Brian Marciniak has been looking to downsize his living space. He has a business in Toronto and wants to swap his five-bedroom house for a two-bedroom apartment.
Marciniak found a beautiful apartment in downtown Toronto, but said he decided to try and save some money by looking for an apartment in Buffalo instead. He’s from the area and still has family and friends nearby.
What he found surprised him.
“Looking at the rents, they’re almost the same as in Toronto,” he said. “A two-bedroom in Toronto versus in the Elmwood Village area or downtown, some of them have great facilities and include utilities, but you’re still paying $1,200 or $1,400 for two bedrooms.”
Western New York’s rent prices have risen 6.95 percent over the last year – the largest increase of any rental market in New York State and New England, according to a report from Sunrise Management & Consulting, an Albany property management brokerage.
Over the last three years, rents have risen by a total of 14.1 percent, according to the survey, which included more than 19,400 apartments in Western New York. In contrast, the median sale price of homes in the Buffalo Niagara region has risen just 1.7 percent since 2012, according to data from the National Association of Realtors.
The increase in rents is a sign of the improving local economy, as well as a population that has begun to stabilize after years of decline. But the higher rents also could squeeze the budgets of tenants who have not seen the same type of increases in income, especially poorer residents, experts said.
Eastern Connecticut had the second highest increase in the report, with rents growing by 5.4 percent; followed by the Albany area, where rents rose by 5.4 percent. It’s no coincidence that those areas – particularly Buffalo, Albany and Hartford – have undergone renewal after years of decline, said Jesse Holland, president and founder of Sunrise Management & Consulting.
Job growth and development, especially that associated with the Buffalo Niagara Medical Campus, is attracting young professionals and new graduates, who typically rent rather than buy.
Other factors have led to an increase in the demand for rental properties as well. Changes in lending practices have made it harder for many millennials to qualify for mortgages. Many retiring baby boomers are looking to downsize and simplify. And people who lived at home with parents, a roommate or a significant other during the recession are starting to feel more confident to step out into spaces of their own, Holland said.
The quick, steep rate increase shows Western New York is in the beginning stages of an upswing as it begins to experience the type of recovery already enjoyed by the rest of the nation, he said.
“As the job picture improves, it changes everything,” Holland said. “If you can get a job, you can get an apartment.”
Indeed, May’s jobs numbers showed Buffalo Niagara added 13,000 jobs over last year, the strongest hiring boom in 15 years. Much of that growth came from construction projects, such as those at SolarCity, HarborCenter and the Medical Campus.
Because building new rental properties is a slow process, it could be a while before supply catches up with demand and prices level out, even despite Buffalo’s wave of adaptive re-use loft projects. The city has added 1,000 new apartments in recent years, but that’s half of Mayor Byron Brown’s goal of 2,000 new units, Brandye Merriweather, a manager at Buffalo Urban Development Corp., told Erie County Industrial Development Agency officials in a presentation this week.
In the interim, working- and middle-class renters are feeling the pinch. Average annual pay in Erie County has not risen nearly as fast as rent, increasing just 3.2 percent in 2014, from $43,286 to $44,673, according to the U.S. Bureau of Labor Statistics. The average entry level wage was just $19,570.
“Buffalo seems to be in a renaissance and that’s great,” said Lawrence Southwick Jr., associate professor emeritus of finance and managerial economics at the University at Buffalo School of Management. “The only concern is it can be difficult for people who are not seeing wage increases, or people whose wages are actually going down.”
That’s particularly the case for people in the Fruit Belt neighborhood immediately surrounding the BNMC, said Veronica Hemphill-Nichols, founder of the community advocacy group Fruit Belt/McCarley Gardens Housing Task Force. She said homeowners there are happy with increasing home values, and that the neighborhood as a whole is benefiting because vacant houses are disappearing. But lower-income renters have found themselves priced out of the neighborhood.
In the past, residents could find a four-bedroom rental for $425 per month. Now, landlords are asking $750 for a one-bedroom. Newly renovated properties in the area are going for up to $1,400.
“Very few people in the Fruit Belt can afford that,” she said.
Valerie McNair, a property manager for Glendale Development LLC, said renters have balked at current rental rates.
“People are sticker shocked when they hear the prices of apartments,” she said. “It has changed over the past few years.”
Increases in property taxes, insurance, utility and the overall cost of living can all affect rent costs. She said renters should try and find common ground with their landlord. For example, McNair said when Glendale Development increases rent, it usually tries to do something in return, like painting the bathroom or replacing the carpet, to soften the blow of higher rates.
Western New York’s costs are catching up after years of stagnation, according to John Leonardi, CEO of the Buffalo Niagara Association of Realtors. Location makes a difference, too. People who want a premium location with nicer amenities will usually pay more in rent.
That is certainly the case for Janet Pattison. She was shocked to see how much the local housing market has changed since she left Western New York seven years ago for North Carolina. Preparing to return to the region for her husband’s job, she searched for a decent rental in a neighborhood with good schools. She finally settled on a three-bedroom, two-bathroom apartment in Clarence for $1,900 a month.
“So much for our savings and retirement accounts,” she said.
Alexander Grigorenko moved to Albany five years ago and moved back to Buffalo in January. He said he was able to find an affordable apartment within walking distance of downtown. But a few blocks away, he said, there are newer developments that might be priced at close to $1,500 a month. That doesn’t mean all one-bedroom apartments now cost four figures, but Grigorenko said he thinks the resurgence in the city has caused a slight increase across the board.
“Older apartments are just a bit more expensive than they used to be, and newer ones might be more out of someone’s reach,” he said. “It depends on where you’re looking and depends on the age of the building.”
With new apartments popping up downtown, there’s the issue of supply and demand. But most people don’t see an issue filling the space, and property managers say the number of people looking to rent has increased.
“Go walk down the medical corridor and see these empty buildings not yet filled with employees,” said Marciniak. “They haven’t even gotten here yet and these apartments are getting eaten up. And the employees are coming, so I can’t see demand dropping anytime soon.”
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