North Omaha Vacancy Rate Not Declining
by Dennis Walsh
for Omaha Together One Community
May 17, 2018
Nationally the vacancy rate in rental property is considered a reasonably important indicator of economic health. It is one of 17 numbers tracked by the US Census Department as an Economic Indicator. A Distressed Communities Index by the Economic Innovation Group makes vacancy rate one of 7 indicators of community health. So an analysis of the vacancy rate is indirectly an analysis of the economic health of a community.
The numbers for this analysis are shown in the accompanying Excel file (pdf). The change in vacant housing units from 2000 to 2010 seems extraordinary. Omaha’s vacancy rate went from 5.4% to 8.4%. The number of vacant households went from 8,993 to 14,891 – an increase of about 5,900. Those numbers were from the decennial censuses from 2000 and 2010, and so are very accurate. Since 2010 the American Community Survey shows the vacancy rate gradually declining to 7.5%, but still with 14,242 vacant housing units.
A reasonable theory is that the dramatic rise in vacant housing units was the result of the economic collapse of 2009. Yet that does not appear to be the case.
We have some American Community Survey data for 2007 and 2008. These are three-year averages, covering 2005-2007 and 2006-2008. While these years are samples and have margins of error, they show already high numbers, with 9.0% and 8.7% vacancy rates. So why would the vacancy rate increase so much between 2000 and 2007?
The Census Department tracks owner- and renter-occupied vacancies quarterly by four geographic regions. Below are graphs for the Midwest region. Homeowner vacancy rate rose sharply from 2003 to about 2008, but consistently declined since. The rise in vacancies really preceded the economic crash.
The rental vacancy rate in the Midwest peaked about 2005. It has mostly declined from 2005 to 2014, and then flattened out since then.
Also note that the homeowner vacancy rate peaked at 3%, where rental vacancies peaked at about 13%. So the overall vacancy rate is primarily driven by rental vacancies.
For the Midwest in general, vacancy rate peaked between 2005 or 2008. As to why that was, it will be left as a mystery here. It is enough to say that if Omaha’s vacancy rate peaked around 2007 and has declined since, that is not necessarily unusual.
NORTH OMAHA (zip codes 68104, 68111, 68110)
The vacancy rate in North Omaha increased from 6.6% in 2000 to 11.4% in 2010. In the numbers of vacant housing units, the increase was from 1848 to 3198, or 1350 households. When the ACS data is included, the peak rate was 13.0% with 3734 vacant housing units in 2011. Subsequent declines have been consistent and slow, reaching 12.3% and 3487 in 2016.
The decline in the North Omaha vacancy rate during this decade has been slower than decline in Omaha overall. Omaha’s vacancy rate has declined 15% (8.8% to 7.5%), while North Omaha’s rate has only declined 6% (13.0% to 12.3%).
The vacancy rate is affected by both the numerator (vacancies) and denominator (housing units). For Omaha the improvement since 2011 breaks down to a 9% decline in vacancies, and a 6% increase in housing units. North Omaha since 2011 has seen a 7% decrease in vacancies, and a 1% decrease in housing units.
That is an important point to emphasize. Omaha’s decrease in the vacancy rate has been driven both by a decrease in vacancies and by an increase in the number of housing units. In contrast North Omaha’s vacancy rate has corresponded with a slight decrease in the number of housing units. Since 2011 the number of housing units has decreased by about 250 in the North Omaha zip codes.
One reason for the decrease in the number of households in North Omaha since 2011 is the number of demolitions by the City of Omaha. The city demolition budget has grown significantly in the last decade. I believe 2012 was the first year the budget exceeded $800,000 and since then has consistently approached $1,000,000. A public city database (scroll down to General Search, then click on Search)shows demolition permits issued and executed since 2015. It allows us to identify city demolitions completed from 2015 to 2018 which entered the system after January 1, 2015. Since 2018 demolition activity has just started within the last month, the data provides an estimate of demolitions from 2015, 2016, and 2017.
This data was assigned zip codes through the Census Geocoder. This data shows an average of 58 demolitions are occurring per year in the three North Omaha zip codes. This number likely underestimates the number of demolitions, since some 2015 demolitions, for example, would have been on older demolition permits not in the current database. We know that fewer than 100 residential demolitions are performed per year and that most involve North Omaha properties. It seems reasonable to estimate that 60 such demolitions have been performed annually since 2012. Such demolitions would have totaled 300 by 2016.
Since the ACS identifies a decrease of 250 housing units from 2011 to 2016, this would again be consistent with demolition activities. It seems reasonable that non-profit developers would have added properties during this time to partially offset the demolitions. In sum, the story embedded in the demolition database is consistent with the story shown in the census data.
What effect have those city demolitions had on the vacancy rate? Let’s imagine that the city had not performed any demolitions during this period. Thus North Omaha would have an additional 300 housing units, all vacant. The 2016 data would then have showed 3787 vacant properties among 28,709 housing units, for a vacancy rate of 13.2%. In that case North Omaha’s vacancy rate would essentially remain unchanged from its worst rate of 13.0% in 2011. In other words, the entire decline in North Omaha’s vacancy rate has been the result of city demolitions. In effect none of the decline in the vacancy rate can be attributed to the improved economic situation.