Tenants: I Can't Pay The Rent

Rising Property Values Drive Up Prices As Wages Remain Stagnant

January 4, 2005
By MIKE SWIFT, Courant Staff Writer

After a divorce in 1981, Frank Butash landed in a ground-floor apartment in West Hartford. He spent the first few nights on a towel on the floor because he had no furniture.

But two decades have filled every nook in Butash's apartment with computers, books, musical instruments, campaign signs, even a hulking old console TV, its porthole-like screen pushed into a corner. Outside, Butash planted a garden, first just a patch of tomatoes, then a larger common flower and vegetable garden in the apartment complex at 229 S. Quaker Lane.

Over time, the landing pad had become a home.

Then, this fall, investors paid $5.3 million to buy the apartment complex where Butash lives and a nearby complex on Boulevard - an aggressive price, according to real estate professionals.

"Within a week, we got a call that the rents were going up, in one case by 40 percent," Butash said one recent evening, sitting in his apartment among a group of other tenants who said their paychecks were no match for the new rent. Facing $875 rent, including heat, which the retired college professor said he couldn't afford on his fixed income from Social Security and savings, Butash considered the unthinkable - moving.

"My life in the last 23 years is built around this place," said Butash, a member of West Hartford's Republican Town Committee. Instead, he's planning to get a job to cover the higher rent.

The new owners of the South Quaker Lane complex, DR Boulevard LLC, say they are raising rents in part because they are making major upgrades to two apartment complexes they own in the neighborhood. They say the tenants were fortunate to pay below-market rent in the past.

But Butash and his neighbors are far from alone in being squeezed by increasing rents in Connecticut. A renter must earn $16.79 an hour to afford the fair market rent for a two-bedroom apartment in the Hartford metro area, according to a recent report based on federal census and housing data.

Put another way, a person earning the Connecticut minimum wage of $7.10 an hour would have to work 95 hours a week to afford the fair market rent of $873 in Greater Hartford for a two-bedroom apartment.

In the Stamford-Norwalk area, where, the U.S. Department of Housing and Urban Development says, the fair market rent is $1,437, two people earning the minimum wage would both have to work 78 hours a week to afford a two-bedroom apartment, the new report says. Those numbers make Stamford-Norwalk the second-most-unaffordable rental market in the United States, trailing only San Francisco.

Stamford-Norwalk may be less affordable, but Greater Hartford has four times the number of low-wage people being squeezed by increasing rents, according to the "Out of Reach" report, which was issued by the National Low Income Housing Coalition in Washington, D.C.

About 28,500 people in the Hartford metro area who earn 30 percent or less of the area's median family income - families that make $22,000 or less - cannot afford the rent for a two-bedroom apartment in the region, the report said. The New Haven-Meriden area had the second-largest number of low-income people, about 15,600, who could not afford a two-bedroom apartment. Affordability is based on a family spending 30 percent or less of their income on housing.

"There are a lot of people under incredible stress," said Lynne Ide, associate director of the Connecticut Housing Coalition, a statewide housing advocacy group. "I think this report puts numbers to the story that people experience every day in their effort to put a roof over their heads, and still pay their utilities and medical bills and whatever else it takes to get through the day."

The big problem in Greater Hartford and across the United States, experts say, is that wages are not keeping pace with rising rents.

"The problem is getting worse. Wages are stagnant or declining. Rents, even where they are soft, are increasing," said Danilo Pelletiere, research director for the national housing coalition. "The gap is growing."

That problem is exacerbated in a place like West Hartford, where booming real estate values mean that new owners pay top-dollar for properties, and then must service the debt on those prices. Inevitably, experts say, those costs are passed on to renters in the form of higher rents.

U.S. Census Bureau data show that while wages have not increased in metro Hartford relative to inflation since 1999, rents have been escalating rapidly.

Between 1999 and 2003, the median earnings for a full-time worker in Greater Hartford was essentially unchanged, at about $33,200 in 2003 dollars. But from 2000 to 2003, the median rent in the Hartford metropolitan area jumped nearly 17 percent in 2003 dollars, according to the census bureau.

The "Out of Reach" report documents a growing gap between wages and rents, using a statistic called the "housing wage." The housing wage is the hourly wage a single breadwinner would have to earn to afford the fair market rent on a two-bedroom apartment.

In Greater Hartford, the housing wage jumped from $13.31 an hour in 1999 to $15.90 in 2003.

A booming real estate market is a fine thing for owners who see the equity they hold in their property grow with prices. But it is hardly a boon for renters.

The apartment complex where Butash lives on South Quaker Lane, and a nearby complex on Boulevard, were owned by the late Rita Gelinas, a landlord who owned a number of properties on or around Park Road. Her properties were sold to investors after her death about a year ago. For Butash's complex, the sale price was more than double what the Gelinas family paid in the 1980s, town records show.

Renters ultimately pay for the escalation in real estate values, said Edward Sanady, the fair housing officer for the town of West Hartford, who has met with Butash and his neighbors.

"I'm sure the new mortgage for these owners, compared to the old owner, is huge. They have huge bills to pay that she didn't have," Sanady said.

In West Hartford, rents are rising to the point where some landlords are charging Manhattan-like fees of $2,000 or more for desirable apartments on the edge of West Hartford Center, Sanady said.

"Hearing about rents of $1,300 to $1,500 no longer raises anybody's eyebrows," he said. "I'm overwhelmed when I see the prices of rents."

Rents are up across the state, said Penny L. Trick, managing attorney of the housing unit for Statewide Legal Services of Connecticut, a federally funded nonprofit organization that provides legal aid to low-income people.

"Over the past year, I think it's been quite significant. It used to be that we would get a fair number of callers who would have rents of $500 or $600 a month," Trick said. "We hardly ever see people with rents that low now."

Higher rents are squeezing many long-term tenants who suddenly find they cannot afford the rent after new owners buy their apartment buildings at inflated prices.

"We're getting calls where people are getting evicted who are living there eight years, 10 years," Trick said. "But these new landlords can get what they are asking [in rent]."

A related problem is that there is a huge backlog of people in the Hartford area who are unable to get federal rental support vouchers, even though they have incomes low enough to qualify.

Hartford's regional program currently has about 2,700 families on its waiting list for "Section 8" vouchers, a list that has not accepted new applicants since 2001. Because of federal cutbacks, the backlog could get worse, said Ken Schultz, director of program management for Imagineers, the private company that administers Hartford's Section 8 program.

Nor is there a large inventory of apartments begging for tenants in the region, say real estate experts who monitor the multifamily market. That is true not only in desirable suburbs like West Hartford, but even in poorer communities like Hartford, where one large block of apartments that recently sold in the Asylum Hill neighborhood was 96 percent occupied.

That means that Butash and his neighbors may have fewer options if they decide to move - even if, technically, their new rents are roughly what the government says is fair market rent for the Hartford region.

"We're maintaining very high occupancy in this market," said Steve Witten of Marcus & Millichap, a broker in the sale of many apartment buildings in Connecticut. "There aren't a lot of options for moderate income tenants, but I don't know if you penalize an owner for what is market [rate] rent."

A number of South Quaker Lane tenants said there are physical problems with the apartment complex. The physical condition of the apartments is not good enough to justify the higher rents, Butash said. "They are not market rate because they are not up to snuff," he said.

The principal of DR Boulevard says those improvements are on the way and are one reason for the rent increase.

Dan Rosow said the landlords are also facing increased costs for oil, insurance, taxes, advertising, staff and contractors. The tenants had been paying below-market rents before DR Boulevard bought the complex, he said in a written reply to The Courant.

"Many of these tenants have been fortunate that they have had the opportunity to pay so little for so long," Rosow wrote. "In several cases these rents have had little or no increases to keep up with inflation, consumer price index increases and other operating costs."

Rosow said the landlords have tried to meet with all tenants in an effort to be fair: "As hard as we try to be fair in our dealings, we will not be able to please everyone. If we were charging above market rents we would have no tenants, if it was our practice to act unfairly we would have no tenants and if we did not maintain and improve our properties we would have no tenants."

But tenants say the rent changes have disrupted their lives.

Perhaps eight or nine tenants have already moved, or are planning to, to avoid rental increases of 30 percent or more.

"I want to stay in this place, but you increase [the rent] 33 percent, I'm unable to pay that much," said Mihn Le, a machinist who is planning to move after his rent went from $700 to $925.

He wants to buy a two-family house with an apartment he would rent to another Vietnamese family who wants to move out of the South Quaker Lane apartment complex because of the increasing rents.

Butash said he'll be fine. For some of his neighbors, he says, it will be much tougher.

"It's like Simon Legree," he said. "It's like a cartoon. It's out into the snow."