Janesville's rental vacancy rate a worry
"I think certainly anytime we exceed 10 percent, we're getting into an area where the supply is exceeding the local demand," said Duane Cherek, manager of city planning services.
The rental vacancy rate is up from 7.4 percent in 2000, according to census data.
Among all the city's nearly 28,000 housing units—rental and owner-occupied—2,168, or 7.7 percent, were vacant in 2010, up from 4.7 percent a decade ago, according to census data.
Local experts agree that the increase in rental vacancy is a matter of economics, and they offered theories that can't easily be quantified.
More single-family homes might be on the rental market because of the owners' economic circumstances, Cherek said.
People who lose income have to cut expenses and might move back home with parents or double up with a roommate or family, said Richard Haviza, Janesville city assessor.
Low mortgage rates and the federal first-time homebuyer tax credit might have enticed renters into buying homes. The city's first-time homebuyer classes remain popular, said Carrie Clark, city housing financial and rehabilitation specialist.
A 2006 city apartment vacancy survey found a vacancy rate of 11.7 percent for market-rate units.
While a higher vacancy rate creates more competition for tenants, finding qualified tenants in Janesville has been difficult, said Dale Hicks, president of Janesville Area Rental Property Association.
Some areas of the city are fully rented, while other areas are 25 percent vacant, he said.
"People coming in are not qualifying," he said.
Landlords aren't going to lower their standards just to fill vacancies, he said, because in the end it would cost landlords more to evict bad tenants.
He said he goes through 10 to 15 applicants to find a satisfactory prospect.
It's all about jobs, he said, because tenants need to prove they have a means of paying the rent.
Along with the difficulty of finding qualified tenants, landlords also face rising costs for utilities, taxes and garbage pickup, Hicks said.
The result is several landlords on the brink of bankruptcy, he said.
Supply and demand
Some officials suggested a large supply of rental units should lower the rent landlords charge, but Hicks said he hasn't seen that.
"Primarily because there's no room to move (rent)," he said.
Occasionally landlords will offer freebies such as one month free, usually at bigger apartment complexes, he said.
"As a whole, I don't see a lot of that going on," he said.
Rent has remained steady with some increases.
Hicks said he's been able to increase his rent after tenants move out and before new tenants move in.
"We have 24 units. We probably have gotten $50 more in rent increases as a whole," he said. "$10 here, $15 there. It's just, people are tight."
A healthy rental vacancy rate of 5 to 8 percent provides competition among landlords and choice for renters, city officials said.
When vacancy rates increase, older units often sit empty because they don't have the amenities of newer apartments at nearly the same rates, Cherek said.
"Those older units begin to suffer," he said. "They become unoccupied for greater amounts of time. They limit the owner's ability to stick money back in because the revenue is not there."
"Ultimately, the market sooner or later will correct itself," Cherek said.
"If (developers) continue to add additional units in the face of excess supply, that contributes to the problem. Obviously, we're not adding additional units here in Janesville. Market forces are controlling that," he said.
In the last few years, interest from developers has been in new multi-family development geared toward baby boomers, he said.
"This wave of folks in that age group are now getting to the point of looking to perhaps downsize from their existing single-family home on larger lots, and they're wanting to maintain less—sometimes condos or apartment units," he said.
Residential development is almost nonexistent, which isn't unique to Janesville, but the limited inquiries the city has received for housing development revolve around baby boomers.
The city issued between 44 and 180 building permits for multi-family units each year from 2001 to 2004. Since 2005, however, a total of only 22 permits has been issued.
"You'd expect to see a higher vacancy rate in a time of economic distress," Haviza said. "Hopefully as the economy starts to improve, we start to see increased occupancy rates, and it'll just have to work through the cycle."
RENTAL VACANCY RATES
2010 census data indicates the following rental vacancy percentages for area communities:
Lake Geneva: 9
Williams Bay: 5
Janesville in the last six years combined has issued fewer building permits for multiple family units than in any of the four previous years individually:
City officials say programs to help first-time homebuyers has converted renters to homeowners. The number of people assisted by Janesville's down payment program are:
Source: City of Janesville