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Rent run amok: Rent hikes have sparked bidding wars and sent tenants scrambling

Rent run amok: Rent hikes have sparked bidding wars and sent tenants scrambling

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Bill Tallichet walks in to meet Denise Smith, branch manager of Garnet Property Services to tour this three bedroom, two and half bathroom, two car garage condo in Santa Ana. ED CRISOSTOMO, STAFF PHOTOGRAPHER

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Denise Smith, left, shows Vanesa Cruz and Cecilia Contreras a Santa Ana condo for rent. Cruz has been struggling for three weeks to find a bigger place that her family can afford to rent. ED CRISOSTOMO, STAFF PHOTOGRAPHER

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Denise Smith, right, branch manager of Garnet Property Services, guides Vanesa Cruz, left, Cecilia Contreras and daughter Mia Luna Contreras, 1, on a tour of a three bedroom, two and half bathroom, two car garage condo in Santa Ana. Cruz said she liked this condo because the $ 2,450 a month rent was a great price for the neighborhood. The condo ended up being rented to another contender. ED CRISOSTOMO, STAFF PHOTOGRAPHER

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Sandra Knowles, right, arrives home with son Marc Knowles, 7, after walking home from school. The family will split apart to afford rising rents in Orange County. Two of the five Knowles children will move in with her mother and the other kids will live in a one bedroom in Anaheim with their parents. ANA VENEGAS, STAFF PHOTOGRAPHER

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Cecilia Contreras and daughter Mia Luna Contreras watch as Denise Smith,guides Vanesa Cruz on a tour of a three bedroom, two and half bathroom condo in Santa Ana. Orange County rents have been rising steadily for 5 1/2 years. But the pace appears to be accelerating. ED CRISOSTOMO, STAFF PHOTOGRAPHER

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Bill Tallichet, of Anaheim Hills, shakes hands with Denise Smith, branch manager of Garnet Property Services. ED CRISOSTOMO, STAFF PHOTOGRAPHER

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In July, renter Dan Niemiec, 59, got notice from his landlord that rent on his two-bedroom, two-bathroom condo would go up $ 200 a month to $ 2,175 a month. MATT MASIN, STAFF PHOTOGRAPHER

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Sandra Knowles, right, arrives home with her son Marc, 7, after walking home from school across the street. The Knowleses will have to split thier family apart to afford rising rents in Orange County. , ANA VENEGAS STAFF PHOTOGRAPHER

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Denise Smith, right, branch manager of Garnet Property Services gives Bill Tallichet, of Anaheim Hills, a tour of a three bedroom, two and half bathroom, two car garage condo in Santa Ana. The condo is available for rent at $ 2,450 a month. , ED CRISOSTOMO, STAFF PHOTOGRAPHER

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Bill Tallichet, of Anaheim Hills, has been looking for a place to rent since May. “It’s been so hard,” Tallichet said. , PHOTOS: ED CRISOSTOMO, STAFF PHOTOGRAPHER

Three-fourths of Orange County’s larger apartment complexes are at least 25 years old, according to RealFacts. One in five complexes predates 1970.

Thousands of new apartments are under construction, but most of those new units are at the high end of the price spectrum.

The quality of existing units ranges from sparkling new to dingy and decrepit.

Attorneys and engineers patronize the Starbucks and retail outlets at the heart of The Spectrum’s Village Apartments, where brick plazas are lined with manicured hedges and palms and two-bedroom units rent for $ 2,200 to $ 3,400 a month.

Along Chapman Avenue in Garden Grove, a two-bedroom unit was renting for under $ 1,400 a month, but it reeked of rotting carpet.

At the 46-year-old Huntington Continental Apartments in Huntington Beach, a clean, freshly painted two-bedroom with a stackable washer-dryer rents for $ 2,200 a month. That doesn’t include air conditioning, but the complex does have a pool, barbecues and dog park.

Bidding wars broke out all over Orange County this summer.

Not just to buy houses. But to rent homes, too.

Jane Lewis, property management director for Seven Gables Real Estate, got 52 calls on a recent Saturday for a two-bedroom condo in Anaheim Hills renting for $ 2,300 a month.

Three applicants offered to pay a year’s rent in advance; several others offered to pay at least $ 50 a month over the landlord’s asking rent.

“The rental market is so crazy now, it’s almost like you’re buying a place,” Lewis said.

Last month, property manager Denise Smith had one unit for rent and was getting three others ready for market. Tenants snatched up all four in a week.

“I’ve never done that before,” said Smith, branch manager of Garnet Property Services in Tustin. “There’s more people in need of housing than housing provided, which causes rents to go up.”

Orange County rents have been rising steadily for 5 1/2 years. But the pace appears to be accelerating as the economic recovery gathers steam and employment numbers continue to climb.

Property managers say vacancies are getting multiple applicants and are filling quickly. Landlords get the pick of the litter, choosing stable tenants with good incomes over renters with pets, large families or dings on their credit record.

That’s taking a toll on tenants, who complain the search process has grown longer and increasingly frustrating, if not financially painful.

Renters are moving to avoid budget-busting rent hikes when their leases come up for renewal, because their units are being sold, or because they need a bigger home or a safer environment for their families.

Mingo Chung, 50, of Westminster started looking for a new apartment this summer after getting two rent hikes in seven months, boosting her housing costs by $ 145 a month. That would put a crimp on the adult-school teacher’s living expenses because she doesn’t work during the summer.

But after spending nearly three weeks driving the neighborhood in search of for-rent signs, scouring online listings and calling nearby complexes, Chung failed to find a better deal elsewhere.

Instead she asked her landlady to negotiate. She renewed her lease after trimming $ 25 from her latest rent hike, with the increase not taking effect until October.

“It didn’t take long. A few calls, (and) I realized everybody’s doing the same thing,” Chung said. “All the rent around here is going up.”

Rent hikes in large Orange County apartment complexes averaged less than $ 60 a month in the first half of 2014, according to apartment data researcher RealFacts. During the first half of 2015, average increases topped $ 105 a month.

Market data firms reported that just 2.5 percent to 5.4 percent of Orange County’s apartments were vacant this past spring.

The share of local residents who rent has been rising for years in the wake of the foreclosure crisis – increasing by more than 62,000 households, or 17percent, from 2007 to 2013, the latest year available from the U.S. Census Bureau. About 43 percent of O.C. households rent, while 57 percent own their own homes.

Further boosting rental demand, millennials have been moving out on their own as jobs become more plentiful, property managers and rental listing operators said.

“Rental housing is a big problem, and it’s not just a big problem in Orange County,” said Michael LaCour-Little, a Cal State Fullerton finance professor specializing in real estate. “It’s been a big problem all over the United States.”

On the one hand, there’s been “a surge in renters,” he said. But rental construction has failed to keep up with demand.

“Affordable units are probably the most imperiled category because most of the new units are being built for the luxury market,” LaCour-Little said. “Unless they’re forced to, very few developers build units that are affordable for low- and middle-income households.”

three-month search

Bill Tallichet, 52, of Anaheim Hills learned that lesson the hard way after his landlord gave notice in May that the house he rents is going up for sale. That gave Tallichet until Sept. 1 to find a new home for his wife, two college-age daughters and their pet Chihuahuas, Carlos and Tiny.

“In May, I got out Craigslist, I got out Zillow,” Tallichet said. But every place he found was taken by the time he got there, “some within days.”

With the deadline looming, Tallichet jumped on the chance to view a three-bedroom condo in Shady Hollow Townhomes in north Santa Ana, and emailed the rental application before going to his appointment.

The unit sits in a cluster of two-story duplexes, with yellow stucco walls, two-car garages and swaths of grass between buildings. Inside, a white-painted brick fireplace soars up to the exposed-beam ceiling, with gray carpet on stairs leading to the upstairs bedrooms.

Tallichet arrived at 1 p.m. Thursday wearing a blue polo, black slacks with reading glasses hooked to the front of his shirt.

“I’ve been looking at homes in Yorba Linda … I’ve been to Corona, I’ve been to Chino Hills and I’ve been to Placentia,” he said. “It’s so hard. I’ve been to showings with eight to 11 people.”

Smith, the Tustin property manager, led him to the downstairs den/office, the kitchen and garage before taking him upstairs to view the large master bedroom with an odd little shoe closet just off the walk-in closet.

“There’s more space in this compared with the Cracker Jack places I’ve seen,” said Tallichet, who stands 6-foot-2.

“So you love it?” Smith asked.

“Yes, I’m OK.”

“I’ll get you processed and approved by tonight,” Smith said. “I just want to make sure you totally love it.”

“I’m there,” Tallichet said, shaking hands with Smith before heading home to assemble boxes.

But Tallichet didn’t learn if he’d gotten the rental until later that night, after Smith completed her background check.

“Totally! Awesome!!” Tallichet texted after getting the news. “(I’m) very relieved.”

The paper trail

Landlords also are subjecting would-be renters to new levels of scrutiny.

Tenants pay a fee of around $ 40 for credit checks, and there’s a separate check on everyone who’s helping to pay the rent. Multiply that by the number of applications potential tenants file, and the costs start to add up.

Landlords also want to see an applicant’s pay stubs, driver’s license, bank statements and pictures of their pets. They want to verify that a renter’s gross pay is three times the monthly rent. Some landlords also require tenants to get renter’s insurance.

“Landlords are like lenders today,” said Tanya Collins, a First Team Real Estate agent who works with renters. “It used to be they’d run your credit check, ask for your residential history and your landlords.”

Kevin W. Smith, another First Team agent, said landlords have to comb through multiple applications containing as many as 50 pages to find the best tenants.

“The process is long and tedious for both sides,” he said.

The rent hikes reflect limited supply and rising demand, said Nick Dunlap, an Irvine-based property manager and president of the Apartment Association of Orange County.

“Buildings are full, and rents are on the rise,” Dunlap said. “It’s a very good time to be a property owner.”

Splitting up the family

For renters at the margins, the overheated market is forcing some fundamental life choices.

Sandra and Michael Knowles had to split up their family of seven after their landlord refused to renew their lease because of two late rent payments.

Michael, a security guard, and Sandra, a part-time school playground supervisor, paid $ 1,884 a month for a three-bedroom, two-bathroom unit at The Gallery Apartments in north Anaheim. The couple and their five children lived there for three years.

The Knowleses looked at seven apartments and priced countless others. Three-bedrooms were renting for close to $ 2,100 a month, and “we don’t have the funds,” said Sandra, 43.

While the Knowleses could afford the two-bedroom units, managers wouldn’t let seven people live in an apartment that size.

This weekend the Knowles are moving a mile to the east, into a two-bedroom townhome that rents for $ 1,800 a month.

The two-story, rowhouse-style complex, with alternating red- and white-brick facades, covers two square blocks and has four pools. Green lawns and walkways adorn the front yards.

But the couple’s 15- and 17-year-old sons won’t move in with them. They will be three blocks away in their grandmother’s one-bedroom apartment.

“It was a hard to have to do it this way but my kids do understand,” Sandra said. “We can still visit after school and on Saturdays.

“We used to have dinner as a family, and I would help my older ones with homework. … Now if they have a question about homework they have to text me or call me, rather than come up to me to ask.”

Haggling with landlord

In July, renter Dan Niemiec, 59, of Huntington Beach got a notice from his landlord that rent on his two-bedroom, two-bathroom condo would go up $ 200, to $ 2,175 a month.

“I frankly told him that’s beyond my budget,” the divorced father of two said.

But after looking at a condo in Tustin Ranch, Niemiec realized he doesn’t want to move so far from his church and the neighborhood where he has lived for 27 years. Apartments and houses nearby rent for $ 600 to $ 1,500 a month more than his new, higher rent.

So he reached a deal with his landlord to reduce his rent hike to $ 75 instead of $ 200 in exchange for a shorter lease. After six months, he faces another possible hike. “Maybe at that point, I’ll look someplace else,” Niemiec said.

Chung, the Westminster resident who also stayed put after negotiating a smaller rent hike, said she’s worried that a time may come when “I might not be able to afford my rent.”

“You feel helpless, and they don’t look at you as a human,” she said of the rental search process. “It’s about the money. It’s all about money.”

Contact the writer: 714-796-7734 or jcollins@ocregister.com

The Orange County Register – News Headlines : Real Estate News