Unemployment Taking Toll On Landlords

The rise in unemployment has prompted and/or forced tenants to seek subleases, roommates, cheaper units, and better lease terms. Landlords have been forced to accomodate the new demanding tenant.

In the third quarter of 2009, the national apartment vacancy rate was 7.8%, a 23-year high, according to Reis Inc., who tracks vacancies and rents in the top 79 markets. This shifts the power of negotiation to the tenant.

Landlords are having to take extra measures to keep their units leased. Landlords are attracting and retaining tenants by offering incentives and rent cuts. Landlords would rather lower rent rates to keep existing tenants because revenue would decrease even more if tenants were lost. Empty units are sitting on the market for a long a time, and landlords want to avoid the extra costs and lost revenue associated with empty units.

Landlords are also loosening tenant qualification standards. For example, a foreclosure history often barred tenant qualification. However, a foreclosure history is becoming so common, that landlords are being forced to overlook that on credit records. Any renter is better than no renter.

The relative freeze on construction along with the economic recovery and/or inflation should eventually help landlords regain their footing. Until then, it's a tenant market.