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Friday, May 25, 2018
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Big demand, little space fuels high rents in St. Pete

ST. PETERSBURG — The first wave of more than 2,000 new apartments planned in Pinellas County are becoming available to lease, but they’re not likely to fill the huge need for rental housing, especially for people of modest means.

Rising land prices, coupled with exploding demand, is driving upscale rental development near the county’s urban centers that caters to ex-homeowners and rising young professionals with solid paychecks.

For instance, tenants in the 326 units at the Beacon 430 in downtown St. Petersburg will pay from $1,000 for a studio to $2,200 for three bedrooms with granite countertops, stainless steel appliances, a resort style pool and a veranda with grills and cabanas. Leasing is set to begin this spring.

Monthly rents run about $1,800 for a two-bedroom, two-bath apartment at Ibis Walk, a growing development adjacent to newly built shops and restaurants in the gateway area near Roosevelt and Gandy boulevards.

City governments have managed to attract some subsidized, affordable developments in recent years, such as the Urban Landings/Harbour’s Edge building near the University of South Florida St. Petersburg. It has 85 units restricted to seniors starting around $700 a month.

But in Florida’s most densely-populated county, it may be a while before growth in new rental property meets the broader demand from low- and middle-income earners whose housing budget has shrunk as gas, food and healthcare costs have increased.

It comes down to basic economics, real estate experts say.

The roughly 135,000 rental properties across the peninsula are about 95 percent full and a majority are old. Land is 98 percent built out and acquiring large enough tracts for big multifamily developments is increasingly expensive.

“Pricing for rental housing is absolutely driven by the key factors of supply and demand,” said Michael Slater, president of real estate market firm Triad Research & Consulting Inc. in Tampa.

Every age group but the very oldest has shifted to some degree from homeownership to renting since the 2008 recession, as millions across the U.S. have lost jobs and homes, a 2013 study by Harvard University’s Joint Center for Housing Studies found.

Over the past three years, the market has responded in a big way; multifamily construction starts, most of them rentals, jumped 54 percent in 2011, the study found.

A large number of these new units are targeted to the middle and upper-income market. The trouble is, as of 2010, half of all renters were spending 50 percent of their monthly income on housing, way above the 30 percent annual income mark the government defines as “affordable.”

Pinellas reported 56 percent of renter households were paying gross rents above the 30-percent affordability threshold in 2010 U.S. Census data, but only 3.6 percent of the county’s total housing supply was subsidized or receiving rental assistance.

“We have a real need in this marketplace for some more affordable housing for the folks who are the service workers, for the folks who are our school teachers, our fire fighters,” said Jeff Rogo of the Bay Area Apartment Association.

A concern for affordable housing advocates is that the population in Pinellas has declined in the past decade even as surrounding counties such as Hillsborough and Pasco have grown. If new, moderately priced housing is increasingly unavailable in Pinellas, many workers may leave to find a more affordable place to live, according to a 2012 analyst report prepared for the county’s housing finance authority.

Building workforce housing is a challenge because it’s generally harder to make money on lower price developments unless they exceed a certain size and number of units, said Darrell Irions, who heads the St. Petersburg Housing Authority.

“If you’re looking at a place like St. Petersburg where land is scarce, unless you want to pay a really pretty penny for it, most of these developers aren’t going do it,” he said.

There are many success stories, including a 97-unit complex aimed at veterans planned by the housing authority and private developers just north of downtown, but they take substantial investment by government agencies.

Since 2010, St. Petersburg has added 582 affordable housing units, with 221 nearing completion this year. That required an investment of $12.5 million in city funds combined with $113.5 million in other subsidies from county, state and federal sources.

The projects moving forward without any financial incentives tend to target a higher income bracket.

Multifamily developments in Clearwater, Largo, Dunedin and St. Petersburg are advertising monthly rents ranging from $900 for a studio to $1,200 for a two-bedroom unit, though several luxury properties are closer to $2,000.

A young adult starting a career at $40,000 could likely afford a small studio, though families making the county median income of $46,000 would likely need more space than what’s offered in the typical 1,000-square-foot, two-bedroom unit.

Many of the new apartment buildings are part of a mixed-use development, putting living space above bars, shops and restaurants. Their target is the so-called “young professional” with a strong preference for an urban lifestyle.

A 20- or 30-something doctor or IT specialist might want to shell out more than $1,800 a month to live at Fusion 1560, one of the first new upscale apartment complexes built in St. Petersburg located in the popular EDGE district just north of Tropicana Field.

An individual would have to bring in $70,000 a year to comfortably pay that kind of rent by the government’s 30-percent affordability income standard.

Much of the market for these high-end “apartment homes” is from families that left behind a $3,000 or $4,000 a month mortgage in a three-bedroom suburban house with a pool, Slater says.

Even if a working couple lost an income or took a pay cut in the economic downturn, $1,500 to $2,000 a month to live above shops and restaurants, with no taxes, insurance or maintenance, holds powerful appeal, he said.

“Nobody likes to go backwards,” Slater said.

“So if a young professional roommate or couple bought a house and were living nicely, comfortably, if they’re going to downsize and go back to rental, they still aren’t going to go looking for the inexpensive rental and they want those lifestyle issues.”

With occupancy exceeding 95 percent across much of the Tampa Bay area, Slater anticipates rents steadily climbing for several years to come.

Evan Brady says he’s comfortable with the $1,200 he pays for the renovated two-story apartment he rents in downtown St. Petersburg.

While he still has to finish his business management degree at USF St. Petersburg, the process service business he owns and operates brings in enough to make the costs worthwhile.

“I used to run a business out of my house. Housing was very important to me,” he said, adding that he’s the youngest person in his building.

“You get what you pay for.”

It’s also a steal compared with the $3,600 he shared with his sister during a spell living in Brooklyn, N.Y.

Reuben Pressman, a friend of Brady’s, has a different take on housing costs.

He graduated three years ago and says he’s content to split $825 rent with his girlfriend for a small, older house in the Old Southeast neighborhood.

Keeping housing costs low is a necessity as Pressman’s salary can vary as a tech entrepreneur. Many recent college graduates may struggle to get into newer downtown apartments because they fall below the property’s minimum income requirements, he said.

Mainly, though, Pressman says it’s a lifestyle choice.

“I try to live as simply as possible, which is a more popular thing at least for my friends in my generation; trying to minimize costs as much as possible so we can spend our time doing what we want to do,” he said.

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