LACONIA — In the 40 years since Lakeshore Estates was built in 1974 there has been no major investment in expanding the inventory of rental housing units in the city. But, in the past year Dick Anagnost of Manchester announced plans to construct 96 apartments of Mile Hill Road in the South End and Chinburg Builders intends to add 37 rental units to the Beacon Street West complex. Meanwhile, last month a Florida investor purchased Lakeshore Estates for $5 million.
"The economics of the marketplace for units renting at market rates has changed for the first time in years," said Russ Thibeault of Applied Economic Research.
Although population growth has stalled, a number of demographic and economic factors have combined to boost demand for rental housing. "It is not growth but change that is driving demand," explained Dan Smith of the New Hampshire Housing Finance Authority, "and it's happening across the state."
Despite the sharp fall in property values during the recession, home ownership remained beyond the means of many young singles and couples. Some were burdened with student loan debt, which in New Hampshire averages $32,900, the highest level in the country. They may also have lacked secure employment or earned modest wages. Some balked at home ownership as a risky investment. At the same time, lenders tightened their standards and down payments increased.
At the other end of the spectrum, as the baby boom generation begins to retire they are realizing the equity accrued in their homes and downsizing their living arrangements. Moreover, a share of these retirees never owned a home.
Not surprisingly Anagnost told the Planning Board that that he expected that two age groups — 29 to 35 year-olds and 62 to 75 year-olds — would represent most of the demand for apartments in the South End.
While demand has grown, the inventory of rental units, especially beyond the southern tier of the state, has stagnated and aged. Smith estimated that about a third of all rental units may be at least 70 years old. As the supply of rental units has not risen in pace with the demand, rents, which began rising in the wake of the collapse of property markets in the early 1990s, have continued to climb in pace with inflation.
According to the annual rent survey undertaken by the New Hampshire Housing Finance Authority, the median gross rent (including utilities) was $1,018 for all units and in 2013 and $1,076 for two-bedroom units statewide and $953 for all units and $1,005 for two-bedroom units in Belknap County in 2013.
Thibeault said that the mix of growing demand, short supply and viable rents offered opportunities for investment in rental development.
Apart from expanding inventory, new construction and reinvestment will likely enhance the quality of rental units in the city. Speaking to the Planning Board, Anagnost described a "trickle down effect," explaining that when new apartments come on to the market, renters in older units move into them, filling them relatively quickly. As vacancies increase at other properties, landlords are faced with lowering their rents or improving their properties in order to compete. The new owners of Lakeshore Estates have already indicated they intend to improve the interiors of the apartments.
Smith said that by introducing more competition to the housing market, investment in rental properties would offer more choices to households shopping for shelter.