Analysis: How Much Will New Apartments Cost for Rent? Not So Simple

Share:

One of the complaints about the new mega-dorms is that they are “unaffordable” and even “luxury.”  However, as Ashley Feeney, the newly-promoted director of community development and sustainability for the city of Davis, told the Vanguard, “I wouldn’t classify the housing products as ‘luxury.’  I would say that they are ‘new’ market rate housing which typically can demand a premium in the marketplace beyond existing housing stock of similar product type.”

Moreover, as a recent article in the Bee shows, the cost of housing, even outside of Davis, is prohibitive.  The article from Monday noted the rise in the number of homeless Sacramento State students – an issue in Davis that students have raised in recent months.

The Bee published: “Rent near the university starts at about $1,000 for a studio or one-bedroom apartment, while some landlords charge $569 or more per bed.”

But if they are high in Sacramento, they are even higher in Davis.  We found single bedroom apartment rents to be around $1200.  Two bedrooms are between $1600 and $1800.  Three bedrooms are around $2300.

The Bay Area Economics (BAE Urban Economics, a private real estate consulting firm) group partnered with UC Davis Student Housing in the 2016 Apartment Vacancy and Rental Rate Survey and found the following for unit leases: the average rental rate was $1576 per month in 2016, which was a 5.8 percent
increase over 2015 when the rate was $1489.

They found the cost was $972 for a studio, $1210 for a one-bedroom, $1549 for a two-bedroom, 2041 for a three-bedroom and $2627 for a four-bedroom.  But that study only surveyed about 10,000 units.

So, how much will a new rental cost?

Mr. Feeney explained to the Vanguard that the developers have not yet provided what their rents are estimated to be.

He explained that right now the top of the current Davis market is generally in the $2 to $2.25 per square foot range.  But, as he pointed out, there has been no new market rate housing built in the last 15 years.  While they are building Sterling right now, those units have not been built and thus have not come on the market.

He told the Vanguard, “Due in part to the higher development costs associated with greater required energy, aesthetic and amenity features in Davis, I would anticipate rents needing to be greater than existing products.”

He said a potential rate of $2.50 per square foot per month would represent a 10 to 20 percent premium for the new products.

He also pointed out, “Units that are of a larger square footage would typically have a lower price per square foot given that the rent is being spread over a greater amount of footage.”  He added, “Even for new product with a higher-level amenity package, I am sure they pay close attention to the range of rents and would want to be competitive with existing housing stock while recognizing a reasonable premium for the value add/new product.”

The bed lease units tend to be a bit cheaper.  According to BAE estimates, “the average rental rate for a bed lease, in units of all sizes, was $875 per month.”  That means you can, generally speaking, lease by the bed more cheaply than you can rent a studio apartment in Davis.

And what else is interesting is that the cost of bed leases actually decreased 3.3 percent since 2015.

Ashley Feeney believes, based on that figure, that a potential rate of about $1000 per month would accommodate the 10 to 20 percent premium for new proposed products.

Recall that the LincolnLift affordables would range from $670 for the very low income to $800 for the low income.  That would represent between a 20 percent to 33 percent savings from the market rate.  The $1000 potential rate is actually similar to the cost of a unit at UC Davis, which right now is about $1050 per month.

The best way to build in affordability is to increase the vacancy rate.  Not only are rents rising, but the survey from 2016 reports: “All survey respondents reported static or increasing rents, relative to 2015. None of the respondent complexes reporting lowering rents in 2016 in order to fill vacancies.”

—David M. Greenwald reporting



Enter the maximum amount you want to pay each month
$
USD
Sign up for

Share:

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.

Related posts

22 thoughts on “Analysis: How Much Will New Apartments Cost for Rent? Not So Simple”

  1. Tia Will

    “I wouldn’t classify the housing products as ‘luxury.’  I would say that they are ‘new’ market rate housing which typically can demand a premium in the marketplace beyond existing housing stock of similar product type.”

    I fail to see a difference between “luxury” given the associated amenities, and “new market rate” which can “demand a a premium….”. If the new construction has extra amenities and can demand a premium, perhaps someone can explain to me how that differs from “luxury”. Seems synonymous to me.

  2. Michael Bisch

    “He explained that right now the top of the current Davis market is generally in the $2 to $2.25 per square foot range.” -Ash Feeney

     

    Which explains why no market-rate, non-student, multi-family rental units are being built. An owner of such a project would be losing money because Davis market rents would have to be significantly higher or Davis development costs would have to be much lower.

     

    The advocacy by the Mega-Dormers demanding market-rate, non-student rentals instead of student rentals only results in no new rental units being built at all. If the Mega-Dormers are genuine, they will be down at city hall for every council meeting demanding that the Council replace the policies preventing development of rental units with policies that encourage development of rental units. I’m looking forward to tuning in to the next meeting.

     

     

     

     

    1. Ron

      Michael:  “If the Mega-Dormers are genuine, they will be down at city hall for every council meeting demanding that the Council replace the policies preventing development of rental units with policies that encourage development of rental units. I’m looking forward to tuning in to the next meeting.”

      Some have already pointed out that city policies inappropriately favor megadorms (e.g., regarding the Affordable housing program and impact fees), ultimately at the expense of the city and those needing affordable housing.

        1. Ron

          David:  That depends upon whether or not one cares about city finances, Affordable housing, and housing for non-student singles, couples, non-related roommates, and small families.  (Not to mention commercial development, which is another possibility for some of these sites. I’ve forgotten which ones are already zoned for commercial development.)

          1. David Greenwald Post author

            No it depends on what you view as “inappropriate”. What happens if the consultant comes back and determines that the problem is that the city has set its fees to high and therefore the problem is on the other end? That’s the point Michael is trying to make and a problem I have heard from numerous sources.

        2. Ron

          Not sure which “consultant” you’re referring to.  But, with several megadorm proposals in process, it’s pretty obvious that fees (or – in the case of Nishi – even the cost of another ballot measure, as well as the cost of creating access to UCD underneath railroad tracks) aren’t holding those back.

        3. David Greenwald

          The city is having a consultant evaluate their fee structure.  With several proposals for apartments, it’s obvious that Michael Bisch probably has a point about the city fee structure being prohibitive…

        4. Ron

          David:  As you’ve just noted, there’s been no “shortage” of proposals, including the megadorms, Trackside, B Street, Mission Residence, etc.

          Perhaps the fees are too low, in regard to city expenses, programs, and goals (and in relation to the potential rents received, as noted below).

          Can you provide more information regarding the consultant process (e.g., who, when, where)?

          1. David Greenwald Post author

            “Can you provide more information regarding the consultant process (e.g., who, when, where)?”

            I cannot

  3. Ron

    From article:  “Ashley Feeney believes, based on that figure, that a potential rate of about $1000 per month would accommodate the 10 to 20 percent premium for new proposed products.”

    Just to clarify, I believe that’s the estimate for a bed in a shared room.  (Not criticizing it, but yowza! Hope it’s ultimately not even more than that.)

  4. Michael Bisch

    Weird how my comment gets turned around. I’ll try to be more blunt. The city fees for market-rate, non-student rental projects must be reduced, the ridiculous parking requirements waived as Jeff Tumlin rightly pointed out Wednesday evening, the Affordable Housing requirements revised, the “plus” from “CalGreen plus” has to go away and the extractions for pet political projects need to be abolished as well. Not doing so means 40,000 plus residents get to experience the ongoing joy of the housing crises.

    So if the Mega-Dormers genuinely desire more market-rate, non-student rental projects, as they repeatedly claim, they need to be down at the city council meetings in force demanding these reforms. I look forward to it.

      1. Howard P

        that we need to re-examine the fees.

        Aye, there’s the rub… some want to double/triple them, others halve or eliminate them…

        Should be interesting… and potentially entertaining…

        1. Michael Bisch

          If I present mysel as an advocate for affordable rental housing, but then advocate for policies that only result in a dozen or a couple dozen units when the need is in the thousands, what does that make me?

        2. Howard P

          One of the typical VG posters on the subject… at least some of the ardent ones…

          No new rental housing, except on campus, with all the amenities, separately metered everything of course, LEED Platinum or above, aesthetically pleasing,and dirt cheap…  and some probably want fries with that…

  5. Jeff M

    Want more affordable housing?  Bring back RDA, and demand reductions in the CEQA requirements and fees as a start.

    Beginning 1/1/2018, California will require an additional $75 per county real estate recording document, not to exceed $225 per transaction, supposedly to go into some state fund (or the general fund) to be used for affordable housing projects.

    Typical California government… increases taxes and fees to solve a problem primarily caused by all the taxes and fees.

  6. Ron

    The SacBee article that David referenced in the article above describes an “emergency housing program” at Sacramento State University.

    Per the link, below:

    “The program provides short term housing assistance to students who are unexpectedly displaced from their homes. Students must meet with the Student Affairs Case Manager for a basic needs assessment, and may qualify for up to 30 days in the residence halls. On a case by case basis, students may also receive a meal plan which provides 2 meals a day in dining commons.”

    At least Sacramento State is doing something to help their students in need.

    http://www.csus.edu/student/casemanager/emergency%20housing.html

Leave a Reply

X Close

Newsletter Sign-Up

X Close

Monthly Subscriber Sign-Up

Enter the maximum amount you want to pay each month
$ USD
Sign up for