Bay Area landlords pushed rents up by nearly 10 percent across the region’s nine counties in 2015 as renters kept scrambling for apartments.
In San Jose, the average monthly price for an apartment rose to $2,436 — a 9.4 percent increase over the fourth quarter of 2014. In Oakland, the rise was even steeper: up 13.7 percent to $2,806.
“Basically, the fundamentals of apartments are strong,” said Sarah Bridge of RealFacts, in Novato, whose report crunched the latest numbers. “It’s been a strong year of appreciation, one of the best.”
She hedged at predicting whether double-digit increases will continue to be the rule, however, saying it’s inevitable that turmoil in the economy, nationally and internationally, would have “some effect” on rentals.
Construction workers work on one of Crescent Village Apartment Homes’ apartment buildings in San Jose on April 12, 2012. (Dai Sugano/Mercury News)
Analysts said it’s too early to tell whether a slight year-end dip signals some sort of equilibrium in the rental market after years of dizzying increases, or if the market simply softened a bit around the holidays, never a popular time for signing leases.
According to Friday’s fourth-quarter report, a studio apartment costs an average of $2,120 a month in the nine counties, up 9.1 percent compared with the same time a year earlier, and a two-bedroom, two-bath apartment rents for $2,816, up 10.2 percent. Locally, that same two-bedroom apartment rents for $3,476 in Mountain View (up 8.8 percent) and $3,515 in Oakland (up 13.9 percent), making it tough for longtime residents without tech industry incomes.
“There are nights when I wake up and I feel like there’s a big rock on top of my chest,” said Anju Chugh of Palo Alto, whose rent has increased from $2,825 to $3,160 since 2014. A longtime resident of the city, she works multiple jobs — special ed instructional aide in the local schools; cook; art teacher; ESL tutor; summer camp operator — but struggled to find a lease until her cousin agreed to co-sign.
“People would say, ‘Oh, what a noble job you have, working with special ed children,’ ” she said. “And the next morning, they’d leave me a message: ‘Sorry, we can’t rent you the apartment.’ If this continues, who will teach the children? Who will drive the school bus? We’re all being pushed out.”
Taken by county, the average rent for all unit types looks like this:
Santa Clara County: $2,575, up 8.9 percent.
San Mateo County: $2,817, up 9.5 percent
Alameda County: $2,226, up 11.2 percent
Contra Costa County: $1,859, up 10.9 percent
Given that such prices can eat up as much as half of many workers’ pretax wages, renters such as Richard Hoinski also wonder how long they can remain in the Bay Area. Hoinski, retired from his job in financial services, and his wife, a schoolteacher, recently signed a new lease at $3,140 a month for their two-bedroom apartment in North San Jose.
“It went up $220 a month — that’s a car payment,” he said, noting that he had anticipated an even steeper hike. “While my wife is working, it’s affordable. But once she retires, I don’t see how we could afford that.”
They paid $2,655 when they moved to the complex in 2012 and have watched their rent climb as many new units have been built to meet the demand from highly paid tech workers: “There’s all kinds of money; the kids drive big beautiful cars and don’t mind paying these kinds of rents. But for a lot of people, it’s getting ridiculous. So much so that my wife and I are thinking that at some point we’ll leave the Bay Area.”
Jeffrey M. Mishkin, regional manager at the San Francisco office of Marcus and Millichap, a real estate brokerage firm, pointed to “anecdotal evidence that rents have been leveling off” since the second half of 2015. Still, he anticipates that they will rise again in 2016 to the tune of about 7 percent: “As long as firms continue to pay young people salaries in the range of $80,000 to $120,000 — two of them can team up and they can afford to pay these rents.”
He noted that new high-rise and other residential construction is “starting to mount” in Oakland. According to the RealFacts report, the Oakland occupancy rate stands at 95.8 percent. In the nine counties, the occupancy rate was 95.5 percent in the 1,294 complexes with 238,524 units covered by RealFacts. The company reports on complexes with 50 or more units.
Even with thousands of new units coming online in the region, the demand remains acute, especially for middle-class and working-class families. About 17,000 families have registered interest in renting one of 115 units of affordable housing scheduled to open up later this year at the Marea Alta apartments in San Leandro, said Adhi Nagraj, director of development for Bridge Housing, the project’s developer.
“We are still seeing real insatiable demand” for such projects, he said. The Marea Alta units, adjacent to the San Leandro BART station, will typically rent for $493 to $1,155 a month for families of four earning between $26,500 and $50,600.
The rental squeeze put a fast end to the dreams of Navida Johnson, who moved from Albuquerque, New Mexico, to Berkeley last summer with her 9-year-old daughter to enroll in a program at Cal: “The program was called ‘design and innovation for sustainable cities,’ ” she said.
However, she found that living in the East Bay was not exactly sustainable. Even some of her instructors worked two and three jobs, she said. During the summer, she sublet an apartment for $1,500 a month in the university’s family housing, and planned to apply to graduate school and look for work once the program had ended. Instead, she quickly found herself in a downward spiral, couch-surfing with her daughter.
“What I learned was that as a single parent, you either have to be enrolled at one of the universities in order to get housing, or you have to know somebody who’s going to give you reduced rent or share something with you, or else you’re pretty much screwed.
“I finally decided that we needed to make a decision to return to Albuquerque. Because we could afford it.”