When thinking of cities likely to have the least affordable rental housing, New York City is a good bet. It only makes sense that the financial capital of the United States would be an expensive place to live. So when the New York Times recently published a list of the top 20 cities where rents are highest relative to median gross income, it was a bit of a surprise to find Ithaca ranked 11th, just one spot below the Big Apple.
The list, derived from an analysis conducted by the real estate website Zillow, found 90 cities where the median rent—not including utilities—was more than 30 percent of the median gross income. Conventional wisdom suggests an individual’s rent should be somewhere around 30 percent of his or her income. Zillow found Ithacans, on average, spend 38.6 percent.
According to the U.S. Department of Housing & Urban Development (HUD), the average two-bedroom apartment in Ithaca—including utilities—costs $1,130 per month. To afford such an apartment without spending more than the traditional 30 percent of one’s income on rent, the household would need to earn $49,000 a year. The median household income in the City of Ithaca is $29,230 and two-thirds of the city’s households earn less than $50,000 a year, according to the 2008-2012 estimate from the American Community Survey (of the U.S. Census Bureau).
“The cost of housing is increasing at a faster rate than the increase in median household income,” said Nels Bohn, Director of Community Development, Ithaca Urban Renewal Agency (IURA). “Between 2013 and 2014 the cost of rental housing in Ithaca increased 13 percent,” he said, “yet household incomes are largely stagnant. We have a growing housing affordability problem in Ithaca.”
Why is rent so expensive in Ithaca?
Several cities found on the New York Times' least affordable rents list were to be expected. Los Angeles (topping the list at 47 percent), Miami (43.2 percent), San Diego (41.4 percent) and San Francisco (40.7 percent) are sought after destinations for employment. It’s easy to fathom why living in those cities year round would be costly.
It is less apparent why the rental housing market in Ithaca is so competitive. Even when compared to other college towns in the Northeast, Ithaca is expensive. According to Apartmentratings.com, the average two-bedroom apartment—$1,165 in Ithaca—is cheaper in Burlington, VT ($999), Charlottesville, VA ($1,139), Amherst, MA ($1,074), and New Brunswick, NJ ($1,066). All of the aforementioned college towns have median household incomes greater than Ithaca, with Burlington ($33,070) the only one not north of $40,000.
The simplest explanation for why Ithaca’s rental housing market is skewed is supply and demand.
“The New York Times article that just came out that looked at all of these market areas had, to me, really surprising results,” said Paul Mazzarella, Executive Director of Ithaca Neighborhood Housing Services (INHS). “I knew Ithaca was expensive. I’ve also known New York City was very expensive. One of things that makes rentals expensive in Ithaca is that the supply of rental units is really limited.”
Thanks to a constant stream of renters supplied by Ithaca College and Cornell University students, landlords in Ithaca find themselves with very few vacancies. According to Bohn of IURA, the current rental market in Ithaca has a vacancy rate of less than 1 percent. A desirable vacancy rate in a real estate market is typically 5 percent. In addition to increasing rent, a housing market that prioritizes a student population leaves the rest of Ithaca’s rental market in the dark.
“It is important to note that increasing the supply of housing aimed at only one price range or targeted to a single age niche will not result in the benefits of increased competition for the entire market,” Bohn said.
“For instance, increasing the amount of housing near campuses that are targeted for college students has minimal impact on the rents for households seeking housing elsewhere throughout the community. Likewise, increasing the supply of high-end housing is not expected to trickle down to offer more choice for lower-income households. We need an across-the-board increase in the rental housing supply as well as other types of housing, such as condominiums,” he added.
Not only is the presence of Ithaca College and Cornell University dictating the city’s housing trends, the institutions also create jobs. This brings new faces to Ithaca looking for a place to live, and more times than not, to rent. While a thriving job market is a good thing, Ithaca Mayor Svante Myrick said it factors into why affordable apartments are so hard to find.
“I think it’s because there’s a lot of jobs here, and there’s not a lot of apartments here,” Myrick said. “It’s that dynamic. We have not grown the housing market as fast as the job market. So that while we’re adding more jobs, the people coming in to take the jobs are now competing with the people that were already here.”
Even Myrick, with a yearly salary of $50,000, flirts with paying more than 30 percent of his gross income on rent. Living with a roommate in a two-bedroom apartment on Linden Avenue with a monthly rent of $750 per person, Myrick estimates spending close to $12,000 a year on rent and utilities. He said, after taxes, he clears a little more than $35,000 in income. That puts him right around spending a third of his income on rent, and that’s with a paycheck well above the city’s median income. Myrick noted that the job he had before being mayor paid him $26,000 a year, and that those days included missed meals and “a lot of Ramen.”
“I can’t complain about my paycheck at all,” he said. “I’m a single guy with no overhead, that’s pretty good. But the rent is killer.”
Myrick said the first step to creating a more affordable housing market is keeping up with the population growth; the second step is keeping up with the local job growth. However, even if those two conditions are met, a new trend of national household size shrinking is creating a need for more households, Myrick said.
“Fifty years ago, someone my age would be married and have three kids,” he said. “Four people would live in one house. Now, whomever it is I’m going to marry is out in an apartment on her own. And I’m in an apartment. So it’s double the number of apartments you would need before.”
You Don’t Pay for What You Get
Anyone who was surprised to find Ithaca among the least affordable places to live probably doesn’t rent in Ithaca. Whether you’re the mayor, a student, or just a longtime resident, it is a known concern.
Cornell graduate student Amanda Costello, who lives in a four-bedroom house on South Quarry Street, pays a monthly rent of $625 per person, which only includes water. Before that, she lived on Dryden Road.
“So far this is the cheapest place I have lived in Collegetown,” she said. “Rent increases between $25 and $50 per person every year no matter who your landlord is. Collegetown—its housing at least—is basically a glorified slum. I would never pay what I do if I didn’t need to be within walking distance of campus. The [building at the] intersection of Dryden Road and College Ave. now sits half empty because of the outrageously high rents. Who that is working out well for, I can’t say. It is horrifically overpriced. The landlords must pay off the inspectors to get these houses passed.”
Cornell graduate student Owen Rickey—who like Costello also attended Cornell as an undergraduate—echoed Costello’s frustration. He pays a monthly rent of $850 for his share of a two-bedroom apartment on Oak Ave. Angered by the year-to-year increases in his rent, he claimed that eight major landlords cornered the market in Collegetown.
“They work together to keep prices high on their properties despite each one being a piece of crap,” he said. “Each year a house or two is closed for the removal of asbestos from the walls and ceilings. Houses sag to the point of almost collapsing. It is insane. These are $200-300 per person a month places that are going for $700-900, and all the way up to $1200 or more. All because they are close to Cornell University.”
Landlords Association of Tompkins County President Herb Dwyer said there is no such rent collaboration between the eight major landlords of Collegetown, or any landlords in Ithaca for that matter. He added that the landlords association holds roundtable meetings to make sure “those types of meetings don’t happen.”
“I’ve never heard of that,” he said. “It would only be a monopoly if there it was just one guy. If they really are meeting to discuss rents, that’s price fixing and that’s illegal. That’s straight out of a Hollywood movie. I can’t imagine that’s the case. Increases in rents are purely market driven.”
Overpaying for mediocre living arrangements is not exclusive to Collegetown. Myrick estimated that his $750 rent per person apartment looks and feels like “what $400 per person should get you,” adding, “if $750 a month gets you this, then what do you get for $400? It’s brutal.”
Ithaca Times staff photographer Justin Zoll has rented in Ithaca for seven years. He said he pays $465 (heat included) for his half of a two-bedroom apartment in Fall Creek. Even though this would qualify as cheaper than the average, Zoll said it still takes its toll.
“I’ve always paid about this much, so I can’t comment as to whether or not it’s reasonable,” Zoll said. “I can say that as someone who has worked a number of different jobs in Ithaca, it does take a considerably large portion of my income.”
Raising rents to “tread water”
With the cost of rental housing in Ithaca up 13 percent in the last year (according to the IURA), it might seem like landlords are taking advantage of a situation where there is more demand than supply. However, owning property in Ithaca is an expensive endeavor in its own right.
“It’s very expensive to own property in the city of Ithaca,” said Ithaca landlord Monica Moll. “Property taxes are 22 cents of every dollar. Utilities and water is very expensive. I have a high turnover rate, so that’s very expensive. Every year, I turn over 75 percent of my property. So that costs money. So I can see why rents are so much above the median income in Ithaca because there are so many factors in keeping up property that is very expensive. It’s really hard. I can’t raise rents fast enough at this point to cover the increase in property taxes.”
Warren Real Estate broker Mark Mecenas been in the real estate industry in Ithaca for nearly 30 years. He is also a landlord and a developer. No matter what hat he’s wearing, he said the cost of doing business in Ithaca—or anywhere in New York State—is high. He pointed to the area’s high taxes and long heating season as to why owning and renting property is more expensive in Ithaca, than say, Virginia or Georgia.
“My whole reason for investing in real estate is to be a hedge for inflation,” he said. “Because every day I’m losing buying power through inflation. I’m not trying to raise rents. For the most part, I’m treading water. I’m not getting ahead. I’m not making any real gain. I’m just saying ‘Ok, what are my expenses this year? Oh, I have to increase rent.’ It’s a vicious cycle.”
As taxes rise, so will rent.
“On the cost side, homeowners and renters struggle with high property taxes due to the high percentage of tax-exempt property in the city, which is over 60 percent,” Bohn said.
“It is not unusual now for a homeowner to pay more in taxes than mortgage payments. One solution to alleviate this problem is to increase the tax base. A new market-rate condominium housing project downtown or student housing project in Collegetown may not lead directly to more affordable housing, but the property taxes they pay will reduce the tax rate for the rest of the community, including housing developers of moderate income rental housing,” he added.
Can anything be done?
One solution to stabilizing the rental housing market in Ithaca would be to increase the supply. However, as Bohn noted, simply adding housing options is not guaranteed to have any impact. A new apartment complex near Collegetown isn’t likely to lower the cost of living in downtown. Options must be added across the board. Unfortunately, developing new housing is a huge challenge anywhere, let alone Ithaca.
“We run into such a firestorm of opposition at every turn any time we have affordable housing projects proposed,” Myrick said. “People wonder why it’s so hard to build affordable housing in the city. The people who like it generally don’t show up. I mean, they just don’t show up at city council meetings. You’ll never have 100 people show up (to support an affordable housing project).” He also pointed out that a lot of people who would be in favor of the project don’t actually live in the city yet, making it even less likely that they would attend a council meeting.
Landlords Association of Tompkins County President Herb Dwyer said adding new housing options in Ithaca is a challenge because there are few places left to build.
“It all comes down to supply and demand,” he said. “It’s not like there’s giant lots of land that aren’t being touched. But we need to be careful and find an intelligent approach to building density. The notion of increased density … people want more density but they don’t want it in their backyards, so it’s tough.”
One affordable housing project that did make it through city council meetings is INHS’s Breckingridge Place, the 50-unit apartment building in the heart of downtown Ithaca that opened in January. Its rents range from about $616-$1,100 a month, plus electricity. These apartments are only available to families and individuals that meet the income criteria for the project. Income eligibility depends on the size of the family. Single person incomes up to about $48,000, two-person incomes up to about $55,000, and three-person incomes up to about $62,000 were eligible for the lottery.
Breckingridge Place filled up in less than six weeks, Mazzarella said.
“The economic theory is if you increase the supply, that’s going to make rents go down,” Mazzarella said. “That’s not going to happen here. But I do think we need more rental units. Development of more rental units could slow down the rate of increase in rent prices. We’re always looking at different sites and the possibility of building new housing, and we’ve got a couple places in mind. But it literally takes years to develop a project and get it under construction.”
As for rents going down in Ithaca anytime soon, don’t hold your breath.
“You look at the Ithaca City School District, and they’re about to pass a budget that will increase property tax by more than 8 percent,” Dwyer said. “So I can already tell you rents will be more expensive again next year.” •