A survey by a New York-based property management firm shows rents for apartments in multifamily properties in Rhode Island have risen by about $60 in the last six months, to an average of $1,165 per month, while rents in most of the Northeast remained flat.
The survey is conducted twice a year by Sunrise Management & Consulting, a commercial brokerage firm in Albany that manages multifamily housing properties such as apartment complexes. The spring 2006 report covers 330,000 units in 1,900 apartment communities throughout the region, including 10,995 in 60 properties in Rhode Island.
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Richard Dolins, a spokesman for Sunrise, said the state “stood out from everyone else” with its rising rents. A $60 jump would amount to about 5.4 percent. The rate per square foot increased by 8 cents, Sunrise found, to $1.37. Rhode Island was the only New England market showing “notable growth” in rents, the company reported.
But local property managers and housing leaders said that’s not what they’ve seen.
“I am shocked,” said Harry Bilodeau, owner of Bilodeau Property Management, which manages rental properties in and around Providence, Cranston and Warwick. “If the report is covering a five-year period, then I agree with it. If it’s covering one year, I don’t see it.”
Bilodeau said not only are landlords not increasing rents in the area – they are slightly reducing them or keeping them flat.
“We’re seeing increased vacancy,” he said, adding that it’s particularly the case on the East Side of Providence, as a result of Brown University and Rhode Island School of Design becoming more active in real estate. RISD has developed apartments for about 555 students in the former Rhode Island Hospital Trust building downtown, for example.
Bilodeau said increased costs, including utilities, fire code compliance, lead paint compliance and property taxes should be driving rents up, but landlords are keeping rents low to ensure they can fill their units. In addition, property owners spend 15 percent of their gross annual income on property taxes, he said, while universities pay none.
“It is straining the financial viability of a lot of these buildings,” said Bilodeau.
Jim Durkin, owner of Durkin Cottages Realty in Narragansett, said he too was surprised by the findings of the Sunrise survey. “I would think the rental rates decreased, if anything,” he said.
Though Durkin said his agency deals more with weekly summer rentals than year-round rentals, even the seasonal rentals have been on more of a downward slope in rates. He attributes the decrease to lessened demand for the properties.
“It’s hard to track,” he said. “Our business is so volatile; it’s based on the weather. We don’t know until the end of the season how our season went.”
But Dolins, of Sunrise, offered one possible reason why rents could rise overall even as rents on existing properties stay flat: He attributed it to completion of new developments in the state, often involving the redevelopment of old buildings.
“It’s bringing new product on-line,” Dolins said. “New product has a tendency to be more expensive.”
Chris Barnett, spokesman for Rhode Island Housing, said Rhode Island hasn’t created enough housing “to keep pace with job creation” during the past 10 years.
“When demand outpaces supply, prices have one direction to go,” he said, adding that now business leaders are getting involved because the increased cost of housing creates less disposable income for consumers. “The more we spend on housing, the less we have to support Rhode Island businesses.”
Based on a survey of real estate classified ads that Rhode Island Housing conducts annually, Barnett said, the average rent in South Providence and Elmwood neighborhoods rose 78 percent between 1998 and 2005, from $558 to $996.
Barnett said the cost of land could be affecting the affordability of housing and rentals.
“There isn’t enough money to subsidize the development costs of enough housing to bring prices down,” he said. “We can’t invest our way out of the housing shortage.”
(In one positive development, the House version of the fiscal 2007 budget, unveiled last week, would ask voters to support a $50 million bond to help finance affordable housing development; $45 million of that money would go to rental properties.)
What is happening in the rental market is more and more rental apartments are being converted to condominiums, Bilodeau said. The Sunrise report found the same trend in suburban Boston, Southern New Hampshire and Connecticut.
Increased vacancies and rising utility, regulatory and tax costs could force rental property owners to convert, he said. Converting to condominiums shifts the burden of property taxes from the apartment building owner to the owner of each individual unit.
“If squeezed to it, you can’t make any money,” he said. “You have to sell or you have to convert.”
