Opponents of Sterling tried to use the mega-dorm argument against the project, arguing that the project was unique in that it rented by bed and utilized mainly four- and five-bedroom apartments and was therefore precedent setting. They argued that rental housing should be available to all potential renters.
But that argument largely was rejected by the city council. At the time, we noted that the rental market has actually been shifting for some time and already we have a sizable number of bed leases, most of those for four-bedroom apartments, and there didn’t appear to be much precedent setting about Sterling other than it would be the first market rate student housing approved in the city in over a decade.
The council at the time of the vote was more concerned with the 0.2 percent vacancy rate than in micro-managing how a private developer chose to supply that housing to the market.
The same issues are arising in the discussion over Lincoln40 and it doesn’t seem likely they are going to be more effective this time around.
In looking at some of the data earlier this week, I was definitely surprised by how stark it actually is.
We are using the 2010 census as the latest available data, but we do so with the understanding that UC Davis went from about 30,000 students to about 35,000 over the last seven years – that’s a 18 percent increase which is only likely to make these numbers more stark.
Of the 25,869 units in the city at that time, 57 percent were rental units or about 14,745. The census also tracked that 12,949 of the total housing units were rented by non-family households. Now, while there may be a few owner-occupied non-family households in Davis, you have to believe that the vast majority of non-family households are renting.
So we estimate that, in 2010, somewhere around 88 percent of rental units were rented by students or non-family members.
That means that one big piece of this large puzzle is that the rental market is primarily composed of students. And again, with 5000 more in the last seven years, it has probably only gotten higher.
We have estimated a need for about 10,000 additional housing units between now and 2027. UC Davis has so far agreed to take on 6200 of those beds. The city, if it passes Lincoln40, will have added about 1500, and somewhere we are going to need to find 2300 more or the remainder of the students will have to commute.
We have been told one of the key advantages of the bed lease is that the property manager can more efficiently manage the tenant numbers. In our discussions the view has been that, with or without the bed leases, the vast majority of tenants at a place like Lincoln40 would be students.
We were pointed, for example, to Lexington Apartments which is across the street on Olive Drive from the proposed Lincoln40 site and were told, though I have not confirmed, that there is not a single family living there – even though, like many apartment complexes, Lexington Apartments does both unit leases and bed leases.
As a family that rents in Davis, I understand there is a need for locations which can accommodate families that cannot afford to buy homes, but families even on the open market find themselves competing with student rentals and most unit leases allow for two tenants per bedroom and one additional tenant – which means a four-bedroom apartment could hold nine tenants. Easy for them to afford even a $2400 a month rent. Whereas, for a family, $2400 a month for a rental apartment would be largely unaffordable.
The argument some are making is that there is a college enrollment bubble and we are in danger of building too much capacity.
I disagree for a lot of reasons. As Don Shor pointed out, this is not an entirely new or novel argument. He noted that UC Davis has had little trouble meeting either the goals of the 2020 initiative or the enrollment demands placed by the university.
The data shows, “A record high of 86,041 prospective students have applied to study at the University of California, Davis, for fall 2016.” At some point they may have to increase their acceptance rate, but it seems unlikely that UC Davis is likely to suffer an enrollment drop in the near future.
The colleges that seem most vulnerable are the for-profit colleges and lower tiered schools.
Regardless, you have to plan housing for current projections – ironically, the entire housing crisis was created in part because UC Davis failed to back up their planned enrollment growth with sufficient housing. Do we really want to perpetuate that?
Finally, we seem to be forgetting here that the city of Davis is only providing about 15 percent of the additional housing need, assuming it approves Lincoln40. That means of the 10,000 needed additional beds, the city between Lincoln40 and Sterling is providing about 1500.
Even if enrollment declines in the future, that is not going to leave a huge glut of student-only apartments on the market.
The current vacancy rate is 0.2 percent, and the city’s stated goal is to create about a 5 percent vacancy rate, which they believe would be more helpful and advantageous. If they get to that – which seems difficult under present conditions – it will help both student and non-student renters alike.
What that means is that we should be focused on bringing in good new rental housing and allowing the developers and property managers to worry about the market.
—David M. Greenwald reporting