The Tight U.S. Apartment Squeeze

Rents soar as construction cannot meet demand

Apartment hunting in many cities has taken on aspects of stalking big game. First there is the uncertain trek through the wilderness of newspaper classifieds, riddled with bait-and-switch ads for apartments that were just rented, sorry. There is the patient wait for the quarry, an exercise in stealth, timing and cunning. Finally--if the hunter is lucky--there is what appears to be the target: lg studio, din. area, dressrm, window, kit. D/W, so expo. Then comes the price for bagging what is really a one-room flat: perhaps $350, plus another $350 security, plus maybe another $350 to a rental agent for finding the place. No kids, dogs, cats, Venus's-flytraps or wild parties, please.

Vacancy rates have seldom been lower in desirable parts of cities. Rents are double what they were at the start of the decade: $400-$750 for a one-bedroom unit on Manhattan's tony East Side, almost $300 in Miami and Los Angeles. Says Daniel Rose, chairman of the housing committee of the Real Estate Board of New York, where vacancies in Manhattan are running only 1 1/2% to 2%: "We've never had such pressure." Declares Kathleen Connell, director of housing for the city of Los Angeles: "It has got to the point where if there is a vacancy, owners aren't advertising. News of a vacancy is getting out by word of mouth, and by the next day there's a line of applicants."

Supply of apartments is scarce partly because builders ran out of money during the 1973-75 recession. Overall U.S. apartment building is down 60% from 1972, to 415,000 units, nowhere near the 1 million apartments experts say are needed. Developers' costs for land, labor and maintenance have gone up far faster than rents. Result: apartments are being converted into owner-occupied condominiums, thus removing them from the rental market, or condominiums are being built and sold at high prices to realize a quick return on investment. Says Howard Ruby, chairman of R. & B. Development Co. in Los Angeles: "Rents are still too low." Daniel Packard, an executive with Mayer Construction Co., which last year built 40% of the apartments in Southern California, predicts that his company may go out of the apartment business by 1980. Says he: "It's now costing us $28,000 to construct a single apartment."

Demand for rental units is high, partly because house prices are at record levels, forcing tenants to postpone buying homes--or to double up and join another family in renting a large old house. The tight market also reflects changing American social values. The growing population of Splitsville--more than 1 million Americans got divorces last year, v. less than half that number a decade ago--has forced spouses to seek separate dwellings, and they usually want apartments. So do childless hetero-and homosexual couples and independent-minded women. In Los Angeles, the number of people per dwelling dropped from 2.2 in 1970 to 1.9 in 1975.

There are exceptions to the squeeze, mainly in "problem neighborhoods." In Boston, for example, vacancy rates in run-down apartments range from 30% to 50%. But the norm is scarcity and high rents. Says Ginger Decker, manager of an apartment referral agency in Atlanta: "Tenants are running scared, but there's really no place for them to run."

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