At this time of year, competition is all around us: competition for a national championship in college football, competition at the mall to return holiday presents, competition at the gym to take off some of those extra pounds.
But there is another competition playing out in our community that places the Eugene area at the top of the heap nationally: competition to find rental housing.
According to RentCafe, an apartment finder company, and Yardi System, Inc., a rental software company that supplied the data, Eugene is the most competitive rental market in the country out of 105 ranked metro areas. San Diego, and Knoxville, TN rounded out the top three.
RentCafe’s year-end survey showed that renters in the Eugene area are facing a market with a nearly 97% occupancy rate and a market in which, for every single available apartment, 30 prospective renters are waiting to pounce. The national average by comparison is a 95% occupancy rate, and 14 renters competing for each available apartment.
“In 2021, the most competitive rental markets were small metros, within close proximity of nature that allow for an affordable lifestyle. So, with their high demand, low apartment availability and renters with high credit scores, the top three most coveted locations to rent in this year were Eugene, OR; San Diego, CA; and Knoxville, TN,” RentCafe said in its press release.
When I spoke with Doug Ressler, Manager of Business Intelligence for Yardi, he pointed out several key factors driving the hot rental market in our community.
“The conditions are based on too much demand chasing too little supply. This will take years to resolve. Based on our data, the US has a shortfall of anywhere between 1.2 – 5 million homes,” he said. “For the Eugene market, you also have huge attractors like the University of Oregon, Life Science-Data Centers, and tech hubs which attract high-paying jobs and positive net in-bound migration.”
Ressler also points out that Oregon contains a lifestyle population attracted to the milder weather and accessible outdoor recreation. Further, Eugene boasts an educated workforce that may be able to work more remotely than employees in other markets.
“Eugene/Springfield/Cottage Grove as a market has always been competitive in terms of rentals,” said Nick Nelson, a resident of Springfield and broker at Nick Nelson Real Estate in Eugene. “What’s different is that there is literally no vacancy rate right now. I have clients who own rental property who don’t even make announcements about availability, and people rush in to snatch them up.”
Sandy Belson, the Interim Planning Manager for the City of Springfield, points to the last decade and a half of under-building in the Eugene/Springfield area as a big reason for the tight rental market today. One of the great impacts of the Great Recession was an almost complete halt to building new rental properties.
“Issuing new building permits dropped off a cliff about ten years ago,” said Belson. “In some ways, we’ve been in catch-up mode for the past decade in and around Eugene/Springfield. 2020 was shaping up to be fairly good, but then of course, COVID-19 hit.”
Belson agreed that in some ways, our community hit a perfect storm of factors contributing to our tight rental market: the large in-migration for jobs and quality of life butting up against the lack of overall rental housing availability. She also points out another issue that has contributed to the scarcity of housing. “It was a trend in the last few decades where you had people building larger and larger homes, when at the same time the number of people living in each household was declining,” she said. This contributed to a situation in which current housing density can’t accommodate the needs of the community.
For the state and for cities like Eugene and Springfield, the solution is not as simple as just building more apartment complexes, as such large projects often take years to move through planning, approvals, and construction.
A law passed by the state legislature, House Bill 2001, was designed to expand housing options and move larger metro areas toward increasing such density. “It allows for what’s called ‘middle housing,’ where duplexes and other additional homes can be added to an existing property,” he said.
To further that pathway toward more balanced density, Springfield encourages the use of Accessory Dwelling Units. By amending the housing code, Springfield allows homeowners to add studio units or “mother-in-law” units to current houses to take in tenants at a much denser population than before. Belson notes that just in the last few years, the change has allowed for 57 new Accessory Dwelling Units, where in the decade before only two were added.
“To get us where we need to be, a mix of solutions is going to be required,” she said. “Getting away from large homes with few occupants, increasing the number of rental units on existing properties, and building more housing are all key to our housing future.”
Doug Ressler of Yardi explained that the Eugene market is a great example of the double-edged sword of the housing paradox. “People really want to move to your community due to excellent quality of life amenities and high-paying jobs in academia, tech, and biosciences. At the same time, rental stock is lagging.”
Belson, from the City of Springfield, agreed and concluded our conversation by saying that, “We are, in some ways, the victims of our own success. Our rental market is so competitive because so many people want to live in this wonderful part of the world. Our collective job is going to be finding and implementing solutions that accommodate all the people who want to call this area home.”