Once a haven from KC’s frenzied home market, apartments begin to fill up, raise prices
At one point, Westley on Broadway Apartments offered to cut rent by half for six months in an effort to induce people to sign leases at the new Westport complex.
In the height of the pandemic, that sort of offer was a comfort to renters who were hesitant to move and worried about potential layoffs or furloughs. But that kind of a deal — worth thousands of dollars over a 12-month lease — is history.
The 256-unit Westley now offers the more standard one month free with the signing of a new lease as the wider Kansas City rental market has begun to limit promotions and specials.
“It’s our first pull back,” said Devon Coffey, senior manager of real estate development for The Opus Group, which developed the property. “At the same time, we’re kind of raising prices.”
With an ultra-hot housing market, Kansas City’s rental market has been a haven for some who want to avoid the high prices and bidding wars of the ultra-fast real estate market. And while rents have not decreased by any large measure, many buildings kept them flat in 2020 and offered lucrative incentives for those signing leases.
“The big problem on the sale side is the lack of inventory, the lack of supply, whereas on the rental side that’s not a problem,” said Lisa Parks, an agent with Boveri Realty. “There’s plenty of supply. In fact, there’s an oversupply.”
But that may be changing as the summer leasing season takes full effect. Parks and other experts said discounts and promotions have been curtailed in recent weeks as vacancies decrease across the metro.
In the first week of April, Boveri saw more people move into apartments than in the entire month of March.
“So it’s definitely picking up a lot,” she said.
Parks, the leasing manager at Boveri Realty, helps renters find apartments and buyers find properties for sale. She said most rent rates seem to be holding steady or increasing only slightly.
But that hasn’t quelled concerns about Kansas City’s lack of affordable housing. And data from online listing company Zillow shows that rents are actually increasing the most on those who can afford it the least.
Even as many apartment complexes do away with discounts meant to entice renters, the newest and most expensive properties will likely continue offering promotions as they try to enter the marketplace, said Kim Coates, president of the Apartment Association of Kansas City.
“There’s a lot of inventory,” said Coates, who is the regional property manager for Cushman & Wakfield, “and you look at the pipeline and there’s still a lot more coming on.”
Last month, Apartment Guide ranked Kansas City as having the largest increase in rent of the 100 largest cities in the nation. That online listing service said average rents on one-bedroom apartments jumped 33 percent in March to an average of $1,435 per month.
And developers continue to push more luxury units into the marketplace: The Downtown Council of Kansas City estimates several thousand new units are under construction or in planning. And developers recently rushed in incentive applications for more than 5,000 new units, the Kansas City Business Journal reported. Those project plans came in just ahead of the April 8 implementation date of a new ordinance that requires new housing projects seeking incentives to include affordable units or pay into the city’s housing trust fund.
Most new apartments coming online, particularly in the downtown area, are at a luxury price point, full of amenities, views and upgraded finishes.
“It makes me wonder where all these people with high incomes wanting to live downtown are coming from,” Parks said. “Where are all those people coming from to be able to sustain those prices?”
The unequal impact of rent hikes
Like in many Midwestern cities, Kansas City’s already hot housing market has only grown more competitive over the course of the pandemic. Inventories are down, sellers generally enjoy multiple offers and many homes sell far above list price.
In March, the median sales price for homes reached $225,000, a 14.2% increase over last March, according to the Kansas City Regional Association of Realtors. Inventory of homes was down 65%, increasing the pace of sales.
So far, that hasn’t spilled over into the rental market much.
“The story in Kansas City is that rents have been pretty stable, pretty uninterrupted during the pandemic,” said Alexandra Lee, an economist with Zillow. “It’s nowhere near the for-sale market where you’re seeing really red hot appreciation and it’s a sellers’ market with homes flying off the market.”
Zillow predicts an increased inventory of homes for sale in the coming months. That may not cool the housing market, but could relieve some of the pressure on eager buyers struggling to find homes.
Lee said she doesn’t expect any major changes in rental rates going forward. But Zillow data shows that rents are rising the most on lower-priced units with high-end apartments plateauing.
That means those looking for top-of-the line rentals can expect to find some deals. But low-wage workers — generally most affected by the pandemic — are actually seeing rents increase fastest on units in the lowest price tiers.
“This population generally has been hurting,” she said. “There doesn’t seem to be a lot of good news for them.”
Every day, the KC Tenants hotline fields calls from renters who face unexpected rent hikes. That’s especially true for those in units that rent for $1,000 or less per month.
“Rents are actually increasing,” said KC Tenants Director Tara Raghuveer. “Property managers and landlords are using utilities, the pandemic, and all sorts of other reasons for rent increases.”
While some developers argue that an increase of overall housing supply will help with prices across the board, Raghuveer said that just is not true. Developers have been adding high-end rentals in the River Market, downtown and the Crossroads Arts District for years.
But rent increases have not slowed, particularly for those at the bottom tier of the market. And those luxury units, often aided by tax incentives, prioritize the wealthy, the young and the professional class over lower-income and working class families, she said.
“Trickle-down supply does not work,” Raghuveer said. “That’s a total fallacy.”
To rent or to buy?
Before the pandemic, apartments in the Kansas City metro generally had average vacancy rates of 6% or lower.
That spiked to more than 10% last year amid major employment disruptions, but has since fallen to about 8%, said Mike Tiehen, owner of a third-party rental marketing site and president of the Tiehen Group, which owns and manages apartment buildings across the city.
“It looks like we’re going to hopefully get back to our normal vacancy rate if the trends continue,” he said. “We’re heading in the right direction getting back to a more normal market where specials and price reductions will probably go away.”
Newly opened buildings will generally offer specials as they work to lease up for the first time. But Tiehen expects many of the best deals to vanish as the market rebounds.
He said the crazy housing market has pushed some would-be buyers to renew their leases or elect to rent while they wait out the market.
“A lot of those people who would normally be buying homes are being pushed into the rental market,” he said. “If I’m looking at one or the other — buying or renting — I would probably choose to rent for the time being and just let the housing market calm down.”
That’s what Tami Hartz chose to do.
She recently sold her Northland home to take advantage of the real estate market. Her house went for $75,000 above her original asking price.
She had planned to downsize but was discouraged by the inflated prices and limited selection of homes for sale. So she set out to find a rental unit.
Several units came and went before she could even look at them. And at some buildings, she noticed the prices could fluctuate day to day by hundreds of dollars.
With the help of an agent at Boveri Realty, she found a two-bedroom apartment on the 29th floor of the Power & Light building in downtown Kansas City. From her balconies, she can see the West Bottoms, the Country Club Plaza and the nearby T-Mobile Center.
Hartz, 44, still plans to buy a home in a year or two. But she said there’s no question that renting is much more expensive than buying, even with today’s frenzied market.
The monthly mortgage payment on her 5,000-square foot home was $1,900 before she sold. Downtown, she pays $3,400 per month, not to mention fees for parking and valet trash removal, along with the monthly storage costs for many of her belongings.
“I could have paid for two of my houses in the amount I’m paying for rent,” she said.
This story was originally published May 10, 2021 at 5:00 AM.
