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Some landlords expected to raise rent as military allowances go up

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Increases in the basic allowance for housing for Fort Drum soldiers in 2014 will cause many landlords with military tenants to raise rent, real estate experts say, putting a squeeze on families already paying relatively high rent due to the scarcity of vacant housing.

Soldiers’ housing allowances will go up by as much as 15 percent starting Jan. 1. Because soldiers from all ranks will receive from $100 to $200 more to spend on off-post housing each month, some landlords are expected to capitalize on that by demanding higher rent, said Brian H. Murray, commercial real estate developer in Watertown.

Mr. Murray, owner of Washington Street Properties LLC, owns several apartment complexes in the community: the Palmer Street, College Heights and Hycliff apartments on the city’s west side, along with the Solar Building downtown. Renovated apartments are also planned by the developer on the upper floors of the Lincoln Building downtown, which will be rebuilt next year.

Mr. Murray said he does not intend to raise rent at those complexes, where apartments range from $500 to $1,000 a month, including utilities. That’s because members of the military only account for about 25 percent of his tenants.

“If you’re a landlord that specifically targets the military, the increases in BAH will allow you to raise the rent,” he said. “A lot of the new developments outside the city are the ones that are targeting the military. Some of those landlords are outside the city in Evans Mills, Carthage and Gouverneur. There are complexes that are 100 percent occupied by military members.”

However, there is still a significant need for housing for people not in the military.

“The majority of our tenants are nonmilitary, so it would be harmful to raise the rents and short-sighted,” Mr. Murray said. “There’s a chance we could replace some of our tenants with the military if we change the rents, but then we’d have to be dependent on what happens with the military,” such as higher turnover of apartments due to deployments.

In the short-term, more lower-ranking soldiers will probably choose to move into newly constructed housing units at large complexes rather than more affordable units, like Mr. Murray’s, because they have more money to spend, he said. Examples include the Beaver Meadows complex on Towne Center Drive and the Preserve at Autumn Ridge on County Route 202.

Starting next year, the monthly allowance of soldiers with dependents on the Army’s lower tier (E-1 through E-4) will be boosted by $162, or 13 percent, from $1,266 to $1,428.

But the trend of military members leaving the city’s downtown area to live in new complexes will likely begin to slow down as the volume of available housing climbs and rental pricing becomes more competitive, Mr. Murray said. A handful of major apartment projects have been planned downtown, including a complex to be built at the former Mercy Hospital site and the renovation of the vacant Woolworth Building.

“If we keep building, I think this new construction is going to have the greatest effect on properties that are priced north of $1,000 a month because of the higher BAH,” Mr. Murray said. “With growth of all of these projects on the table, I think the new construction is more likely to create a surplus of homes in the upper tier. It will be a challenge for the landlords who are now building new to keep their units full once those new units come online.”

City landlords who own apartment buildings generally belong to two separate camps: one camp refuses to set rent prices based on military trends, while the other will increase rents based on military housing allowances, predicted Charles E. Bates, who owns nine apartment buildings with a total of 32 units, ranging from studios to multiple-bedrooms.

“I rent my apartments for what they’re worth, and that’s it,” said the 37-year-old landlord, who has managed properties for seven years. The allowance increase “won’t affect me, because I rent to about two soldiers now and try not to raise rent. I’m not like other landlords who raise it from $1,200 to $1,300, knowing the housing allowance is up. I don’t think it’s right for people to raise rent because they can get more money, because that’s like price-gouging at a gas station.”

Mr. Bates owns nine apartment buildings on Union Street, one on Franklin Street and one on North Meadow Street. Monthly rental rates range from $400 to $1,000 a month, and utilities are included for most units.

More than half of the rental property owners in the city are “absentee landlords” who live in other states and hire someone local to manage their properties, Mr. Bates said. Those landlords are more apt to increase rents due to military allowances.

“People who own a lot of apartments around here are the big guys who don’t know the community,” he said. “Most of the time they have ground management handle their properties, and I would assume that the rental management would raise the rent because they get paid more.”

Mr. Bates, meanwhile, is making improvements to his apartment stock to stay competitive in the market. This summer, he acquired $240,000 in grants from the Neighbors of Watertown rehabilitation program to completely renovate two six-unit apartment houses on Union Street.

Many city landlords “are afraid right now because they have to meet up with the big guys” building new units, he said.

Escalating rents caused by 2014 military housing allowances could lead some civilian and military families to buy houses at a more affordable rate than renting, said Lance M. Evans, executive officer of the Jefferson-Lewis Board of Realtors. The median price of a home with two bedrooms and three bathrooms in the region was $143,000 over the past year, according to statistics from Dec. 1, 2012, through Nov. 30 from the board of realtors. But Jefferson County has a large number of houses in the $70,000 to $100,000 price range; a search Thursday on the board’s website found 132 houses in Jefferson County for sale in that range.

A $150,000 home purchased today with 30-year conventional mortgage with 4.75 percent interest, taxes and insurance included, would equate to a monthly payment of about $1,131, Mr. Evans said. A $100,000 home purchased under the same criteria would equate to a monthly payment of about $768.

“People who are already paying $750 (or more) in rent might consider becoming a first-time homebuyer,” Mr. Evans said. “You need to look and see if you can buy a home, and the first step is to talk with a mortgage professional about what you can afford.”

The monthly rent for a three-bedroom, two-bathroom apartment at Beaver Meadows is now $1,327, according to its website. That figure includes all utilities except electricity but doesn’t account for a $100 monthly fee to use one-stall garages.

Monthly rent for a three-bedroom, two-bathroom townhouse at the Preserve at Autumn Ridge is $1,275, but that does not include electricity, gas, water or sewer charges.

These housing projects represent a total of 1,493 market-rate and affordable apartment units under construction in the Watertown-Fort Drum area:
• Mercy Hospital site: Stone Street complex to be demolished by COR Development Co., Fayetteville, which will construct new buildings containing 168 residential units and 42,000 square feet of commercial space.
• Woolworth Building on Public Square: Developers David J. Gallo and Erich H. Seber to renovate vacant building with 50 affordable and market-rate apartments on upper floor and ground-floor commercial space.
• Lincoln Building: Developers Washington Street Properties LLC and Purcell Construction have planned 18 rental apartments on the two upper floors, business incubator on the second floor, along with commercial and office space.
• Creek Wood Phase I: 96 units (market-rate and affordable) planned Norstar Development USA, Buffalo, off Mill Street in Watertown.
nCreek Wood Phase II: 104 units (market-rate and affordable) planned.
• On-post housing: 166 market-rate, four- and five-bedroom homes in the Crescent Woods neighborhood at Fort Drum.
• Beaver Meadow Apartments: 296 units (market-rate and affordable) planned by COR Development Co., Fayetteville, behind the Target store off outer Arsenal Street in the Towne Center Plaza in the town of Watertown.
• Preserve at Autumn Ridge: 394 market-rate townhouse apartments to be built by Morgan Management, Pittsford, off County Route 202 in the town of Watertown.
• Madison Barracks, Sackets Harbor: 90 market-rate apartments to be built by Lawler Realty LLC, Sackets Harbor.
• Eagle Ridge Village Phase V: 92 market-rate townhouses to be built for the final phase at the housing community at Route 342 and Goulds Corners Road in LeRay planned by CloverConstruction Co., based in the Buffalo suburb Williamsville.
• Emerald Acres: 19 market-rate single-family houses to be built by Guy H. and Gaetano H. Javarone at the intersection of Graham Road and Route 37 in the town of Pamelia.
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