Mike Abernathy did not need a rent expert to tell him he had stumbled into a renters’ market when he moved to the San Fernando Valley.
The Oklahoma native, classified ads in hand, was in his third day of apartment hunting recently, checking out the various gimmicks used by landlords these days to lure tenants into vacant units.
The Valley’s apartment vacancy rate is running at 11.3%, a sizable jump from 7.4% in 1991, according to the Apartment Owners Assn. of Southern California. For Los Angeles County overall, the apartment vacancy rate is 12%, the highest since the association started its surveys four years ago.
So desperate landlords in the Valley are offering everything from free video rentals to a month’s free rent, no security deposits and cheaper rents to attract tenants.
On this day, Abernathy was checking out the Camino Apartments in Van Nuys. The price, $425 per month, was right for a bachelor apartment, plus the landlord was including free television, free utilities and tenants were not bound by a lease.
“I checked out a nicer place in Reseda that had free cable, gave you one month free rent and didn’t want a security deposit. I need to check out three other places before I decide where I want to live,” said Abernathy.
It only takes a quick scan of the rental ads in a newspaper to see that the Valley mirrors the rest of Los Angeles County’s apartment glut. The ads tell the story.
A Chatsworth complex is advertising a “free video library,” and one month’s free rent. A landlord in Newhall has advertised a “summer giveaway” that includes two months free rent in a “family oriented building.” Other complexes offer reduced rents, “zero deposit,” paid utilities and recently installed game rooms and gyms, as managers struggle to fill vacant units with renters.
Not surprisingly, the survey shows that rents have also dipped 2.7% throughout the county compared to 1991 levels. The average rent in Los Angeles County today is $631, compared to 1991 when the average rent was $649, said James J. Rodriguez, spokesman and vice president of the apartment owners association. (The association’s latest survey was done in April, and the group only does one sampling per year.)
However, landlords are commanding higher rents in the Valley, said Rodriguez. The average rent here is $645, he said.
Experts blame the recession for the high number of apartment vacancies, but they say there are other factors that have contributed to the exodus of renters.
“A lot of this is the result of overbuilding in the 1980s, when the Southern California economy was stronger. Back then, people were tearing down old buildings and replacing them with apartments. They had no trouble finding renters then. But the recession has changed all of that,” said Katherine Bergh, investment broker with Grubb & Ellis commercial real estate in Sherman Oaks.
Rodriguez and others blamed the loss of defense industry jobs in Southern California and its ripple effect on the local economy for the vacancies throughout the county.
“The defense downsizing has forced many people to leave the area. Many of these people lived in apartments. The (defense) cutbacks are a direct correlation between job loss and apartment vacancies,” said Rodriguez.
Apartment managers said the economic hard times have also forced more tenants, many of whom are unemployed or underemployed, to share apartments with roommates.
“Three or five years ago, when I could be more selective about who I rented to, I would never allow more than two people to live in my one-bedroom units. Today, I have to look the other way when I know there are four people living in the same unit. I can’t afford to have a steady stream of vacancies,” said a Canoga Park apartment manager who requested anonymity.
Nowadays, you take a chance with renters and sometimes are forced to take whomever comes along, said Matt Madison, manager of the Tara Hill apartments in Northridge.
“I don’t do it, but I’ve heard of managers who are signing up tenants without doing a credit check on them. But even if you’re as careful as you can possibly be, you’re still taking a chance,” said Madison.
Last week, Paula Putnam, assistant manager at Tara Hill, said that only 14 of the complex’s 152 units were empty. At the beginning of September, there were 39 vacant units, which amounted to a 26% vacancy rate, she said. Earlier this year, the complex had 65 vacant units, some of which had been empty for 18 months, she added.
“We’ve turned things around by sprucing up the place and lowering rents by $50,” said Putnam. “The economy is only half-responsible for the vacancies. Some of our tenants said they were moving out of the Valley because the crime problem has gotten so bad.”
Rents at Tara Hill range from $695 to $895 a month. About half of the tenants are students at Cal State Northridge and the others are families, Putnam said.
Apartment managers said that move-in specials are a successful way to attract tenants, but they also said that the renters’ market can produce cutthroat competition among landlords.
At the Villa Gardens apartments in Canyon Country, a $495 move-in special has whittled the vacancies down to two in the 45-unit complex. Monthly rents range from $595 to $725.
“The $495 includes a security deposit and first month’s rent, but you’ve got to have a good credit record to qualify. I know $495 is almost a giveaway, especially when you’re renting a $725 apartment. But you’ve got to do these things to stay competitive,” said manager Caryn Alpern.
But the weak economy has also been a boon to former apartment dwellers, who now find they can afford to be homeowners because of the decline in home prices and interest rates. In the Valley, single-family house prices have dropped 11% in the past year.
“That’s the silver lining in all this. The weak economy has also turned some renters into homeowners. If you were saving your money for a house and paying $1,000 a month in rent, you can now make a mortgage payment for the same amount of money. Nobody really knows how many apartments are now vacant because their tenants went on to purchase a home,” said Grubb & Ellis’ Bergh.
The apartment owners association study found that Santa Monica had the lowest vacancy rate in the county, at 4.9%, which Rodriguez attributed mostly to the city’s rent control laws. The Harbor City-San Pedro area’s vacancy rate of 17.3% was the highest in the county, according to the survey.