Renter's Hell

They probably belonged to the former resident of her $800 Murphy bed-equipped studio apartment on Northwest 22nd Avenue and Glisan Street—the person who painted the walls bright yellow and left the kitchen and bathroom coated in so much grime they took hours to clean.

But Bozanich, 29, was thrilled. Not with the filth, of course, but with the fact that after several weeks of searching, she had finally found an apartment.

When her short-term lease ran out, it took even longer to find another place—she and her future roommates spent two months looking. They finally found a house in the Concordia neighborhood that, on their initial visit, contained seven aquariums of assorted reptiles. They grabbed it. (The reptiles later moved out.)

"I couldn't believe how fortunate we were," Bozanich says, noting that friends have looked even longer without finding a place that fit their budget. “We really counted our blessings on this one.” 

Portland has long had a reputation as an affordable West Coast city, boasting rents that are lower on average than in Seattle or San Francisco. 

But affordability only matters to people who can actually find an apartment.

The Portland area has the tightest rental market of any major city in the United States, according to the U.S. Census Bureau. Only 3 percent of apartments here are vacant at any given time—half as many as were available three years ago.

The days of apartment companies offering a month off or free parking are long gone. Apartment managers and landlords see people lined up outside rentals, many with applications and blank checks in hand. Desperate renters are finding places have been rented within minutes after being posted on Craigslist. Some renters have offered to pay above the advertised rent if it means they can land the place.

"We'll put something up and hear within five minutes they've heard about a property and want to have a viewing," says Bette Durham, a broker at Mainlander Property Management. "Unfortunately, we can't pull extra properties out of our hats.” 

The fierce demand for apartments in short supply is causing Portland's reputation for affordability to slip away.

Rents have risen 17 percent in the last five years in the Portland metro area, according to the Metro Multifamily Housing Association, a trade group of landlords and rental managers. That's well above the national average of 12 percent during that same time.

No Rooms to Spare: The 25 Major US Cities with the Lowest Vacancy Rate:

View No Rooms to Spare in a full screen map. Source: The U.S. Census Bureau measures vacancy rates in 75 markets nationwide. These are the 25 lowest rates of cities that have at least 500,000 people.

And rents have jumped 8 percent this year—more than three times faster than the nationwide rate.

Rents are climbing even faster in downtown and the Pearl District, where they've jumped 16 percent this year, according to the records.

As a result, many people are being pushed to the edges of the city, adding to the hidden costs of housing, including more money and time spent commuting to jobs.

"If we care about people having choices about where they live, if we don't want to concentrate poverty on the edges of our city, then we need a range of housing choices in each neighborhood," says City Commissioner Nick Fish, who oversees the Housing Bureau. "We're limiting people's choices about where they can live and raise a family."

In a market where demand is so high, developers should be lining up to build more rental properties. But many say they face a dilemma. High-end projects still can't charge the rents they need to make them pencil out. And more modest building projects, where the rents are lower, are having trouble getting financing.

That might also be true in other cities. But in Portland, even during the building boom in the last decade, few developers had any interest in apartments—they built condos instead. That left the city short on rentals as the demand grew—from people who cannot afford to buy a house, those who had to give up the houses they owned, and a steady stream of newcomers who moved here despite the recession.

Mark McMullen, the interim state economist, says the influx was mostly young people willing to move here without jobs.

"Portland is still a magnet," he says. "And that's a good thing."

Except if you can't find an affordable place to live—in some cases, any place to live. 

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Portlanders traditionally have tended to buy homes, not rent. About 55 percent of Portland-area residents own their homes, compared to 50 percent in Seattle and 38 percent in San Francisco, according to the U.S. Census Bureau. 

That's because even as home price have risen here in the past two decades, they've remained low compared to those in other big West Coast cities. 

As a result, the relatively soft demand for rentals meant the city simply did not need as many apartment units—until now.

Developer Dwight Unti, head of Tokola Properties in Gresham, says Portland has traditionally needed about 4,000 new units of housing per year to keep up with growth in the metro area, but says that need hasn't been met for the past five years. “We’re way behind the curve,” he says. 

Today, the area including Portland, Vancouver and Beaverton has about 97,000 rental units. 

As recently as 2005, a lot of those units were available—one out of every 10, according to Census Bureau records.

The rental market suddenly got tighter in 2007. The reason? The national economy was surging, more and more people wanted to buy homes, and credit was readily available. In Portland, developers started taking rental units off the market and converting them to condos.

McMullen says the low vacancy rate four years ago was a symptom of a very different kind of rental market—a “supply phenomenon,” he calls it. 

When the economy tanked in 2008, vacancy rates shot up again—to 7 percent. McMullen says more condos went on the market as rentals because people couldn't sell them.

But the whipsawing continued. Two years later, the vacancy rate dropped closer to pre-recession levels—but for far different reasons.

Banks tightened their credit rules, making it tougher to buy homes, and many people couldn't afford to stay in the homes or faced foreclosure.

That's left far more people chasing the too few apartments left in the city. 

Joe Colasurdo moved to Portland from Bellingham, Wash., nearly two months ago and still hasn't found his own place to live. He's staying with his girlfriend, Renee, and her two roommates, but the situation has worn thin. 

In a Gladstone apartment Colasurdo, 25, viewed last month, black mold coated the shower tiles—except where duct tape clung to keep other tiles in place. "I'm surprised the landlord even had me come over,” he says. 

It wasn't the only time he looked at what turned out to be a dump. "They would have pictures online and it would look really nice, and I would go there and it would be like, 'Wow, I'd rather live in my mom's basement.'"

Many people say they have faced similar situations looking for an apartment, with little or no choice when it comes to quality. 

In September, Zac Thayer, a 20-year-old punk-rock musician, started trolling Craigslist for a house or an apartment to share that would cost him no more than $500 a month. It took two months, including weeks spent sleeping on friends' couches.

“I got pretty panicked,” Thayer says. 

Most places he saw were disgusting, he says. The worst was a house near Southeast 52nd Avenue and Belmont Street—like a sauna inside, with a once-white carpet turned brown from cat feces smashed into the carpet. 

"It's almost impossible to find somewhere livable in my price range," he says.

The search becomes more complicated for people who need to live in a specific neighborhood, especially if it's close in.

Bozanich, the woman who found fingernails in her new apartment's bed, needed to live close to the city center. She'd been living with her parents in North Plains, but she was undergoing chemotherapy for breast cancer and wanted to be nearer to her clinic in North Portland. 

The neighborhoods Bozanich desired—inner Northeast and Southeast, downtown and Northwest—have vacancy rates lower than the city as a whole—from 2.1 percent to 2.5 percent. 

That demand means rents are increasing faster than in places such as Oregon City, Gladstone and Gresham, where the vacancy rates range from 5 to 5.5 percent. (Rents in Gladstone and Oregon City have actually dropped in the past year.)

Bozanich saw this firsthand. She looked for a month but couldn't find a place for less than $1,200 a month. 

She found her Northwest Portland studio in March. Six months later, she was looking with three other people to rent a house. They waged a daily search for two months, spending hours hitting the refresh button on Craigslist.

But the places they liked were snapped up within minutes. They prepared stacks of rental applications and arrived early at open houses, only to find a line had already formed. 

"We got really frustrated," Bozanich says. "We'd draw out a map of different neighborhoods and just start bickering about just having to live farther out, and I would be like, 'I don't want to spend money to live in a place I don't really like.'"

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Landlords say they need to do very little now to attract tenants. Nina Lyski—the building manager for Jeanne Manor, a historic 67-unit building in the South Park Blocks owned by KBC Management—says there are 15 people on a waiting list. 

"I rented about eight apartments last year sight unseen," she says.

Nancy Swann, who runs the complaint hotline for the Community Alliance of Tenants, says most of the criteria landlords use to reject tenants aren't new: Credit history, rental history, pet ownership and employment have been application questions for years.

The difference today is that landlords can afford to be picky. The slightest blemish on a credit history can doom a would-be renter's chances. 

Swann says landlords who in the past have been willing to work through problems with tenants are far less inclined to do so in this market. 

She has heard complaints from people who lost their jobs and whose landlords refused to wait for the tenants' unemployment benefits to start before evicting them.

“A lot of landlords are like, ‘Pay the rent or get out,’” Swann says. 

Developers say the economics of building apartment complexes in Portland don't pencil out right now, even with rents climbing fast.

High-rise buildings need higher rents to pay off their large upfront construction costs, which tend to run higher per unit than the low-slung apartment buildings outside the city's core. There are only a few places in the city—the Pearl District, for example—where landlords can demand especially high rents, but some developers say not high enough.

Spencer Welton, senior vice president of development for Simpson Housing LLLP, says apartment towers like the 15-story building his company planned—and then canceled—for the Pearl District can't charge rents high enough to pay for the project.

Welton says his company, after looking at rents in similar-sized Pearl buildings, planned to charge an average of $1,700 to $1,800 a month for a one-bedroom unit. 

It didn't pencil out to cover the $56 million project. "With the kind of construction we were trying to do, the rents just didn't support that," he says.

Portland developer Bob Ball says he can make a new Pearl District building work. He recently announced plans for a six-story, white-brick apartment complex called The Parker on Northwest 13th Avenue between Pettygrove and Quimby streets, with a planned opening of 2013. 

Ball says the key is constructing a shorter building with slightly smaller units, thus reducing the building costs while allowing him (he hopes) to charge about the same rents Simpson considered.

"If you have the right product and the right amount of land, I think the rents are there to support it," he says. "But if you're building anything with many stories, you're going to have to have the rents to pay for it."

Pearl District rents are beyond the means of most Portlanders. Yet developers are not building the low-slung apartment complexes that are cheaper on a square-foot basis to develop and, in turn, rent for less money.

Tokola Properties' Unti says the region's available land for stick-built, horizontal, suburban apartments has pretty much been used up, and the area's urban-growth boundary has limited where new construction can be built.

Unti also says banks cut way back on lending for real-estate development, especially those for apartments that charge mid- to low-range rents.

"In the past, I could borrow about 85 to 90 percent of the cost to build a new apartment," he says. "Now, I can borrow about 60 percent. Everyone is more risk sensitive, more risk averse."

Unti says public-private partnerships, such as subsidies in urban-renewal areas, could help. 

Fish says the city has tried to find ways to help, but he admits it hasn't been enough. According to the Housing Bureau, the city since 2006 has paid $150 million to help add 4,500 units of affordable housing through construction and aid to renters making down payments when they buy a home. 

Fish says the subsidized units go to households that make 60 percent or less of Portland's median family income. That means a family of four that makes less than $43,200 would qualify. A single person needs to make less than $30,240.

Even with this housing available, Fish says more than 50 percent of Portland renters are "cost-burdened," which means they pay more than 30 percent of their monthly incomes on rent.

"On paper, we're doing a pretty good job, but the demand just keeps growing," Fish says. "We're going to have an impact, but on the margins. The market is going to provide the bulk of the housing."

No one has a good answer for satisfying the demand.

"It's absolutely true we won't be able to build our way out of our housing crisis," says Mary Li, Multnomah County community services director. 

Li, who works with several programs designed to help people find housing, says she sees the shortage on a daily basis.

She says the city and county provide financial help for people to rent, from short-term rent assistance to cosigning leases if the renter has bad credit. But those programs don't address the rental shortage.

That means higher rents—the only way developers will get the cash they need to qualify for financing. And rents have already risen too high for the average Portlander.

Elisa Harrigan, executive director of the Community Alliance of Tenants, says she's already seeing the impact of high rents.

"We're seeing the burden be higher on tenants to maintain their housing," she says. "People's incomes aren't growing at the same rate as the rental price, and government services are getting cut.

"Things were bad before, but they're worse now."

Bozanich hopes the city and developers figure it out.

"I know that community is really important to Portland," she says. "I hope we get to keep living that way instead of being pushed out and separated.” 

WWeek 2015