Shortage of units limits tenants
A duplex burned down two weeks ago in Springdale. Tenants are used to paying their rent on time, the money comes to them through tenants insurance, and a state legislator who works in the rental industry helps them scout for a new place — and still having trouble finding one.
Those tenants were not responsible for the fire, state Rep. Robin Lundstrum, R-Springdale, said Tuesday. She would rent to them “in a heartbeat” if she had units available, Lundstrum said.
The rental housing vacancy rate in northwest Arkansas fell to 3% earlier this year, according to the latest figures from Skyline Report, a real estate market reporting series commissioned by Arvest Bank at the Center for Economics and Business from the University of Arkansas. To research.
A 97% occupancy represents full occupancy for all practical purposes, said Duke McLarty, executive director of the Northwest Arkansas Council’s Workforce Housing Center. The council is a non-profit group of business and community leaders working on regional issues.
“Apartments need to be cleaned and repainted after someone moves out,” McLarty said. “Some will need repairs. So 97% is about the most you can do.”
Students coming to the University of Arkansas are an obvious factor in the rental market, he said. The university recently announced that it expects to be about 1,000 beds short to accommodate students for the fall semester.
The problem is region-wide, McLarty said. Northwest Arkansas is one of the fastest growing metropolitan areas in the nation, according to U.S. Census figures.
The region has seen explosive growth in house prices, according to figures from the real estate sector. Northwest Arkansas saw the second highest increase in the cost of buying a home of any U.S. metro area in May 2022 compared to May 2021. Median home prices rose 28.8%, an increase of nearly $75,000, according to industry figures cited July 14. at the annual meeting of the NWA Council.
Then, the US Federal Reserve has raised interest rates for the past two consecutive months. This increase occurring during a sharp rise in home prices keeps an undetermined number of potential buyers in the rental market, McLarty said.
“People at the bottom of the ladder before qualifying for a home loan are now giving up,” McLarty said. “It forces them into the rental market, and rental prices go up.”
The multifamily market added 4,400 rental units over the past year, according to a March 17 Skyline report. Despite this, the average rental price for a multi-family dwelling has increased by 6.4% over the past year, according to the report, and the vacancy rate has fallen from 3.4% to 3%. Apartment search website Zillow.com, for example, showed a total of two two-bedroom units for rent in Rogers on Friday costing less than $1,000 a month. One was $900 and the other was $925 per month.
Rising house prices have helped fill the rental market in other ways, said Rob Apple, director of strategy and communications for Specialized Real Estate Group of Fayetteville.
“A lot of empty nests sold their homes at those prices, and now they’re looking for apartments,” Apple said. They’re looking for amenities, locations near restaurants and entertainment, and the freedom to travel without having to worry about things like lawn care and routine home maintenance, he said.
Rising interest rates aren’t even slowing the rate of house price increases in northwest Arkansas, said Mervin Jebaraj, director of the Center for Economics and Business Research.
“We are in the process of preparing the next Skyline report,” Jebaraj said. “It should be out in a few weeks. We didn’t expect house prices to go down, but at least we expected the rate of growth to slow down. It’s not.”
Besides a growing demand for housing, supply still has problems, according to McLarty, Apple, Lundstrum and Jebaraj. Supply chain disruptions resulting from the covid pandemic persist. “Before, it was lumber,” McLarty said. Today, wood is plentiful and affordable, but components and electronics are hard to come by, he said.
Another factor driving up demand for apartments is the trend for young professionals to work from home or be close enough to the office to bike to work, Apple said.
The solution to the problem is to tailor living spaces and neighborhoods to the way people want to live, McLarty said. “Build neighborhoods with things like corner grocery stores to accommodate the new work-from-home environment,” he said. He called the principle “soft density”, something different from the neighborhoods of all single-family homes or multi-story buildings.
“This area has never needed this type of housing option before,” McLarty said.
Until recently, relatively low housing prices compared to the rest of the country, along with a thriving economy and good quality of life, were a major strength in Northwest Arkansas. The council is reviewing city codes and regulations in the area and will make suggestions on changes needed to encourage such construction, McLarty said, but final authority over building in those cities rests with municipalities.
People are having such a hard time finding a place to live that they’re accepting leases without even looking inside properties, Lundstrum said.
Carolanna Buchanan has a 2017 drug-related crime on her record. She and her husband are paying $600 a week to live in a hotel – six weeks so far – while they look for an apartment. They wouldn’t have that room if her husband didn’t work for the hotel, she said.
“I’ve been out of trouble for five years and I’m trying to live a decent life,” she said. “It’s hard to do if you can’t find a decent place to live.” Even the poorest apartments have waiting lists, she said.
And scammers prey on desperate seekers, Lundstrum noted.
“Someone called to say my property manager told me to meet him at Walmart with a cashier’s check and he would bring a key and a lease,” Lundstrum said. “My immediate response was: my property manager is not a ‘he’. She’s a woman.”
“Someone had put a picture of one of my properties on Facebook and said it was available for rent,” Lundstrum said.