Booming apartment market means higher rents
Miguel Puyo and Cristina Gonzalez have been set adrift in the real estate market.
Immigrants from Colombia, the couple lost their four-bedroom house in Pasco County to foreclosure and a short sale in 2011.
“We thought we'd be in our house for 40 years,” Miguel Puyo, 62, said in Spanish, sitting in the tiny living room of the one-bedroom apartment off Linebaugh Avenue he shares with his wife. They're looking for a new place again because the building is in foreclosure.
The couple have joined thousands of households across the Tampa Bay area for whom rent has replaced a monthly mortgage payment.
Real estate companies have responded by building apartment towers and complexes downtown on both sides of Tampa Bay and at West Shore in between. Beyond the urban core, investors are snapping up bank-owned houses and putting them under lease.
Economists say all this activity points to a region emerging from the wreckage of the housing crisis. People who doubled up with family and friends are beginning to move out.
“As the employment in the Tampa Bay area is rising, more people with low incomes are finding it possible to set up independent households,” said University of Florida economist David Denslow.
Across the region, average rent runs about $900. But the new apartments and the rental houses coming on the market are pushing the average higher, commanding between $1,100 and $2,000 a month.
All this raises two questions: Is the tilt toward rentals a permanent change for the region or just a side trip on the road back to home ownership?
And, in the short term, can workers in what remains a low-wage economy afford the higher prices that the booming rental market is demanding?
Puyo and his wife worry they can't. The couple have set themselves a budget of $800 a month — a third of their income. They want to stay in the area, close to their daughters and three grandchildren.
What they like they can't afford.
“There's a whole lot of areas that are cheap, but they have a lot of bad people,” Cristina, 46, said in Spanish.
“My parents want the $900 to go for something worth paying for,” said daughter Norma, 23. “I've been having a hard time finding something they like.”
Like Puyo and Gonzalez, nearly half the region's renters spend a third or more of their monthly income on housing, the Census Bureau estimates.
That's a level economists consider “burdened” — money going to rent can't be spent on other things, said John Tuccillo, chief economist for the Florida Association of Realtors.
It's unclear if the turn toward rentals marks a fundamental change in the housing market, Tuccillo said, or is just a way for former homeowners and former homebuilders to stay afloat as the post-housing crash world rebuilds.
One thing is certain: It will take years for homeowners who have been in foreclosure to restore their credit. Meantime, they will be forced into rentals, regardless of the price.
“Things in the market are restricting people's choices,” Tuccillo said. “These folks are not in a position where they can choose.”
It's a long way from 2007, when Puyo and Gonzalez made enough working in the housing industry — he in construction, she as a housecleaner prepping new houses — to buy a house in Lake Bernadette west of Zephyrhills.
A year later, they were out of work, their house headed for foreclosure.
Today, they get by on less than $3,000 a month from Puyo's job driving a truck for the Postal Service. He's expecting his hours to be cut this year.
A new report from the Census Bureau ranked Tampa and Florida's other major metro areas as some of the most expensive in the country for renters. The number of burdened renters grew from 45 percent in 2009 to nearly 50 percent in 2011, according to the census.
The Tampa area has the sixth-highest percentage of financially burdened renters, putting it behind No. 1 Miami, Orlando, New Orleans, Los Angeles and the Inland Empire area of Southern California, the census said.
On a recent afternoon, Michael Blair was walking the grounds of the new NoHo Flats apartment project, rising from a gritty warehouse district north of Tampa's Hyde Park neighborhood.
Blair, managing director of Pollack Shores Real Estate Group of Atlanta, hopes his company's new development will appeal to the young, urban hipster who wants to be close to downtown.
He's stocking his project with a resort-quality pool area with flat-panel TVs and wireless Internet in the common areas. Inside, the 311 units will have granite or quartz countertops and stainless steel appliances.
Rents will start in the high $800-a-month range for a one-bedroom unit to about $1,600 for a three-bedroom, said Anthony Everett, a partner in the project.
Many developers planning apartment complexes are following the same pattern: pick land in an urban setting close to downtown or a shopping center and stock the apartments with enough amenities to justify rent from $1,000 to $2,000.
At least five developers plan apartment buildings in or bordering downtown Tampa and at least five others are planned for the West Shore district.
They're in the works as Tampa's downtown undergoes a population boom, from a few hundred residents a decade ago to nearly 5,000 today. They live in towers and low-rise complexes that were nearly empty five years ago but are now full.
Mayor Bob Buckhorn wants to fill future downtown rentals with young, tech-savvy entrepreneurs who value urban living over the suburbs and are willing to rent to get that.
Fueling the apartment boom are cheap loans from banks and life insurance companies and a shortage of apartments available today. Apartments across the Tampa Bay area are about 94 percent occupied, according to the research firm MyRentComps.com.
Compare that to the area's office real estate industry, in which 85 percent of offices are occupied, and it's easy to see why banks are eager to lend for apartments.
To cover the higher cost of building downtown, developers will need to charge $1.80 to $2.20 a square foot, said Bruce Erhardt, a land broker for the Cushman & Wakefield real estate firm. For a 750-square-foot apartment, that translates into $1,350 to $1,650 a month rent.
Erhardt is optimistic the market can handle it, but acknowledges it's an open question.
“How deep,” he said, “is the rental market that supports the rents necessary for high-density construction?”
The new luxury apartments are competing with the thousands of single-family homes hitting the rental market, some owned by individual investors and others by multibillion-dollar investment firms such as New York's Blackstone Group.
Blackstone, through its subsidiary THR Fla LP, owns 552 single-family homes in Hillsborough County, more than any other entity, according to a review of Hillsborough County Property Appraiser's records.
This year, Blackstone knocked the federal government's Freddie Mac off its perch as Hillsborough's largest owner of single-family homes. Freddie Mac is the congressionally chartered company that underwrites many of the nation's residential mortgages. Close behind Blackstone are large investors from California and Minnesota.
Blackstone also owns 217 homes in Pinellas County, putting it second behind Fannie Mae. Fannie Mae, like Freddie Mac, is a leading source of residential mortgage credit.
The promise of rental income has also caught the attention of Atlanta-based home builder Beazer Corp.
A decade after building thousands of homes across the Tampa Bay region, Beazer created a subsidiary last year to buy empty houses and rent them. The new company operates in Florida, Arizona, Nevada and California.
Last May, company officials said the strategy was a way to make money in markets where Beazer could no longer afford to build homes. Company officials declined to be interviewed for this story.
Investors such as Blackstone and Beazer are entering a market long dominated by local property management companies like Rental Houses LLC.
Rental Houses President Dee Dee Cornelius said her Clearwater company has invested heavily in Hillsborough County with an eye on the long-term.
“We've had most of our homes now eight or nine years,” Cornelius said. “Our original plan was to finance them for 15 years and hold them for 15 years.”
Cornelius said her houses rent for about $1,500, and about a quarter of her renters fall into the “burdened” category.
“Some of them have credit issues,” she said. “But they also have a fair amount of available cash. I would certainly see them turning into homeowners.”
Cornelius said she sees the arrival of deep-pocketed investors such as Blackstone as a plus. They're fixing up houses many banks abandoned to blight, she said. They also are helping push up property values across the board, she said.
“It's a strong positive, not only for the housing market, but for communities,” said Tuccillo, the Florida Association of Realtors economist. “They're not slumlords or flippers. They've got to keep the homes up in quality.”
Ultimately, the future of the Tampa Bay area's rental market could be determined by people such as Mohammed Reza.
A 34-year-old physician from Boston, he's relocating to Tampa. He recently posted an ad on Craigslist seeking to rent a home or apartment for $700 a month.
He knows he may have to go higher. His target of $700 won't touch one of the new apartments hitting the market or most of the houses for rent.
“I would think $1,000 would be reasonable for a nice apartment,” Reza said.
“The other thing is it's almost cheaper to buy than to rent. But since we are not familiar with the area, it makes sense to rent for a few months before buying a condo or a house.”
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