Some have recently argued that by focusing on student housing, we have made rental housing for families and workers a second issue. However, the problem right now is that the rental market for student housing is so “hot” that it is sucking all of the oxygen out of the room for other renters.
Here is a recent example of the problem. A letter that came into the local paper illustrates what a tight rental market can do.
The writer notes: “I have recently received a 12-percent rental increase, which amounts to $280 a month on my apartment at the Seville at Mace Ranch in Davis for next year. I have conducted my own rental survey and found that the complex was overpriced in comparison to similar properties before the increase and now is at a ludicrous amount. It is owned by Dartbrook-Twin Oaks LP.
“While I understand the business economics of basic supply and demand, I protest a 12-percent increase and resent the position the unreasonable hike in rent puts me in. Moving is upsetting, disruptive and expensive … but then they know that, and I feel held hostage to their greed.
“Over the past two years, I have observed the loss of the families who once inhabited this complex, their having been replaced with each rent increase by what appear to be largely students. What can be done to preserve the safe, beautiful environment that the city of Davis provides for renting families? How can we fight unscrupulous landlords who care not about reasonability and the
welfare of their tenants but only profits?”
What is happening here is what is probably happening all around town. The rental market is so tight that landlords can basically do whatever they want and their tenants are forced to either adjust or in some cases move entirely out of town.
That is the problem when the functional vacancy rate is less than 0.4 percent and there are maybe a few dozen available units. A lot of people do not realize the implications of such a tight market. What it means is that students and others basically have to search for new places in January in order to find a place for the following fall.
Those few units that are available will often have heavy competition to fill them. And many of the vacant ones are either very expensive or have something else wrong with them.
This particular individual is going to have trouble finding a new place to live if she ends up having to leave her current apartment because it is already the end of February and most rental units will be filled by now for next year.
She is correct to point out that families have mostly been replaced by students. Why? Because the cost of renting a market rate apartment is prohibitive for most families and because the market right now is dominated by students in need of living arrangements.
For those who believe that adding student housing would not help the situation – imagine a market where we have a five percent vacancy rate. Then if an apartment complex decides to raise the rent by $280, each individual renter has a choice of where to go – and can leave. The market will force the landlord to adjust their rent according to what the market can bare.
I have also received some recent correspondence on the impact of the proliferation of students into single-family homes in the core area. This is the other side of the same story. Market scarcity has forced many students away from campus and into core area houses where homeowners have speculatively purchased homes for the purpose of renting them to students.
As one person told me, they’ve lived in their neighborhood for generations and “it’s tough watching your neighborhoods completely fall apart. The prices of the property remains high while ‘dorm’ transitions take place around you.”
The result is trash, loud parties, alcohol, people on the street in the wee hours of the morning, cars everywhere.
They told me, “The tipping point is happening. Fewer and fewer families can even live in our neighborhoods now because the environment is just NOT family friendly.”
Yes there are things the city can do administratively and through ordinances, but this is really a problem of market failure. The vacancy rate and supply of student housing is the driver for this problem and the best solution here is to change the distribution of housing.
There are those who simply do not believe that building more student housing will fix this problem – but it can go a long way toward taking the incentive out of the conversion from single-family homes to mini-dorms. It could end a lot of the speculative purchasing of core area homes.
It can free students up to living in apartments near campus where the facilities are better and they are in locations more conducive to student life, with less clashing with existing neighbors.
Once again, if the vacancy rate is 0.4 percent, there is every incentive to purchase a home for the purposes of renting it to students. If the vacancy rate is five percent, that incentive disappears. Absentee landlords who do not care for their property will not be able to rent their properties in a market with surplus supply.
—David M. Greenwald reporting