The robust national economy, which has produced tens of thousands of high-paying technology jobs and has helped revitalize urban areas, is also spawning housing prices and rents that are threatening the ability of Americans to find affordable housing, according to a study released yesterday by the Department of Housing and Urban Development.
The report, released at the U.S. Conference of Mayors in Seattle, says job creation has helped drive housing prices up at twice the rate of inflation and rents at 1.5 times inflation. Like many of the 114 cities and metropolitan areas analyzed in the study, the Baltimore area falls in step with the national trend.
The price of a new single-family home in the Baltimore area rose 9.9 percent in the first quarter of the year to $261,108 compared with the corresponding period last year.
Yet, what seems to be driving new-home prices upward is the price and availability of land.
"The cost of land is moving at lightning speed," said Michael W. Kingsley, sales manager for the Maryland division of D. R. Horton Custom Homes.
Kingsley said a lot purchased from a developer a year ago would cost $140,000. Today, in the same development, a similar lot goes for up to $175,000.
"Just as you've heard stories of people listing their house and getting more for an existing home than they are asking, it's kind of the same thing with land. You put in a contract at what they are asking and that is just the beginning point. It has come to that," Kingsley added.
"It's a cruel irony that while most communities are doing very well in this booming new economy, the better they are doing, the more acute their shortage of affordable housing," HUD Secretary Andrew M. Cuomo said. "The stronger the economy, the stronger the upward pressure on rents."
"Rents have been increasing at a much faster pace than they certainly have at any time that we have seen in the last 10 years," said Julie Smith, president of Bozzuto Management Co., which manages more than 1,100 units in the Baltimore metropolitan area. "Three or four years ago we were seeing rental increases anywhere from a low of 2 percent to a high of 5 percent, and today we are looking closer at rent increases of 5 to 10 percent over current lease rates."
In the past year, Smith said, rentals in the Promenade, an upscale property in Inner Harbor East, have risen 14 percent in the past 12 months, with rents ranging from $1,000 to $3,100.
In the suburbs, the same is true. At the Briarwood, which opened in July in Owings Mills, rents have risen 10 percent, ranging from $800 to $1,350. Another Bozzuto-managed property - Cambridge Court in White Marsh - has increased rents 7 percent since July.
"The renters that are moving into our communities have higher incomes. What we are seeing are people moving into our communities with very, very good jobs, renters with much higher incomes," Smith said.
From Federal Hill to Canton, waterfront rentals are becoming more scarce, mainly due to the hot housing market that turned former rental homes into valuable sales for landlords.
"Before, when people had a hard time selling their property, the alternative was to rent them out. Now that the market has picked up so much and they are able to sell these properties, we don't have the amount of rentals that we used to have," said Linda Morgan, manager of the Fells Point and Federal Hill office of O'Conor, Piper & Flynn ERA.
"The few that we do have gone up quite a bit ... from something that maybe somebody was getting $800 or $1,000, now [landlords] can sit there and get $1,500 or more a month. They can almost name their price, depending on where their property is located in Federal Hill."
Morgan acknowledged that the rising rents are knocking people out of the market, but "there are other people out there that are willing to pay the prices." The number of private sector jobs in the nation's central cities grew 8.3 percent between 1992 and 1997, with 2.3 million jobs created overall.
Job growth in the city during the same period rose 1.4 percent, while jobs in the suburbs grew 13.5 percent. The Baltimore metropolitan area ranked 21st of 114 cities in total high-technology jobs.