Ever-growing apartment construction in Champaign-Urbana is increasing vacancy rates and depressing monthly rents, according to apartment building owners who have filed property assessment complaints with the Champaign County Board of Review.
Although most of the recent apartment construction has been focused around the University of Illinois campus, the assessment complaints come from owners of properties away from the Campustown area.
Listed in the assessment complaint filed by the owners of the Hessel Park Apartments in Champaign are 11 apartment complexes scheduled to be completed in either 2019 or 2020. The projects will increase the number of available apartments by 532 units and 1,079 beds. (Developers list their projects both ways. The Opus Group’s 14-story building at Fourth and John streets, scheduled for completion next July, lists a capacity of 548 beds. The Landmark Properties’ Retreat at Illinois at Lincoln and University avenues in Urbana lists 162 townhouse units with two-, three- and four bedroom units).
In any case the new construction is sure to increase the local apartment vacancy rate now estimated at 10 percent or more.
Raymond Timpone Jr., owner of the Stratford Apartment in downtown Urbana, told the board of review that an 18 percent increase in his development’s assessment was unjustifiable.
“As you know, there has been an explosion of apartments in Champaign-Urbana which has caused rents to go down associated with more vacancies,” he wrote. “Property values in Urbana have not increased by double digit growth over the past few years.”
He said five of his units were vacant all or part of the last year.
In northeast Urbana, the owners of the Town and Country Apartments told the board of review that their 662-unit complex has seen an increase in vacancy rates from 8.65 percent in 2017 to 13.57 percent for the period January through September 2018. That came even though in 2017 “the facility took aggressive action to lower rent and increase concessions to decrease vacancies,” said the owners.
The owners of the Grammercy Park Apartments in west Champaign asked the board of review to reduce the assessment of their property, with a weighted age of 52 years, by more than a million dollars.
“As of January 1, 2019, CoStar (a commercial real-estate information provider) reports vacancies in the Champaign-Urbana area at 10.5 percent,” said the Grammercy appeal. “New deliveries have outpaced demolitions by 275 units in 2018.”
Grammercy said that enrollment increases at the University of Illinois are fueling the apartment construction boom but noted there still are too many units in the market.
“Currently the market cycle appears to be at the end of Phase II — Expansion or at the beginning of Phase III — Hypersupply,” said its appeal.
Grammercy said its annual net operating income has dropped from more than $1 million in 2014 to a loss of more than $300,00 in 2018. It said its vacancy rate was 41 percent in 2018.
In a related development, some members of Congress say they hope to undertake oversight of the controversial “opportunity zone” federal tax break that was supposed to direct investment into low-income neighborhoods but for the most part hasn’t. In Champaign, for example, it led to the construction of three Campustown apartment buildings. The owners acknowledged the construction would not benefit local low-income communities.
Separate bills in the House and Senate would require increased filings by opportunity zone funds.
“Given the breadth of the Opportunity Zone incentive, the lack of reporting requirements under current law, as well as the high levels of reported interest from taxpayers, we believe it is critical that the Government Accountability Office (GAO) assist Congress in evaluating the incentive and monitoring its implementation and outcomes,” said the letter from Sens. Ron Wyden and Cory Booker and U.S. Reps. Richard Neal and John Lewis.
Rep. Mike Kelly, a Republican from Pennsylvania, joined with Democrats in promoting legislation to require funds that invest in opportunity zones to file annual reports with the Treasury Department that disclose details of their development projects.
The opportunity zones idea was included in the Trump tax cuts of 2017.
Tom Kacich’s column appears on Sundays in The News-Gazette.