Rental market in SLO County reflects unstable times

San Luis Obispo County’s rental market continues to show signs of stress as the economy eases out of a recession.

While some property managers report low vacancies and relatively stable rents, others say the market has yet to regain its footing, and they have adjusted prices to attract tenants.

“I think it’s still struggling,” said Dawn Pentoney, the owner of Manzanita Property Management in Paso Robles. “And that’s a direct reflection of the fact that people are still struggling.”

Many clients have been forced into the rental market because they have lost their homes or are now unable to buy a house. In some cases, they’re renting from people who have relocated out of the area for work and have decided not to sell until the real estate market picks up, property managers say.

“It’s maybe one out of three people renting a home right now,” Pentoney said.

Properties, if priced right, are rented almost as quickly as they appear on the market, although it’s difficult to find tenants for more expensive homes listed at $2,000 a month or more, she said.

Landlords asking $1,400 for a three-bedroom home in a North County tract development will have an easier time renting their property, she added.

Pentoney has noticed that some clients — many of them government employees — have taken a financial hit because of furloughs.

“There are good solid tenants who say I can give you $500 now, but I won’t have the rest for two or three weeks,” she said.

Pentoney has worked closely with property owners to seek slight reductions in rent or waive late fees.

“We want to show tenants that we value you and we want to keep you,” she said. “If you’re struggling to pay your rent for valid reasons, we’re not going to stick you with a $100 late charge.”

Curtis Mortensen, owner of Turn-Key Property Management in Atascadero and San Luis Property Management in San Luis Obispo, also has seen “a lot of homeowners come back into the rental market.”

In the North County, which has been home to the bulk of distressed properties, demand for single-family homes has been “very good” in the past four or five months, Mortensen said. “It could be we’re working through the pitches of the recession,” he said. “For our company, with houses, there are almost no vacancies.”

Robert Lee, founder of California Property Services, a Pismo Beach-based property management company, said the market is tighter than it has been in some time. His firm does not have one vacant house right now, and usually it has about a half dozen to a dozen properties available.

“We’ve had the lowest vacancy rate in the last five years,” he said.

But Lee attributes the low rate to people not moving to new properties. The normal rate of move-outs per month has dropped by more than 50 percent, he said.

“I don’t think they have the money or the means to move like they used to,” he said.

Timothy Banducci, president of California-West Inc. a property management firm with offices in Arroyo Grande and San Luis Obispo, said the Five Cities market seems to be strengthening. There have even been some minor rent increases, he said.

“We’ve gone from something that was very volatile, which means we weren’t getting things rented, to something that’s almost all full,” Banducci said.

Different in SLO

The market in the city of San Luis Obispo, which is heavily dependent on students, remains challenging, however.

Property managers continue to feel the effects of Cal Poly adding more than 2,500 beds on campus in 2008. They also fear that the university will continue to see declining enrollment.

Due to state budget woes, the university’s enrollment fell roughly 5 percent in fall 2010 from 2009. It fell only slightly — about 0.4 percent — this year over last year, according to the university.

While individual homes close to campus are renting well, apartments are having a tougher time filling up, said Tim Kershner, owner of Stenner Glen, an off-campus student housing complex.

“It’s pretty brutal,” said Kershner, who also serves as president of the Off Campus Student Housing Association. “We have not rebounded in the least.”

Kershner added: “Everyone has rents down as low as they can.” Moreover, he said some properties are attempting to attract tenants by allowing pets, offering discounts, and even opening up units to nonstudents.

He estimates that rents have fallen about 10 to 15 percent in the past few years.

“We’re profitable, but we’re not as profitable as we were in 2008,” he said of Stenner Glen.

Because of the nature of the dormitory-style housing at Stenner Glen, it’s difficult to estimate an occupancy rate, Kershner said. But he noted that it’s roughly 65 percent to 70 percent.

Banducci of California-West said the firm isn’t sure what the future holds for the San Luis Obispo market. Given that, it has no plan to raise rents and is taking an aggressive marketing approach.

“We’ve got an increased amount of staff time, and we’re starting out earlier this year and going longer until we get everything rented,” he said.

At Mustang Village, manager Keona Lee said the property is in a much more stable position than last year and is forecasting the same type of occupancy levels as in the past, roughly 90 percent. Students are committing earlier than in recent years, she said.

Mustang Village has no plans to raise rents and is touting some new offerings with the hope of catching the attention of students.

Last year, the complex started accepting cats and small dogs and this year opened a coffee shop and café. Utilities are also being included in the larger three-and-four-bedroom plans at Mustang Village 2 at 200 N. Santa Rosa St. It’s part of the property’s “Going Green” campaign, which encourages students to conserve energy.

“We are definitely trying to think outside the box to improve our community,” she said. When the market was at its peak about three years ago, Larry Smyth, owner of Farrell Smyth Real Estate Co., said the San Luis Obispo firm had little trouble getting people in the door of a rental.

But times have changed.

“Last year was probably one of our softest years,” he said. “If anything, it may be leveling off a little bit. It’s still early in the rental season, and so we’ll see where it heads.”

While he characterized his vacancy rate as “still pretty low,” he said properties take longer to rent because there are more choices. That’s also a factor in keeping rents low, he said. “If something is not renting, then you adjust it down,” he said.

In the broader market, renters cautious about the economy and jobs “shop price,” he said. “Even though someone has a good job right now and could afford more rent, they wonder, ‘What if I don’t in three to four months?’” Smyth said.

For Smyth, success in today’s environment requires staying one step ahead.

“It’s a dynamic market,” he said. “It’s like a lava lamp. It’s always changing.”