Rentals are now all the rage

Remember the apartments of yore? Well, now they are typically called multi-family residences, and these days they come in all shapes and sizes. While developers are still building large structures with 50 or 100 or more units, more common are the groupings of fourplexes. Then there are the eightplexes, other plexes, townhomes, lofts and condos.

Outside of major cities, multifamily housing used to be seen as the lot of people who couldn’t afford to buy a house with a yard. But since the financial meltdown of a decade ago, apartments have become a lifestyle choice for those who would rather spend time exploring the neighborhood than mowing a lawn.

“Townhomes is my comfort zone,” said Hannah Ball, owner of Urban Land Development, a Boise developer with a focus on Garden City. “I think townhomes appeal to a wide range of audiences from investors to purchase or owners to occupy.”

Ball has bought a number of lots adding up to about 10 acres in Garden City since May 2017, mainly on 34th Street and up to 41st Street – “I call it almost every other lot.” She intends to do mixed-use development that could include townhomes, single-family homes, cottages and commercial structures.

As a 33-year-old, Ball is part of the generation that doesn’t necessarily or can’t necessarily subscribe to the former century’s American Dream of single-family home with the white picket fence. Also, some in the older generations have also changed their sensibilities.

“I would say maintenance,” she said. “People are tired of having a big lawn. They want a maintenance-free walk to dinner.”

Apartment living appeals to baby boomer and to millennials, both groups that are seeking a low-maintenancer place to live in a high-density cultural destination, said Bryant Forrester, a broker with Urban Concepts / Keller Williams Realty Boise who is working on several Boise-area apartment projects.

“We’re social creatures, so our natural tendency is to hang with our tribe in close proximity,” Forrester said. For millennials and baby boomers, Forrester said,  the cultural amenities around the housing are far more important than the size of the house or apartment.

The result: apartment living is suddenly popular. Gone are the days when apartments were seen as an inexpensive, temporary alternative to permanent housing. New multi-family housing typically comes with high-end amenities such as granite counter tops, chrome appliances, often wood floors, and sometimes high ceilings. That means the lower earners are often priced out of the new apartments that are under construction now in Idaho and nationally.

“Since the 2007 housing crash, consumers’ housing preferences have changed and they have shifted to apartments,” said Paul Smith, executive director of the Idaho Apartment Association. “Three primary reasons are the flexibility renting affords and the lack of maintenance work and amenities of the modern apartments and the realization by watching others go upside down in housing, that homeownership is risky and not always liquid.”

Booming apartment construction

Multi-family construction is soaring in the Treasure Valley.

Ada County escalated from building permits issued for two apartment units in 2010 to 553 in 2013 and 1,467 in 2017. Canyon County had zero apartment building permits issued in 2009 and 2010 with 208 issued in 2016 and 184 in 2017, according to Valbridge Property Advisors and Mountain States Appraisal.

“We constantly get phone calls for what Idaho is all about and what we have to offer,” said Trey Langford, founder of Build Idaho, a real estate data division of Group One Sotheby’s International Realty in Boise. “I think it’s common knowledge that the stability of the economy and feeling good about where you live makes Idaho very attractive.”

Langford cites Cedar City, Utah,-based Construction Monitor statistics showing thatfrom May 2017 to May 2018, 250 permits were issued for 3,726 units.

Rick Gehrke, a RE/MAX Executives agent in Eagle, notes that 37 percent of Treasure Valley households are rentals.

“With the inventory of homes at a critically low level, potential homeowners have no choice but to turn to rentals,” Gehrke said.  “All of this data has given investors confidence to invest in the new construction of multi-family units across the valley.”

But the booming construction isn’t necessarily keeping up with the flood of people moving to Idaho.

“Throughout the valley, fourplexes and apartments are being built everywhere we look,” Gehrke said. “They have a waiting list before they are completed.”

The fourplex has become the multi-family housing sweet spot, though some 100-plus unit apartments are still built.

“I think it is a construction financing vehicle,” Smith said. “A fourplex is still a residential loan and easier to get than commercial financing (five units and more). So what I see is the developer or a property management company builds 40 fourplexes rather than 160-unit garden style (usually three stories) and sells them to multiple investors.  It is easier to pull off than building 160 apartments.”

The construction industry welcomes the variety and volume of multi-family projects, said Wayne Hammon, executive director of the Idaho Associated General Contractors.

“Our multi-family housing construction is very diverse,” Hammon said. “There is high end, middle end and affordable. It’s not just all condos. Having a mix is important. You don’t want all your eggs in one basket. There is less overall risk if there is diversity.”

Apartment List gives Idaho an A+

Apartment List, a San Francisco online apartment rental marketplace, rates Idaho an A-plus in overall renter satisfaction, based on a recent renter survey.

Idaho was among only five states awarded an A-plus along with Alaska, Colorado, South Dakota and Minnesota.

Broken down in categories, renters in the survey assigned an A-plus for safety and crime rate, job and career opportunities, affordability and quality of schools. An A grade went to recreational activities, social life and state and local taxes. An A-minus was attached to weather and commute time, while pet friendliness got a C grade and public transit a D grade, according to Apartment List.

Idaho is popular with out-of-state multifamily real estate investors because of the favorable market, and because the state’s rental housing law is landlord-friendly, said Andy Propst, CEO of the HomeRiver group, an Idaho property management company with offices in 20 states.

Propst said his company sees far fewer rental delinquencies in Idaho rentals than in other states.

“It’ss a very low-risk market to invest in because the tenants always pay their rent, and it’s a very landlord-friendly state, meaning if they don’t pay it it’s pretty easy to get them out,” he said. “Also, salaries are low, but so is the rent price – the rent is cheap in Idaho compared to Portland, Salt Lake, or Denver.”