Commentary: So Called Mega-Dorms Are Being Villainized, but there Are Advantages As Well

On Tuesday, roughly nine people came to public comment to protest the construction of so-called mega-dorms.  While there are a variety of reasons for the opposition, it comes down to a few key points.

The first is the idea that four- and five-bedroom rent-by-the-room apartments are really only useful to a limited demographic – a demographic that can also be served by a two- to three-bedroom apartment that would have broader use.

The word that has been used is “exclusionary housing.”

My view here is somewhat different.  First of all, we have all sorts of exclusionary housing, from senior housing projects to affordable housing projects.  Even a single-family home is in effect exclusionary by design, as it caters to a wealthier constituency than other forms of housing.

The fact of the matter is that the city right now has a very low vacancy rate (some have disputed the 0.2 percent figure, but whatever it is, it is low and that low vacancy rate is harming students and also others who would be in the rental market).  Students at this point are the largest single group in the rental market by far, and by developing housing that caters to their needs, we go a long way toward dealing with low-hanging fruit.

The argument has been put forward that, by developing two- and three-bedroom apartments, you can serve a wider array of needs.  For a number of reasons, I really don’t agree.

First of all, the shortage of student housing right now is so stark that, in the short-term at least, students are going to eat up all of those two- and three-bedroom apartments.  So, in effect, for
the foreseeable future if you build three bedrooms at Lincoln40, those are going to be rented by students.

Second, and this is a point I keep making which the opposition is not addressing – families cannot afford in most cases the rent of a market rate two- and three-bedroom apartment.  You are talking about $1600 to $1800 for a two-bedroom in Davis and $2300 for a three-bedroom.  Even a family making above median income is going to have trouble paying that amount for rental housing – especially when they can probably buy a home in other areas and pay less in mortgage payments.

Third, it is not like students are going to disappear from Davis any time soon.  Even if enrollment at UC Davis declines or stabilizes, having student-oriented apartments is going to be a need.  Given that these apartments are new compared to the majority of multi-family housing stock, they will be in demand for some time – and as demand falls, the prices will either lower or stabilize.

What providing student housing can do, however, is reduce pressure on neighborhoods to house students in mini-dorms or with 13 students sharing a five- or six-bedroom house in a neighborhood – which could be rented instead to a family or put back on the market as a single-family for sale unit.

There are also advantages to the rent-by-bed model and large apartments with several rooms that have not been considered.

First of all, bed leasing creates efficiency.  On the one hand it limits the amount of tenants living in a given unit and a given building, which helps the city plan.  On the other hand, it allows for each bed to be rented out so that the unit is fully utilized.

Thus, unlike conventional units, the management of bed-leased units can control the number of tenants living in each unit.

The reason that bed leases have proliferated is that the market has found that this arrangement is beneficial to both the student and landlord.

From the tenant’s perspective, bed leasing limits the liability on the part of the tenant.  The tenant is only liable for the terms and financial obligations stated in the individual bed lease.

This doesn’t just work for students but also for young professionals and workers who do not have families yet and are looking for cheap and inexpensive places to live.

The price of a bed lease is often less than for a unit.  Part of that is that they are renting by the bed.  Part of that is that the management can divide the rent up for the occupants who rent by the bed.  Part of that is a function of the efficiency.  And part of that is a function of the fact there is a reduction in the fees.

Those who are arguing that city fees should be based on units understand that, while the market will dictate some of the rental costs, the cost of building and the fees involved also play a role.  Any fees that cut into the margins for the owner will be transferred to the tenants.

Furthermore, the rooms in bed-lease units are usually furnished, which again reduces the tenant’s financial burden.

Projects like Lincoln40 allow double-occupancy rooms, which creates more of an affordability-by-design model.

Renting a one-bedroom apartment is financially prohibitive for many young individuals and finding additional roommates, apartment hunting, and becoming jointly liable for an entire unit is a complex and onerous process.

Bed leasing makes it easier for the renters to remove a troublesome or problem roommate without incurring problems with the lease and risking all of the tenants being removed.  This not only reduces problems for the renters, but makes it easier for management not to have to worry about the impact of removing problem tenants.

The bottom line is that in a market with a 0.2 percent vacancy, finding a model that can add a lot of beds fairly quickly is advantageous to the community and the students.  With UC Davis’ commitment to add 6200 beds and the apparent possibility of increasing that number, and the city adding 4000 to 5000 beds in the next few years, the city can greatly alleviate the student housing crisis.

I agree with those who argue that family housing is needed.  However, as I have pointed out several times, market rate apartments are probably not the best and most affordable way to address those shortages.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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43 thoughts on “Commentary: So Called Mega-Dorms Are Being Villainized, but there Are Advantages As Well”

  1. Tia Will

    David

    families cannot afford in most cases the rent of a market rate two- and three-bedroom apartment.  You are talking about $1600 to $1800 for a two-bedroom in Davis and $2300 for a three-bedroom.  Even a family making above median income is going to have trouble paying that amount for rental housing – especially when they can probably buy a home in other areas and pay less in mortgage payments.”

    While I agree that there are pros and cons to by the bed rentals, some of which you have noted, I would also like to address the above point that you say no one is addressing. Your statement is a strong argument for building more “little a” affordable housing, not specifically an argument for the dormitory type setting. If what we need is more affordable 2 and 3 bedroom apartments, then surely that is what we should be building. Instead building high cost dorms is an indirect approach attempting a complicated game of musical chair living arrangements which is what we are hoping will provide “trickle down housing opportunities” instead of meeting the primary need.

    Bed leasing makes it easier for the renters to remove a troublesome or problem roommate without incurring problems with the lease and risking all of the tenants being removed.  This not only reduces problems for the renters, but makes it easier for management not to have to worry about the impact of removing problem tenants.”

    While this may be true in theory, it is not necessarily true in practice. We had significant problems with one of four roommates originally sharing a rent by the bed suite in an off campus dorm. While it was eventually resolved, it took several months and that was with a very responsive resident assistant. This “advantage” depends entirely upon the responsiveness of management and there certainly is no guarantee.

    At this point, I see clear advantages and disadvantages to the large off campus dorms and so have not taken up advocacy one way or the other. I remain committed to assessing each project separately on its merits as they wend their way through commissions towards council approval.

    1. Mark West

      “If what we need is more affordable 2 and 3 bedroom apartments, then surely that is what we should be building. Instead building high cost dorms is an indirect approach attempting a complicated game of musical chair living arrangements which is what we are hoping will provide “trickle down housing opportunities” instead of meeting the primary need.”

      It isn’t an either/or proposition. We need more housing for students and more housing for young families, or more correctly, we need more housing for the people who live and work in town.

      The types of projects that are being proposed are a function of the demands and incentives that we have built into the system and reflect what developers see as the most viable approach to a successful project. If we want a different type of project to predominate, we need to change the demands and incentives to achieve that goal. We don’t live in a command/control society where we dictate what types of projects private developers propose, though there are some here who think we do. If we want more 2 and 3 bedroom apartments, then we need to create incentives for developers to create those types of projects. In the end, though, the pent-up demand for MF housing in town is so much greater than the available supply that any type of new MF project will be beneficial.

  2. Ron

    From article:  “Any fees that cut into the margins for the owner will be transferred to the tenants.”

    Any fees (or inadequate amount of taxes) that aren’t paid by the developers will ultimately be paid by all Davis taxpayers.

    The developers will charge the market rate per bed, regardless of their costs.

  3. Ron

    From article:  “What providing student housing can do, however, is reduce pressure on neighborhoods to house students in mini-dorms or with 13 students sharing a five- or six-bedroom house in a neighborhood – which could be rented instead to a family or put back on the market as a single-family for sale unit.”

    “Not bloody likely”, especially for properties located close to UCD.

  4. Ron

    From article:  “Bed leasing makes it easier for the renters to remove a troublesome or problem roommate without incurring problems with the lease and risking all of the tenants being removed.  This not only reduces problems for the renters, but makes it easier for management not to have to worry about the impact of removing problem tenants.”<b></b><i></i>

    Right.  For example, “good luck” with trying to identify the “water waster” in a given unit (driving up costs for everyone else), and then convincing management to have him/her “removed”.

      1. Ron

        In general, tenants will have a difficult time convincing management to “evict” a troublesome roommate, since each person has their own lease (and makes their own payments, to management).

        Water wasters are just one example. (The excess costs will simply be allocated to other tenants – either by unit, or all occupants of the building.) And, there won’t be a way to identify the “water waster”.

        1. David Greenwald

          Water wasters are not what we’re talking about here.  What we are talking about are serious conflicts that right now result in all of the tenants being evicted in unit leases.

  5. Ron

    From article:  “Projects like Lincoln40 allow double-occupancy rooms, which creates more of an affordability-by-design model.”

    And, greater impacts to the city (and a corresponding need to adjust impact fees).

      1. Ron

        Well then, you probably should review what impact fees are for.  They are based upon the impacts of new residents.  I’ve posted information regarding this, several times now.

        1. Ron

          It’s not that you disagree with me.  It’s that you disagree with facts:

          “Development Impact Fees are one time charges applied to new developments. Their goal is to raise revenue for the construction or expansion of capital facilities located outside the boundaries of the new development that benefit the contributing development (Nicholas, et al., 1991). Impact fees are assessed and dedicated principally for the provision of additional water and sewer systems, roads, schools, libraries and parks and recreation facilities made necessary by the presence of new residents in the area. The funds collected cannot be used for operation, maintenance, repair, alteration or replacement of capital facilities” http://www.impactfees.com/publications%20pdf/dif.pdf

          Now, if you want to dive into the details (and argue about each impact and how the costs should be allocated), then that’s another matter.  (And would likely become an extensive discussion.)

        2. Ron

          Well, the only “conclusion” I’ve presented is that larger numbers of new residents have a greater impact than fewer numbers of new residents. (I realize that arguments can be made, regarding each “type” of impact.)

          But again, impact fees are supposed to be based upon the impacts of new residents (a “fact”, not a “conclusion”).

        3. Howard P

          Yes… and we should analyse whether, since they were adopted in the late 80s, whether they were sufficient to cover all of the costs of the impacts were/are of folk who came after 1987, are covered… even retroactively assessing them…

          That would be “justice”, right, Ron?

  6. Tia Will

    We don’t live in a command/control society where we dictate what types of projects private developers propose, though there are some here who think we do”

    I do not know anyone who believes we “live in a command/control society”. But I do know from recent direct experience that our CC does have the ability to “incentivize” certain types of development that they favor over others by choosing to strongly favor collaborative processes when they choose, or to make exceptions for favored developments when they so choose. If we see a strong need for affordable 1-3 bedroom apartments, which some do, it is well within the purview of the CC to provide encouragement and “incentive” for those types of developments. One council member quite honestly stated that she believed the provision of such exceptions ( aka incentives) was precedent setting. If this can be done for a small luxury apartment development, surely it could also be done for affordable housing if there existed the will to do so.

    1. Mark West

      The City analyses projects that are presented by developers under the existing legal framework. It is an open process where everyone is free to offer their input if they wish. The ultimate step in that process often involves a decision by the majority of the City Council, but it does not always have to be that way. Some projects do not require CC consideration. There is no way that a single City Council member can offer incentives in the process, unless you are implying that our CC members are illegally making ‘back room’ deals with developers?

      The way that the City may incentivize certain types of housing is to adjust the demands and fees to make the preferred type of project more financially viable for the developers. That is the justification for instance for excluding mixed-use projects from the affordable housing requirement. If that form of incentive is untenable to the community, but we still want to have mixed-use projects, then we will need to find a different approach to make those projects viable. Without the incentives, the projects simply won’t be built. It is the current mix of demands and fees that we have in place that have created the incentive for developers to propose projects with 4-5 bedroom apartments, not your hypothetical backroom deals.

      The zoning exceptions allowed in recent decisions are not ‘precedent-setting,’ they are a normal part of the planning and development process as it is defined by State law. The issue here is not the process, though you try to frame it that way, it is that you want to control the outcome.

       

      1. Ron

        Mark:  “That is the justification for instance for excluding mixed-use projects from the affordable housing requirement. If that form of incentive is untenable to the community, but we still want to have mixed-use projects, then we will need to find a different approach to make those projects viable. Without the incentives, the projects simply won’t be built.”

        No evidence presented to support that statement. The argument that a given proposal “won’t pencil out” has apparently been incorrectly claimed, previously.

      2. David Greenwald

         

        “It is the current mix of demands and fees that we have in place that have created the incentive for developers to propose projects with 4-5 bedroom apartments,“

        This is a key point that I’ve heard many times that has been overlooked over and over again.

        1. Ron

          David (quoting another commenter):  “It is the current mix of demands and fees that we have in place that have created the incentive for developers to propose projects with 4-5 bedroom apartments . . .”

          David’s response:  “This is a key point that I’ve heard many times that has been overlooked over and over again.”

          It’s not being “overlooked”.  In fact, many of us have pointed out that developers are taking advantage of the incentives which favor megadorms (fewer requirements regarding Affordable housing and impact fees, for example).

        2. David Greenwald

          But that’s missing the point of what I’m saying which is that we may be setting the fees too high and thus contributing to the economic incentives to produce the type of housing you are arguing against.

      3. Tia Will

        Mark

        unless you are implying that our CC members are illegally making ‘back room’ deals with developers?”

        I do not know why you chose to post this since I was clear in my post that I thought Councilmember Swanson was making an honest statement. I am fully able to make my own comments and don’t need you to attempt to translate for me.

        The issue here is not the process, though you try to frame it that way, it is that you want to control the outcome.”

        No, the issue for you may only be outcome. Process is a separate issue and is as important to me as outcome. With regard to Trackside, as one commenter put it, I had no skin in the game either way. The issue was not outcome, but process and precedent. I truly regret that you do not seem to be able to put aside your preconceived notions about what I must think.

         

  7. Ron

    David:  I believe that you were planning to ask the developer what the probable rents would be, for the market-rate beds.  Have you received an answer?  (I assume that there will be a range, based upon whether or not a room is double-occupied, for example.)

      1. Tia Will

        I have a request in with the city, it turns out to not be as simple a question as you would imagine.”

        This reply is troublesome to me. It is possible that the question is more complicated than it appears on the surface. It is also possible that the developers do not want to provide and are not being pushed to provide the answer by the city. I am concerned about this because during discussions about The Cannery, no firm answers were provided to my repeated questions about the range of prices which could be expected. It was only after I presented a range and asked if that were reasonable ( in front of a packed room of citizens) that The Cannery and city representative reluctantly conceded that I was likely not “far off”. This is not the kind of transparency that I would hope for.

         

        1. Howard P

          Then Tia, we should demand the same of all the developer’s “successors in interest”… all landlords… including you(?)… I’m good with that approach…

          Any time you are willing to specify the rents you charge, SF-age, # of bedrooms, occupants, please share… a sign of good faith, as you will, Tia…

        2. David Greenwald Post author

          Part of the issue is that until all of the costs come in, it is a guess and the developers have not provided what their market rate rents are estimated to be. The current Davis market in terms of monthly rents is generally in the $2.00 to $2.25 per square foot range. But there is almost no new units (less than 15 to 20 years) in the city. So the guess is that new units could start out at around $2.50 per square foot.

      2. Ron

        David: According to your estimate, the monthly rent for a 5-bedroom, 1,500 square-foot megadorm unit might be around $3,750 per month (divided among each leaseholder).  If divided 5 ways (single-occupancy), it would come to $750/leaseholder.

        Isn’t that about the same as the estimated amount for the “Lincoln Lift” Affordable program, for a shared bedroom?  (If so, then the market rate estimate seems too low.)

  8. Ron

    David: I appreciate that you simply “reported” some of the concerns yesterday, and created a separate article for your commentary, today.  Seems like a more balanced way to present an issue.

  9. Eric Gelber

    First of all, we have all sorts of exclusionary housing, from senior housing projects to affordable housing projects.  Even a single-family home is in effect exclusionary by design, as it caters to a wealthier constituency than other forms of housing.

    The the fact that there are other forms of exclusionary housing is not an argument for additional exclusionary housing. And you’ve used a very broad definition of exclusionary.

    I’ve previously stated my objections to senior housing, which permits lawful discrimination against families with children and others, and fills a need that could be met in less restrictive ways (e.g., universal design). Affordable housing, on the other hand, is exclusionary but is justified because it provides options to households that would otherwise be without any alternatives and therefore serves a compelling public purpose. (Single family homes may, as a practical matter, be de facto “exclusionary” because of economics. But that’s not the same issue.)

    Obviously, there are many types of rental housing suitable for students, which is why the city-wide rental vacancy rate is such a problem; the issue is with insufficient supply. To meet the need for student housing, therefore, the overall rental housing supply needs to increase, but it’s not necessary to develop rental housing that, by design, is exclusionary of other groups in need of relatively affordable housing alternatives.

    1. Howard P

      Eric… for clarification… do you differentiate between ‘affordable housing’ (which likely is rental), and ‘affordable’ “for sale” housing (ownership units)?  For me, affordable housing is an important goal… but ownership affordable units are low on my priorities.

      Not making a judgement, but seeking clarification.

      [Definitely not aimed at Eric… general comment]  Housing is a huge priority for me.  But the affordability part has trade-offs… we need to recognize that… and we need to differentiate between rental units and ownership units in our priorities… focusing on SF ownership affordable units are very low on my list of priorities.  Affordable rental units, and ensuring that folk can be housed/sheltered, is very important to me.  As someone who has a SF home, paid-off mortgage… but we worked long and hard to get there… it was not ‘given’ to us.  Not an inherent “right”…

        1. Howard P

          OK… question remains for a future topic…

          Your response was fair… talking about rental units…

          Yet City policies crossed those lines big-time, over the years… but you are correct, not the current topic.

          Thank you for your fair response…

  10. Ron

    From article:  “Second, and this is a point I keep making which the opposition is not addressing – families cannot afford in most cases the rent of a market rate two- and three-bedroom apartment.”

    If true, then I would think that you’d argue for more two and three-bedroom apartments, since they contribute a larger amount/number of Affordable units (compared to equivalent-sized megadorms).  The Affordable housing program contributions are based upon the number of units, not size of the units.

    Smaller (but more) units = a larger contribution to the Affordable housing program.

      1. Ron

        David:  The (rather ludicrous) implication in your argument being that there “is no market” for traditional apartment complexes.  It’s either “megadorms”, or “nothing”, according to that argument.

        I sincerely doubt that you believe that.

        1. David Greenwald

          First of all, not what I said.

          Second of all, that being said, there hasn’t been a “traditional apartment complex” built in Davis in over 15 years.

        2. Ron

          That’s the implication in your argument.  And, it ignores the lingering impacts of the recession.

          In addition, we’re seeing proposals that don’t adhere to existing zoning.  Perhaps that was (naively) viewed as an “obstacle”, in the past.

          And, when developers figured out that they could build megadorms more inexpensively (e.g., due to fewer Affordable housing requirements, and less impact fees) while simultaneously “packing ’em in” (thereby maximizing rental income per property) perhaps this combination finally “kicked open” the floodgates for these proposals. Especially with a willing council, Vanguard blog, students, and UCD on board.

          As a side note, I believe that we have had Affordable complexes built.

        3. Ron

          In addition (as has been pointed out), rents have been rising dramatically, across the entire region.  That’s another (rather recent) “motivator” for these proposals to arise.

          Here’s another article that I saw today, regarding the “fastest rising rents” in the Bay Area.  (Turns out it’s in Fairfield, which isn’t that far from Davis.)

          http://www.sfgate.com/realestate/article/Bay-Area-rent-fastest-growing-Fairfield-expensive-12404493.php

          A related quote from the article: “Sacramento rents have risen more than 9 percent since this time last year (and Sacramentans are not happy about it).”

          Seems like the Sacramento valley “follows” (lags) the Bay Area.  Housing costs rise and fall there first, followed by the valley (which experiences wider “swings”).  (Note that the article mentions that rent increases are slowing in places like San Francisco.  The valley will probably follow that trend, as well.)

           

  11. Tia Will

    including you(?)… I’m good with that approach…

    Any time you are willing to specify the rents you charge, SF-age, # of bedrooms, occupants, please share… a sign of good faith, as you will, Tia…

    I am absolutely fine with that. It is a bit too late however because the only rental property I have is now empty and the house being readied for sale. I will be happy to share the last rents however. The last time the house was rented to a family, the market price was around $ 2000.00 and I rented it for $ 10000 to a family I knew could not afford full price. When my son and partner were occupying the master bedroom and bath of the house, they were renting 3 bedrooms to 3 students. I believe that they were renting the largest bedroom and use of bath for $ 500.00 and the smaller two bedrooms with shared bath for $ 450 ( give or take since my son was managing). Use of the yard, living room, kitchen, family room and dining room came with the rent as did all utilities. Enough information or do you have other questions ?

     

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