Chronicle scrutinizes student rental housing market

The presence of older houses repurposed for student rental housing off East Campus is a fixture of west-central Durham life to this day. 

Sure, a dozen or so of the more notorious houses got spun off from Guy Solie to private fix-em-up hands thanks to Duke's intervention -- even if one of those houses, the most notorious of all in recent years thanks to some hockey-on-grass players, sits in seeming limbo even as those around it have spruced up.

But there's hundreds more like those, still in private hands, fixtures on many central Durham streets. The most iconic of all views, perhaps: the light blue house on Markham Ave. that's a perennial student rental property, sitting cheek-by-jowl against the home of Duke provost Peter Lange and his wife, economist Lori Leachman.

The owner of that rental house is one Bob Schmitz, who sometimes uses a picture of that rental house on his flyers propped around Duke's campus, advertising rental opportunities.

Now the Duke Chronicle has taken a look at the market for off-campus rental housing, with a particular focus on Bob Schmitz, a physician-turned-real estate investor who's managed to gobble up 270 properties in the Bull City -- 10% of which are student rental houses.

It's a fascinating look at the economics and practices around student rentals, which get the rep of being in average to poor condition but at prices higher than one would expect for their condition.

Not surprisingly, the Chronicle suggests, those high rental prices and sometimes dilapidated come down frequently to that old saw of real estate: location, location, location.

“Our house is ridiculously overpriced,” said one senior, Elliott, who pays $700 per month excluding utilities payments. “When we first moved in, it looked nice, but we realized that everything was actually falling down. There were roaches here when we moved in…. I haven’t said anything yet to them about the hole in the ceiling.”

Duke Community Housing Director Linda Moiseenko, who has spent nine years in that office, said rental properties leased through Bob Schmitz generally ride above market value. Moiseenko added that it’s usually the date of construction that drives real estate value in Durham—not so much proximity to campus—meaning that these old construction houses should be bargain-priced. “The market price is less than what Bob Schmitz is charging, and students may or may not know that, but they still go ahead and rent,” Moiseenko says. “Ultimately, the choice is the students’ choice in whether they’re willing to pay that amount to live in that house or not.”

....

Bob Schmitz Properties is currently at 100 percent occupancy, Schmitz said, suggesting that his prices may in fact be too low, given the demand for the product. But Schmitz’s application of supply and demand theory is based on the assumption that the market for the kind of housing he invests in is free and competitive. Rather, Schmitz has something of a monopoly with the type of house undergraduates—particularly seniors in fraternities—are seeking.

As the Chronicle notes, there's a limited supply of such houses available for rental, and Schmitz has many of them, particularly those in close proximity to Duke's campus.

As a senior tells the Chronicle in its Towerview magazine story this month, his compadres and he found "a couple of sweet houses that were probably 10 minutes away" and beautiful for the same price -- "but we didn’t want to be 10 minutes away from campus, because no one would come hang out."

And therein, it seems, lies the proverbial rub.

There's other factors the Chronicle explores, too, including the reticence of a number of apartment complexes and property management companies to rent to undergraduates, some even having explicit age limits on their properties.

(For yours truly, the apartment complex we lived in upon first arriving in Durham trumpeted their age minimums as a bonus, proudly telling us we wouldn't ever have undergraduates as neighbors.)

The Chronicle also takes a look at one of the often-brandished weapons used on landlords: a Durham ordinance banning residences from having more than three individuals not related to each other from co-habitating, a rule that Schmitz (unsurprisingly) tells the paper he finds to be bad law.

Though Schmitz is quick to note that he only signs leases with no more than three parties on the document -- and doesn't do "bed checks."

~ ~ ~ ~ ~

The debates over student residences in local neighborhoods have died down this year, commensurate with less disruption being reported out of Trinity Heights, home to the Lange/Schmitz duality and a wide range of complaints last year over parties and enforcement.

The irony, of course, is that Trinity Heights is itself a neighborhood that has experienced simultaneous increases in both rental and ownership behavior, thanks to an effort by Duke to redevelop some core blocks with infill housing covenanted to sale only to Duke faculty or employees.

Yet many of these, as part of the new-urbanist guidelines that steered their development, themselves have backyard alleyway garages with upstairs apartments that are popular among student renters.

But these 500-600 sq. ft. apartments aren't the source of the complaints, which go instead to to those domiciles large enough to house an entire fraternity -- or at least (wink wink, nod nod) three members of one.

Residents often clamor for more of these houses to transition to single-family ownership as the Solie houses did of late.

Certainly the southern half of Trinity Park is quieter as a result. And the houses in question have been fixed up beautifully, and reconverted to single-family ownership.

And, naturally, seemingly accelerated housing values in the Brodie Duke-developed 'hood off East Campus.

Concerns arise from time to time over the impact of that pricing rise on economic diversity in the neighborhood -- where more-affordable properties and rental housing are in abundance only in the northeastern corners of the neighborhood these days, a section that itself has seen a solid rise in price. But then again, it's not as though large party houses brought in a particularly wide range of residents in the first place.

One thing is clear from the Chronicle article, though.

With 270 rental properties supporting their debt service through rental income, and the ability to earn above-market rents for the houses, it doesn't seem like Bob Schmitz is going anywhere for a while.

Which means residents are likely to keep complaining about party houses schmucking up neighborhoods, too -- for better or worse.

Comments

[Retro-Grouch]

Has anyone ever rented from Bob Schmitz and actually gotten their deposit back? I rather doubt it from the reports I've heard.

[Lauren]

whoa. holdup.

@hen was the last time you heard major complaints about party houses in trinity heights? The last major story I heard was the mid-may ABC 11 report (conveniently released just after students left for the summer and were unable to respond). Can we please recognize the efforts of students living off campus, student government, Duke administration, and Trinity Heights residents? There haven't BEEN major complaints this year, and that's something we can all be grateful for.

This post exposes the unfortunate attitude (not of the author, just in general) that Duke students and Durham residents cannot be neighbors. Concern is expressed over lack of economic diversity when houses are converted, but what about lack of interaction between students and locals? A single fraternity isn't necessarily diverse, but fraternities as a whole and Duke students in general are. Anyway, not all of Schmitz's 27 student-rented properties are frat houses (Duke doesn't have anywhere near 27 fraternities).

But back to the article. What bothered me when I read this in Towerview, and then again when I read this post, is that a clear issue is described, but not named. Why skirt around it? Bob Schmitz has a "monopoly." Location IS key, and students will continue to pay high prices for dilapidated houses that are conveniently located. What this should be saying to the local real estate industry is that there is unmet demand for well-kept houses near campus. Schmitz should not be the only one capitalizing on the Duke market - I'd like to see more houses developed by other other real estate investors and then rented back to Duke students. Having someone besides Schmitz in this market would keep prices fair. Lowered prices would increase demand, and allow renters to practice more discrimination in choosing who to rent to, so it's NOT all the frat stars. Fraternities can afford the bloated prices BECAUSE they have more than three members living there. There is a clear opportunity for local players in real estate - by investing in this market, they can make prices competitive, rent to a wider range of students, and potentially change the face of town-gown relations around East campus.

[Andrew]

I rented from Bob Schmitz when I first arrived in Durham. I have since then moved.

When I rented from his management service initially I was in a jam to quickly find a place close to work (downtown). I rented an apartment at his property at 906 W. Trinity Ave, 3 story building.

About 6 months in to my lease they started charging me for natural gas in the common area. The common area being defined as the unfinished basement where there was a washer/dryer that you had to deposit coins in to use it. The prices for the natural gas in the "common area" which I admittedly never used because of how disgusting the washer looked would be in the $15 range some months but others up to $45. I called to argue the charges but of course I was met with a hostile staff. I asked to see the bill for the building so I could divide the charges to see if I was being charged fairly but no luck at all. Basically I am 99% certain that they made up charges to bill me for every month.

Throughout my time at the apartment the pipes would burst below the building or they'd randomly enter my apartment without warning and leave forms on the counter in the kitchen. It was like living with your parents to a degree as they had no respect for anyone's privacy. I was a model tenant, never threw one party and was never late on my rent, not once in 2 years. The guy and his staff are complete scam artists and it brings great joy to my heart to see this article exposing some of his other tennants feelings.

Finally, regarding a security deposit being returned... that definitely didn't happen. Moreover, they charged me for things that were already broken. Basically I rented an apartment in disrepair and was then charged for it when I ended my lease.

What a joke. What goes around will come around for Schmitz and his staff.

[jonn]

I rent from Bob Schmitz and it's been great so far. But I do worry about the security deposit..our old neighbor told us they were charged $25 a piece to replace light bulbs.

[patty]

When I was looking to rent near downtown, I saw the preponderance of properties owned by Bob Schmitz, the cheery positivity of his website, and the many glowing reviews on such sites as Citysearch, but yet a small voice inside my head told me to stay away. I think I am glad I did.

[Matt Johnson]

Some undergraduate friends were moving out of a place near the corner of Markham and Buchanan. They paid $2500/month for a "four bedroom" house, which basically has three bedrooms and a small closet. The place was poorly maintained and slathered with linoleum. Soon after they moved out I was looking for a place and my roommate and I visited Bob Schmitz.

Interestingly, after we told the representative that we were Duke graduate students, they offered us the same place at $1500/mo. We laughed all the way to Apple Realty.

[Tar Heelz]

"...even if one of those houses, the most notorious of all in recent years thanks to some hockey-on-grass players,..."

Wow. BCR's lowest blow?

[M]

Ain't no low blow, just a little poetic flair.

[Past renter on Green Street]

Bob Schmitz was able to keep a straight face when he told me (and my roommates) that we were not going to get our deposit back because we had not cleaned the dust off of the baseboards. He knows that renters are usually leaving and don't have the time or the resources to fight him. We didn't. If Karma exists, Bob should be afraid. Very afraid. I will never rent from him again and would discourage anyone/everyone from renting from him.

[HP]

Certainly did not get my deposit back from Bob Schmitz--and we spent a good deal of time making sure everything was clean and in order before leaving. If you do rent from him, don't waste your time cleaning before you move out.

[Christine Westfall]

It's interesting to see how many times the word "fraternity" comes up in the Chronicle's article about the big, run down houses that Bob Schmitz rents for a fortune near Duke's campus. If you read between the lines, the students essentially say those homes are their de facto fraternity housing.

The elephant-in-the room question is, why doesn't Duke,which is over 30% Greek, create decent and safe fraternity houses where students won't be price gouged and have to worry about the floor falling in?