As More People Rent, Are There Enough Rental Units Out There?

By Jack Etzel

If you’re renting instead of buying, or if you’re continuing to rent much longer than you planned, you’re not alone. Renting has recently become a more common way to live.

We talked with David W. Briggs, the director of Operations for Arbors Management, Inc. for some answers to this month’s Perspective. Arbors manages owners’ rental properties ranging from individual houses to large apartment complexes in the greater Pittsburgh area including Allegheny, Butler and Westmoreland counties.

North Hills Monthly Magazine (NHMM): David, are the number of renters really on the increase, and if so, why?

David W. Briggs: Absolutely, and the reason why is twofold. First, we’re retaining more and more of our renters from previous years. The biggest reason the number of those renters is growing is because of the recent credit crunch. In years past, people have been able to go out and get financing for their homes very easily. Since we’ve gone through the collapse of the mortgage market and the collapse of the banking institutions to some degree, more people are being forced—or are at least choosing—to stay in their rental locations until the market swings back, and financing a house again becomes available and affordable for them. That’s why we’re seeing retention of our current tenants right now.

NHMM: And the second reason for more renters would be…

Briggs: We can single out young people. The ones coming out of college are becoming renters because so many of them are not looking at buying homes like before. We’d normally see the cycle of people coming out of college, or anyone about that age of 22 to 30 years old, who would rent briefly, but then get married, have a child or for whatever reason would decide to become a single family home owner. Today, those same people are staying renters much longer, so that’s another reason the rental base is increasing.

NHMM: How does the Pittsburgh area compare to other parts of the country in the total number of rental properties?

Briggs: It’s very high. I don’t have the latest exact figures for you, but I’ve read reports that show we have the highest rental occupancy rate of any major city in the country over the last two years. A major reason given for that is that we have lost fewer jobs in this market than other major cities, so renters have been able to keep their jobs and maintain their status quo in order to stay in the western Pennsylvania area in their rental properties. As far as the amount, or base of actual rental properties in this area, I would have to say that it has leveled off because there’s not a lot of new construction of rental properties being built right now.

NHMM: So is there enough in the rental supply line to satisfy the growing demand?

Briggs: Right now? Yes. However, if the market continues in the direction that it’s going, you might see a shortage. At this time, we’re looking at occupancy rates of 96 percent, so you can see a crunch-margin there of units still available. The highest and lowest priced rentals are more available, but there’s always more of a squeeze in the middle.

NHMM: What about stand-alone houses? Just driving around, there seem to be more individual homes up for rent.

Briggs: No doubt about it; you’re not imagining that. There’s a large increase in the number of single family homes for rent. That also correlates directly to the condition of the financial markets that we discussed earlier. People are clearly having difficult times in selling their homes. In many cases that comes down to, “Well, I need to make these mortgage payments,” or “I’d better get some income out of this property, so I’m going to put it up for rent.”

NHMM: Have these homes-for-rent changed your business?

Briggs: We’ve seen changes, I would say, over the past 18 to 24 months in those $1,500 to $2,500 single family home rentals where a homeowner is saying to us, “Do what you can to put a rental tenant in there.” They either need to cover their costs or to generate some income, and have little or no other choice.

NHMM: At some point in school, we all learned that old supply-and-demand lesson, so if rental demand is increasing and the supply isn’t growing much, is the cost of renting going up?

Briggs: Yes and no. You don’t see the rental increases here in southwestern Pennsylvania that you see elsewhere. You might see a 1.5 to 2 percent annual rental increase, but not those examples in the country that suddenly jump from $1,000 a month to an $1,100 rental. That’s just not the marketplace in which we live. A major part of our job as a property manager is to find out what that right number is so that property owners don’t price themselves out of the marketplace.

NHMM: Nevertheless, this looks like a good time to be a landlord.

Briggs: It’s not a bad time to be a landlord. We have owners all across the country who buy and own investment properties in the Pittsburgh area. Plus, we’ve recently seen more local people interested in rental investments because of the higher rental properties demand.

NHMM: Time was when paying rent was considered pouring money down the drain. Has that changed?

Briggs: It’s still the American dream to own your own home. But for now, instead of having all of the costly upkeep and taxes that come right out of the owner’s pocket as compared to renting, the decision to rent is superseding the purchase of a single family home. That’s now. Of course, with enough time, that pendulum can swing back.