A greater portion of families’ incomes are going toward rent as property owners – many of which are now institutions outside the county – take advantage of a market flooded with renters, local experts say.
The trend, a combination of several factors, has been seen across the country. The average household spends 29.5 percent of their income on rent compared to the historical average of 24.9 percent, according to a recent analysis by the real estate website Zillow.
Families forced into short sales or foreclosures during the recession and years since have turned to renting out of necessity. With an increased demand for rentals and to compensate for bad credit scores, landlords are able to charge higher rent.
The country’s growing number of 20- and 30-somethings strapped with college debt and skeptical of home ownership have added to the trend.
“Supply and demand,” said Jim Haisler, chief executive officer for the Heartland Realtor Organization. “Since there’s a larger demand, rents crept upward.”
Additional supply has, to a degree, followed additional renters, Haisler said.
In many cases, the additional supply comes in the form of houses purchased by large corporations like Invitation Homes, a Dallas-based company that offers 30,000 rental homes across the country, according to its website.
Such institutions buy foreclosed homes and short sales, fix them up and rent them out, said Colleen Clavesilla, a broker with Century 21 Affiliated in Algonquin and former president of the Illinois Association of Realtors.
“They’re beautiful. They’re just a pleasure to show,” Clavesilla said. “People tend to go with those before they go with an individual investor who might not have the same colors throughout the house. ... It’s a nice product to move into.”
Clavesilla estimates that the four such institutions that operate in McHenry County now control 60 to 70 percent of the county’s rental market. Invitation Homes, she said, is the largest.
Jim Humbard, a realtor for more than 25 years who is currently with RE/MAX plaza in McHenry, said rents have risen with the trend toward institutional buying.
“The people that I have personally seen looking for rentals definitely have some credit things, so I’m guessing, too, that the rent costs have gone up because there’s risk-reward,” Humbard said. “If I’m going to have to rent to a less-than-stellar tenant, I’m going to charge a premium.”
High rents add incentive for those who are in a position to buy, but so far, most housing recovery has come in the $100,000 - $150,000 range, said Scott Beilfuss, managing broker for O.K. and Associates Realty Plus in Richmond.
But Beilfuss is in many cases showing and selling those homes to institutional buyers looking to cater to the mass of renters.
With few other options in a county short on apartment complexes, renters feel the squeeze.
“Instead of renting two-bedroom apartments at $800, they’re forced into homes or condos,” Beilfuss said.
It could be a while before the flooded rental market recovers. Credit scores of those who lost their homes in the early stages of the recession are just now starting to recover – a process that typically takes about five years, Clavesilla said.
“We’re going to have a nice, heavy rental market for quite a while because of the timeline,” she said. “The people who had short sales five years ago, they’ve now repaired their credit to buy again.”
Haisler said he’s still seeing a lot of foreclosures and short sales happening throughout the county.
“We are still trying to fight through this mess,” he said. “And while we do that, rent remains high.”