- The Washington Times - Tuesday, March 28, 2006

Anthony Grossi rents a one-bedroom, one-bathroom apartment in Arlington and recently signed a six-month lease that raises his rent $75 per month.

The increase, more than 4 percent, is typical in the Washington area, which continues to be one of the hottest apartment markets in the country, with average occupancy exceeding 96 percent, above-inflation rent growth, and demand far outpacing supply for affordable rental units, said Gleb Nechayev, vice president and senior economist at Torto Wheaton Research, a business unit of CB Richard Ellis.

Mr. Grossi said the $75 bump was comparable to previous rent increases.

“It’s been pretty consistent since I started here” six years ago, said Mr. Grossi, an information technology consultant.

While the average rent increased by about 4.2 percent last year in the Washington region, some areas, including parts of Reston, Herndon and Arlington, saw 6 percent increases, Mr. Nechayev said.

Mr. Grossi, 36, did not want to rent elsewhere and was hesitant to buy a home before his July wedding. He said the six-month agreement was the most cost-effective option to remain in his current Archstone-Smith-managed building because signing a one-year lease that would run out in February would have raised his rent to about $2,500 per month instead of $1,850.

“There’s definitely seasonality in it,” said Heather Campbell, a spokeswoman for the Englewood, Colo., company that rents more than 21,000 units in the Washington area.

All Archstone-Smith residents are given renewal options for two- to 12-month leases, Ms. Campbell said. If the agreements expire during a high-traffic time, such as summer in Washington, renters can opt for lease periods with lower increases, she said. The average cost of a new lease was up 6 percent last year from 2004 at Archstone-Smith properties.

Bozzuto Management Co., which owns and manages more than 12,000 apartments in the Washington-Baltimore area, said its tenants can expect a 3 percent to 5 percent increase this year.

The exact amount depends on factors including demand, local occupancy rates and the size of the apartment, said Julie Smith, president of the Greenbelt company.

More bad news for renters comes in the form of fewer options. About 9,800 rental units were converted into condominiums last year in the Washington area, but only 6,300 new rental units were built, Mr. Nechayev said.

But Ms. Smith said no one knows how many of those conversions were bought and then turned back into rental properties. She acknowledged, however, that the smaller market definitely helps Bozzuto’s bottom line, and said the company is seeing retention rates increase almost across the board.

“We’re still seeing some home buys,” but with housing prices on the rise, many more Bozzuto residents continue to rent, she said.

Daniel Yang, 25, also lives in an Archstone-Smith-owned building in Arlington. He and his roommates converted their dining room into a third bedroom.

The two-bathroom unit costs about $2,300 per month, and the rent will increase by $150 if they want to renew for one year in June.

Mr. Yang, a freelance photographer, said cost is an issue as they decide whether to stay in the condo-converted building.

The D.C. Fiscal Policy Institute, a nonprofit research group that examines tax and budget issues affecting low- and moderate-income residents, last year analyzed U.S. Census Bureau data that showed rising rents and home values in Washington contributed to a decline in affordable housing units.

Median rent in Washington increased by almost 9 percent, from $734 in 2003 to $799 in 2004. By comparison, median rent was $720 in 2002, $699 in 2001, $693 in 2000 and never exceeded a 3 percent annual increase in that five-year period.

Washington lost 2,400 affordable rentals between 2003 and 2004 and gained 4,600 high-cost rentals over the same period, according to the institute analysis.

A search of popular apartment-search Web sites ApartmentGuide.com and Apartments.com showed about seven times as many listings for apartments priced between $1,000 and $2,000 as those that cost $750 or less.

But if housing sales lose steam, as many economists are predicting, condo sales and conversions will follow suit, which would be good news for renters.

“That tail wind to help landlords increase rent so aggressively will not be there if the housing market slows down,” Mr. Nechayev said.

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