Scores of New Residents
With a growing job market and renewed investor interest, Houston was already on the upswing before Katrina hit. But the hurricane still made a tremendous impact on the city. In 2005, the Houston apartment market absorbed about 28,000 units; Rotan says as many as 24,000 of those units were taken by Katrina evacuees. “Houston was already positioned for recovery,” he says. “Then, all of a sudden, you have 250,000 people register for assistance from the Texas emergency relief centers.”
While Katrina evacuees moved into all classes of apartments in Houston, many appeared to migrate to lower B and C level properties, which saw the most significant jumps in occupancy. “We didn’t get any big bump from Katrina,” says Campo, whose Houston Class A properties’ occupancies only increased 3 percentage points, to 98 percent. “But some properties that were 80 percent occupied and not well-located definitely got a big boost.”
Consequently, many buyers sought out those apartments. “We’ve seen a lot of investors looking at C and B products,” Rotan says. “I think there’s a lot more interest in that.”
It represents a big, if temporary, change in the Houston apartment market. Before hurricane survivors arrived in the Texas city, higher-end properties seemed to be the hot buy. “In the beginning of the year, Class A and urban infill were selling at a record pace,” Rotan says. “We had a lot of condo conversions. Class B and C were growing slower.”
What’s Next?
While the Class B and C owners and operators have gained the most from Katrina, they also have the most to lose. “Those folks may be concerned about what happens to their occupancy levels over the next six to eight months,” says Campo, who isn’t worried about the impact on Camden’s Houston holdings. “Generally the top of the market has done very well and I don’t think [it] has a huge amount of risk because of the Katrina folks leaving.”
But things are different at less luxurious properties. First, no one knows how long the Katrina evacuees will stay. It may be only for a few more months, or it could be for good, depending on a resident’s options and finances. “The people that came from New Orleans who are used to government subsidies and housing won’t move,” predicts Meek.
But will these residents be able to pay their rent in the future? “These guys don’t have any money,” Lynd says. “What are they going to do when the government funds run out? That’s a real issue. It’s a big concern, and it should be a big concern for everybody, including the government. Landlords will not ride with these folks. They’re going to punt them.”
That could leave the city of Houston in a tough spot. “When they [the landlords] kick them out [because] they’re not paying their rent, you’re going to have a lot of guys who don’t know where to go,” Lynd says. “The cities aren’t prepared to handle those guys on a voucher basis. Where do they go?”
