A resilient rental market

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At. Hanna Properties, apartment occupancy rate has remained at almost 100 percent.
(Photo: Hanna Properties)

Unlike many other apartment rental markets nationwide, Rochester has held its own through the COVID-19 pandemic. Local landlords finished the year with high occupancy rates, and the median rent for a one-bedroom apartment rose. 

By contrast, landlords in New York City, Boston, Buffalo and some other locations have dropped their rents to attract more tenants, in some cases by over 20 percent. A kind of renter migration, driven by the pandemic’s effects on the economy and employment practices, may have weakened those markets and kept others, like Rochester’s, strong. 

“(Rochester’s) rental market fared very, very well, atypical to a lot of other places that really, really suffered,” says Neil Gerstein, growth analyst for Zumper, an online marketplace for rental properties in the U.S. and Canada. 

The coronavirus outbreak has driven up unemployment and spurred an increase in remote work. A flexible work lifestyle has allowed many people to move to areas with lower infection rates and a more affordable cost of living. 

Market intelligence firm Civic Science found that 28 percent of Americans have considered relocating due to the ongoing pandemic. U.S. households that indicate planning to move in 2021 increased by 20 percentage points from 2020 to 56 percent, research group NPD’s blog states. 

In this milieu lies Rochester, where the outlook remains stable. The pandemic has not impacted the rental market drastically, and landlords say they aren’t hurting.

The impact of increased unemployment

As the coronavirus spread last year, many U.S. businesses curtailed their operations or closed; more and more people found themselves without jobs or working fewer hours. By April, unemployment reached a record 14.7 percent. 

Apartment dwellers were hurt along with everyone else. Among those surveyed by Zumper in 2020, nearly 9 percent reported being furloughed and 14.8 percent had been laid off. For those living in higher-rent areas, the economic impact could be particularly difficult. 

A Zumper study in February 2020 found that median rents on one-bedroom apartments in the five most expensive markets ranged from $3,520 to $2,440 in 2019. In the second- and third-highest markets, New York and Boston, median rents were $3,000 and $2,500, respectively. By contrast, the median rent for a one-bedroom apartment in Rochester was just $970.

Neil Gerstein

“Many people were laid off or lost their jobs, and likely got priced out of these expensive markets,” Gerstein says.

A Zumper survey found that 18 percent of renters who were forced to move last year did so because they had lost their jobs or for other financial reasons. In addition to writing rent checks they no longer could afford, some urban apartment renters faced the loss of amenities that had made those rents palatable.

“Generally, the things that people like about living in cities are bars, restaurants, museums, the ability to just kind of go out and do all these different things,” says Chris Salviati, housing economist for the online rental marketplace Apartment List. “Amid the pandemic, all of that activity has basically been put on pause.” 

Going remote

At the same time, businesses around the country began assigning or allowing some of their employees to work remotely.

“Having that flexibility is definitely something that’s a new and direct impact of the pandemic,” Salviati says. “That seems to be having a definite impact on the rental markets.”

Chris Salviati

By October, 33 percent of U.S. workers did their jobs remotely, and another 25 percent sometimes worked from a distance, data from the U.S. Census Bureau shows. Among apartment renters, just over 14 percent reported that they started working from home in 2020, Zumper found.

Then, as colleges and universities ceased in-person classes, some of the students who’d rented off-campus housing no longer needed to do so. Joseph Hanna, founder and owner of Hanna Properties LLP, believes that about 30 percent of the 122 tenants who moved out of his apartments last year were graduate students who left the area. 

“If we’re not going to campus, why should we pay for an apartment?” says Hanna, who owns 380 apartments in Rochester’s Neighborhood of the Arts and Park Avenue areas. “We can go back home and do the same thing.”

Of all the adults who moved last year because of the pandemic, 23 percent said the closing of their college’s campus was the biggest reason for pulling up stakes, a Pew Research report says. 

Relocating for safety

Finally, fear of the pandemic might have led some renters to seek other places to live. David Riedman, president and CEO of Riedman Companies, believes that factor might have significantly impacted New York City, by far the state’s largest apartment rental market. By March 3, New York City had confirmed 735,732 cases of the virus, which resulted in 29,564 deaths.

“People have left New York City to go to what they perceive to be a safer environment upstate, be that in the Hudson Valley or the Poconos or places beyond,” says Riedman, whose firm offers as many as 1,500 apartments in Rochester and the surrounding area.

David Riedman

Some of those looking for a safer place to live could have turned to Rochester—as of Wednesday, 51,851 coronavirus infections had been confirmed, and 1,154 had died of the illness in Monroe County. Such relocations have augmented the pandemic’s impact on rental markets.

“The largest weight of the pandemic’s effect on the rental market was causing migration patterns to shift dramatically in 2020,” Gerstein says. “People moving essentially from expensive areas to cheaper, often nearby, places.”

That shift appears to have prompted some landlords in large markets to reduce the cost of leasing their apartments. 

“Basically, demand left those markets, so prices dropped dramatically,” Gerstein says.

Over the last 12 months, the cost of leasing a one-bedroom dropped by almost 22 percent in New York City and more than 19 percent in Boston, bringing their median rents to $2,350 and $2,020, respectively. Closer to home, the median for the Buffalo market fell by just a hair over 7 percent, to $1,050. 

“Short-term price changes tend to be driven more by the demand side, by fluctuations in how many folks are looking for apartments,” Salviati says. 

Holding its own

By contrast, the median rent for a one-bedroom apartment in the Rochester area last month was $1,010, 4.1 percent higher than a year earlier.

“That’s indicative of just stable growth,” Gerstein says. “Nothing growing too fast in Rochester over the last year.”

Local landlords say the pandemic has not seriously affected their businesses. 

“One of the great things about Rochester is we don’t take the beatings as bad as other places in the country,” says Tom Latta, vice president of leasing and tenant relations for Buckingham Properties.

Tom Latta

Buckingham, which offers 572 apartments in the Rochester area, had a 97 percent occupancy rate at the end of 2020.

“We’ve had a very high retention rate during this period,” Latta says.

Of those who did move out of their apartments, some just shifted to other residences within Buckingham’s portfolio.

“We’ve had a lot more people transfer,” Latta says. “They transferred to a two- or three-bedroom because that’s what they desired to have some separate space to work.”

A handful of tenants who were in financial trouble were released from their leases.

“If we could come up with an amicable resolution to get them out and into a place that doesn’t put them in a bad financial hardship … we’ve tried to be cooperative,” he says. “We’re not interested in hurting someone’s life.”

Rents on Buckingham’s individual apartments either stayed flat or rose by no more than 2 percent.

“(The pandemic) really has not had an effect on our rental rates,” Latta says.

Hanna says he doesn’t know of any local landlord who is raising rents “at any great pace.”

“I haven’t raised rents (in) a year for my existing tenants,” he says. “I would’ve raised rents anywhere from 2 to 3 percent if not for the pandemic.”

Still, about 3 percent of his tenants have had difficulties paying their rent.

“Of the people who have been having problems, most of it has been (being) laid off, or their hours cut back,” he says. 

Though 122 of Hanna’s tenants moved out last year, that’s down by more than 21 percent from 2019. Altogether, Hanna’s occupancy rate has remained at almost 100 percent.

“I’m still filling the apartments,” he says.

A vote of confidence

Riedman says the tight housing market has also been a factor in keeping local apartment occupancy rates high. The Greater Rochester Association of Realtors has found that not enough homes are for sale in the Rochester metro area to meet current demand. The shortfall has helped drive up the median price of a home to $161,000, a 9.2 percent increase over 2020. 

“We have a fairly tight market, a fairly low supply of housing, and therefore a pretty stable market, whether you’re talking about for-sale or for-rent housing,” Riedman says. “Therefore, the pandemic hasn’t had a demonstrable effect on vacancies.”

How the local apartment rental market fares through the rest of this year depends upon many factors; chief among them is the course of the pandemic. As of Mar. 3, new infections were down nearly 60 percent from a month earlier. At the same time, vaccine distribution has been ramping up. 

If conditions continue to improve, those leasing in the area could begin thinking about moving to other apartments or buying a home.

“Now that things are settling down, people are much more confident. They’re more apt to move,” says Rich Calabrese, owner of RentRochester.com, an online portal that advertises apartments for rent. 

Rich Calabrese

That could benefit the local market—or not.

“If the population that came to Rochester stays, growth will continue as normal in pace with 2020,” Gerstein says. 

Though he doesn’t expect to see great changes in the Rochester rental market this year, they can occur. In 2019, the median rent soared to $970, a 15.5 percent increase over the previous year. Riedman says his rents have remained relatively stable since before the pandemic.

“I have a thing that I say all the time about Rochester, New York,” he says. “Never a boom, never a bust.”

Mike Costanza is a Rochester Beacon contributing writer.

One thought on “A resilient rental market

  1. I’d like to see a follow-up article next year, when all of the Inner Loop buildings are finished and we’ve emerged from the lockdown.
    Will the market be oversaturated and temper the rents? Will downstaters stay?
    Hoping for growth and prosperity in ROC.

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