honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Monday, January 25, 2010

Hawaii renters getting a break


By Mary Vorsino
Advertiser Urban Honolulu Writer

Hawaii news photo - The Honolulu Advertiser
spacer spacer

40%

Portion of Hawai'i residents who are renters ó more than most other states

$407

Increase in average monthly asking price for home rentals from 2004 to 2005

$194

Decrease in average monthly asking price for apartment rentals in Honolulu from 2008 to 2009

5%

Estimated decrease in average monthly home rents over year-ago prices in Central O'ahu

spacer spacer

After riding out the housing boom, when rents skyrocketed, Hawai'i renters are finally seeing things turn in their favor.

Across the state, rents have been declining for the first time in at least a decade, say property managers and housing experts, and landlords are offering incentives to fill vacancies from giving renters up to a month free to making home improvements to lure tenants .

Even in urban Honolulu, rents are edging downward and some suburban and rural renters who couldn't afford to before are moving into town to escape long commutes.

"It is more of a renter's market," said Lurline Johnson of Property Profiles, a past president of the National Association of Residential Property Managers O'ahu chapter. "Many times, (prospective tenants) are asking for a reduction in the rental rate, (and) if not that, then some kind of improvement to the property."

In some cases, landlords are dropping their rents by about $100 or more or are offering existing tenants lower rents to get them to stay.

Landlords are also being warned to prepare for a wait when they put a rental on the market.

Amy Knecht and her husband, Aaron, have been considering a move from their Makiki studio apartment to a one-bedroom in the Ala Moana area, largely for convenience, and have been surprised by the low rents they're finding.

They're now paying $1,025 for a studio, and have seen rents as low as $800 in Ala Moana for a one-bedroom.

"The prices have dropped for sure," said Amy Knecht, a 27-year-old writer who said she is also looking to pay a little less for rent because she is thinking about going back to school and the couple is saving to buy a home.

"An extra $100 a month, I would easily just put that away to save for a downpayment for our own place," she said. "It would just increase what we keep."

Michael Marietti, a program analyst at Pearl Harbor Naval Shipyard, is also in the market for an apartment rental near Ala Moana.

The Kalihi resident is looking to move in late February or March. When he calls landlords, they want him to move in right away. And they're often willing to negotiate the rent.

Marietti said his price range is about $1,800, with utilities included. He has found a number of units that fit his budget.

"There's so much out there right now," Marietti said. "I'm surprised about the number of rentals available."

RENTERS DOUBLE UP

The situation in Hawai'i's rental market is not as drastic as what is being seen on the Mainland, where properties in communities hit hardest by the housing collapse can remain vacant for months. Landlords in those markets are slashing prices and offering bigger sometimes gimmicky incentives to attract renters, including free gift cards and elaborate remodels.

And onlookers say the favorable market for renters is being tempered by the economic downturn: Renters themselves face tough times as some lose their jobs or see their wages get cut, so the lower housing costs may not make them feel all that much better about their financial picture. Nationally, economists are at least partially blaming the increase in vacancies in the rental market on renters doubling up, downsizing or moving in with family members because they can no longer afford their housing.

Local property managers and housing experts say given continued high unemployment and little hope the economy will make a full recovery soon, rents in the Islands will probably continue to decline or at least remain stagnant in 2010.

A new survey of classified rental ads in The Honolulu Advertiser shows the average asking price for apartment rentals from January through October 2009 was $1,422, down about 12 percent or $194 from the average in 2008.

The average asking rent for townhouses and homes also declined, about 4.7 percent and 2.6 percent, respectively, according to the survey by local housing market researcher Ricky Cassiday.

A similar survey of classified ads conducted by Hawaii Information Service also showed a decline in asking rents.

In the third quarter of 2009, the survey showed, the asking rent for advertised homes, townhouses and apartments statewide was about $1,474 down about 13 percent from the same quarter in 2008.

Cassiday said though the housing market in the Islands shows signs of strengthening, the rental market is "more open, more volatile."

Part of that volatility is tied to how the economic downturn is affecting renters, he said.

Since renters are "less affluent than homeowners, these are the guys that are suffering the most. They're on the front lines in an economic downturn."

IT'S STILL EXPENSIVE

Meanwhile, advocates say despite the declines in rental housing costs, Hawai'i still has some of the highest average rents in the nation and affordable housing is still in short supply.

Census figures released last year put Hawai'i's average rent in 2008, including utilities, at $1,298 a month the highest in the United States. The statistics also showed more than half of renters spend more than the recommended 30 percent of their household income on rent and utilities.

Still, the drop in rents is good news for many in the Islands: About 40 percent of Hawai'i residents are renters more than most other states.

And, say advocates, any break for struggling families will be well-received.

The declining rents are in sharp contrast to what renters were seeing when housing costs started skyrocketing in 2004. Rents largely continued to climb until 2008, and started falling last year.

'BOON' FOR RENTERS

Cassiday's survey of a sample of Honolulu Advertiser classified ads for rentals showed that the average asking price for home rentals in 2005 grew by 19.6 percent or about $407 from the year before, when the average was $2,081.

The average asking rent for apartments grew by $220, or 16.5 percent.

Wendy Burkholder, executive director for Consumer Credit Counseling Service of Hawai'i, which works with renters and homeowners to tackle their debt, said the now-declining rents are "certainly a boon" for renters.

Some of her clients who are renters have been negotiating with their landlords to reduce their rent something unheard of 18 to 24 months ago, she said.

"More and more, we're referring people back to their existing landlord," she said. "It seems that more often than not, landlords are willing" to discuss rent decreases.

But she added that those negotiations are often taking place because a renter is facing a new struggle making rental payments, either because of seeing a wage cut or losing a job or hours.

Catherine Matthews, of Callahan Realty and a member of the O'ahu residential property managers association, said she has lowered rents for some tenants, sometimes so they'll remain in a unit.

She also said prospective tenants "are in a position to ask for things."

Things like appliance upgrades, new carpeting and in some areas where rentals are moving particularly slowly, such as 'Ewa, she has offered tenants a half-month free.

"Tenants are able to be choosy," she said, "and find a property that really suits them."

Matthews estimates the average rents for the homes in the areas she manages, largely in Central O'ahu, have declined 5 percent from a year ago.

And she expects the renter's market to stick around for a while. "I would anticipate things to stay the same for at least the next year," she said, "until the economy rights itself."

Scott Kimball, director of business development for Hawaii Information Service, which compiles real estate data, also anticipates rents will start going back up once the economy improves. "Once people's incomes are rising," he said, "that's when we're going to start to see the turn."

Meanwhile, advocates say the drop in rents shouldn't lure lawmakers into believing the affordable housing crisis is improving much.

NO TRICKLE DOWN

At a recent briefing at the state Legislature, advocates and state Comptroller Russ Saito, the governor's special adviser on homelessness, said the lack of affordable rental housing remains a significant concern for low- and moderate-income families (and continues to force some onto the streets).

"There's a real big need for affordable units," Saito said.

Advocates also say it doesn't appear the drop in rents is extending in any big way to the lower end of the housing market.

"Of course, we're hoping it will trickle down," said Doran Porter, executive director of the Affordable Housing and Homeless Alliance. "But I'm not sure it will."