Editor’s note: This story clarifies a comment made by Simon.
YOUNGSTOWN, Ohio (WKBN) – As part of WKBN 27 First News’ series on housing in the Valley, we wanted to see where rental prices are going, how we got here and what goes into the price you pay every month to keep a roof over your head.
If you are paying rent in the Valley, your cost has likely increased, but some are paying more than others — a lot more — and it comes down to who or what entity owns your property.
The real estate market has seen a big shift in corporate buyers and the Valley has not been immune, but luckily, it hasn’t been impacted as much as other areas of the country.
Jeff Simon is the president of Simco Management Corporation based in Girard. He is a third-generation owner of the company, following in his grandfather’s footsteps with the beginning of Simco in 1960. He said he has seen a lot of changes over the years but nothing like what is happening now.
“The price of plumbing parts and carpentry materials and roofing, and anything with petroleum in it has gone up drastically. Sometimes prices have doubled for certain items, like large hot water tanks that we use,” Simon said.
Costs have gone up for everyone. We are all paying more at the grocery store, the gas pump and at retailers. Inflation has hit historic highs over the past three years. Costs have gone up for apartment owners, too. Simon said he could follow some other property owners and institute big rent increases but said that just wouldn’t be good business.
“We couldn’t take that approach. We’ve been doing business in this Valley for 60 years. I am from here. Our residents are people that I know or I’ve met them after the fact. I live here, so I feel like Simco is a community player, and so we simply said how aggressive can we get? So we picked a number around 4% to 5% was our increase as opposed to 10%-plus. That was our increase for the last two years and we sent a letter out explaining that this is how we are doing it. A lot of our competition did something different and went more aggressive,” Simon said. “There there was no magic in the number other than that’s the number I felt comfortable with.”
Simon said he decided early on to “eat some of the costs” of inflation and split the rest with his residents.
“We weren’t going to pass all of it along. That was our approach to it,” Simon said. “On a typical $800-a-month, two-bedroom apartment, it was about $35.”
Simons said historically, rent increases would have been about 2%. Inflation has impacted everyone.
“I think people have been hit hard enough in this Valley, Northeast Ohio and Western Pennsylvania where we do business, and I didn’t want to be the straw that broke the camel’s back, so that’s the approach we took,” Simon said.
Simon said new players have come to town over the past 10 years — some from out of state or at the very least out of the area.
“There used to be a lot of local owners like my grandfather started Simco 60 years ago. He had the Solomons, Terlecky — those were his contemporaries that he started with, and they were family-owned for many years. Seems like in the past 10 years, companies are coming in from out of state or from out of town and they do it differently. They are absentee landlords in a sense. They don’t live here. It’s strictly an investment to them. And I’ve never taken that approach. I’m third-generation. I grew up in Liberty and moved to Poland. I’m a lifer here,” Simon said.
Just like gas prices change, rental prices can change, too, based on supply and demand. Not only is supply and demand impacting prices, but computer algorithms could be a part of the puzzle, too, especially for corporate owners.
In March of this year, U.S. Senators Elizabeth Warren (D-Mass), Bernie Sanders (I-Vermont), Tina Smith (D-Minn) and Edward Markey (D-Mass) wrote to the antitrust division of the United States Department of Justice asking it to look into the practice of algorithm rent-setting software.
The letter cited “corporate landlords” and “anti-competitive forces” that are making it more difficult for renters to find affordable housing. The concern is that with more corporate owners, price collusion is a risk when pricing information is being gathered from other properties in such an immediate way and then used to set a particular price on a rental unit.
“As institutional investors’ housing portfolios have grown, so too has their power to set rents
as competition in certain housing markets dwindles. Following the financial crisis of 2008, the
presence of intuitional investors, particularly in the single-family housing space, has grown
steadily at about 3 percent each year since 2010,” the senators wrote.
Software, from companies such as RealPage, uses an algorithm to make recommendations to apartment owners about setting a price using internal supply and demand and rents offered by other properties. The goal is to make as much money as possible.
“I find that reprehensible. I don’t like that strategy. Yes, we could do it, and we would get away with it because 10 years ago, we would have 300 vacants. Today, we have waiting lists everywhere. We are not special; everyone has waiting lists. Because of that waiting list, people say, ‘Hey, I can charge more and more,’ and they can. But I want a long-term relationship with our residents. I don’t want them to be here because I am holding them hostage because they have nowhere else to move to. I want them to want to be here,” Simon said.
There are over 49.5 million rental units in the U.S., according to the U.S. Census. According to RealPage’s website, its software is used by over 4 million units, or about 8 percent of housing units, and growing.
Quick rental price fluctuations are nothing new, but the practice has been on steroids since the pandemic. According to Rent.com, prices have dipped recently but are still not where they were before they increased by 14% over the last two years and 25% since 2019, adding almost $250 a month to rent bills.
“A lot of landlords, in our opinion, heard about, ‘Hey, everybody is raising prices,’ so we started seeing crazy rent increases from our competitors — $100 bucks, $150 bucks a [month]. Where historically, they would be maybe $25 a year, give or take. I think they felt that this was a good time to institute aggressive rent increases because they could — because everybody else was doing it,” Simon said.
In July, the median rent in Ohio was $1,406, 1.7% higher than last year and 1.18% higher than in June.
You will see more price fluctuations in bigger cities. If you plan to move, keep in mind that pricing tends to tick higher in the summer until about mid-September when people tend to put off a move until after winter. That’s when prices could dip. According to Apartments.com, a rental property you couldn’t afford in June could decrease enough for you to afford by February.
Also, the day of the week or the time of the month that you look for a rental unit could impact the price, according to Apartments.com, sometimes even by the time of day, all thanks to technology.
Simon said his company sets a price and it stays that price for about one year. When asked if he thinks prices will stabilize or come down, he said would only happen if there is a major job loss that would force people to leave the area or if new apartments are built, creating more inventory.
“More building, more capacity comes online and people build apartments, which may happen, but historically, Youngstown is not the place for new apartments. There have only been a handful in the last 30 years, unlike busier cities where there is building year-round. Here, we just don’t have the capacity,” Simon said.
This is part of a series of stories that WKBN is looking into involving local housing issues in the Valley. Do you have a housing issue that you’d like us to look into? Send us your information here.