BOISE – For the past couple years, Boise’s rental market has been on fire, with units hitting and leaving the market quickly, huge rent jumps, and increases in homelessness and evictions.
Boise rents have gone down but are still much higher than five years ago, likely burdening many renters who make below $27 an hour. This includes many professionals who, for example, work at banks, as teachers, in construction or as cooks.
In fact, the average hourly wage in the Boise metro area is only $23.77, according to a Boise City Area Economic Summary by the United States Bureau of Labor Statistics.
“The pandemic served as a really clear example of what happens when supply and demand go off the rails,” said Rob Warnock, Senior Research Associate at Apartment List. “In terms of undoing, rolling back the affordability crisis that has developed over the last two years, that’s very unlikely.”
At the same time, some Treasure Valley sellers who can’t sell their single-family homes are instead renting them out — which provides more rental opportunities but can limit the number of potential homes for prospective buyers to purchase.
And the increasing inventory on the sales market is providing opportunities for investors to buy rental properties.
Many in the Treasure Valley have focused on the home sales side of the market as interest rates have risen. But apartments and single-family rentals are important aspects of the market. As Warnock put it, apartments are the housing available to the broadest set of households — from the wealthiest to the poorest.
Rental homes offer flexibility in a post-COVID-19 world that is increasingly dynamic, according to Cassandra Swanson, chapter president of the Southwest Idaho Chapter of the National Association of Residential Property Managers.
“You’re never going to leave a rental and have to leave and lose money on it like you could in the real estate market. And you’re never going to have it sit inventory-wise for several months,” she said.
But on some level the rental market is at the mercy of the homebuying market.
At the mercy of the market
Most people rent until they can buy. When home prices are high, more people rent for longer. But there’s an unintended consequence of this.
“As prices go up in the for-sale market, if you think about who continues to rent, it’s … the people who are just not quite wealthy enough to afford a home,” Warnock said. “Not only does a lack of affordability in the for-sale market keep more people renting, it also, I think, keeps wealthier people renting.”
A previous city of Boise analysis showed that the local housing market is over-rotating toward higher-income households.
Right now, Boise’s for-sale market is correcting itself after also being on fire for the past few years. Inventory is up but rising interest rates have removed people from the buyer pool.
For example, if someone was approved for up to $400,000 by a lender back in the winter, their buying power may have dropped into the $300,000s, the Idaho Press previously reported.
Higher supply and decreased demand means houses are currently sitting on the market for longer than before. In Boise’s overheated market, lots of sellers and agents got into the mindset that if a house doesn’t sell immediately it’s overpriced, as previously reported.
In July, rental demand spiked, said Clifford Callen, team member of Nest Idaho Property Management, because buyers realized they couldn’t buy at that time and decided to ride the wave out.
But then the opposite happened: The slowdown in real estate has prompted some sellers to offer up houses as rentals instead, Callen said.
“A lot of sellers that are on the markets have been trying to sell and either have decided that they won’t sell because prices have come down or they just have to cancel because you have equity traps, are now putting their homes into the rental market,” Callen said.
Now there’s more inventory available for renters, but there are still high demand problems, Callen said.
“It’s still unaffordable for majority but there is more to choose from now, so we’re dropping prices a little bit here and there,” Callen said. “I think everything got inflated and I think we need to have a correction. That’s just my personal opinion.”
Rents are going to be a lot stickier than home prices, Callen said, because people need to live somewhere. So until home prices come down there will be a high demand for rentals, he said. However, the increase in inventory is mitigating that somewhat.
Callen expects to see some downward pressure on rents the next two quarters. However, he said so far that downward pressure is most prevalent in the upper end of the market – homes renting for $2,200 and above.
“It may make its way into multifamily,” Callen said. “It’s just coming down from the top end.”
The bottom end
The oft-mentioned rule when it comes to housing prices is to not spend more than 30% of your income on housing, like rent or a mortgage.
Apartment List estimated the overall monthly median rent in Boise for August 2017 was $891, according to its data. That’s $10,692 a year. That means someone with that rent needed to make at least $35,640 a year, or about $17 an hour for a 40-hour work week.
But then prices jumped.
By the time August 2022 rolled around, Apartment List estimated the overall median rent in Boise was $1,418, or $17,016 per year, meaning someone with the average August rent should make at least $56,720 or around $27.25 an hour for a 40-hour work week.
On the Boise School District’s salary schedule, a teacher, counselor or nurse with a bachelor’s degree could make up to $45,893.
Other professions making, on average, less than $27 an hour include event planners, credit counselors, chemical technicians and rehabilitation counselors, as well as interpreters, exercise physiologists, paramedics, correctional officers and legal secretaries.
The Boise metro area rental market first started tightening in 2010 and 2011, the Idaho Press previously reported. That’s in part because labor market conditions led to a decrease in homeownership, as previously reported. Those who weren’t buying homes were renting.
In 2015, several factors in the Boise area drove demand for rentals: After the recession, credit was an issue and gun-shy lenders presented a challenge for those who wanted to buy. Wage growth was also slow and there was a low supply of rentals in the area.
Canyon County’s vacancy rate at the time was below 4%, far beneath the healthy rate of around 7% to 8%.
These numbers may seem abstract, but, in practice, it means people cannot grow or move and have extremely limited choices or time to make the decision about where to live. Low vacancies also cause less competition, which in turn spurs landlords to raise rents.
Boise featured the United States’ highest rent increases in 2020. And in an analysis presented to the Boise City Council last year, 67% of renters and 36% of homeowners can’t afford the housing the local market is producing.
Now, it’s even worse in both Canyon and Ada counties, with vacancies sitting near 1% to 2%, according to the Southwest Idaho chapter of the National Association of Residential Property Managers.
“I am a renter … it is a high-occupancy rental market out there,” resident Pam Roemer told the Legislature earlier this year during a hearing. “It is not easy to find a place that is either as cheap or as inexpensive or less than the increase.”
A good, healthy thing
Over the past few years, there just haven’t been enough rentals, Swanson said.
“We were starting to see a lot of locals be priced out of the market as the rents increased,” Swanson said.
But things are looking up. People looking for a rental home will have their pick instead of applying and moving. In the past, some tenants moved in and applied after just one showing.
“They just took it whether or not it was a good fit for them because they needed a house,” Swanson said.
Now, people are able to pick the home they like the best and is most convenient, she said.
“The price drop isn’t so much that it’s hurting owners,” Swanson said. “We’re still a desirable market to buy rental homes in, which is really important because without that our supply will drop. But this is sort of a stabilization over what we’ve seen over the last two years.”
Plus, in the overheated market, anyone with lower credit or a brand-new job without an established work history was at a disadvantage. More inventory levels that out, Swanson said, and is a “good, healthy thing for the market.”
Rental home prices are a bit more stabilized, Swanson said. She imagines that next quarter, the vacancy rate would be closer to 3%. By next summer, she said she believes monthly rent increases will be back to a normal growth of $25-$50 instead of hundreds of dollars.
And Idahoans will get to experience the benefits of all this growth, said Swanson, who is fourth-generation Idahoan.
“I think the growth hasn’t been negative. I think this last year we weren’t as prepared for it as a community as we would have wanted to be,” Swanson said. “But I think we’ve made it through the big boom and things are leveling out and will be enjoyable again for the community.”
