Apartment landlords see strong year ahead
Houston apartment landlords are bullish going into the new year amid an improving job market, lower supply pipeline and a post-Harvey environment in which many Houstonians flooded out of their homes are likely to remain renters.
“The numbers of people moving back to homes is going to be much less than anticipated,” multifamily analyst Bruce McClenny said Wednesday morning at an annual meeting of the Houston Apartment Association.
McClenny estimates that 19,000 units were leased as a result of the devastating August hurricane. Several thousand could stay in apartments.
A healthier job market in 2018 will bolster demand for rentals.
When the price of oil was $52
a barrel, Patrick Jankowski, senior vice president of research for the Greater Houston Partnership, forecast 45,500 jobs would be created this year. It closed Wednesday at $65.61.
“If oil prices stay above $60 for two quarters, my forecast will be low,” he said at the Galleria-area industry event.
Camden Property Trust recently started construction on an apartment tower downtown after it had been delayed during the energy downturn.
The company’s CEO said Wednesday that changes in the federal tax code will benefit renters.
“When you double the standard deduction and limit mortgage deduction ... you have shifted the incentives for owning a home versus renting,” Ric Campo said. “Doubling that creates more income for our residents.”
Local apartment rents could grow as much as 2 percent this year, said McClenny, president of ApartmentData.com.
Despite low oil prices and an oversupply of rental units the last few years, the market fared reasonably well, Cyrus Bahrami of Alliance Residential said.
“We didn’t have a lot of foreclosures. We structured our deals better, with less leverage,” Bahrami said, referring to the industry as a whole.
The market hit bottom in 2016 and began to turn around last year.
The hurricane damaged some 15,662 units and by year’s end landlords saw an annual average of $42 in rent growth as thousands of flooded homeowners leased apartments, McClenny said.
“We saw the concessions go away,” landlord John Boriack said.
Yet the market faces ongoing challenges.
Funding for new development remains constrained, construction labor is tight, and insurance premiums are skyrocketing.
Landlords at the event cited increases as high as 30 percent on insurance renewals for 2018.
“Our master policy renewed a month after Harvey, and we snuck in with a 10 percent increase,” Boriack said. “Our insurance guy was like, ‘Take this and run ... 20 or 30 percent is coming.’”