YOUR BUSINESS AUTHORITY
In an online listening session hosted Jan. 14 by advocacy group Springfield Tenants Unite, some of the city’s renters shared their experiences in a climate of rising rent prices and shrinking available housing.
Wait lists go deep at many of the city’s rental properties, and as a result, some renters say they feel vulnerable.
“Everyone needs good, decent housing to stay healthy,” STUN organizer Victoria Altic said. “We know that it’s almost impossible to create a life where we can sustain ourselves … when we are constantly near or actually experiencing some kind of housing crisis.”
Session participants brainstormed a vision of how housing can look in Springfield. They proposed landlord registration that would provide names and contact information. Rental caps, low-barrier housing and stronger anti-retaliation laws also made the list.
There was also a list of potential results if renters do nothing. Participants envisioned homelessness rising and rents continuing to increase. Mass gentrification and displacement, a continued focus by developers on creating only upscale housing and deterioration of existing housing stock, were also foreseen.
STUN will be examining candidates for Springfield City Council to back those who are pro-tenant.
Rent by the numbers
According to the latest U.S. Census Bureau figures, 43.3% of Greene County residents are renters, the highest rate among 15 surrounding counties. Median gross rent 2017-21 was $799 per month. Six counties had higher median incomes than Greene’s level of $50,682.
The U.S. Census Bureau’s annual American Community Survey of 2022 shows Springfield’s 57.1% rental rate is higher than the county’s rate.
The U.S. Department of Housing and Urban Development publishes fair market rents for local housing markets, and these are the bases for vouchers HUD provides to qualifying tenants. The rate for the Springfield area, which HUD counts as Greene, Christian and Webster counties, rose precipitously from fiscal 2022 to 2023.
Fair market rents rose 10%-11%, with the monthly cost of an efficiency apartment now $676; one-bedroom, $681; two-bedroom, $871; three-bedroom, $1,225; and four-bedroom, $1,383.
The rise in rental housing prices outpaced the U.S. inflation rate of 6.5% for the 12 months ending December 2022. In the previous fiscal year, rent hikes were more moderate, with increases of 2%-4%, according to HUD.
According to Springfield Business Journal reporting from summer 2022 on data provided by the city, there are 41,050 total rental units in the city. Of these, 5,980 are affordable housing units available to renters living at or below 50% of the area mean income level.
On the tenant side, there are 14,215 households at or below 50% of the AMI, leaving a gap of 8,235 units that are absent from the market. The city applied for and received Home-American Rescue Plan Act funds to fill the gap.
Bob Jones, grants administrator for the city, said he thought the gap could actually be as high as 14,000.
Some rental housing providers who are also developers offered insight into rising rent prices.
Brent Brown, managing partner for Greenway Development Group LLC and CEO of Entrust Property Solutions LLC, said construction costs and continued rising interest rates have driven up development expenses, and rent increases have not kept up. He’s recently developed the Villas at Anthony Park and Boomer Town studios on National Avenue by the Missouri State University campus.
“Like any other business, we have to drive enough revenue to offset the cost of doing business,” he said. “Our revenue sources are rents and fees. … Those increases at the moment are not keeping up with the costs associated with building and operating these buildings.”
While there is plenty of demand for housing, locally and in other markets, Brown said demand is not the issue driving up prices. He declined to provide rental rates for his properties.
“People who aren’t in this business see all this action, and they think, well, it doesn’t seem like anything is slowing down,” he said. “Keep in mind, the projects you see started 18-24 months ago.”
Development is a lengthy process, Brown said.
“When you think about the interest rates, we were seeing rates sub-4% for these projects in March, less than a year ago,” he said.
Debra Shantz Hart owns Housing Plus LLC and Sustainable Housing Solutions LLC. She develops affordable housing in the city through HUD’s Low-Income Housing Tax Credit program.
Hart said she submits a project budget and sets rental rates two years in advance. The state encouraged developers to leverage funds by using private third-party financing, which did not have a fixed rate.
“The problem is, nobody really expected that the Fed was going to continue increasing interest rates,” she said. “We went from an effective rate of 0% to 4%. Banks wouldn’t hold their rates, and that added to costs for projects.”
The cost of the debt is the cost of the debt, Shantz said. If a developer didn’t foresee a dramatic interest rate change, the only way to pay the difference is to raise rent.
“There’s pressure to change what rent you have to charge to make project cash flow,” she said.
Hart said she has a waiting list for all of her properties, declining to provide rental rates.
“If we don’t have a waiting list, we’re not doing the program right,” she said. “We should be very attractive, very affordable.”
Like Brown, she doesn’t see supply and demand as the driver of increased rent prices.
“The whole economy is kind of a delicate balance,” she said. “When you start twisting the dial, it trickles down and gets felt at all the levels. Somebody at the end of the day has to pay for it.”
Renter pain points
Andrea Palamar lives in an apartment complex that was recently sold by one large rental agency to another. She hails from New Jersey, where she said she lived in rent-controlled apartments her whole life.
When Palamar’s new agency came in two years ago, she said it increased rent by $125 to $525 per month. Now she is facing an option of committing for the coming year at $565 per month – 29% higher than she was paying the previous property owner – or staying month-to-month for $615, which is a 35% increase.
“I cannot believe the whole state of Missouri doesn’t have rent control,” she said. “That is flabbergasting to me.”
Missouri is one of 26 states that prohibit rent control by state or local governments, according to the National Multifamily Housing Council.
Contrary to Palamar’s experiences with another property company, Brown said he is not seeing huge increases in rental rates locally.
“I’m not seeing anyone take increases that go beyond inflation,” he said. “That’s not realistic for our residents.”
He said he works with vendors and subcontractors to try to anticipate costs and build increases into his budget.
“The relationships that we share are super helpful in managing increased costs and what’s happening with some of those factors that we can’t control,” he said. “We try to keep each other in the know.”
Brown came to property and development and management from the grocery industry.
“We had to do business the right way or customers wouldn’t come back,” he said. “Did that mean they could dictate price? No, because we can’t dictate our costs. Market rate is a business like any other.”
He questioned the myth of landlords putting rent payments directly into their own pockets.
“Like any other business, we have expenses to pay,” he said. “If we take care of residents, take care of people, do business the right way, they keep coming back. That’s Business 101.”
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