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