by Scott Richter and Dr. Patrick Jones
Housing information relating to vacant rental housing units are used by public and private sector organizations to evaluate the need for new housing programs and additional private construction. The rental housing market is an important part of any economy supporting businesses such as landlords, rental agencies, and home builders. The rental housing market also includes low-income housing advocates and those working on economic development to support moderately priced rental housing the workforce can afford.
The rental vacancy rate is a component of national indices of leading economic indicators. Everyone from the U.S. Federal Government and economic forecasters across the nation use the rental housing unit vacancy rate to help gauge the current economic climate within smaller geographies such as local, county, and state.
The rate of rental unit vacancies is affected by several forces, such as changes in the supply of rental units, changes in the number of people seeking rentals, as well as a "frictional" level of empty properties due to a timing gap between move-outs and move-ins.
The rental market is, in turn, affected by the strength of the owner-occupied housing market. Key determinants of owner-occupied housing are population growth and income growth.
Looking at the Overall Rental Unit Vacancy Rate indicator on Walla Walla Trends, we first observe the fluctuation of the Walla Walla Metropolitan Statistical Area (Walla Walla County and Columbia Counties). This volatility is due to the much smaller population of the metro area compared to the state and U.S. benchmarks. As a consequence, the margins of error (MOE) of the estimates can be large. For example, the MOEs for the 2019 estimates imply a range of vacancy of 0% to 6.5%.
The next observation might be the series is short - only seven-years. However, during three of the seven years, the metro area estimates were lower than the benchmarks (2013, 2016, 2019) and twice less than one percentage point higher than the state (2015 and 2017). It is difficult to say why 2014 and 2018 jumped up so high, but the ACS is a survey so every data point in this graph are estimates. The combination of being a survey and the comparatively smaller population of the metro area, one of the smallest populated metro areas in the U.S., is helping to create higher fluctuation from year to year. This is not the only indicator on Walla Walla Trends you will see this occurring.
Taking all of this into account, the Walla Walla Metro Area appears to have a rental vacancy rate on par or better than the state, and typically lower than the U.S. The 7-year averages are 5.7%, 3.8%, and 6.1% for the Walla Walla Metro Area, Washington State, and the U.S. respectively.
The U.S. Census Bureau is the source for this indicator with data collected through the American Community Survey (ACS) and reported on data.census.gov. Census defines the rental vacancy rate as “the proportion of the rental inventory which is vacant for rent.” Yet it is both a little more complicated and simpler than this.
The rental vacancy rate formula Census uses is:
Rental vacancy rate as a percent = (occupied rental units) / (renter occupied units + vacant year-round units rented but awaiting occupancy + vacant year-round units for rent) * 100
More simply, the calculation is:
Rental vacancy rate as a percent = (occupied rental units / total rental units) * 100.
While both formulas are essentially the same, producing identical results, you can see in the longer formula Census collects data on three different rental unit types found in the denominator.
While not reported in this indicator, it shows the ACS offers more housing data than these. These data can be found in the American Housing Survey (AHS), Housing Vacancy Survey (BPS), Manufactured Housing Survey (MHS), and others.
This indicator measures the rental vacancy rate, but it also discreetly reports the rental occupancy rate. For example, the estimated 2.9% rental vacancy rate for the Walla Walla Metro Area during 2019 tells us the estimated rental occupancy rate was 97.1% - the sum of the rental unit vacancy and occupancy rates will always total 100%.
As with many indicators on Walla Walla Trends, when 2020 data is available, we will have a chance to see the impact of Covid-19 on the rental housing market. With higher education institutions scrapping in-class learning, 2020 will likely stand out as one of the higher rental vacancy rates in this series simply because the annual in and out migration of college students vying for rental housing did not occur.
As mentioned, when averaging out the high fluctuations in the Walla Walla Metro Area, they are not too far off the state and U.S. benchmarks. So, it is likely the rental housing market in the metro area is largely matching supply and demand. However, among the unanswered questions looking ahead are those households who rent year-round.
How many year-round renters in the metro area have been facing eviction or would have been evicted already if not for the protection given renters from the federal covid relief packages? The latest relief bill extended the eviction moratorium through June 30th. As early as July 1st, landlords will be expecting to be paid-in-full for all back rent owed. They will also be able to start the eviction process on those who cannot pay.
These data will be another 18-months out, but the bigger issue is what changes on July 1st.