Rents Blog: Study says slow growth a cause of rising rents
Rents Blog: Study says slow growth a cause of rising rents
Authors of a new analysis claim that slow housing growth is a cause of rising rents, saying the nation’s least affordable housing markets are the ones where new housing permits are not keeping up with population growth.
The analysis from home listing site Zillow says rental affordability is “as bad as it’s ever been in the U.S.” due in part to a lack of new, affordable units to meet demand. It lists San Francisco and San Jose as two of the least affordable metropolitan areas in the country; Oakland – which has thousands of new homes in the works – apparently wasn’t studied.
Zillow’s chief economist, Stan Humphries, said the improving economy is driving people to rent and purchase homes. But the supply of affordable homes – especially affordable rentals – is insufficient to meet demand, he was quoted as saying in a press release – causing fierce competition and driving up prices.
He said more construction would ease the crunch.
San Franciscans who rent spent an average of 44 percent of their monthly income for housing during the last quarter of 2014, the analysis showed, second only to Los Angeles, where renters spent more than 48 percent of their monthly incomes on rent; the Bay Area city issued just 193 building permits per 1,000 new residents during the year studied, 2012-13.
San Jose-area renters spent 39.4 percent of their incomes on rent; cities there issued 294 building permits per 1,000 residents during the year studied.
On average, renters in the metropolitan areas included in the analysis spent 30.1 percent of their monthly incomes on rent – nearly twice the 15.3 percent of income homeowners spend for their mortgages – and 384 new building permits were issued for every 1,000 new residents. Rents are considered affordable when they consume 30 percent or less of a household’s income.
Local census data collected by City Councilman Tony Daysog showed that the average Alameda renter pays 29.4 percent of their income for rent – which is just under the federal affordability threshold – but that a rising percentage of Island renters, whose incomes declined over the time he studied, are paying more than what is considered affordable.
Data collected by RealFacts show that rents at the 3,000 units the firm studies rose 13.3 percent last year, to $2,057 in the third quarter of 2014, and that Alameda’s rentals are pretty much at full occupancy.
Alameda issued 14 building permits for new homes in 2014, all of them for Alameda Landing, according to Allen Tai, the city’s planning services manager. Permits for Marina Shores, an 89-home development on Buena Vista Avenue, were issued this year, he said.
While hundreds of new homes are in the planning, building and completion stages in the Alameda Landing development, Alameda Point and along the city’s Northern Waterfront, it’s not yet clear what impact the new homes, once built, will have on rents and availability in Alameda.
Alameda’s population grew by more than 2,000 people between 2010 and 2014, estimates provided by the California Department of Finance show. But there were few new homes built on the Island during that time, and for now, there’s not a lot of existing ones to choose from.
“Our population is growing. But housing isn’t necessarily growing as fast as population,” said Tony Berg, president of the Alameda Association of Realtors, who said the association supports housing growth.
Last week, there were just 34 homes for sale in Alameda, including 11 new listings, Berg said. Data provided by the association show that 74 homes were sold in the first quarter of this year – down from 99 during the same period of 2014. Sale prices were up nearly 10 percent, topping $700,000.
“We are surpassing what our peak market was in (2004),” said Berg.
A lottery for nine new Alameda Landing homes designed for households with moderate incomes drew more than 500 applicants, according to the website for lottery manager Hello Housing, which notes that competition for affordable homes can be “tremendous” due to the dearth of such homes on the market.
Only 120 households – families of four or more who live or work in Alameda and haven’t owned a home in three years – qualified to buy the homes, which carry a starting sales price in the mid-$300,000, as a result of the high demand.
“This to me says that there are 500 families who can afford to get some money together to afford to buy a moderately priced house,” said Angela Hockabout of the Alameda Renter’s Coalition. “This means that if there were more affordable housing developments that hundreds of families would be able to leave the rental market, providing more rental availability to people who cannot afford to buy a house.”
Full-priced condominiums and flats available for sale in the development are listed on its website at a starting price in the mid-$600,000 range. Three- to six-bedroom homes, meanwhile, are $1 million and up.
Hockabout said she’d like to see half of the housing in new developments be sold at below-market rates, though she said the numbers for that might not pencil out due to the cost of building roads and utilities to support the housing and the lack of federal funds to help pay for it.
Alameda’s “inclusionary housing” ordinance requiring developers to include affordable units their new neighborhoods – a key source of affordable housing – mandates that 15 percent of the homes built are sold or rented at below-market rates. A lawsuit settlement requires homebuilders at Alameda Point to set aside 25 percent of the units they build as affordable housing.
But ordinances like Alameda’s are under fire in court. The California Supreme Court just heard arguments in a legal challenge to a similar ordinance in San Jose.
Hockabout, whose organization is working to engage renters in development discussions, said more people who are impacted by the tight housing supply and high costs need to come forward to demand changes.
“We need housing at all levels yesterday,” Hockabout said.