BUSINESS

Rising rents have everyone feeling squeeze

Emilie Eaton
eeaton@enquirer.com
  • Since 2009, rent adjusted for inflation has increased 7 percent in the Cincinnati region
  • This year, rent is expected to increase another 2 to 4 percent, experts say
  • Increases can affect 605,718 Cincinnati area renters from all backgrounds and income levels
  • Higher costs hits low-income renters hardest; more should be done to aid them, housing advocates say
Iris Jennings stands outside her Avondale apartment August 26, 2015. While rising rent affects all renters, low-income families are hit the hardest. Nearly 84 percent of households in Cincinnati that make under $15,000 annually spend more than 30 percent of their income on rent, according to statistics from Harvard University.

AVONDALE – Iris Jennings moved into her cozy apartment here two and a half years ago, and slowly she has made it home. A handful of cards addressed to “Mom” are scattered on the dining room cabinet, and a couple of paintings line the hallway leading to the two bedrooms.

She pays $550 for the small apartment on Glenwood Avenue, in an area where four people have been shot in six days. It may seem like a nominal fee, especially given the recent crime in the neighborhood. But it’s roughly 44 percent of Jennings’ monthly paycheck at Hampton Inn & Suites in Corryville where she makes minimum wage.

And now, all the other tenants in her apartment building are paying $600 for rent. She doesn’t think her rent will go up, but sometimes she worries about it.

“I have a job now, but it pretty much covers the bills as they are,” Jennings said. “If there was an increase, I wouldn’t know what to do.”

Since 2009, rent adjusted for inflation has increased 7 percent in Greater Cincinnati, according to data from commercial real estate firm CBRE Cincinnati. It is expected to increase anywhere between 2 and 4 percent this year depending on the type of property.

It’s an increase that affects 605,718 renters in the Cincinnati region, or 29 percent of the population, according to 2013 estimates from the U.S. Census Bureau. The National Low Income Housing Coalition has that number even higher, estimating that nearly 34 percent of the population rents in 2015.

And it’s something that affects people of all lifestyles, backgrounds and income levels: From a millennial living in Hyde Park to Jennings on Glenwood Avenue.

“We live in a city full of people that are spending 50, 60, 70 percent of their income just for their housing,” said Kevin Finn, president and CEO of Strategies to End Homelessness. “Everybody is overextended due to the lack of affordable housing.”

Rents rising across the area.

Experts cite taxes, demand as triggers for higher rents

Experts credit the spike in rental prices to many different factors, including supply and demand, an increased interest in certain neighborhoods, and hikes on property tax, water, sewer and 911 fees.

Bree Lang, a professor at Xavier University who studies housing economics, said many neighborhoods have seen rent increases because of their amenities.

“If you live Downtown, you don’t have to commute. That’s an amenity,” Lang said. “Over-the-Rhine is a great example of that. How much does it cost to rent space when that gives you access to those amenities?”

The cost of an apartment depends on whether it’s a renter’s market or an owner’s market, Lang said. She pointed to the housing crash of 2007. Many people who subsequently had their homes foreclosed were suddenly in the rental market, raising demand and the price of units.

Charles Tassell, director of governmental affairs at the Greater Cincinnati Northern Kentucky Apartment Association, said rent also increases due to hikes in property tax, water, sewer and 911 fees.

A Hamilton County task force has been considering whether to charge Hamilton County residents a $86 a year fee per parcel to maintain Hamilton County’s 911 emergency communication system. In Kenton County, residents pay $60 per parcel fee for 911 services. And in Campbell County, the county fiscal court approved in 2013 a $45 annual property tax fee per housing or commercial unit, a move that prompted the apartment association to file a lawsuit.

Tassell said typically landlords and property managers raise rent because of other factors in the market.

“Owning apartments is a business enterprise,” Tassell said. “But rental properties are not a high-profit enterprise. In other parts of the country, property owners say ‘Here’s what we can draw out of the market so let’s charge this.’ But that’s not what’s happening here.”

Cincinnati hasn’t been the only city to see rent increases. Rent rose 2.8 percent in Cincinnati in the fourth quarter of 2014 compared to the fourth quarter of 2013, says New York-based commercial real estate firm Reis. Other neighboring cities to see rent increases: Columbus at 4 percent, Cleveland 2.2 percent, Dayton 2.1 percent, Indianapolis 2.5 percent and Lexington 1 percent.

Housing affordability advocates acknowledge Cincinnati is no worse than the rest of the nation. In some cases, rents are more affordable than other cities.

Housing here is more affordable than in other cities, said Ayanna Wallace, manager for the Greater Cincinnati Urban League’s Financial Opportunity Center. “But ... when you look to see what the price of market affordable housing is, it’s not that low.”

Rising rent affects millennials and baby boomers alike

Scott Oyler, a sales associate at Coldwell Banker West Shell, said many of his clients are buying a home in part because rent is so high.

“We’re definitely hearing it from clients,” Oyler said. “Right now people are seeing how high rents are and they’re saying, ‘That’s money that we’re tossing away.’ ”

Oyler said once many renters begin paying more than $1,000 for rent, they begin thinking about buying a home instead.

Kim Lenzo, a sales associate at Coldwell Banker West Shell who manages three rental properties in Reading, said many of the people she works are suffering the pressure of rising rent.

“For someone who can’t pay that rent, they have a couple decisions to make: Do they buy season tickets to the Reds games or Bengals games?” she asked. “Or, they may make some changes to save for a down payment. If they’re able, they may meet with a realtor and start looking.”

Dave Lockard, senior vice president at CBRE Cincinnati, said there has been a lot of anecdotal evidence showing that baby boomers and empty nesters have been selling their homes and renting more.

“It’s not a necessity,” he said. “It’s an ease of housing.”

Low-income neighborhoods face the worst squeeze

Up until a few months ago, Jennings lived in her two-bedroom apartment with her three kids, 21-year-old David, 19-year-old Jamaris and 17-year-old Lierra. David and Jamaris recently moved out, so now it’s just Jennings and Lierra. Lierra works at Wendy’s when she’s not in school to help pay rent.

Next year, Lierra will enroll in Cincinnati State’s culinary arts program. She plans on living at home, at least at first. But if she decides to move out, Jennings knows she’ll have to find a new place.

“If she’s leaving, I know I’m leaving too,” she said. “I’ll downsize to a one bedroom, maybe an efficiency.”

While rising rent affects all renters, it hits low-income individuals and families the most, housing advocates say. In Cincinnati, 44 percent of renters have cost burdens and 24 percent of renters have severe cost burdens, according to a study by the Harvard Joint Center for Housing Studies.

Nearly 84 percent of households that make under $15,000 annually spend more than 30 percent of their income on rent, while nearly 70 percent of households that make between $15,000 and $29,999 spend more than 30 percent of their income on rent, the study found.

“That really constricts the ability for renters to spend money on other items,” said Dan McCue, senior research associate at the Harvard center. “That has implications down the line, as far as health, if you’re not eating right or you’re not spending it on necessary checkups.”

When renters spend more than 30 percent of their income on rent, that can also affect the broader economy, McCue said. Renters aren’t able to save up for home ownership and put money down for a down payment.

Housing advocates say the issue of housing affordability is compounded by low wages.

“Wages and people’s incomes have not kept up – even though employment has gone up – with what’s needed to afford housing,” said Lucy Crane, director of the Community Impact program at United Way of Greater Cincinnati.

A study by the National Low Income Housing Coalition found that a person working at minimum wage in Cincinnati at $8.10 an hour would have to work 44 hours a week to afford a modest zero-bedroom apartment at fair market rent. In order to afford a one, two, three, or four bedroom apartment, a person would have to work 55, 73, 101 or 111 hours a week respectively.

For many renters, it’s hard to find and move to a more affordable place. For every 10 extremely low-income renter nationally, there are only three units available, McCue said.

Lockard added many properties that are being built now in Cincinnati and Northern Kentucky aren’t targeted for low-income clients.

“The cost of construction means you have to charge higher rent to make a profit,” said CBRE’s Lockard. “You can’t say, ‘I’m going to pay 30 percent less in construction and then I’ll charge 30 percent less in rent.’ ”

Problem unlikely to disappear but steps could ease the pain

Housing advocates say the problem of affordable housing won’t go away, but can be curbed.

Iris Jennings, of Avondale, a mother of three, is one of 605,718 renters (29 percent of the population) in Greater Cincinnati that face the possibility of a rise in rent. "I have a job now, but it pretty much covers the bills as they are right now," Jennings said. "If there was an increase, I wouldn't know what to do."

McCue said the problem can be addressed through construction, rules enabling more affordable housing and more rental assistance for low-income households.

While there aren’t many new developments being built in Cincinnati for low-income renters, there are some properties being renovated and “that’s where the opportunity lies for low-income renters,” Lockard said.

Wallace agreed, saying property owners could have people work on the buildings and then live there for free.

In the mean time, Jennings will just keep working hard. She works 11 p.m. to 7 a.m. at the hotel, where a customer on TripAdvisor recently called her the “kindest employee in town.” During her off time, she’s studying at Cincinnati State to become a real estate agent. One day, she hopes to own her own home. She knows she may lose some money for a down payment if her rent rises. But that’s OK. She’ll get there.

“I’m not a big spender,” she said. “I’ll put money away in coffee cans to save.”

How our rents compare

Average rent for an apartment locally is comparable to many peer cities, but much cheaper than in larger, coastal markets.

Market: Cincinnati

Avg. rent: $785

Change from Q4 2013 to Q4 2014: up 2.8%

Market: Columbus

Avg. rent: $776

Change from Q4 2013 to Q4 2014: up 4%

Market: Cleveland

Avg. rent: $794

Change from Q4 2013 to Q4 2014: up 2.2%

Market: Dayton

Avg. rent: $680

Change from Q4 2013 to Q4 2014: up 2.1%

Market: Indianapolis

Avg. rent: $756

Change from Q4 2013 to Q4 2014: up 2.5%

Market: Lexington

Avg. rent: $692

Change from Q4 2013 to Q4 2014: up 1%

Market: Louisville

Avg. rent: $728

Change from Q4 2013 to Q4 2014: up 3.6%

Market: Pittsburgh

Avg. rent: $935

Change from Q4 2013 to Q4 2014: up 3.4%

Market: San Francisco

Avg. rent: $2,299

Change from Q4 2013 to Q4 2014: up 6.7%

Market: New York

Avg. rent: $3,281

Change from Q4 2013 to Q4 2014: up 2.9%

Source: Reis, a New York-based commercial real estate firm