When Publisher Tommy Allen tackles the topic of rental rates, he discovers that while construction for new units are justifiably higher due to building costs, some landlords are unreasonably raising their rates, contributing to the housing stress in Grand Rapids.
Last weekend, as I waited for the sun to decide if it would shine or not, I found myself, as most do when they have some downtime, surfing Facebook.
It was while on Facebook’s newsfeed that I stumbled on a friend’s post indicating their landlord had just informed them they’d be raising their rent by $300 a month.
As I read the thread developing in real time, folks contributed their insights on the rent increase from the Grand Rapids landlord. The one comment that stood out was a confirmation that should make everyone in the business of attracting and retaining talent for this region take notice.
For there, it was in black and white that a friend stated this new rental amount to stay in a somewhat fringe section near downtown Grand Rapids was advancing quite closely to what these new Grand Rapidians had paid to live in their Brooklyn, New York neighborhood.
I don’t know about you, but when I compare what New York has to offer compared to West Michigan, rents should be a competitive advantage for Grand Rapids, considering the too-
list amenities of our nation’s largest city.
Those with friends living in New York, San Francisco, and even Chicago have long become accustomed to the topic of rent increases from these larger markets. While friends have always complained about rent increases, most outside of these metropolitan areas have always blown off the increases as the price one pays to live in one of the greatest cities in the world.
Even when Jimmy McMillan started his campaign for Mayor of New York, forming the aptly named the Rent Is Too Damn High party
, we as outsiders along with the cast of Saturday Night Live turned his mantra into a character for comic relief. America loves to laugh at big city problems.
Fast forward to today, and I am not so sure I find this funny anymore in light of the problems that have emerged in NY as a result of their astronomical rent increases.
As I read about my friend’s increase on Facebook, I performed some quick math, discovering that this was a 35 percent i
ncrease - a dollar amount that far outpaces any cost of living increase for our city, but, most importantly, is way out of sync with wages, which have been flat for a long time.
As a person who deeply cares about the retention of our citizens, from millennials to young families to seniors, in the city who I would like to see continue to be our neighbors, I am hoping we can agree to call out this type of price gouging behavior before it becomes an epidemic and threatens to stalls the growth of our city or results in messy policy battles from within Lansing to our own City Hall as we attempt to figure out how to protect local renters in our city.
I may be a person with distinct viewpoints on a range of topics, but I can assure you that on the topic of rents, we probably have more common ground than what separates us as a people of this city.
Having sat in the offices of area builders, I have listened to the challenges in creating brand new spaces for people to inhabit as they seek to fill the shortage of available housing
in our city. The road map to providing more housing is not easy, as many builders cite rising construction costs in the delivery of a new building that must arrive on time and on budget. It is not a position I envy.
As we look at the costs involved with erecting a new building, it is easy to see how the rents for these types of units are being priced where they are. In fact, it is expected in my opinion that the cost of doing business demands such a price tag per month for these units.
And yet, even with the newer buildings and all the amenities appearing on the landscape, locally we are witnessing many who are engaging in a money grab from their properties that have neither been upgraded nor modernized in a way to warrant such extreme increases. This is where I part ways with those who seek to be landlords, who, instead of making improvements, are creating steep increases because they know there is a housing shortage in our city.
When I posted on my own Facebook the question if could you survive a 35 percent increase in your housing costs, I quickly discovered many pages later that the answer was clearly no, and that these kinds of huge increases are indeed happening in many pockets all around the city, as some landlords are clearly seeking to take advantage of our newfound coolness as a hipster city
Since the crash of 2008, American home ownership has slipped from 69 percent at the height of the housing bubble all the way down to a 1967 level of only 63.4 percent.
When you factor in the folks migrating to Grand Rapids seeking to call this place their new home with the large number of folks who walked away from their houses post-bubble, you quickly can see how we got to the place where we are today, with many vying for the limited rental housing we have available. We grew very fast and are now playing catch up in many ways.
Since 2000, rents in Grand Rapids have increased by about 35 percent, according to statistics from the U.S. Census Bureau. While the local economy is growing and some are able to afford $2,000 downtown apartments, that certainly is not the case for everyone.
According to the National Low Income Housing Coalition’s 2014 Out of Reach report
, Kent County renters must, on average, earn $14.23 an hour to afford a two-bedroom unit at a fair market rate, about $6 more than Michigan’s minimum wage of $8.15 in 2014 (it has now grown to $8.50), and $2.53 more than the average wage earned by Kent County renters, $11.28. Therefore, to afford a two bedroom unit, a renter making minimum wage would have to work about 71 hours each week.
And as economics 101 teaches us, where there is scarcity, there will be demand translating into a price war for those willing and able to pay for it Here in our city, our affordable housing crisis can, in part, be traced to the city’s vacancy rate, which, as of March 2015, hovered around 1.6 percent - the lowest in the nation, according to a 2015 Zillow study
The low vacancy rate translates to a small supply of rental units, which drives up the price of the available houses and apartments. According to Grand Rapids’ “Great Housing Strategies,”
a multi-tiered plan to address affordable housing needs in the city, this low rental vacancy rate is due to: an inability to purchase homes because of damaged credit following the foreclosure crisis, a high level of student and other debt that limits an individual’s ability to purchase a home, a slow economy and stagnant wages, and a general growing interest of individuals to leave the suburbs and return to urban areas.
But are all apartments created equal? The answer is obviously no. However, the cost associated with owning a rental has not risen to the level to justify as we have recently witnessed, with folks being asked to pay a huge percentage more than in prior years.
For the many who had hoped to stay in their neighborhoods, their dream of staying in the city quickly vanishes as they scour Craigslist seeking what, if anything, is available at an affordable rate.
Up until recently, the formula that financial planners strongly suggested when making a household budget was to never pay more than 30 percent of your income for housing.
Unfortunately, our new wave of renters here are often paying greater than 30 percent of their household income, with many more now shelling out 50 percent or more of their income to live here in our city. You can easily see how with the stats like this from Apartment List’s Rentonomics site are alarming as renters in Grand Rapids are now 56 percent cost burdened (in other words, spending more than 30 percent of their income for housing costs) by these increases. Nationally, the cost burden trend appearing in nearly every city now comes out to an average of 51.8 percent.
This stress facing our local renters is echoed within a new Gallup poll, which details that all across the country renters in every income bracket were far more concerned than homeowners about being able to pay for their housing.
Nationally, renters are 49 percent more likely to be afraid they won't be able to sustain living in their cities under the current rental housing climate.
Stress can act out in many ways in a community, from renters cutting back on doing things in their city just to stay in their neighborhoods to seeking out those less than desirable places where often rental units are not regulated, placing the tenant in harm’s way.
Even millennials, who often are characterized by society unfairly as being aimless, are not able to reverse the trend of moving back in with their parents under this rental crisis. About 31.5 percent of millennials moved back in with mom and dad at the end of 2015, a number that is up by nearly five points from 27 percent in 2005.
And while we have a silver lining of a promise that many millennials, according to Apartment List’s Renter Confidence Survey, hope some day to purchase a home, the reality
is that this behavior is not predicted to occur until at least 2018.
In the meantime, with such rent increases this generation is facing, ask yourself that if you were a renter and facing these kinds of costs, how much money do you think you could expect to save for the down payment that we know they surely will need to qualify for a loan under stricter borrowing criteria post-housing bubble?
As I read line upon line of comments from folks who shared stories and insights from the local marketplace, I began to noodle about in my head because I know that complaining was not going to change anything.
For while there were no shortages of stories of the increase or the amount of stress these increases were ushering into the lives of our area renters (and those who rent business spaces, as one person pointed out who’d just experienced a 65 percent increase on their space from their landlord), surely there could be a silver lining.
Not only did folks offer up solutions like never sign a lease that says they can increase the rent more than five percent a year to another story as to how one landlord bucked the suggestion of a property manager to mark up her unit to a market rate. The city clearly has folks out there who were self-organizing around the concept of fair pricing versus market rate.
I was introduced to this concept by my former landlord Carol Moore, who, in the 1990s, offered a fair monthly rate when I was her tenant in 1992. She only raised my rent about $25 over the course of seven years on my Virginia Street apartment. Her theory was simple:
take your time finding the best tenant and then keep costs low so that they become good neighbors of your city.
To this day, I am forever grateful that she bucked the trends of that era, even as the neighborhood of East Hills began to flourish and grow.
So maybe the solution is not to focus on the problem of high rents since it is a complex one, and rather seek to find a way for renters to share with others out there the names of those landlords of our city who still believe in the power of fair pricing over trying to make a quick buck off the backs of millennials and young families who are struggling to stay in their community.
Maybe what is needed is an online exchange board where landlords rates are shared, verified, and even praised by actual tenants.
I may be a homeowner now, but I am one who is still very concerned about saddling generations to follow us with unwarranted housing stress and debt just to live in our city. I see tremendous potential in a vibrant and thriving city where people from the generations to follow me will have a chance to create a city for others to enjoy who will follow them.
Rather than throw stones at the limited housing available right now (and it will change, according to many futurist sources, around 2018 when we have more rental units than we have people interested in them), I want to encourage renters to consider building an online network to reveal those places where fairness is offered over market rate, thereby giving all those who wish to call Grand Rapids their home a good shot at truly making it here.
We used to be affordable, and I believe with a little creativity, we can once again find a path out before the “Rent Is Too Damn High” party sets up an office here in our city.
The Future Needs All of Us.
Publisher & Lifestyle Editor
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Photo of Tommy Allen provided by Terry Johnston Photography