the deposits in their bank account. It was just letting the owner know where the deposit is."