The Rental Crunch

Wednesday, May 14, 2008

By Grace Hammond

Jackson Hole, WYO. -  You  must be one of three things to own a home in Jackson Hole: established, lucky or rich.

Otherwise, you must play the odds in the renters’ market. While supply has always been limited in the valley, renting once provided a mix of housing options - some better than others - to Jackson’s workers.

But this season, local real estate professionals say that the renters’ market is the tightest they’ve ever seen it, and that there is little relief in sight.

The situation is all too familiar to Joanna Pescatore, a naturopathic technician who is learning the hard way that finding a place to rent isn’t a way to sidestep the valley’s impermeable housing market.

Pescatore, 38, was a homeowner in Riverton, Wyo., before making the decision to move to Jackson to be near her long-term boyfriend. She was reluctant to rent after owning for many years, but knew sky-high prices placed homes in Jackson beyond her means. So, she sold her home and moved at the start of Jackson’s off-season, which she heard was the best time to find a rental.

That was a month ago, and Pescatore’s frustration is building.

A few weeks ago, Pescatore had a lead on a two-bedroom condo for $1,600 a month in the Elk Run Apartments. When she called to inquire, she was invited to look at the property – along with everyone else. There was such overwhelming interest in the rental unit that the leaser decided to host an open house for it.

Pescatore arrived the first minute the open house started, as did more than 30 other people, all looking at the single available unit, she said. Each person wrote their name, phone number and a brief introduction of themselves on a legal-sized notepad to pitch their case to the leaser.

“She was going to go through it and see who she wanted,” Pescatore said. Pescatore talked to other single people at the open house about how awkward it was to compete against families and children.

“Gosh, we just felt like leaving because we didn’t want to take a home from a family that could be homeless as we are,” she said.

Real estate observers said the same forces that keep people from buying into Jackson Hole’s expensive housing market are now squeezing the rental market. With limited inventory, high second-home ownership rates, and few affordable options, would-be renters like Pescatore are being shut out.

“It’s pretty in Jackson,” Pescatore said. “But is it worth all this trouble? I heard somebody call it ‘poverty with a view.’ I thought: that’s funny, that’s about right.”

Lack of availability

Brokers at both Mountain Property Management and OK Rentals in Jackson said their businesses hold a marked lack of inventory this season, compared to previous years.

A year or a year and a half ago, the papers were full of “for rent” ads, said Sally Rousch at Mountain Property Management. Then, Rousch’s agency would advertise 11 or 12 places at a time, but right now “we have zero,” she said.

In the past, it might take several weeks to fill an apartment. Now, “it’s like there’s a line waiting for them,” Rousch said.

Simple laws of supply and demand are at play, property managers said. The market is flooded with renters. Due to the price of real estate in Teton County, many individuals and families who would own homes if they lived in any other market are forced to rent here instead.

These renters may not be eligible to apply for affordable housing because their income is too high. And while they may be reluctant to rent, they can shell out more for a rental than the Average Joe, raising prices across the board and creating an additional ‘renting class’ that would not exist in a different housing market. Combined with seasonal workers and ‘typical’ renters, the market is saturated.

Many rental property owners have asked their management companies to raise rental prices this spring, and “we have done it without any trouble finding people, which is kind of surprising,” Rousch said. “Some of the increases have been substantial.”

Lori Kyle at OK Rentals agreed that now is a particularly difficult time for renters.

“The market [for renters] is probably tighter than I can ever recollect, and we’ve been here for almost 10 years,” she said.

At this time of year, OK typically has 15 to 20 properties available. “But right now we have one, a higher-end property, and if it was less than $2,000 a month, I’m sure it would be gone,” Kyle said.

The recently released Hole Report, a semi-annual analysis of the valley’s real estate transactions, shows that real estate values have seen growth, growth, and more growth over the past several years, with myriad effects on both buyers and renters. The median sale price of a single-family home continues to hover at $1.1 million, the report states, but as of April 2008, only 27 of 151 available, single-family homes were listed for under $1 million, bringing the median list price to $1,950,000.

With local development in a headlock until the county’s comprehensive plan can be revised, a waiting list for affordable houses, and single-family homes priced in the millions, people of all stripes are snatching up apartments - if they can.

Between long-term renters and a deluge of summer seasonal workers, demand is running laps around supply and landlords are finding that the market will bear bigger and bigger price hikes. Further, property managers said that many long-term renters are now choosing to renew their leases, even at an increase, rather than risk losing a plum spot in the renters’ market, making fewer units available now than are typically on the market.

“People with [rental] housing seem to be staying put,” Kyle said. “They are hesitant to move because there isn’t anything out there.”

Bye-bye buildings

“We are always talking about people needing affordable housing to buy, but what about affordable rentals?” asked Smokey Rhea, executive director of the Community Resource Center (CRC).

On a daily basis, Rhea said, valley residents unable to find housing seek advice from the CRC, a local social services agency. A few years back, Rhea said, lower- and middle-income people could find affordable rentals in Jackson’s trailer courts, hotels and multiple apartment complexes. Rent hovered around $600 a month in her estimates, but now tops $1,200 “if you can find it,” she said. In the past few years, many of those properties have been torn down and replaced with high-end housing, leaving renters scrambling.

“It took a huge chunk of the rental market away,” Rhea said. “The market for the working poor is shrinking almost daily.”

In Jackson, Rhea noted, the “working poor” includes a broad range of wage earners compared to other places in the country or state. It’s not just the lower class, she said. These days, even the middle class has nowhere to go.

In the past seven years, more than 200 local apartments were converted to condominiums, said David Viehman, editor of the Hole Report and owner of Jackson Hole Real Estate. This figure does not include the Virginian Apartments, he said.

The fate of these apartments, which in Viehman’s estimates make up about 100 units and therefore houses a bulk of Jackson’s renters, is uncertain. According to Shawn Hill, the town’s associate planner, applicants received approval in December 2007 to plat the existing apartment buildings at 55-69 Virginian Lane as condominiums. According to the land lease office, the “Virginian Village Condominiums” were recorded in January 2008, the final step in the approval process.

Hill said that since approval has gone through, it is up to the owners to determine a timeline during which to convert the apartments, if they ultimately decide to do so, and that they are not legally required to offer current residents the option to buy. A staff person at the Virginian Apartments declined to comment other than to say that it was their “intention a year ago to convert” but that “it has not happened yet” and that there is no existing timeline.

If the Virginian Apartments do convert, “you’re looking at maybe 300 people now, in all,” who are out of rentals due to recent condo conversions, Viehman said. “Where are those people going to go?”

Supply and demand

The last time Elizabeth Gilmour and her husband rented out their Jackson condo, they took the first renter that looked at it, and even reduced the price during negotiations. They regretted it.

“We got so many calls after that,” Gilmour said. So this April, when their current leasees opted not to renew, they upped the rent on their three-bedroom condo by $200, to $2,200, and put an ad in the paper. They were deluged with replies.

Ultimately, one of their original leasees got cold feet after trying unsuccessfully to find a different apartment and asked if she could stay. The couple agreed and took the unit off the market.

“She didn’t even care that the rent had gone up, she had so much trouble finding a place,” Gilmour said.

New competition

Individual renters are not only competing with each other. Local businesses are now contracting paid professionals to scout out housing for their workers, making it more difficult for individual renters to snag an advertised space before someone else gets to it.

Mayor Mark Barron, owner of High Country Linen, recently hired a company that will not only supply his business with workers on J-1 Visas, but will send in a scout to broker housing deals in Jackson for up to 20 workers.

“He comes into town and spends a week or two looking for different places for rentals, apartments, motel rooms or houses, and when he is satisfied he has housing, he brings the students over,” Barron said. “He signs the lease and provides the employees. We brought seven in on Friday.”

Eric Vik at High Country Linen said he believes the rental market is getting tighter every year, and employers have to take an active role in supplying housing for their employees, especially for visa workers.

With Jackson’s low unemployment rate, thriving economy and relatively high-paying service wages, many people strike out to Jackson confident they will find work but without first finding living arrangements.

Steve Koning at Snake River Kayak and Canoe said he regrets not being able to provide housing for his employees. He said if applicants are not already in Jackson, “you’ve got to let them know up front: start working out a place to live. Or else they will be sleeping in their car.”

Lease shy

While hopeful renters made early morning calls to people advertising rooms or condos, Dan Hazen at the 235-unit Blair Place had eight units open last Thursday.

“We’ve had vacancies all winter,” he said. While eight units is “pretty low” for this time of year, he said he is not seeing a tighter market than in the past. Still, Blair Place does not advertise its rentals - “we haven’t needed to,” Hazen said.

Six of eight units were snatched up within 24 hours of speaking to Hazen, an employee said Monday. Further, rent increased at the complex during the past few weeks, the employee said, up to $1,025 from $975 for a one-bedroom and up to $1,300 from $1,125 for a two-bedroom apartment.

Six months is the minimum lease at Blair Place, which Hazen said turns away a lot of summertime employees.

Heather Peacock also found that long leases were unpalatable to many Jackson renters. She received “thirty some calls” for a rental ad she placed last month, but only a few callers were interested in the year-long lease she was offering for a furnished one bedroom, one bath unit at $1,100 a month.

Almost everyone was looking for a summer or a six-month lease, she said, or wanted to squeeze more people than allowed - or entire families - into the one bedroom unit. Even with the flurry of interest, it took her a month to find someone to sign the lease.

“What I learned from that is really a need for some short-term housing,” Peacock said. “I was kind of shocked at how many people needed seasonal things.”

Property managers and renters emphasized that, contrary to popular opinion, the off-season is not a good time to look for a rental.

“There is a certain seasonality to it,” Rousch of Mountain Property Managers said. “We never try to have properties available around January 1. Nobody wants to move then.”

Kyle at OK rentals called the summer renters’ market “more severe” than in the winter. “Someone who lives here year-round would do better to look then,” she said.

A community crisis

While the problem may be especially acute in Teton County, renters are having trouble across the state. A study published by the Equality State Policy Center entitled the “State of Working Wyoming” reported a rental vacancy of less than 2 percent statewide in 2007. The average price of a home in Wyoming increased 17.6 percent from 2005, with both rental and home prices going up faster than the average wage, according to the report.

In Teton County, high rental costs are creating ripples throughout community life. The Community Resource Center has seen a marked increase in the number of people who cannot afford both housing and health insurance costs, Rhea said. Wages are higher now, but not high enough to allow regular folks the basic necessities of life: a roof over their heads, food, and care when they are sick.

“The middle class is moving away,” Rhea said. “There’s a constant revolving door, which is never good for a community. Instead of defeating poverty, we are creating poverty.”

Kyle said she believes the community has “hit a crisis mode” with affordable housing and renting. “It’s a problem for employers, and I don’t think they should be expected to solve it on their own. As a community, we really need to pay attention and do something. It’s a question that I think that we need to be a little more aggressive in answering.”

Don’t look to the future

Some property managers noted that the recent increase in property taxes will likely have a smaller effect on rental prices than people might think, as rental prices are based almost exclusively on what the market will bear, not what it costs to maintain the land or property.

Still, real estate and property management companies said, rental supply may remain limited because it is unlikely new apartment complexes will be built here by private entities in the future.

Land is limited and zoning laws are restrictive when it comes to apartment complexes and trailer courts. As things are, apartments simply aren’t very profitable in Jackson Hole, some real estate professionals said. Even if land can be acquired, there are more profitable things to build on it than apartment complexes, which have high overheads and are expensive to both construct and maintain.

“The value of land is too high,” Viehman said. “There are no incentives to build apartments. Cost-wise, it makes no sense. So the next best thing, I guess, is transportation to Idaho or Star Valley and hoping that people don’t mind taking the bus for an hour.”



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