With home sales down and the economy uncertain, it would seem that the rental industry would reap the benefit of people looking to downsize. But local rental companies say this is not the case. Instead of a boost in business, they report higher turnover rates, budget cuts and an overall drop in rent prices.
“It’s kind of a difficult time,” said Flathead Property Management Owner Pete Burkett. “We haven’t seen anything like this in the Flathead Valley.”
Burkett said his rental prices are down anywhere from 15 percent to 20 percent in the last seven months, along with a drop in demand. He attributes the drop-off to job loss and people moving out of the Flathead Valley.
In addition, Burkett said potential renters have been more successful than ever in negotiating their rent rates. Since the customer demand is lower than the rental housing supply, renters have more power to dictate the terms, he said.
“Nobody would have come in a year ago and say, ‘Would the owner take $50 less than this?’ and now its common place,” Burkett said.
Jennifer Volkert, property manager at Glacier Property Management, said her company has seen similar drops in business. The beginning of the year was tough, she said, but her company adapted by dropping rent rates to meet market demands. She estimated rent rates fell $100 across the board to accommodate price levels people could afford.
Decreasing rent rates has an obvious affect on revenue, and Volkert said her company is trimming back in a variety of ways, from spending less on advertising to saving on office supplies.
At Big Sky Properties, owner and broker Brett Kelly said he has seen more client turnover so far this year than before. People seem to be a moving out of the Flathead Valley to follow jobs, Kelly said, causing more rental vacancies.
“It seems like things maybe aren’t as stable as they were in the past,” Kelly said.
The Upside of a Down Market
But there are some who are benefiting from such a rental market. Valley residents who need help finding affordable housing are more successful with lowered rental prices and shrinking program waitlist times, said Doug Rauthe, director of the Community Action Partnership of Northwest Montana.
The agency handles the Section 8 vouchers for the Flathead Valley. These vouchers are government subsidies that help low-income renters pay bills. Renters pay at least 30 percent and up to 40 percent of their income toward rent, and the voucher makes up the rest according to fair market value. Officials at CAP said they only have 367 vouchers available.
In recent years, the waitlist for Section 8 vouchers had been two to three years long, Rauthe said, but lately it has been whittled down to six to nine months.
“I believe I’m seeing that there are more rental opportunities on the market because their homes aren’t selling so they’re renting,” Rauthe said. “It’s taking some waitlist pressure off multi-family housing; rents certainly aren’t going up across the market.”
The Section 8 staff at CAP of NW MT has been aggressively pursuing lower-rate housing, placing people in safe, affordable housing during this downturn, Rauthe said.
But the vouchers are only one part of subsidized housing. Private developers can apply for federal tax credits, which are sold to an investor to raise the money to build a project. The resulting development is low-income, affordable housing.
The need for these housing complexes still outweighs the availability in the Flathead Valley. Spring Creek Apartments, a new subsidized housing development in Kalispell, has just finished development and is already at capacity.
“We’ve had a tremendous response – we’ve got way more applicants than we could ever house,” said Alex Burkhalter of Sparrow Group Inc., the Missoula-based company building the apartments.
Even with waitlists for more apartments, Burkhalter said building subsidized housing is tough in a good market, but the recent downturn has made it nearly impossible. He said they were lucky to have finished the first phase of 33 apartments since all the partners involved were able to keep working on the project, but he is also hopeful they can break ground on the second installment soon.
“I know we’ll get there, I just know it’s harder than ever,” Burkhalter said.
Cautious Optimism
As for the local rental companies, most said they had a client increase last month, but they were tentative about declaring a market turn-around. Burkett said it is a good sign to see more renters, but the market they are most interested in – homes for under $1,000 a month – may not be plentiful for long.
Volkert said she has also recently experienced a business increase, but remains guarded about the future. She said her clients seem to be planning further ahead than ever before, setting up rentals three weeks before they need them instead of a couple of days.
“People everywhere are definitely being more conscious of their spending,” Volkert said.