High number of Pittsburgh Rental Units

9 Replies

Hi,

I'm curious about the high number of rental unit openings in Pittsburgh vs the population. Are people generally seeing that they're able to rent their units in a reasonable amount of time? I don't have much data on specific parts of town though and the data is from Zillow and US Census Bureau.

For comparison here are two other cities:

SF:
Units: 3k          Population:860k

Milwaukee:
Units:1,700      Population: 595,351

Pittsburgh:
Units: 2,600     Population: 300k

@Jesus Garcia

The biggest problem I see is that a one-size-fits-all mentality has been applied to this city's housing issues that just doesn't work here, mostly by out-of-town investors. Plenty of new-construction and newly renovated apartments in this area are aimed at tenants with $$$ who don't exist. There is an assumption by many people who don't live here that, in a city where you can find a functional 2-bedroom house for or less than $200,000 in practically every neighborhood, people are lining up to rent fashionable apartments for $1500 or more.

The reality is far simpler. The city has a lot of broke tenants and not-so-rich homeowners who are paying somewhere around $600/month for rent and $700/month for their mortgage, respectively. People talk to their friends. The weather and traffic here is a great equalizer when it comes to neighborhoods -- if it's grim in McKees Rocks it's going to be just as grim in Shadyside, and if it's bumper-to-bumper on I-79, it'll be bumper-to-bumper on I-376. Fashionable neighborhoods are few and far between, and the fashionable people who really-really-really want to live there are likewise thin on the ground. On the other hand, people with strong lifelong friendships who talk to each other and figure out they're overpaying for rent...more of them here than most places I've lived.

There is also very much a root of unpretentious humility that I like about this town. It's Pittsburgh. Practically everyone here can trace their roots back to industrial and factory workers. You don't spend your whole day trying to impress the grandson of the guy who poured steel next to your grandfather because you live in a certain zip code and he doesn't.

@Jim K.  

That makes a lot of sense. So the high end of the market has become saturated but you'd say that the market for duplexes and SFHs that rent closer to 700/month is doing better?

Maybe people were buying in with the speculation that Pittsburgh will be the midwest silicon valley?

Also here's an article that talks about luxury apartment complexes that are left vacant or have to reduce price https://pittsburgh.cbslocal.com/2018/03/14/pittsbu...

@Jesus Garcia

Yes, lower-priced rentals are healthy. I wouldn't say booming, but quite healthy. The article is spot in. What kind of conversation are you supposed to have with your friends about your 2 bed/2 bath $2450/month rent in East Liberty, when your buddy around the corner is still paying $1200/month for his older place and his friend of a friend a mile away is at $550/month for their rundown-but-serviceable 2-bedroom on the neighborhood border of Larimar and Homewood? Ten years ago, East Liberty was the sort of place you'd find street preachers standing on corners shaking Bibles at anyone who might be persuaded to part with five dollars for a double helping of Jesus. You can't tell a local that you're renting a 2/2 in East Liberty of $2450 and not expect to be laughed at.

Pittsburgh has been being promoted by those hoping to make a buck off it as an emerging Silicone Holler up the Tech Run Road about as long as I can remember, at least since the early 90s. The much ballyhooed explosive transformation never happened, and Pittsburgh isn't about to explode on the national tech scene now, despite what people insist the coffee grounds have told them. There have been steady, strong, well-planned steps here, and most would argue that they've put the city on firmer financial ground than any sort of sudden boom. The next thirty years of Pittsburgh as a city that lots of federal Medicare money flows to ease elder care and dying in the oldest MSA in America is guaranteed by its demographics.

What happens after that is anyone's guess.

Is there money to be made here in low-cost rentals in the here and now? Of course. But nobody on BiggerPockets really, really wants to be a slumlord. The vast majority of people I've seen here want to own nice places to rent out to nice, civil people who have never put a foot wrong in their lives and have sparkling clean criminal and civil records and yet still consciously decide to be tenants and not homeowners. I think Pittsburgh really isn't the best place for that sort of business model.

Jim is right on the money.  The higher rental price ranges have been flooded with supply and for us those units sit and have been hard to rent (shadyside, south side, etc..).  The strength of this rental market is what I'll call the class B properties in areas like Crafton, Carnegie, Bridgeville type areas that rent for 700 to 1000 a month.  We get flooded with calls on those.  And we are typically able to find qualified renters for them.  

@Jesus Garcia Ditto to what Jim and Brian said. B and C class areas are in high demand it's the high end luxury stuff that's sitting vacant for longer periods of time. 

@Jim K.   this is not unique to Pittsburgh .. we see this in Portlandia as well..  infill glass and elevator MF  that takes 2 to 3 years in planning another year to build.. costs sky rocketed to build them  300 to 400 a foot just building costs.

now you have a 1000 sq ft apartment your all in cost close or at 400k.. rent 2500 and our median home price is 350k 

that renter can own.. and have a real garage hop on Max or ride bike or whatever .. or live out in the burbs were nice new homes that i build are 2500 sq ft for 450 to 500k all in maybe 3k a month with FHA loan.. why rent ??

there are no 700 dollar rents for SFR in our market pretty much starts at 1500 for a home.. but that home price is going to be 250k for a dump in the worse area to 350k.. so therefore very few SFRs are bought for rental purposes.

its 90% of renters live in MF in this area. And replace 3rd or 4th generation steel worker with a logger or fisherman and you have the same mentality.. although Portlandia has gone Tech Intel is the largest employer with almost 20k employees and it appears they are going to double down on their fab plants.. the last 10 years they build DX 1 2 3 to the tune of 10B they are going to build even bigger facilities in the next 10 years.. so there is a need for about 30k homes to be built.  We used to build 12k doors  a year until the crash.. now we are short 20k doors.  But as you point out its a huge issue with building costs and building MF that comes in at a price point were you can rent for 1200 a door. Owners who have owned MF for the last 20 years though are killing it with rents basically double or tripling. this is one of the big things you see on BP about OH it has to cash flow day one.. Well this market did not but if you went ahead and trusted it back then now your making a killing far more than you would in markets were rents are 600 to 700 and have been that way for basically decades. and have really no hope to go up much if not at all.. with the old owners of the houses moving on and landlords moving in and competing for the tenant base. 

that's why when i see proforma's for these markets and they include yearly rent increases I don't really think that is reality on the ground.. landlord gets a solid paying tenant last thing your going to do when tenant has a lot of options is raise the rent on them.

Now Oregon is going to rent control for the entire state.. I ran into a buddy of mine that has a large PM company about 10k doors all 50 unit and up projects.. he said its sure to pass.  but it allows 7% a year increase plus inflation increases so for now when we have seen rents double in the last decade to me its a moot point. you cant raise them 7% a year anyway

@Jim K.   Also Portlandia passed a law for new MF over 20 units that you must have a certain amount of the units be for low income.. there was a huge rush to get projects approved prior to this law going into effect.

there has not been one new application for a MF above 20 units since the law was passed.. so much for forcing private developers to build low income housing.

@Jay Hinrichs

Thank you for the high-value extended post, Jay. Wish I could vote for it twenty times, because the highest-value stuff you write depressingly goes practically unnoticed, I've seen. You took the building cost issue to a lot of places I hadn't thought of before.

Originally posted by @Jim K. :

@Jay Hinrichs

Thank you for the high-value extended post, Jay. Wish I could vote for it twenty times, because the highest-value stuff you write depressingly goes practically unnoticed, I've seen. You took the building cost issue to a lot of places I hadn't thought of before.

ya its funny how that goes.. I make some little what I think quick reply and I get 30 up votes.. I take the time to do a deep dive into some thing I am pretty sure 90% of those who are bp beginners have no clue and not much of a response.. LOL.. also it just shows how regional all this stuff is.. it really is.. and this being national to semi world wide site.. everyone posts about their little corner or market and its the experience they have in that market.. So I get that.. I have learned a ton on this site from others in other markets that I would no way have known without reading their posts. 

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