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For Rent: Boise's Historic-Low Vacancy Rate Triggers a Flood of New Apartments 

"A healthy vacancy rate is something around five or six percent. A 10 percent vacancy rate is beneficial to the renters, but a two percent or lower vacancy rate is unhealthy and beneficial to the landlords."

In The History of the World Part 1, Mel Brooks joked, "It's good to be the king." Currently in Boise it is good to be a landlord, and great to be a developer: There are more than a dozen new or in-development housing units in the downtown core alone. More than 1,300 units have been recently completed or are under construction.

The reason for all the development is simple enough: a record-low vacancy rate. According to the Downtown Boise Association, apartment occupancy was 99 percent in 2016.

"A healthy vacancy rate is something around five or six percent. A 10 percent vacancy rate is beneficial to the renters, but a two percent or lower vacancy rate is unhealthy and beneficial to the landlords," said Diana Lachiondo, Director of Community Partnerships at Boise City Hall. "Right now, we have people applying to 20 or 30 different places and wasting money on application fees, putting themselves in a deeper financial hole. It's a really bad scenario for renters."

The best example of the critically low apartment availability is played out every day at Johnson Property Management, one of the largest rental management firms in the Treasure Valley.

"Let's take a look," said JPM owner/manager Don Johnson. "I'd say right now we [manage] about 900 rentals: apartments, condos and houses. How many do we have available?"

Johnson walked over to a huge whiteboard with scores of addresses, a big "X" covering most of them. "Today, we've got six," he said. "Yes, you heard me right. Six. Now, we're in the middle of the month, and things turn over constantly. We'll turn over about 15 to 20 a month. But a one or two percent vacancy rate is very low."

Johnson said he's reserving judgment on how the influx of new rental units will affect the market, but 1,300 new units is a drop in the bucket compared to how many rentals are currently under construction all across Ada County, many of them outside the Boise city limits.

"I keep track of a list from the Ada County Assessor's office. Take a look at this," Johnson said as he pulled out a stack of papers. "Here we have a list of all the units that are in some form of the process of being built." Johnson flipped to the bottom page. "It's 5,500." He looked up, took a deep breath and repeated, "It's 5,500."

Johnson, 70, still shows every rental. It's in his blood. A faded photo on the wall of his office shows him at age 4 standing next to his grandfather, Richard Johnson, who opened Johnson Property Management in 1958.

"My father is still at it," said Johnson. "He has the oldest broker's license in Idaho. He's 92 and he's still active."

Also on Johnson's wall is a framed JPM ledger page, circa 1958, showing rentals ranging from $40 to $45 a month. That's a far cry from what the U.S. Housing and Urban Development Department today calls "affordable."

What's Affordable?

The word "affordable" is often tossed around when analysts talk about housing markets, but what an economist considers reasonable is exorbitant for some.

'This is the so-called income ladder that we use when we communicate with our partners in the community," said AnaMarie Guiles, Housing & Community Development Manager for the city of Boise, pointing to a tall, multi-colored chart titled "2017 Income Guidelines."

"These numbers are important to help us discuss what our focus is when it comes to housing," said Guiles.

In a nutshell, here are the critical numbers from the 2017 income guidelines:

Boise's median income for a family of four is $64,300.

There are four main categories: Extremely Low (four-person family with an annual income of $24,600), Very Low (four-person family with an annual income of $32,150), Low (four-person family with an annual income of $51,450) and Workforce (four-person family with an annual income of $77,160).

Affordable Rent is calculated to be 30 percent of a family's income. According to HUD, "families who pay more than 30 percent of their income for housing are considered cost-burdened."

Affordable Rent for a family of four in each of the categories would be $615 (Extremely Low), $804 (Very Low), $1,286 (Low) and $1,929 (Workforce).

"Yes, there is some criticism around that definition of 'affordable.' We have a lot of individuals and families who say 30 percent of income isn't realistic. There are a lot of people who say it should be more like 45 percent because that's what they're experiencing," said Guiles. "Have you seen the new report from the United Way of Treasure Valley?"

She was referring to the just-released community assessment from United Way detailing the status quo of health, education and financial stability across the Treasure Valley. And some stunning conclusions regarding housing appears on page 27 of the study.

"The stress of housing insecurity is an ongoing threat to lower-income wage earners in the Treasure Valley, especially for those who rent homes or apartments," reads the study. "The percentage of individuals who are burdened by high housing expenses...is higher among renters than among homeowners. This number has been slowly increasing in Ada and Canyon counties. This is not due to renting as the sole factor, but likely reflects that those who rent their home are financially vulnerable—often unable to find an affordable home to purchase, to save enough for a down payment, and to earn enough to provide a financial buffer in the event of other expenses."

An accompanying graphic in the study reveals another jaw-dropper: Nearly 16 percent of renters are deemed food insecure, more than three times more than homeowners.

And that strikes at the very heart of some major housing initiatives managed by the City of Boise.

"Boise is extremely rare in that we own rental housing. We own about 300 units in 48 locations. And that's beyond rare. There's not even a national precedent," said Guiles.

Those city-owned units are geared toward individuals or families in the "extremely low" category, earning 30 percent or less of the median income. But the chance of someone getting into one of those low-cost rentals is extremely slim.

"Someone may be on a waiting list for three years, or..." Guiles paused for a moment and said, "...well, to infinity."

And while the city continues to operate and manage its own much-in-demand affordable rentals, officials say it's even more important for private developers to step in to build more affordable rental complexes.

"We're always looking for more multi-family units. The recession was particularly harsh. In 2010, there wasn't a single permit issued for the construction of a multifamily unit," said Lachiondo. "It created this big chasm where nothing was in the works. And now, here we are in our fourth year of record-low vacancies."

But the city wants a much more diverse portfolio of rental availabilities, not just for low-income families. That's where Guiles points to the upper levels of Boise's median income chart.

"It's all about diversity. We want to appeal to more income levels," said Guiles. "That's, for instance, the nurse who checks you in for surgery at St. Luke's Hospital. Or any number of downtown employees who would fall under the category of 'workforce' housing."

1,000 More Bedrooms ... and Counting

In 2012, Derrick O'Neill raised eyebrows when he took over as the City of Boise Planning and Development Services Director. O'Neill was an accomplished developer in the private sector and served as Executive Director of United Way of Treasure Valley. Barely two years into his new post at city hall, O'Neill stood before the Boise City Council in the summer of 2014 and proposed that the city provide the economic stimulus to create at least 1,000 apartment rentals or for-sale condominiums.

Nearly five years later to the day, the Downtown Boise Association, at its annual State of Downtown confab, displayed a map of the city's downtown core. Scattered across the map were a series of dots, signifying all of the apartment or condo projects that had recently been completed or were under construction. The total number of units? 1,313. In the same demonstration, the DBA said 8,000 people currently lived downtown, only 3.6 percent of the city's population.

Mike Brown, co-founder of LocalConstruct, is in the business of changing that figure.

"Yes, check back with me about a year from now," said Brown with a smile.

Brown, with hardhat in hand, had just inspected the latest LocalConstruct project, the Fowler, which will bring 159 apartment rentals to the revitalized Central Addition neighborhood at Broad and Fifth streets.

"Right now, we're looking at swinging the doors open mid- to late-fall. We're getting a lot of inquiries already," said Brown. "The Fowler will have a mix: studio apartments, one and two-bedroom units. Plus you'll see a high-end pizzeria and coffee shop on the ground floor, plus an enclosed parking garage."

Brown is a busy man. His company has a long list of developments in California, Colorado and Montana, and is making its presence known in Boise. The company recently completed The Watercooler on the 1400 block of Idaho Street, which offers 39 units, including studios and one-, two- and three-bedroom apartments. That followed LocalConstruct's biggest gamble when, at the height of the recession in 2012, it partnered with Old Boise to remodel the historic Owyhee Hotel into a mixed use of downtown apartments, retail and commercial space and dining.

"What did we learn from the Owyhee project? I could write a book," said Brown with a big smile. "At the time, everybody was saying 'millennials, millennials, millennials.' But we anticipated on getting a mix of people. And that's exactly what happened. We saw just as many boomers. It turns out that that millennials and boomers pretty much want the same things in downtown living."

Brown is cautious, though.

"Downtown Boise's continued success is not a foregone conclusion, but I can tell you absolutely that based on the quality of local governance at city hall, the quality of your elected officials and their staffs, I would say that it's a gross improbability that this is not going to continue to thrive."

Even before the Owyhee project was complete, LocalConstruct had already committed to The Watercooler and The Fowler apartment projects. Sitting inside Boise Brewing, directly next door to The Fowler, Brown looked down Broad Street to where, only a few years ago, gravel parking lots had defined much of the landscape.

"If you build the rooftops, everything else will follow," he said. "And who knows? If The Fowler is as successful as we think it will be, we may start working on The Fowler 2, some more apartments right across the street. It makes sense."

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