High vacancy rate drive apartment rentals down

Minus the rusting car parked in front, few garments hung in a metal clothesline and a couple of seven-year-olds playing on the ground, a row of apartments in San Vicente stands idle without an apparent trace of habitation.

This scenario has become prominent since the local economy suffered severe contraction beginning mid-1997 which forced hundreds of foreign businessmen, mostly Koreans, to close down their shops and leave the island in clusters.

The departure of too many Korean businessmen from Saipan has left apartment complexes virtually empty with vacancy rate shooting up by as high as 40 percent, according to Commonwealth Development Authority Board Chair John S. Tenorio.

Mr. Tenorio disclosed that current vacancy rate for commercial and residential apartments is on a record-high at 35 percent, creating stiffer competition among owners for the very restrained market on Saipan.

The brewing competition has been pulling down the prevailing market fees for apartment rentals to as low as $200 for a single-bedroom fully furnished flat while a people can now get a two-bedroom semi-furnished apartment for just $500.

Mr. Tenorio explained that apartment owners are pulling their prices down in order to keep their pads occupied since too long vacancy would only deteriorate the place, thereby, putting more pressure in the maintenance costs.

Despite the practically lower prices for rental, nonresident workers have preferred to live in company staff houses leaving too many apartment doors vacant.

The CDA chief noted that some guest workers who previously lived in apartments have returned to their barracks to boost their capability to save more greenback in preparation for possible non-renewal of contracts because of prevailing economic conditions.

The high vacancy rate, which cripples most of the apartment owners’ capability to pay their loans from CDA, is a major factor in the two percent jump in the agency’s delinquency rate.
Mr. Tenorio disclosed that only about 40 percent of loans approved by the Development Authority for apartment-type businesses have been paid so far.

Government records disclosed that the second largest category of loans issued by CDA was for apartments; the third largest was for fishing. At the end of 1997, CDA had a reserve for bad loans of more than $9 million, equivalent to roughly 30 percent of the outstanding loans.

At the same time, CDA Executive Director Marylou S. Ada said the lending agency has been helping apartment owners cope with the hard economic times by referring to them U.S. citizens signed under the federal government’s Certificate and Voucher Program.

Ms. Ada said CDA has been giving recipients of housing benefits under the Housing and Urban Development, or Section-8 tenants, the chance to choose which apartment they would want to live in.

At present, there are 106 recipients of the housing benefits guaranteed by the HUD in the Northern Marianas who live in various apartment complexes around the island.
Under the program, the Northern Marianas Housing Corporation interviews low-income families and inform them how much money they can get for housing assistance from the federal government.

Since apartment rental fees are cheaper nowadays, Ms. Ada said most of the beneficiaries of the HUD housing assistance program have chosen to live in apartments.

“That way, we are actually helping apartment owners fill up vacancies through Section-8 tenants. It has allowed a lot of vacant places to be rented by voucher recipients,” she said in an interview.