Rental homes scarce in Sandpoint
SANDPOINT — When a coffee shop runs out of beans, it places an order with the roaster, and a fresh supply arrives in a matter of days. But when a property management company runs out of inventory, replenishment is neither so quick nor as easy. That is the situation in Sandpoint, according to Rick Cox of R & L Property Management. Despite increasing seasonal demand, he and his wife, Linda, have no rental homes available.
"We’re on the verge of school getting out across the country, and people are moving here, looking for rentals. Right now, we have a waiting list," he said.
In the past, homes owned by absentee landlords were a good source of rental property. However, with growing numbers of retirees moving to Sandpoint, that wellspring of residential rentals has slowed to a trickle.
“A lot of people come to town and buy houses, planning to return here to live when they retire,” Cox said. "Now, they are moving into their rental homes."
As of last year, approximately 28 percent of the city population was over the age of 60, according to Idaho state statistics. Statewide, only about 18 percent of residents are over 60, said the Administration on Aging. This could indicate that more retirees are moving here to stay rather than investing in rental property for future use.
Another factor that may contribute to the present rental shortage is lack of growth in the construction of affordable housing. The industry is slow to add more inventory to the city's supply of large housing units as well as individual rental homes. For example, in 2014, just 20 new residential buildings were under construction, according to city building statistics. This is one of the lowest numbers since the late 1980s.
As might be expected, a shortage in rental properties leads to higher housing rates.
"All of our clients are asking us to raise their rental rates. When I came to town in 1977, you could get a house for $50 (a month)," Cox said. "Now, you're lucky if you can get one for less than $1,000.”
As rates go up, the area loses a critical economic advantage cited in "Bonner County, Idaho's Resilient Economy," a 2015 report from Headwaters Economics.
"The county’s advantages in cost of living and livability depend on its ability to rein in rising housing and commercial real estate costs," according to the report. Also, residential rental rates are nearly out of reach for many middle-income tenants.
"Among its peers, Bonner County has the greatest number of residents whose housing costs exceed 30 percent of their household income. In Bonner County, monthly costs exceeding 30 percent of household income for 49.9 percent of homeowners and 45.7 percent of renters." This indicates an unmet need for less expensive rentals since a standard rule of thumb in housing is that rent should not exceed 30 percent of the combined household income, according to Investopedia.
Cox would like to see more investors purchasing homes for rentals in Sandpoint, but even that would not be an easy fix. The typical investor would have to have the cash on hand to make a considerable down payment in order to cover the mortgage with a rental rate local residents could afford, he said.
Surprisingly, many of the rental owners Cox deals with are not out to make big profits on their properties. They just want to cover their monthly loan payments and property expenses. Earning a profit would add to their income tax liability.
Instead, they keep the property as a tax shelter until they are ready to retire. Mortgage interest, real estate taxes and annual depreciation on the property value are just some of the deductions rental property owners can take, according to Bill Bischoff of Market Watch.
In addition, purchasing residential property while housing prices remain relatively low constitutes a good investment. Owners can watch their property values grow. If they plan on living in the rental home upon retirement, they'll enjoy the lower monthly payments of a home purchased when the market value was low.