High Vacancy Rates Mean Sweet Deals for Renters : Apartments: A five-year construction explosion and the recession have kept units empty and rent increases low. Some owners offer move-in incentives.


The lingering recession and a glut of new apartments are keeping vacancy rates high and rent increases low in the San Fernando Valley.

Afraid of driving tenants away, many landlords are raising rents by as little as 2%, or not at all, city officials and industry observers say. Meanwhile, vacancy rates of 6% to 10% are prompting offers of such amenities as free vacations, televisions and microwave ovens to attract new tenants.

Although the picture for renters lately has been especially rosy in the Valley--at one point last year the vacancy rate hit 22% here, according to one industry estimate--it’s been favorable elsewhere as well.


The rest of Los Angeles County is also experiencing higher-than-normal vacancy rates. Officials say that in a healthy market, 5% of the rental units are vacant but that even on the housing-short Westside, the vacancy rate has been 6% to 8%.

“Vacancies are high everywhere, but seem to be more pronounced in the Valley as a result of an explosion of construction there,” said Barbara Zeidman, until recently director of the city’s Rent Stabilization Division.

Despite the conservative rental increases and the move-in offers, industry experts said, the market here won’t change for at least a year.

“I’m not a fortuneteller, but obviously it’ll get better if the economy gets better,” said Su Snyder, a supervisor with the Beaumont Co., which owns and manages a total of 500 rental units citywide, including several hundred in the Valley.

But it is the Valley that has been hit particularly hard by the combination of a weak economy and an apartment building construction boom during the past five years.

The rush of construction began in 1986, the last year for several federal tax rules favorable to developers. That year, the city issued building permits for more than 21,000 rental units citywide, according to the rent stabilization office.


Even without the tax advantages, developers pulled permits for more than 10,000 rental units each year until 1990, when the number dropped below 9,000.

The Valley has 202,000 of the city’s 715,000 apartment units, according to the rent stabilization office, a 16% increase from the 173,740 in the Valley in 1986.

Much of the new construction since 1986 has been in the East Valley. The number of apartments in the Pacoima-Sun Valley area, for example, grew by 32%, from 8,301 to 10,997, during that time. The North Hollywood and Van Nuys/North Sherman Oaks areas--already saturated with apartments--saw 15% increases during that time to about 33,000 rental units, up from about 28,000.

Officials said those figures will continue to increase because thousands of new units continue to come onto the market every year and more are being built. “We were overbuilt for a long time, and they are still building,” Snyder said.

Mary Ellen Hughes, executive director of the Apartment Assn. of San Fernando Valley/Ventura County, said the vacancy rate may have soared as high as 22% when many units were completed about a year ago. She said not only are people not moving into new apartments, they aren’t submitting applications.

“There is definitely a lack of movement,” said Hughes, whose group consists primarily of small apartment building owners.


That lack of movement has meant small rent increases, or none at all, for many tenants.

The city’s rent control law requires the rent stabilization office to set the maximum annual increases in rents for units built before 1978. This year that figure is 5%, the same as last year.

“We have been very selective for the last year about raising rents,” said Edward Hulac, president of Surety Property Management, which manages 400 units in the Valley. “We really don’t want our tenants to move.”

Renters least likely to have their rents raised are those who moved in during the past few years, because they are already paying market rates, according to landlords. Those most likely to have their rents raised are those who have lived in rent-controlled units for many years and who are paying below-market rates.

An annual survey of rents conducted by the Apartment Owners Assn. of Southern California, a trade group of both large and small apartment owners, indicates that Valley rents have remained generally stable over the last year.

The group’s survey of about 8,000 units in the Valley found that the average monthly rent for a one-bedroom apartment has increased less than 2% since July, 1990, or from $572 to $582, and about 3% for two-bedroom apartments, from $738 to $762.

In addition to keeping rent increases down, owners have continued offering move-in incentives that began a few years ago.


“We pay half your security deposit. No rent increase second year. Free basic cable first six months,” said one recent newspaper ad for a one-bedroom apartment in Canoga Park. “Free microwave or TV,” said an ad for one- and two-bedroom apartments in Van Nuys. An ad for a Burbank townhouse rental said: “Free complimentary air fare to Jamaica, Cancun, Hawaii or Florida.”

Another Burbank ad tried a more straightforward approach: “No move-in gimmicks, just low rent every month.”

“It’s the law of supply and demand,” Hughes said. “When we had fewer apartments, owners could get top dollar. But when you have a lot of people moving out, owners have to fill the apartments however they can to pay the mortgage.”

The weak economy--with its resulting layoffs, pay cuts and general penny-pinching by consumers--has meant a smaller pool of potential tenants, according to owners and managers.

Landlords say that many younger people who had been sharing apartments have moved out of their apartments and back into their parents’ homes.

“When the economy goes into a slide, a lot of people just go back to their parents,” Hulac said.


Landlords also report that many tenants who had been living alone in studio and one-bedroom apartments are moving out and finding roommates to share two-bedroom apartments to save money.

“People are doubling up because people are losing their jobs and money is tight,” said Charles Isham, executive vice president of the Apartment Assn. of Greater Los Angeles.

Despite the tough times, apartment officials are optimistic that the worst is behind them.

“Each month there are thousands of people moving to Los Angeles,” said Hughes, the apartment association director. “Over time, the rental units will be absorbed.”

Valley Rental Market

Apartment rents, bucking recent trends, have remained relatively stable over the last year.

1990 1991 Rise Single/bachelor $459 $474 3.2% One-bedroom $572 $582 1.7% Two-bedroom $738 $762 3.2% Three-bedroom $893 $957 7.1%

Source: Apartment Owners Assn. of Southern California