My View: A Tight Rental Market Hurts All

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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



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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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28 thoughts on “My View: A Tight Rental Market Hurts All”

  1. Todd Edelman

    So for how many years before the 5% Holy Grail will the lords be legally-able to increase access fees to land they legally-acquired from someone else who did the same, all the way back to when the land was either stolen from other humans, or no one in particular? The lord or their predecessor constructed shelter on this land, true, but the access-by-fee person is paying for it, and they should have basic rights, for example a reasonable opportunity to stay on this land, which in its essence belongs to everyone, and no one. The lord in this example is not being reasonable. Rent control is nothing more than a regulation on extremist capitalism. The lord thanks all who don’t support rent control. Their opportunities may be less golden in the future, but now a 12% or similar annual increase for the duration of the pre-Holy Grail Davis Era pleases them, intensely.

  2. Ron

    From article:  “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.”

    The Vanguard continuously refuses to acknowledge the source of the problem (UCD), which is where the solution must ultimately come from (e.g., via a formal agreement).  Instead, the Vanguard advocates for a temporary/partial “fix”, and downplays the negative impacts of that choice.

  3. Tia Will

    David

    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 would agree with you if we lived in a both “free” and “closed” market. We have neither. The success of building dormitory-like living arrangements aimed primarily at students depends upon an assumption that I am not sure is well founded. The assumption is that moving these students into housing of this type will free up housing in the community for current resident families in need of affordable housing. I would argue that this is in no way guaranteed given the influx not only of new UCD grads who decide to remain every year, but also economic “refugees” from the Bay Area/Silicon Valley. My recent adventures with my kids in securing both rental and single family homes indicates to me that there is no guarantee building for students will address these issues in any meaningful fashion. I am not in opposition to projects such as Sterling and Lincoln 40 because I recognize that students here now are individually in desperate need of housing. But I am not going to pretend that building for them will “build our way out of trouble” as you seem to believe.

    1. Mark West

      “But I am not going to pretend that building for them will “build our way out of trouble” as you seem to believe.”

      How does maintaining artificial scarcity help address the problem? That is the alternative to building more housing.

      1. Tia Will

        Mark

        That might be true. But, please notice, nowhere did I say that I favor maintaining artificial scarcity. I have stated many times that I prefer building for our actual needs, not the wants of our most affluent. That is why I favor building the primarily student targeted housing, preferably including little a affordable housing since that is a real demonstrable need, as opposed to the luxury Trackside or 800K Cannery homes which are definite wants for the wealthy.

        1. Mark West

          Tia: ” nowhere did I say that I favor maintaining artificial scarcity.”

          You have expressed the opinion many times over the years that you doubt that we can ‘build our way’ out of the problems. It is a common platitude that is often expressed on these pages by those who frequently oppose new development. I did not ask you which projects you supported and which you opposed, nor do I care.

          Mine was a simple question, which you apparently cannot or will not answer. I will reword it and give you another chance.

          If we do not build more housing (otherwise known as –  maintaining the current scarcity) how do you propose addressing the severe housing shortage in town?

          If you agree that we need to build more housing (otherwise known as – build our way out of the problem) then stop repeating the silly platitude.

           

    2. David Greenwald

      “But I am not going to pretend that building for them will “build our way out of trouble” as you seem to believe.”

      I don’t think building them solves all the problems, but a key problem is lack of supply and it helps with that.

    3. Ron

      Tia:  “The assumption is that moving these students into housing of this type will free up housing in the community for current resident families in need of affordable housing. I would argue that this is in no way guaranteed given the influx not only of new UCD grads who decide to remain every year, but also economic “refugees” from the Bay Area/Silicon Valley.”

      I see these articles which discuss this trend quite often. Although Davis is rarely/specifically mentioned in these types of articles, it is part of the same region. (In fact, I would argue that Davis is generally even more appealing than Sacramento to those relocating from the Bay Area.)

      “Some data show that many who are leaving pricy hubs like Silicon Valley or Los Angeles County are ending up in Sacramento, with domestic migration rates as high as they’ve been in 12 years.”

      “According to a recent report by real estate website Redfin, Sacramento is the most-searched destination for residents looking to flee. Other hot spots include Phoenix and Las Vegas.”

      Read more here: http://www.sacbee.com/news/business/real-estate-news/article201935779.html#storylink=c
      http://www.sacbee.com/news/business/real-estate-news/article201935779.html

      1. Tia Will

        I would argue that Davis is generally even more appealing than Sacramento to those relocating from the Bay Area.”
        Unless of course you happen to be affiliated with UCDMC, one of the large medical groups such as Kaiser or Sutter, or Sac State. Midtown, Fab Forties, Fair Oaks and Land Park tend to be popular Sac locations for those folks as we found out in the past two years.

    4. David Greenwald

      “The assumption is that moving these students into housing of this type will free up housing in the community for current resident families in need of affordable housing. ”

      My assumption is that not moving them will mean that the current problem will persist and get worse.

      1. Howard P

        “In need” is different than “desires/wants”… haven’t heard much about ‘families’ “couch-surfing”, or living in cars in Davis… that said, yes additional housing will decrease practical/economic problems for both groups… families/students… [and, third,  the currently homeless in our environs]

        You are correct… doing nothing, going with existing, will mean,

         that the current problem will persist and get worse.

        No sentient person could conclude differently…

         

         

         

  4. Ken A

    I’m wondering who told David “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.”  The vacancy rate in many parts of the US has been over 5% for decades but there are still people buying homes to rent to students.  The “vacancy rate” in not a big factor (like purchase price and rent”) when someone looks to buy a home and rent it out.

    As for “A Tight Rental Market Hurts All” this is not true since in addition to the landlords that like a tight rental market most homeowners like a “Tight Rental Market” (and vote against most new housing when they can) since a tight rental market not only pushes all home values up but it pushes out  poor people (who often don’t maintain their yards and have junker cars in the driveway) and since landlords have more money they are more likely to improve their rental homes making them (and the entire neighborhood) look better.

    Below is a link to a neighborhood that (unlike Davis) does NOT have a “Tight Rental Market”:

    https://www.youtube.com/watch?v=VTKEx0N0DCY

  5. Jeff M

    Hey folks, there are a lot of places other than this area, and a lot of places other than California where  you can live where there are fewer people.

    Your continued irritation of growth is a sign that you might need to pack up and go, not a justification for forcing scarcity on the community only to calm you fears of change.

    There might be a day in the future where UCD enrollment slows and even declines.  Frankly, I expected it already given the trending decline in value-vs-cost dogging the industry of higher learning.  But the kids and their parents seem to accept over-priced high learning services instead of the kids pursuing a real working career doing something “icky” like building buildings.

    And California… the dream… the beautiful state with the best weather, all the beaches and wine and all those cool people.   New people keep flooding here… especially the poor and homeless.  Now, there is a mass exodus of wealthier people leaving the state for a great number of reasons.  However, the Sacramento region is not an area where that is happening.   The Sacramento region is one of the fastest growing regions in the nation.  It is sucking many of the over-population-and-high-housing cost-frustrated people from the Bay Area and Los Angeles areas to a lower-cost and lower-congestion lifestyle.

    So here you are a person with a personality type that desires the cake of a low-population rural community… while being able to partake in the eating too of all the community trappings of a world-class research university and a premium location that is just minutes from urban services and that includes proximity to the mountains and the coast and a pretty convenient international airport… and you are getting real fussy that there are so many other people that want the same and thus are “stealing” your cake.

    Here is the truth… you are either unlucky or you miscalculated.  You thought you had found your small city Davis Utopia where you would retire to a life of blissful rural population density just-right-ed-nous.  Your bit of  unluckiness or miscalculation is that the demand for a UCD education has grown and continues to grow, and the popularity of the Sacramento region as a place to live and work has grown… and more importantly here… continues to grow at a rate exceeding almost all other regions in the country.

    Here is what I suggest.  Sell, sell, sell.  Move, move, move.  Sell now while housing prices are super high, take the cash and move somewhere else where there are fewer people and cheaper housing.

    I know many people that have done so and are doing so.  If you wait too long you will miss the boat in CA-vs-ALMOST EVERYWHERE ELSE housing value mismatch and leave lots of money on the table.

    Now, you might lament this idea as resulting in a location having fewer amenities that you enjoy.  But that is the point… if you like them then other people will like them too, and they will compete with you to live where they are located.   The difference is though that they would have a personality type that accepts the inevitable growth and stops fussing so much to block it thus causing many terrible unintended consequences to the community.

    The bottom line is that Davis and the region have changed and are changing no-matter how much you and your friends complain about it, and everyone needs to accept this and move away if considering these changes less than acceptable.

    Call me.  I will help you pack.

    1. Howard P

      Think you have a great suggestion about how to get to a healthy (4-5 %) vacancy rate… now if folk would just heed that, ASAP,  preferably before the June elections…

      We could start a new website:  moveon.dav… we could start a “movement”… I like… if others don’t, well, they could just “move”…

      As G&S wrote in the “Mikako”,

      https://www.google.com/search?q=i%27ve+got+a+little+list&oq=i%27ve+got+a+little+list&aqs=chrome.0.0l6.9136j0j9&sourceid=chrome&ie=UTF-8

       

  6. Howard P

    Actually, title is arguably wrong…  a tight housing market doesn’t much affect those “who have theirs”… they, or their heirs, actually benefit from it, sooner or later… a very large part of Davis folk “have theirs”, and unfortunately, a lot of those don’t care a lick if others don’t… reality… they may “say” they do, but are not inclined to vote that way…

  7. Alan Miller

    My View: A Tight Rental Market Hurts All

    Not so:  It doesn’t hurt homeowners nor landlords.  Last I looked those categories were part of “All”, and in fact the majority of voters who vote.

  8. Tia Will

    David

    Isn’t student housing actual needs?”

    If directed at me, I find that a little disingenuous given that I have stated many, many times, including in a previous comment on this thread that I consider student housing an actual need.

    I am not in opposition to projects such as Sterling and Lincoln 40 because I recognize that students here now are individually in desperate need of housing” from my previous post.

    You and I have also had multiple private conversations in which I have told you that I favor affordable student housing as this is a demonstrable need.

    It would seem that you have chosen to ignore the most critical part of both my comments here and in our private conversations. I am at a loss as to why you would do this.

    1. Howard P

      Yes, you actually never choose “… to ignore the most critical part of … (anyone’s) comments…” it is good to have good role models… maybe folk will emulate…

      1. Tia Will

        Howard

        I frequently respond to only the part of someone’s message that I find compelling. However, what I try not to do is to imply that they have ignored something that is clear from the immediately preceding post. Happy to consider and retract if you find an example where I have done that.

  9. Tia Will

    Mark

    Mine was a simple question, which you apparently cannot or will not answer. I will reword it and give you another chance.

    If we do not build more housing (otherwise known as –  maintaining the current scarcity) how do you propose addressing the severe housing shortage in town?”

    First, thank you so much for graciously bestowing upon me “another chance”.

    Yours was not a “simple question”, it was loaded in the same way as the question “When did you stop beating your wife”. I have never advocated for “artificial scarcity”. I have advocated frequently, repeatedly on the Vanguard and before commissions and city council for building to meet our most pressing needs before facilitating wants for the affluent with concessions. As I have stated repeatedly, but apparently neither you nor David nor some other posters here choose to believe, that I favor building affordable student housing first. I appreciate that there will be at least some “little a” affordable housing at both Nishi 2 and Lincoln 40, which none of you have ever chosen to acknowledge. So in my view, that is the answer to your question. I would build for populations at need, students, low income workers/families, seniors on fixed incomes, the homeless. I believe that every single project that is approved should include accommodations for these populations as well as for the more affluent in our community.

     

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