Harvard study: Renters in Tampa Bay area 'severely burdened' by payments

Rents are going up faster than incomes, and affordable options are limited in the Tampa Bay area, a new study shows.
Published December 9 2015
Updated December 10 2015

More than a fourth of all Tampa Bay renters are "severely burdened'' by rent payments that consume at least half of their income and leave little money for health care and other necessities.

That's among the startling findings of a report on America's rental crisis released Wednesday by the Harvard Joint Center for Housing Studies. It shows that a record number of renters in the bay area and nationwide face serious affordability problems at a time when rents are growing faster than incomes and the supply of moderately priced rental housing fails to meet the surging demand.

"In 2015, rental housing in America is a tale of two markets,'' said Chris Herbert, the center's managing director. "Upper-income renters are finding a healthier supply of housing choices and landlords and private investors are benefiting from higher rent. But too many families earning less than $50,000 per year are having to make trade-offs between putting a roof over their heads and food on the table.''

That's especially true in Tampa Bay, where thousands of luxury rental units are under construction while lower-income families struggle to find places they can afford.

Among bay area renters making between $15,000 and $30,000 a year, 42 percent pay more than half of their income in rent — higher than the national rate, the Harvard study found. Among those earning between $30,000 and $45,000, nearly 8 percent fall into that "severely over-burdened'' category.

Such is the demand for rental housing that even older complexes are getting gussied up so they can command higher rents.

In October, the 43-year-old Palmway apartments near St. Petersburg's Gateway shopping center were sold for $14.6 million and renamed the Vibe Apartment Homes. Plans call for new countertops, flooring and other upgrades in the 432 units and common areas.

Rents that had been in the $600 range for a one-bedroom, one-bath unit are now running from $749 to $800.

"It's an ever changing market,'' says T. J. Jenkins, regional property manager for Finlay Management Inc. of Ponte Vedra Beach, which manages the property.

According to the Harvard study, the number of U.S. families in rental housing has soared by 9 million since 2005 to a current total of 43 million — the largest gain in any 10-year period.

Meanwhile, the share of all households that rent now stands at 37 percent, the highest level since the mid 1960s. Primary reasons for the increase are the Great Recession, which cost many Americans their homes, and the huge number of millennials, those in the 18 to 34 age group that traditionally rents.

Nationwide, the supply of rental housing has actually increased because of new construction and the conversion of previously owner-occupied homes. But the demand for rentals is so great that the vacancy rate is at the lowest level in 30 years.

With so many people wanting or needing to rent, landlords have been able to raise rents a median of 7 percent since 2001. During the same period, the median income of renters has dropped 9 percent.

"The consequences are far-reaching,'' the study says. "In 2014, lower-income households who paid more than half of their incomes on rent spent 38 percent less on food, 55 percent less on health care and 45 percent less on retirement savings than those living in affordable housing.''

The growing rental affordability crisis has serious ramifications for the entire economy.

People who spend so much of their income on rent don't have as much money to buy a car, take a trip, dine out or even buy new clothes. On a sobering note for the real estate recovery, even renters who earn a decent income may find it nearly impossible to save enough for the down payment on a home.

"The rental market is so competitive that people renting have to step up and pay a higher price for rent so it could affect their ability to pay for a house,'' said Bonnie Davis, senior vice president of Re/Max Metro in St. Petersburg. "First-time homebuyers are not quite in the market as much as people would have expected, so do I think that's had an effect? Yes.''

At 26, Christian DiVita can't afford to move to another apartment complex, let alone think about buying a house.

DiVita pays $650 for a studio apartment at Urban Style Flats, built in the 1970s as housing for the elderly and disabled on the fringe of downtown St. Petersburg. Many of the tenants in the 480-unit complex work in downtown restaurants or attend the University of South Florida St. Petersburg.

"If you have a dog and you're a millennial, realistically this is where you end up,'' says DiVita, a web content writer who's studying computer programming. He and his partner looked into moving to the new, upscale Fusion 1560 a few blocks away but the rents there were "extraordinarily different,'' he says — $200 or $300 more for a similar-size studio.

While DiVita likes Urban Style — he got a break on his rent when he developed lymphoma and couldn't work as much — he says "people do feel stuck here'' because rents elsewhere are so high.

Nor is there a whole lot of relief in sight.

For renters with lower incomes, ''assistance programs have been unable to fill the gap,'' the Harvard study says. Households that qualify for rent subsidies outstrip the availability by a 4 to 1 ratio.

The federal Low-Income Housing Tax Credit program gives big tax breaks to developers that build affordable rentals "but by itself cannot address all the need,'' the study says.

Without such incentives, developers prefer to go with luxury apartments, which in the Tampa Bay area command monthly rents averaging $2,450 for a 1,400-square foot unit.

Of the 3,764 rental units currently under construction locally, just 203 are classified as "affordable'' and all of those are in the city of Tampa.

"It makes a lot more sense for a developer to build high-end versus affordable housing,'' said Darron Kattan, managing director of Tampa's Franklin Street brokerage. "The amount of extra money you spend to make a property high end versus kind of a vanilla deal is dwarfed by the amount of extra rent you get.''

And with the local economy humming along nicely, there's no reason to think developers won't build even more luxury rental housing.

"Interest rates are still very low and banks are still loaning money,'' Kattan said. "Developers always want to develop and if a lender will give them money, they'll break ground.''

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate