REAL ESTATE NEWS The Wall Street Journal Hurricane Florence Creating Housing Shortage for Displaced North Carolinians
Sep 18, 2018 — Laura Kusisto
Charles Mostoller/Bloomberg via Getty Images
Finding temporary housing for thousands of North Carolinians displaced by Hurricane Florence could prove more difficult than it was for those uprooted by other recent U.S. storms and hurricanes.
That is because Florence’s path blew through some of the state’s smaller cities, where much of the rental housing stock is owned by mom-and-pop landlords. Places like Wilmington and Fayetteville have fewer than 1,500 empty apartment units each, according to apartment research firm RealPage Inc.
The figure is less than half the number of vacant units in a larger center like Charleston, S.C. Houston, which was suffering from a rental glut before Hurricane Harvey hit last year, had some 70,000 available units just before the storm. Fewer available units in North Carolina could lead to a severe apartment crunch.
Making matters worse, much of the rental inventory in places like Wilmington and Fayetteville is in single-family homes, analysts say. This type of housing is more vulnerable to storm damage than higher-rise apartment complexes.
“A lot of the cities that were flooded are smaller and less dense,” said Ric Campo, chairman and chief executive of Houston-based Camden Property Trust , which owns 21 multifamily properties in Charlotte and Raleigh. “They just don’t have the apartment inventory.”
Cindy Clare, chief operating officer for Greensboro-based Bell Partners Inc., said it is difficult to assess the damage to the company’s four properties in the Wilmington area because all roads into the area are closed and most of the properties still don’t have electricity.
The company’s properties, which are a combination of low-rise garden apartments and mid-rise elevator buildings, experienced minor flooding and one lost part of its roof. An apartment complex’s clubhouse was damaged when an animal—likely a coyote or a fox—got in through a broken door and destroyed the furnishings.
Ms. Clare said it would be some days before she can fully assess the damage, which could grow worse if there is more flooding in the areaand if the electricity remains off, allowing mold to grow in hot, humid conditions.
Still, compared with the damage many in the area have sustained, “We feel very lucky,” she said. “I would assume that short-term the market will probably be a little stronger.”
Hurricanes tend to be bad news for the for-sale housing market in the weeks after a big storm, leading to slower sales and more borrowers falling behind on their mortgages. But for rental landlords whose properties survive with little or no damage, disasters can be a boon.
After Harvey, Houston’s vacancy rate fell to 5.8% in the fourth quarter from 7.3% in third quarter—a significant drop for such a short period. It eventually inched back up to 6.2% in the second quarter of this year, according to RealPage.
Large landlords typically announce they won’t raise rents for a certain period after a large storm to avoid accusations of rent gouging. Still, annual rent growth in Houston accelerated to 3.6% in the fourth quarter of 2017 after rents had fallen 0.7% in the third quarter.
The apartment vacancy rate in Wilmington is 6.6% with annual rent growth of 2.3%. That makes it slightly weaker than the national market, where the vacancy rate is 4.5% and annual rent growth is 2.5%, according to RealPage.
The storm is likely to push that vacancy rate down, as some units may be destroyed and others are likely to be filled by homeowners whose properties are destroyed.
John Pawlowski, an analyst at Green Street Advisors, said that by avoiding the major cities, Florence also largely spared the portfolios of institutional apartment and single-family rental owners.
American Homes for Rent, for example, owns roughly 50 single-family homes in the Wilmington area compared with about 5,000 in Raleigh and Charlotte, he said.
Nonetheless, he said hurricanes and increased flooding are a growing threat to the bottom lines of single-family rental owners, whose portfolios are concentrated in places like Florida, North Carolina, South Carolina and Texas.
“The last couple of quarters there’s been some expense spikes” that are classified as “one-time events,” he said. “The skeptic in me says there’s going to be a lot of one-time references in the next couple of years.”
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