ITHACA, N.Y. — If you’re a Collegetown landlord, you might be a little nervous. For everyone else, it comes as a little bit of relief. Evidence is growing of a slight softening in the rental market, particularly with student rentals.

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Just so it’s clear, by “student rentals”, it only means rentals that are primarily rented by students. There is no legal difference between a regular rental unit and a student rental unit, and fair-housing laws are in place to prevent landlords from discriminating. But, certain rentals are more popular with students, which could be because of proximity to the colleges or unit size, since not many folks outside of student groups have use for 6+ bedrooms.

So, how do we know the market’s getting a little less tight? A little bit of outreach, a lot of references, a good dose of hard data, and some economics. Let’s take a look.

The Evidence

“We have noticed weaker demand. We’ve also talked to a large number of landlords who are experiencing their most difficult years in business,” said Todd Fox, co-owner of rental company Modern Living Rentals.

“Our pace of rentals in 2015-2016 moderated slightly compared to the previous year (2014-2015), which was a record setting year for us. Rentals in 2016-2017 are at about the same pace as 2015-2016,” replied Frost Travis of Travis Hyde Properties.

“My feeling is that we are, I think, behind last year’s pace, but I don’t know if it is attributable to a soft rental market, or our own inefficiencies,” said Ed Cope of PPM Homes.

Most of the landlords the Voice contacted said varying degrees of the same thing – they had noticed the market was more sluggish than usual. The majority weren’t alarmed by it, but it didn’t go without notice. The Voice reached out to owners of multiple properties, since by having more units or more locations, they would likely be better barometers of the market. A couple recommended we contact the banks, so the Voice did that as well.

“We’re certainly watching closely, we really take the long view here. We’re still involved in projects under construction, we’re looking at the market with as much curiosity as you guys. Some landlords are still trying to do it the way they did it ten years ago, the same old thing may not work anymore,” said Mike Cannon, Vice President at Tompkins Trust Company.

Also, from an article on Collegetown in the Ithaca Times recently, we know a few other major local landlords – Steven Beer (Beer Properties), Jason Fane (Ithaca Renting) and Nick Lambrou (Lambrou Real Estate) are also reporting a little more slack in the market.

Lest it sound like just a few anecdotes, the feeling is prevalent enough that the city’s Rental Housing Advisory Commission had a meeting discussing the matter back in March.

For the record, not all rental companies contacted had reported a softer rental market. Josh Lower of Urban Ithaca said, “We have not noticed any changes in the demand for housing,” and the younger Rocco Lucente of Lifestyle Properties wrote “Honestly, it’s hard to tell if the market has softened when we have all of this new product.” This is to be expected, since not everyone is impacted uniformly – some fare better, some worse, “your mileage may vary”.

Also, let’s note that Ithaca’s rental vacancies have been infamously below what a healthy market should be – 0.5%, compared to 3% to 5%. With vacancy rates that low, it’s pretty much been a seller’s/landlord’s market the past several years, and the average rent increases reflect that.

The Causes

So what could be creating this slack? Well, at its simplest, it boils down to changes in supply, and changes in demand.

Let’s start with demand. What are the big drivers of growing demand in the local rental market? Job growth, increasing numbers of retirees, and student population growth. Job growth has been consistently positive, and the total number of individuals in the 45-64 and 65+ age brackets for Tompkins County residents continues to rise steadily. So neither one of those appears to be the culprit. Which leaves suspect number three, student population growth.

A check of Ithaca College’s enrollment data shows that the college had 6,415 students in Spring 2016, up 82 from 2015, but less than every other year since 2009. IC’s impact on rentals is somewhat muted by the fact that 69% live on campus. It’s unlikely South Hill’s impacted the market much lately.

Now a check of Cornell’s enrollment. The above numbers break down Cornell’s enrollment into total enrollment, and those studying outside of Ithaca – some study abroad students, but increasingly represented by the New York City area with Cornell Tech or the Executive MBA program.

The number enrolled has grown steadily over the past decade, but it slowed down after Fall 2014. More notably, the Fall 2015 enrollment actually decreased in Ithaca by 18 students. Not enough to severely jostle the market, but more than enough to justify the rental market “moderating slightly”.

So now we’ve considered the demand aspect, let’s consider the supply aspect. The construction permit data from federal agencies shows that in the past couple of years, there has been an increase in building permits in the city, where rentals are most prominent. Plus, given the number of units that were under construction or approved in 2015, we know that 2015 will continue that trend. The first sizable influx of new apartments in Collegetown since the 2014 rezoning will come online this summer, about 213 bedrooms. The year before, it was about 47 bedrooms.

Here’s your take-away – the supply is finally starting to make some headway in the large market deficit, and it’s being helped along by the moderating demand, mostly as a result of Cornell’s Ithaca student enrollment leveling off.

The Long-Term Impacts

So, we know what the market looks like with a current snapshot. What’s going to happen moving forward? Potentially, a lot.

It’s hard to predict what Cornell’s or IC’s enrollment will be in a few years. IC intends to keep its student population at less than 7,000 per their master plan, and as for Cornell, they want to grow their NYC Tech Campus by thousands, but there haven’t been any recent indications of what their future Ithaca enrollment will be.

One thing the data has yet to fully account for is the Maplewood and Hughes Hall displacements later this year, which should have driven up 2016-2017 market demand for rentals since Cornell was removing housing options. When it comes out, taking a look at the Fall 2016 enrollment data could help, because for all we know, Cornell’s Ithaca enrollment might be sizably lower in Fall 2016 to compensate for the housing situation. Some more information might come from the county’s housing study being conducted by Danter, and due out later this Spring.

Likewise, it’s hard to say how the economy will look or how large the retiree population will be, although if one goes with consistency, those are both likely to stay the course of modest increases, barring economic downturns or epic disasters.

One thing we do have some guidance on, however, is the supply. There’s a lot underway. For one, Collegetown Terrace’s last phase will open in 2017, adding over 340 bedrooms to the market. For two, Cornell’s Maplewood redevelopment will increase the number of occupied beds on the property by over 500. For three, Cornell is still examining a large-scale redevelopment of East Hill Plaza into a new mixed-use, urban neighborhood, one that would house hundreds if not thousands of students and staff.

All of those would add a lot to the supply of housing, and if new supply continues to outpace demand and whittle away at the housing market deficit, less desirable properties and locations would have to either lower their prices, spruce up their properties, or both. If prices come down, renters who don’t have as much buying power as students could finally see a market become more amenable to them, something that hasn’t happened in a while.

So in the end, a softening rental market might sound like a bad thing, but not in Ithaca, with its obscenely low vacancy and affordability issues. Even the landlords agreed with that sentiment.

“I don’t think Ithacans should be worried,” replied Fox.

“I think adding rental product in the student sector takes pressure off of what little mid-market rental product is available, so I would say this could be perceived as a positive for the mid-market that gets squeezed out of Ithaca usually,” said Travis.

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Brian Crandall

Brian Crandall reports on housing and development for the Ithaca Voice. He can be reached at bcrandall@ithacavoice.com.