Renters, rejoice. Some landlords stung by high vacancy rates at rental homes and apartments in Lodi are offering lower rents and other concessions to draw tenants to their buildings. These move-in specials -- which often feature a free month's rent -- can shave as much as 10 percent off the apartment's yearly value.
Good news for renters. Bad news for landlords.
"We've never seen concessions given away the way they are (today)," said Donnie Garibaldi, president of local property management firm RPM Co. "Rents are probably 15-20 percent down from where they were in the past, when things were much better."
California's real estate explosion has been a boon to Realtors, mortgage brokers and homebuilders in recent years, but apartment managers have often found themselves holding the short straw. With record-low interest rates and innovative loan packages offering the opportunity to buy homes and condominiums, more and more renters are leaving apartments behind for white picket fences and two-car garages.
"Those people that could afford to buy a home through low interest rates have bought them," said Frank Johnson, manager at Lodi Property Management. "They aren't looking for rentals anymore."
Even the newspaper want ads show a disparity between this year and last. The rental listings in Friday's News-Sentinel take up parts of three pages, compared to just one for the Jan. 14, 2004, edition.
The average price for one and two-bedroom apartments is $575 and $725 in the 2004 listings. Last month, they were closer to $700 and $525, with a larger number of "Free Rent" advertisements.
According to the city's recently adopted Housing Element, there are 8,684 renter-occupied units in the city -- more than 45 percent of Lodi's total homes.
Johnson's housing stock includes more than 750 apartments, homes and duplexes across the city. In January, 48 of those buildings were empty. He blames some of the vacancies on the absence of seasonal workers who move to town during the summer months, but has also found himself offering free rent specials and lowering rates to fill units in the meantime.
"If you lower your rates by $25 or even $50, you can recover it in six or seven months," Johnson said. "It's better than being vacant. There isn't anything coming in when you're vacant."
Garibaldi's company owns and manages apartments across the state, including 332 units at four complexes in Lodi. About nine in 10 apartments at his Lodi complexes were occupied in January -- not close to the ideal rate of 97-98 percent, but good enough considering the current climate, he said.
"We've had to give a tremendous amount away just to stay in the 90s," Garibaldi said. ""You have to give so much to stay full."
Those giveaways have included one-month free rent and rate reductions of up to 7 percent. On a 12-month lease, the income lost from such renter incentives add up to nearly 10 percent, he said. Pretty soon the figures add up to a substantial chunk of change.
"When you're at 92 percent at times like this and you have to give away a month's free rent, you're economic occupancy is more like 84 percent," Garibaldi said.
Though the boom in homebuying is held up by many in the rental community as the main culprit for vacancies, some aren't entirely sold. Community Development Director Konradt Bartlam said in January that there are many renters with lower incomes who likely couldn't afford to buy a home regardless of the interest rates.
"There is a segment of the community that, even under the best interest rates, isn't going to qualify for a mortgage," Bartlam said. "If you're focused on the high-end rental units, that's probably true. But the people who can afford only moderate to low income aren't going to qualify for a traditional loan."
Randy Snider, former Lodi mayor and president of the Lodi Association of Realtors, said last month that low interest rates don't translate to newfound affordability. More homes have been sold in California in recent years than ever before, but that hot market has also driven prices to record highs.
"It's a double-edged sword," Snider said. "When the real estate market gets hot, the cost of housing goes up."
Don't tell that to Eileen St. Yves. The manager of the 170-unit Orange Grove Apartments on South Orange Avenue has lost "a fair number" of two-bedroom units to families who bought homes in recent years.
She's also found the cost of running a complex is on the rise. Ordinances requiring mandatory fire and interior inspections -- on the property manager's dime -- can cost as much as $25,000, she said. Add in water, energy and insurance costs, and the total becomes fairly steep -- and eventually will be passed on to renters.
"If I've got to put out $20,000 to be inspected, plus the labor and maintenance people, that's all going to be passed on," St. Yves said.
Johnson worries more about empty rental homes than apartment vacancies. While apartments typically have rent coming in at some levels from the units that are occupied, single-family homes can become cash drains if they stay empty for a long time.
"Until you can get that home generating some income, you have 100 percent vacancy," he said.
Not everyone in Lodi is reporting unusually high vacancy rates. Ruth Heminger, rental manager for Lodi Management Company, said in January that she only had four empty apartments at the 218-unit Lakeshore Meadows on Sylvan Way.
And she blamed the four vacancies on recent Kettleman Lane road construction, not a dearth of renters.
"I'm not getting the traffic I normally get," Heminger said.
Garibaldi believes the rental market will swing back in a positive direction once interest rates go up and the housing market settles. Until then, he can only do the necessary work on his buildings to attract the renters when they come around -- move-in special or not.
"We do everything we can to maintain our buildings and make sure everything represents itself to its maximum potential," Garibaldi said. "When the tides turn, we'll be in a great position to take advantage of it."
Contact Business Editor Greg Kane at firstname.lastname@example.org.