City Center Market-Rate Housing Study

Transcription

1 City Center Market-Rate Housing Study OVERVIEW The City of Bellingham, with the assistance of students from Western Washington University, conducted a study of market-rate rental housing during April and May, The study area was the current Multi- Family Tax Exemption (MFTE) 1 boundaries, which include Old Town and Downtown Bellingham. Together with the Waterfront, these areas are referred to as City Center. Figure 1 shows the study area boundaries, and Figure 2 is a detailed map of the housing types within the study area. This study is a continuation of one conducted in April 2011, but with several important differences. The 2011 study surveyed both market rate and subsidized units, and combined the data for both. This study focused exclusively on market-rate rental housing. However, an analysis of current subsidized housing can be found in Appendix 1. Another difference is that the 2011 study did not survey any privately-owned condominiums, while the present study does include some condos that are rented out to a tenant. Of course, many condos are owner-occupied, and we cannot know exactly what portion of the City Center rental housing market is made of condos at any given time. Finally, the current study asked questions about the kind of parking provided. The 2011 survey did not include any questions about parking. Figure 1. Study area boundaries METHODOLOGY City staff generated a list of all multi-family or mixed-use properties with four or more units within the study area boundary. Property management companies and private building owners with rental properties on this list were contacted by phone and . Those who agreed to participate were ed a survey to be completed for each building that they own or manage within the study area. See Appendix 2 for a copy of the survey. Once received, survey responses were compiled and analyzed in Excel. 1 The MFTE Program was put in place to incentivize multi-family residential construction in targeted urban centers, including City Center. To date, a total of 811 units in 28 buildings have received this property tax exemption citywide. July 13, 2018

2 Figure 2. Study area with housing by type 2

3 SURVEY RESPONSE A total of seven property management companies and two private property owners responded to the survey. Altogether the survey comprised a total of 897 units in 28 buildings. (Only 726 of these units are directly managed by the survey participants; when individual condos were sampled they are assumed to be representative of other units in the same building.) This sample represents about 45% 2 of the rental housing units in the City Center study area. The survey sample included 61 condos (8%), and the remainder were apartments. SUMMARY Below is a high-level synopsis of the findings of this study. For details, see the Results and Market Trends sections that follow. The majority (87%) of City Center housing units surveyed are either studios or 1-bedroom apartments. This indicates there are very few opportunities for families to live in Old Town or Downtown Bellingham. Current average rental prices are $756 for a studio, $949 for a 1-bedroom, $1,320 for a 2-bedroom, and $1,325 for a 3-bedroom unit. The vacancy rate among survey respondents was 0.55%. This is significantly lower than the citywide residential vacancy rate of 2.05% a trend that is consistent with the 2011 study. Nearly all rentals include water, sewer, and garbage with rent. Very few rentals include gas or electricity. The majority of City Center rental units include a dedicated parking space. Thirty percent (30%) charge tenants a separate or additional fee for parking. After adjusting for inflation, City Center rents increased by 20% for studios, 18% for 1-bedroom, 19% for 2-bedroom, and 11% for 3-bedroom apartments between 2011 and Housing in the City Center area continues to fetch higher rents compared to other areas in the City, when using HUD s Fair Market Rents as a point of comparison. 2 The percentage is different depending on which types of buildings are included in the calculation. There are 1,917 multi-family, mixed use, four-plex, and condominium units in City Center, and so the sample would be 45% (n = 897 1,917). Including only directly managed units and no condo buildings, there are 1,760 total units, so the sample would be 41% (n = 726 1,760) of those units. If we remove all subsidized units from the total housing stock, than this sample represents 58% of all market-rate housing. In any case, it is a statistically significant sample. 3

4 RESULTS HOUSING STOCK Of the units surveyed, the vast majority are studios or one bedroom units, with studios making up over half of the sample. There were no four-bedroom units in the survey sample, and only five three-bedroom units. Units surveyed Studio 1 bed 2 bed 3 bed While this distribution may be serving the 70% of Bellingham households that are singles or couples, it also indicates that there are very few opportunities for families or larger households to live in City Center. 53% 12% 34% RENTAL PRICES The current average rental prices reported by survey participants are summarized below. Keep in mind that these represent an average of the least and most expensive units by unit type in each building. For more perspective, the median high and median low rents are also shown. The variations in rental price take into account things such as the age of the building, which floor a rental is located on, and how long a tenant has occupied the unit. In this sample, 1-bedroom units have the widest price range. Studio 1 bedroom 2 bedroom 3 bedroom 3 Average rent $ $ $1, $1, Median lowest rent $ $ $1, $1, Median highest rent $ $1, $1, $1, Rent per square foot $1.79 $1.65 $1.65 $1.10 The most expensive units per square foot are studio apartments. Within the sample, 1- and 2-bedroom units are the same price per square foot. Three-bedroom units are the least expensive per square foot. 1% Rent per square foot 3 bed $ bed $ bed $1.65 Studio $1.79 $0.00 $0.50 $1.00 $1.50 $ Use caution when interpreting the average rents for 3-bedroom units due to the very small sample size. 4

5 VACANCY RATES Of the 726 units managed directly by survey participants, only 4 were vacant at the time of this study. This represents a 0.55% vacancy rate. In 2011, the vacancy rate was about 1% 4 among the study sample, indicating that the City Center vacancy rate has decreased even further in the last seven years. Recent United States Census/Postal Service data for the City of Bellingham reports a city-wide residential vacancy rate of just over 2%. The survey data show that the vacancy rate for rental housing in City Center is currently even lower than for the city as a whole, which is a trend consistent with the previous study. In 2011, when the city-wide vacancy rate was 3.37%, the City Center vacancy rate was around 1%. Currently the city-wide vacancy rate is 2.05%, while the City Center vacancy rate is 0.55%. At both points in time, the City Center vacancy rate was less than one-third of the city-wide residential vacancy rate. UTILITIES Water, sewer, and garbage are included with almost all of the rents in this study. By comparison, very few rental units include gas or electricity. A few units include other utilities, such as internet or cable. Utilities Other Garbage Water/Sewer Electric Gas 0% 20% 40% 60% 80% 100% Included Not Included PARKING Parking is provided to the majority of rental units in the survey, with 79% of units having a parking spot available on-site. Of the 20 buildings surveyed that offer on-site parking, six (30%) charge an additional fee for a parking space. The remainder include the cost of parking with rent. Tenant parking is reserved in the majority (85%) of these buildings, and the remainder provide unreserved parking. 4 The exact percentage was between 0.85% and 1.65%. 5

6 MARKET TRENDS The following two figures illustrate the changes in average rent and rent per square foot from spring 2011 to spring Since the original 2011 City Center housing rental market study also included subsidized rental units, the market-rate results were skewed downward. For a more accurate comparison, the subsidized units have been removed from the 2011 dataset, and adjusted for inflation. This has made the sample size for the 2011 study smaller, but makes the earlier and present studies comparable. The prices shown below are all presented in 2018 dollars. Change in average rent: 2011 to 2018 $1,400 25% 2018 dollars $1,200 $1,000 $800 $600 $400 $200 $756 $628 $805 $949 $1,320 $1,325 $1,194 $1,108 20% 15% 10% 5% $- studio 1 BR 2 BR 3 BR 0% % change Change in rent per sqare ft: 2011 to dollars $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $- $1.79 $1.65 $1.65 $1.38 $1.27 $1.24 $1.10 $1.01 studio 1 BR 2 BR 3 BR 35% 30% 25% 20% 15% 10% 5% 0% % change HUD calculates an annual fair market rent (FMR) for Bellingham, which is generally slightly lower than actual local market rents. In 2011 the average rent for a 1-bedroom unit City Center was 7.0% above the FMR. In 2018, the average rent for a 1-bedroom unit City Center was 19.6% above the FMR. This indicates 6

7 that, while rents are also rising in the city and county in general, City Center housing units increasingly fetch premium rents. The results of this study also suggest that rents in the City Center study area have risen faster compared to average rents for the City as a whole. While the nominal FMR for a 1-bedroom increased 16.8% from 2011 to 2018, the average rent for a 1-bedroom unit City Center increased 30.1% over the same period. 7

8 APPENDIX 1. SUBSIDIZED HOUSING Within City Center, there are a total of 503 subsidized permanent housing units for low-income residents. This represents 26% of all rental housing, including condos (or 29% if not including condos in the rental housing stock). The map below shows all of the low-income subsidized housing properties within the study area, as well as temporary or transitional group housing (i.e., Dorothy Place, 22 North, and PAD). Compared to the stock of market-rate rentals, there are a higher proportion of 1-bedroom and 3- bedroom subsidized units, but relatively fewer 2-bedroom units. Of the 503 subsidized units, 39% are studios, 46% are 1-bedroom, 9% are 2-bedroom, and 6% are 3-bedrooms. 8

9 APPENDIX 2. CITY CENTER HOUSING SURVEY Property address: Click or tap here to enter text. Property Name (if applicable): Click or tap here to enter text. Building Type: Apartment Condominiums 1. Total units in building: Click or tap here to enter text. 2. Total building square feet: Click or tap here to enter text. 3. Number of units in building by bedroom: Studio 1 BR 2 BR 3 BR 4 BR 4. Number of units currently vacant: Click or tap here to enter text. 5. Rent by type of unit: Studio 1 BR 2 BR 3 BR 4 BR Lowest rent $ $ $ $ $ Highest rent $ $ $ $ $ 6. Average square feet per type of unit: Studio 1 BR 2 BR 3 BR 4 BR 7. Utilities in included in rent: Water/Sewer, Garbage, Electric, Gas, Other 8. Number of parking spaces: Click or tap here to enter text. 9. If parking is provided, how is it managed for this building? (check ALL that apply) On-site Reserved Included in rent Off-site (other than street parking) Unreserved Extra fee for parking THANK YOU! Please return this survey to: clairesurber@gmail.com or Megmurphy799@gmail.com 9