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2002 Apartment Vacancy Survey

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2002 Apartment Vacancy Survey Powered By Docstoc
					2002 Apartment Vacancy Survey City of Janesville

Prepared by: City of Janesville Planning Department September 2002

I. INTRODUCTION In spring of 2002, the City of Janesville and the U.S. Postal Service jointly conducted the Apartment Vacancy Survey for the fourteenth straight year. The survey included all rental buildings in the City containing three units or more. In total, 4,638 units were surveyed, which represents 56 percent of the estimated 8,300 rental units in Janesville. The other 3,662 rental units are in one and two-family residences or single room occupancy buildings. It is not practical, however, to attempt to survey those units. II. CITY-WIDE STATISTICS Development of Market Rate Units Table 1 describes the growth in the number of market rate rental units in buildings with 3+ units from 1993 to 2002. During this period, 1,019 units were added to the City’s inventory, a 33 percent increase. Over this ten-year time span, an average of 102 market rate units were added each year. Between 2001 and 2002, however, only 36 new rental units were constructed and placed on the market.
TABLE 1 GROW IN MARKET RATE UNITS TH 1993 - 1999, 2001-2002*
GROW '93 - '02 TH # UNITS PERCENT 24 -42 85 88 6 112 88 475 63 64 44 1,007 15.3% -14.7% 15.6% 75.9% 3.6% 23.3% 195.6% 77.6% 52.9% 17.0% 29.7% 33.0%

AREA(1) 1 2 3 4 5 6 7 8A 8B 9 10 TOTAL UNITS VACANCY RATE

1993 157 286 546 116 166 480 45 612 119 377 148 3,052 6.5%

1994 157 286 540 116 164 510 45 649 157 385 164 3,173 5.1%

1995 157 286 538 132 164 507 49 725 173 409 160 3,300 6.3%

1996 157 286 615 196 161 514 44 821 173 425 160 3,552 9.8%

1997 152 277 615 204 163 497 88 867 173 453 176 3,665 12.9%

1998 152 275 613 204 161 525 133 952 182 443 192 3,832 13.4%

1999(2) 152 259 606 204 161 547 133 975 182 441 192 3,852 12.9%

2001 172 255 614 204 161 595 133 1091 182 441 192 4,040 12.3%

2002 181 244 631 204 172 592 133 1087 182 441 192 4,059 12.5%

*Apartment Vacancy Survey was not conducted in 2000. (1) See attached map for area locations.

Vacancy Rates: Total, Market Rate and Subsidized Units

Vacant rental units are necessary to keep rents affordable and allow people a choice of where to live. A vacancy rate of at least 5 percent is required for the effective working of the market place, with 5 to 7 percent generally considered to be normal. Therefore, a higher vacancy rate would suggest that the market is over built. In contrast, a vacancy rate significantly below 5 percent would tend to increase rents because the demand for rental units would exceed their supply. As part of the 2002 Survey, vacancy rates have been calculated for all units, market rate units, and subsidized units. Of the 4,638 units in the 3+ unit buildings surveyed, 4,071 (88%) are market rate units while 567 (12%) are subsidized. Subsidized (Section 8) housing receives funding directly from HUD for building construction and rental assistance; it does not include those units constructed under the low income housing tax credit program. City-wide vacancy rates for 2002 are described below and shown in Figure 1: • All Units: 11.4 percent. This rate, which includes both market rate and subsidized units, increased marginally by 0.2 percent from the 2001 rate of 11.2 percent. The 2001-vacancy rate of 11.4 is 3 percent above the 12-year vacancy rate average of 8 percent. Market Rate Units: 12.5 percent. For the fifth straight year, the vacancy rate for these units has remained at the 12 to 13 percent vacancy level, suggesting that the large number of units added to the City’s inventory over the past five to seven years is still exceeding the current market demand. A vacancy rate of 12.5 percent is double the rate (range) considered acceptable for the effective functioning of the market. Subsidized Units: 3.9 percent. Since the demand for subsidized units has typically outweighed the supply, vacancy rates for these units have consistently remained low. The vacancy rate of 3.9 percent observed in this year’s survey reflects the relative stability of this housing sector.

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FIGURE 1 APARTMENT VACANCY RATES 1990 - 2002

Vacancy Rate

15% 10% 5% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001

1 2.5%

1 .5% 1

3.9%

2002

Year
Market Rate Units Subsidized Units All Units

Vacancy Rates Building Size Figure 2 shows vacancy rates for market rate units by building size from 1993 to 2002. Buildings are broken down into four size classes: 3-4 units, 5-8 units, 9-16 units, and 17+ units. In 2002, vacancy rates decreased for buildings containing 3-4 units, while vacancy rates in the other size classes remained relatively stable. Historically, vacancy rates have been higher for 3-4 unit and 9-16 unit buildings. Units in smaller buildings are often less desirable because they are older and have fewer amenities than newer units in larger buildings. A majority of the units in this building size are located within the inner city where higher rates have occurred over the last three years. Buildings with 9-16 units are heavily concentrated on the far northeast side of the City in Area 8A. This area alone contains more than one-half, or 360 of the total 684 units in this building size, and experienced a 16 percent vacancy rate. Many of these buildings were constructed in the early 1970's and may be losing their appeal compared to newer buildings in the surrounding area. The overall vacancy rate for buildings with 9-16 units was 10 percent which is a considerable drop from the 19.3 percent spike observed in 1998. The vacancy rate for 5-8 unit buildings essentially remained unchanged at 13 percent in 2002, but still represented the second highest overall rate. Since 1994, a notable increase of 8-unit buildings has been added to Janesville’s inventory -- 45 new buildings totaling 360 units. In 2002, buildings with 17+ units experienced a vacancy rate of 11 percent which represents a consistent trend over the past 6 years. In years prior to 1996, vacancy rates for this building size hovered around 4 to 6 percent.
FIGURE 2 VACANCY RATE BUILDING SIZE MARKET RATE UNITS 1993-1999, 2001-2002
21% 18% 16%

Vacancy Rate

15.4% (3-4 units) 13.1% (5-8 units) 11.5% (17+ units) 10% (9-16 units)

14% 11% 9% 7% 5% 2% 0%
1993 1994 1995 1996 1997 1998 1999 2001

2002

Year
3-4 unit buildings 9-16 unit buildings 5-8 unit buildings 17+ unit buildings

III.

SATISTICS BY STUDY AREA

Janesville has been divided into eleven study areas to analyze growth in the number of apartment units and vacancy rates in different parts of the City (see Figure 3). Table 1 breaks down apartment development activity by study area. Recent growth in market rate rental housing has predominately occurred on Janesville’s far northeast and east sides, accounting for over 60 percent of all apartment development activity. More than 600 units have been added to Areas 8A, 8B, 9 and 10 between 1993 and 2002. Vacancy Rates by Study Area Vacancy rates by study area are displayed in Table 2 and Figure 3. The 2002 vacancy rates varied dramatically by study area and, in general, were typical of rates encountered in 2001. Vacancy rates were at or lower than the City-wide market rate average of 12.5 percent in six of the eleven study areas. Area 7 experienced the lowest vacancy rate at 3 percent, while Area 3 generated the highest rate at 17.3 percent. Area 8A had the greatest net increase in units added (475) to a sub-area since 1993. Vacancy rates for other areas of the City, with the exception of Areas 1, 3 and 4 were generally reflective of those observed in 2001.
TABLE 2 VACANCY RATES BY AREA OF CITY MARKET RATE UNITS, 1993-1999, 2001-2002

AREA 1 2 3 4 5 6 7 8A 8B 9 10 ALL AREAS

1993 6.4% 1.4% 10.4% 2.6% 6.0% 6.9% 2.2% 7.2% 0.8% 8.2% 2.7% 6.5%

1994 3.2% 3.2% 5.7% 5.2% 6.7% 5.7% 4.4% 5.2% 8.9% 4.4% 2.4% 5.1%

1995 11.5% 1.4% 9.9% 2.3% 3.1% 4.5% 6.1% 9.5% 8.7% 2.4% 2.5% 6.3%

1996 8.9% 5.2% 12.4% 18.9% 7.5% 8.2% 13.6% 12.2% 5.2% 7.5% 2.5% 9.8%

1997 7.9% 15.5% 16.8% 11.3% 9.2% 12.7% 11.4% 12.6% 8.1% 13.9% 9.7% 12.9%

1998 27.6% 15.6% 15.8% 12.7% 6.8% 11.6% 5.2% 15.5% 4.9% 11.9% 7.2% 13.3%

1999 20.4% 23.9% 19.1% 11.3% 8.7% 13.0% 4.5% 12.1% 6.0% 5.7% 9.4% 12.9%

2001 20.3% 17.0% 20.5% 4.4% 7.5% 14.0% 3.8% 10.7% 6.6% 8.6% 7.3% 12.3%

2002 13.3% 16.0% 17.3% 12.8% 12.0% 14.7% 3.0% 11.7% 3.9% 10.0% 10.4% 12.5%

Vacancy rates are notably higher than the City-wide average in study areas 1, 2, and 3. In addition, vacancy rates in certain areas and other concentrated ”pockets” within City have changed significantly over the past year, as described below: • Area 1: This south side study area contains several 8-unit apartment buildings along Kellogg Avenue that have a combined vacancy rate of over 14 percent. Between 1998 and 2001, rates exceeded 20 percent in this area. During that time, a number of those buildings were being refurbished and not available for occupancy. The significant drop in the vacancy rate from 20.3 percent in 2001 to 13.3 percent this year suggests that the recent improvements to these buildings have made them more competitive and appealing to renters.

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Area 2: This area is also on the south side. Area 2 includes a large senior housing development containing several living units that are being upgraded. Other market rate rental units in Area 2 are also experiencing higher rates which are likely the result of those same circumstances affecting units in Area 1 to the east (i.e. older 8-unit buildings, less amenities). Area 3: A large portion of Area 3 contains the Old Fourth Ward neighborhood - a central city area bordered by Center Avenue on the west, Court Street on the north, and the Rock River on the east and south (see Figure 4). The 2002 vacancy rate for units within the Fourth Ward area was 21 percent. During the 1990s, the average vacancy rate for this neighborhood has been around 12 percent. Area 4: Vacancy rates within this west side area jumped from 4.4% in 2001 to 12.8% in 2002. The increase is primarily the result of higher vacancy rates observed in a couple of larger apartment buildings within this area. All Other Areas: The change in vacancy rates among the other sub-areas within the City fluctuated only marginally over the past year, generally ranging from 1 to 3 percentage points. This level of variation can be attributed to normal market conditions in the rental housing market that occur on an annual basis. CONCLUSIONS

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IV.

The following conclusions can be drawn from the 2002 Apartment Vacancy Survey: • The 2002 City-wide vacancy rate of 12.5 percent for market rate units represents a 0.2 percent increase from the 2001 vacancy rate of 12.3 percent, and is the fifth straight year vacancy rates have exceeded 12 percent. A vacancy rate of this magnitude is above what is considered appropriate for the effective functioning of the market. Since 1993, the City’s apartment stock has increased by 30 percent (1,007 units). Although market rate construction was limited to 36 units over the past year, it appears that the demand for market rate housing has essentially remained the same in recent years. Because more rental units are available than there is demand for, vacancy rates have remained high. Market rate units in the small to mid-range building sizes experienced the highest vacancy rate percentages in 2002: 3-4 unit buildings (15.4%) and 5-8 unit buildings (13.1%). Several older apartment buildings within the City’s rental unit inventory fall within these size ranges. Factors that may be affecting the increase in the vacancy rate for buildings of this size include: competitive rents for newer apartments with more amenities, undesirable condition of older structures, locational preferences for east side apartments, and renovation of some existing units. If City-wide vacancy rates remain at the existing level, gross monthly rents may drop in the City. While this would have a positive effect on renters within the community, it would adversely impact rental housing property owners/managers. The 2001 vacancy rate for new rental units placed on the market since 1998 (consisting of 272 units) was 9.9 percent. This suggests that the supply of newer rental units is also currently exceeding market demand.

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