Affordable Housing for Middle Income? It's a Myth!

May I ask you a personal question? Can you afford to live where you live? I mean, I know it’s none of my business what you pay in rent (or a mortgage) but … Oh. Wait. I IS my business to know such things. And the truth of the matter is, it IS getting harder to afford the rent in many places. Take the city where my student housing properties are: South Bend, Indiana, the home of the Fighting Irish - #GoIrish!

Recently the Edward Rose Company increased the rents on all units in their communities upwards of $45 or more on their 2 bedroom 2 bath floor plans. This should be a more or less expected increase, since it is my understanding they have not increased rents at all for years. Their pricing remained stagnant because the market here has been stagnant. No job growth. No industry growth, other than the GM plant and the nearby recreational vehicle industry in Elkhart, Indiana.

Many of you may remember the entire industry there collapsed a few years back when the Great Recession hit this area like a ton of bricks falling on a person’s head. It just died. Within the last 24 months, there have been significant signs of new life, but I wouldn’t call it a growth pattern. You cannot really have a sustainable growth pattern when no one is getting raises. There is absolutely zero salary growth in this area. It makes it depressing for the apartment industry, and no doubt for the many people who work here … at the same exact pay they were making 3-5 years ago. 

So, can you afford where you live? If the apartment rent goes up from your current rate, are you able to renew your lease? Or, will you start looking to enter into home ownership? Or, even home renter(ship) instead of renewing your lease? 

Too many people are making between $22-30K per year. How is it justified that many of the local apartment complexes have 2 bedroom 1 bath apartments that went from rents lower than $600 only 2 years ago to now $795-850? There are brand new complexes in the area but they are marketed directly to affiliates of the University of Notre Dame (especially students and their parents), AM General, Bayer and city employees at rents starting at $2400 per month. Where does place the local workforce who cannot afford the new places and now are being priced out of their current rentals?

What this are desperately needs is an in-between community and investors who believe in this market. What this market needs is a community that puts rents in $700-850 price range that are energy efficient, offer larger kitchen areas with an open concept living plan and in-unit laundry facilities. Nobody really cares about the pool or a billiards room in the Clubhouse. What they would use are outdoor kitchens with nice furniture, walking trails, being pet welcoming with real green space. Let the resident the choice to pick his own cable/internet source and pay for it, or include it in the rent. I’d pay for that. I’d pay for this kind of place.

What I won’t pay for is a building built in the 60s or 70s that has installed granite countertops, wood-look flooring and a price that is not worth it. Old buildings are still old construction. Pipes are still gunked up with past grossness with flows very restricted. Yes, some of these management companies include the gas heat; however, the windows and patio doors actually allow frigid wind to blow through … so the resident is still uncomfortable and the management companies are still paying for the heat to warm the great outdoors.   

I love it when an older community makes the cosmetic updates to compete but keeps their pricing affordable for the current residents. Am I just dreaming?

Renter's Remorse

Have you ever had a Prospect walk into your Leasing Office, take a tour, submit an application and once he walks out of the office your Consultant jumps for joy. Oh, Boy! Another Lease! All right, all right, all right!

Unfortunately, the very next day, he either calls or emails you to tell you he has changed his mind and decided not to sign a lease. Or, worse, he signed the lease and paid the deposit and fees and calls a week or so later to say he “can’t move in” and wants to cancel the lease and get the deposit back. What?

We call that Buyer’s Remorse (or Renter’s Remorse.)

Is there a way to counter that, or prevent that from ever happening, or even save the Lease that is quickly slipping through the Leasing Consultant’s fingers? Yes and No. The short of it is, no, if you have trained your Leasing Team to push people to make a quick, on-the-spot decision, you may not be able to save it (unless you want to play hard ball.) If you have encouraged your Team to not ask appropriate questions and make a solid connection with their Prospects, then you may have to let it go, especially if they haven’t signed a lease and paid the deposit.

The best leasing decisions are made thoughtfully, from the Prospect’s gut, with plenty of communication between the person and the consultant. That is in a perfect world. But we don’t live in a perfect world. This is the one situation that annoys me to no end when a Leasing Consultant tells me “we lost one.” Why? I always want to understand the why of this situation. Here's the long of it.

Ask the Prospect WHEN he wants to move.

Ask the Prospect WHICH floor plan is best for his lifestyle and which one he PREFERS. Just because you have a lot of two bedrooms available SHOULD NOT dictate where the Prospect should be taken on tour. If you have a Consultant on your team who gets pissed off because someone asks to be shown three different units, then shame on that Consultant – get rid of that person. No one should be told by your staff where he has to live. If you push them into accepting the decision of the team, then forget about getting the renewal.

Ask the Prospect HOW MUCH HE WANTS TO SPEND on rent. Seems like a simple question, but oftentimes, a Leasing Consultant just tells the Prospect how much the apartment is without deducing the optimal payment he can afford. After all, he might be able and more than willing to spend a few more dollars to get the apartment of his dreams. Or, during the conversation, the Consultant may learn the Prospect is in seasonal employment, or has plans to go back to school and will have less money to spend on rent. It pays to listen.

Finally, again, it PAYS TO LISTEN. Ask WHERE ELSE the Prospect is considering living. This may help the Consultant gain a competitive advantage and can guide him to present the best features of his property compared to the other one being considered. Leasing Consultants have to be able to get the Prospect excited about moving, moving to your community, and about spending money to live in that community (value!). If he does that, I doubt seriously, there will be many times you will be told, “We lost one.”