Planning to rent a home in Palm Beach this season?
That’s basically the word from real estate brokers and agents who have been fielding calls almost daily from people desperate to lease a home on the island but who have been stymied in their efforts.
In many cases, their interest in leasing stems from the fact that they can’t find a house or condominium to buy in town, where sales have soared and the inventory of available properties has plummeted to historic lows since the COVID-19 pandemic began.
“There are no rentals — but there are renters,” said Joan Wenzel, a Douglas Elliman Real Estate agent who has specialized in condo sales and rentals, especially on the South End, during her 28-year career.
“I have someone right now who would pay $15,000 a month to rent a condo — and not even a fancy one,” Wenzel said. “The rentals (dried up) in July.”
It’s a similar story in the single-family rental market.
“We had an already constrained rental pool, and it’s even more constrained now than it was prior to COVID,” said agent Dana Koch of the Corcoran Group.
He was echoed by broker Linda Olsson of Linda R. Olsson Inc., Realtor: “The (single-family) rental market is very, very strong. It’s very difficult to find a house to rent in Palm Beach because inventory is so scarce.”
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A search last week of for-lease listings in the Palm Beach Board of Realtors Multiple Listing Service showed 30 single-family properties with prices starting at $15,000 per month — although some of those had only a few months available.
At the top of the single-family price scale were five properties listed with rents of $95,000 or more a month, including an oceanfhouse at 6 Via Los Incas that could be rented seasonally for $250,000 per month or annually for a flat fee of $2 million.
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The search last week also turned up 42 MLS-listed condos and cooperative units for rent, although lease-length requirements and availability varied widely. Of those, 21 units were in Midtown at monthly prices ranging from $4,500 to $60,000.
On the South End, another 21 condos were listed with rents ranging from $1,700 per month to $40,000 per month. The latter was the annual rent for Penthouse 4 at Bellaria, which entered the MLS last week, at 3000 S. Ocean Blvd. “We’ve already received offers within a few days of listing,” agent Greg Forest of Sotheby’s International Realty said Friday.
‘You need to be ready to act’
The lack of rentals has stumped many potential homebuyers, who have traditionally rented homes in town for the season while they shopped for something to buy, said Olsson, echoing other real estate professionals.
But those would-be renters have been forced to change their strategy.
Some have instead bought a house or condo, even if it wasn’t the home of their dreams, Koch said. Doing so has bought them some time and made it easier to keep up with the market when a better property finally becomes available for sale — and that could very well be an off-market listing.
“In order to be in the market, you have to be here,” Koch said. “You need to be ready to act.”
Why is the rental market so tight?
The number of houses for rent has tightened for several reasons, Koch explained. Some owners who previously leased out homes that were investment properties instead moved into the houses during the pandemic — and they haven’t left.
At other rental homes, renters who were scheduled to vacate the properties once their leases ended simply called their landlords and extended their stays.
And other owners of houses that were in the rental pool simply sold them when the market began heating up a couple of months after the pandemic hit in March 2020.
Strict rental rules for houses, condos
The single-family leasing situation is further compounded by the town’s strict rental ordinance. Town Hall limits to three the number of times per calendar yearthat single-family houses can be rented out.
Or, as Olsson put it: “They’re not running an Airbnb town.”
In addition to the local ordinance, owners who have their properties homesteaded as their primary residences risk losing their tax exemption if they rent out the residence for more than 30 days for two consecutive years or for more than six months, according to state law.
And further compounding the problem for would-be renters? Many owners of single-family properties don’t want to rent them for less than six months — and they may even hold out for an annual lease. Properties for lease in the Palm Beach Board of Realtors Multiple Listing Service often list two prices — a so-called “seasonal” lease at a higher price per month and an annual lease at a lower monthly price.
“Owners make their (rental) money during the season,” Olsson explained.
Some would-be renters hold out — and then miss out
She noted that any property rented for less than six months qualifies as a “short-term” rental, requiring the owner to pay 13% in combined taxes to Palm Beach County for its “tourist development tax” and to the Florida Department of Revenue. And that cost would be passed on to the renter.
Even so, would-be renters often want to lease for only a few months and initially balk at the longer term, agents said. And as a result, they often lose out on properties. By the time someone in the rental market agrees to negotiate for a lengthier lease, the property often has been snapped up by someone else, Koch said.
“Sometimes these people end up with nothing,” he added. “I call them innocent bystanders.”
Olsson agreed: “He who hesitates is lost in this market. We know that.”
Condo rentals present their own hurdles
Meanwhile, the town’s condo market has its own set of challenges for renters. Many buildings strictly restrict how often owners can lease out their properties.
“Basically, few buildings allow rentals every year — and the restrictions are getting stiffer,” Wenzel said, adding that condo homeowners associations tend to discourage investors from filling buildings with renters.
On the South End’s Condominium Row, Wenzel noted, some buildings require owners to wait a year after buying their units before they can rent them out for periods ranging from three to 12 months. And once that lease term has expired, they can’t lease them out again until three years have passed.
Other buildings have similar waiting-period policies but demand units be leased for only six to 12 months at a time.
Another building might not have a waiting period after an owner buys a unit but only allows rentals of three to 12 months every other year.
And still other buildings prohibit any rentals at all.
Similar policies are in place at Midtown’s condominium buildings.
Working the phones to find properties
With demand for rental homes so intense, agents and brokers are doing what they can to track down suitable properties.
Agent Gary Pohrer of Douglas Elliman says he is regularly on the phone, trying to find rental houses for customers.
“I’m calling my clients to ask if they will rent their house for a month,” he said. “Because people really want to be here.”
Some of his clients, he adds, have never before rented out their properties but are responding to the unprecedented demand — especially for the peak months of January, February and March.
Two of his homeowners, he said, recently accepted shorter-term rental offers at prices “north of $75,000 a month.”
And where are the homeowners going to reside during that time, when they would normally be enjoying warm sea breezes and sunny afternoons on Palm Beach?
“Both are going to stay in the cold for a month,” Pohrer said.
Darrell Hofheinz is a USA TODAY Network of Florida journalist. Help support our journalism. Subscibe today.