A duplex burned down two weeks ago in Springdale. The tenants have a spotless history of paying their rent on time, money coming to them through renters insurance and a state legislator who's in the rental business helping them search for a new place -- and still are having trouble finding one.
Those tenants bore no fault in the fire, state Rep. Robin Lundstrum, R-Springdale, said Tuesday. She would rent to them "in a heartbeat" if she had any units available, Lundstrum said.
The residential rental vacancy rate in Northwest Arkansas fell to 3% earlier this year, according to the latest figures from the Skyline Report, a series of reports on the real estate market commissioned by Arvest Bank from the University of Arkansas' Center for Economic and Business Research.
Occupancy of 97% represents full occupancy for all practical purposes, said Duke McLarty, executive director of the workforce housing center for the Northwest Arkansas Council. The council is a nonprofit group of business and community leaders that works on regional issues.
"Apartments have to be cleaned and repainted after someone moves out," McLarty said. "Some will need repairs. So 97% is pretty much the maximum of what you can do."
Students coming to the University of Arkansas are an obvious factor in the rental market, he said. The university recently reported that it expects to be about 1,000 beds short to accommodate students for the fall semester.
The problem is region-wide, McLarty said. Northwest Arkansas is one of the fastest-growing metropolitan areas in the country, U.S. census figures show.
The region saw explosive growth in home prices, real estate industry figures show. Northwest Arkansas saw the second-highest increase in the cost of buying a house of any metro region in the United States in May 2022 over May 2021. Median home prices rose 28.8%, an increase of nearly $75,000, according to industry figures cited July 14 in the NWA Council's annual meeting.
Then the U.S. Federal Reserve raised interest rates for the past two months in a row. This increase coming during a steep rise in home prices keeps an undetermined number of would-be home buyers in the rental market, McLarty said.
"People at the bottom end before of qualifying for a home loan are dropping out now," McLarty said. "This is forcing them into the rental market, and rental prices are increasing."
The multifamily market added 4,400 rental units in the past year, according to a March 17 Skyline report. Despite this, the average lease price for a multifamily unit increased 6.4% in the past year, the report said, and the vacancy rate fell from 3.4% to 3%. The apartment-finding website Zillow.com, for instance, showed a total of two places with two bedrooms to rent in Rogers on Friday costing less than $1,000 a month. One was $900 and the other $925 a month.
Rising house prices helped fill up the rental market in other ways, said Rob Apple, director of strategy and communications for Specialized Real Estate Group of Fayetteville.
"A lot of empty-nesters sold their homes at these prices, and now they're looking for apartments," Apple said. They're looking for amenities, locations near dining and entertainment and freedom to travel without having to worry about things like lawn care and routine home maintenance, he said.
Increased interest rates aren't even slowing the rate of increase in Northwest Arkansas home prices, said Mervin Jebaraj, director of the business and economic research center.
"We're in the process of putting together the next Skyline report," Jebaraj said. "It should be out in a few weeks. We didn't expect home prices to go down, but we expected at least the rate of growth to slow down. It hasn't."
Besides a growing demand for housing, the supply side still has problems, according to McLarty, Apple, Lundstrum and Jebaraj. Supply chain disruptions stemming from the covid pandemic persist. "Before it was lumber," McLarty said. Now lumber is plentiful and affordable, but electronic components and appliances are hard to get, he said.
Another factor pushing up apartment demand is the shift among young professionals toward working from home or being close enough to the office to bicycle to work, Apple said.
The solution to the problem is to adapt living spaces and neighborhoods to the way people want to live, McLarty said. "Build neighborhoods with things like corner grocery stores to fit the new work-from-home environment," he said. He called the principle "soft density," something different from neighborhoods of either all single-family homes or multistory apartment buildings.
"This region hasn't had the need for this type of housing option before," McLarty said.
Until recently, relatively low housing prices compared with the rest of the country, along with a thriving economy and a good quality of life, was a major strength of Northwest Arkansas. The council is reviewing city codes and regulations in the region and will make suggestions on changes needed to encourage such building, McLarty said, but final authority on building in those cities rests with the municipalities.
People are so hard-pressed for a place to live they are agreeing to leases without even looking inside properties, Lundstrum said.
Carolanna Buchanan has a 2017 drug-related felony on her record. She and her husband pay $600 a week to live in a hotel -- six weeks so far -- while they look for an apartment. They wouldn't have that room if her husband didn't work for the hotel, she said.
"I've stayed out of trouble for five years and am trying to put a decent life together," she said. "That's hard to do if you can't get a decent place to live." Even the poorest-quality apartments have waiting lists, she said.
And fraudsters are preying on desperate seekers, Lundstrum noted.
"I had somebody call me saying my property manager said to meet him at Walmart with a cashier's check and he'd bring a key and lease," Lundstrum said. "My immediate reply was: My property manager is not a 'he.' She's a woman."
"Somebody had put a picture of one of my properties on Facebook and said it was available to lease," Lundstrum said.