If you are a renter and are worried you will be priced out of your home or apartment in Manteca, Tracy, Ripon, or Lathrop then you might want to pay attention to five ballot measures.
Voters in Mountain View, San Mateo, Richmond, Alameda, and Burlingame are deciding on rent control measures. The common thread is existing tenants will not have rent increases that deviate much from the rate of inflation.
Oakland, which has rent control for years has seen apartment rents go up 50% since 2011 to $2,406 a month. Across the Bay in San Francisco — another rent control city — rents have jumped 40 percent in the past five years for apartments reaching $3,277. San Jose — the largest Bay Area city — does not have rent control but has seen apartment rents soar 37 percent during the same time period to $2,791.
The assumption, of course, is that greedy landlords are driving up rental prices.
In reality price — once units or homes are built — is driven by supply and demand.
RentJungle.com does a monthly analysis of Bay Area and Northern San Joaquin Valley apartment rent trends. You will notice three things in their latest monthly data for September. Overall Manteca apartment rents are averaging $1,312 — that’s below the peak of $1,360 in June of 2015. Overall rents of available apartments slid downward to $1,197 by December of 2016 before starting on the way back up.
Manteca one bedroom apartments in September were at $960, coming down from a peak of $989 in June. Meanwhile two bedroom apartments — a floorplan that is in much higher demand than one bedrooms, studios or three or more bedrooms — is now at a record $1,324 as of September.
The figures ultimately will have an impact on existing apartment dwellers when their leases are up for renewal.
If the five cities adopt rent control, it will create a huge disincentive for new apartment building in those cities.
The real problem is supply. The Bay Area Council of Governments notes the four-county region added 400,000 jobs between 2008 and 2015 while permits were only issued for 86,000 housing units. It has forced workers to look elsewhere for housing including apartments to rent. It makes the 209 not just the affordable housing alternative for much of the job-rich Bay Area but to a degree the only housing option.
A few months ago several colleges and federal agencies released studies that indicated regulations and fees may be driving the price of housing up. While that may be news to many regions in the country, for California it is akin to diagnosing a patient with a fatal disease after they’ve been dead and buried for 20 years.
Most fees provide funding for infrastructure needed to support growth. Regulations are another issue. It can take five years from the start of the approval process to the first dirt being turned for a small subdivision. Not only does it mean the housing sector is less limber — actually more like crippled — when it comes to responding to demand, but it also consumes a lot of time and money.
The cost of government regulations adds up.
Take one simple rule that the City of Manteca has in place involving the timing of when growth fees are paid for parks, fire stations, major street projects, and such.
During the recession, builders were able to convince the city to give them some breathing room. So instead of paying the growth-related fees that are in the tens of thousands of dollars per home at the time a building permit is issued, the city allowed the developer to pay them at the time an occupancy permit is requested.
Builders have to borrow the money for the fees from a bank until such time a home is sold and they get their money out of escrow. Developers indicate it costs them $400 in interest per home just to cover the growth fees during the four to six months it takes to build and turn over the keys to a new home in a solid housing market.
It was a no-brainer. The city didn’t need the fees right away and when they do get them they squirrel them away in a fund until they are ready to spend them in a major project. The only real loser was the banks.
The city has now dropped the payment of fees at the point of occupancy permits being requested and reverted back to the building permit being issued. The reason? Reportedly the cost analysis of the temporary system the city put in place to track the fee deferral costs the city almost $500. So instead of streamlining city hall bureaucracy by doing away with the paperwork tracking they created and simply adding the requirement that fees have to be paid before an occupancy permit is issued, the solution was to stick it to the home buyer and builder.
Little things add up as Mayor Steve DeBrum noted. Why pay a contractor drilling a well $6,800 to remove a couple of trees in a park when city crews could do the work for perhaps a third of the cost?
The Great Recession and the new economic realities that emerged required many in the private sector to rethink how they do business and to keep adapting. That’s not the case for the burecarcy from the federal level on down. It’s back to the same old, same old.
And that’s going to cost you big time whether you rent, own your home or own a business.