Why the Rental Market Matters

We have been reading lately about New Haven's stellar rental market--either the lowest or the second-lowest vacancy rate in the country, depending upon your source.  Why is this?  And how does it relate to other real estate data?

New Haven's extraordinary occupancy rate for apartments has several causes, some of which are unique to New Haven, and some of which apply across markets nationally.  New Haven's own reasons have to do, first of all, with the large number of students residing in the region.  Students are almost always renters, and graduate students rarely live in university housing.  The second driver in New Haven is the nightlife and culture prevalent here, so that young people (and empty nesters) who work in other places in Connecticut will disproportionately choose to rent in New Haven and commute to their jobs. 

Around the country, there are certain trends that are helping rental markets to stay strong.  Of course, high foreclosure rates will result in more renters, as the people displaced from their houses won't be able to buy right away.  Also, the uncertainty of all job security means that many more workers, executives included, leave their families behind and rent in the new city until they are confident that they will stay at the job.  That trend is exacerbated by the difficulty transferees are having in selling their homes in the locations they are leaving; until they do, many must rent.  Even those who sell are renting in many instances, since they worry that housing prices have not bottomed out, and that this may not be the best time to buy a new home.

All of these factors have combined in Greater New Haven to make rentals scarce and expensive.  It also offers an opportunity for investors to buy property and rent it out, and not just the typical apartment building or multi-family house.  Single family homes make good rentals also, particularly when you can buy one for a price that allows you to cover costs with rental income.  It can even be a good alternative for those who have houses on the market that are not selling.  Many people are looking for homes to lease, not just in the center city, and it's a good time to find tenants.  This is especially true if you allow pets!  As with all types of real estate markets, there are ways to make money in this one.

Who Would Have Thought It?

If someone had told us twenty years ago that the center city's residential properties would be holding value better than those in the suburbs--better even than direct waterfront--we probably would have scoffed. It's clear right now that the hot market is New Haven--the closer to downtown, the better.

This isn't by accident. President Levin of Yale, who has been in office for fifteen years, lived in New Haven for many years before he became Yale's leader (and, in fact, has continued to live in his own home, rather than the one that Yale provides). He has made it clear that he would be happy if every new hire lived there as well. The last time that I heard, 47% of Yale's senior faculty lived within the city limits. In today's New Haven Advocate, the stated equivalents of New Haven's municipal police and firefighters were 13% and 17%. Yale's showing clearly represents the payoff of a long-term strategy.

There is another factor at work, however. Current demographics favor the central city, although this is a change from earlier generations. Young professionals have always preferred urban life, but now, increasingly, so do empty nesters. The arts, the dining, the conveniences, and the lack of commuting time have all contributed to make New Haven a popular housing choice. Even those with school-age children, if those children attend one of the city's prestigious private schools, have been moving into the city neighborhoods.

And that's all good news for the region, since a vibrant city makes for healthier suburbs.