No question about it. Rents have been going up and probably much more than home prices. Without another recession in the Bay Area, this trend will continue.
What you need to understand about the rental market is that it’s totally unregulated, with few statistics available. And before you start blaming greedy Realtors for jacking up rents, understand that very few properties go through the MLS for several reasons.
First, most landlords don’t want to pay agents a commission for finding a tenant when they are so plentiful. Advertising is pretty cheap too. Many Realtors really don’t want to do property management and deal with unpleasant calls during all hours of the day since the fees are so low. So landlords charge what the market will bear and in some cases there are multiple offers so rents are bid up even higher. Nobody really knows the average rental price, as nothing is published other than the asking price. I’d say the floor is probably around $2,600 for a condo and $3,000 for a small home.
Why are rents going up so much? First realize that this isn’t a Coastside phenomenon; it’s happening all over the Peninsula with a growing job market. More jobs bring in more people and put upward pressure on a limited supply of homes. The rising rents you see here are also going on over the hill.
So the Coastside is affected by what’s going on in the Bay Area. We also have brought some of this on ourselves with antigrowth, litigious policies that keep supply pretty flat. Pacific Ridge is finally breaking ground now, but that’s been a 20-plus-year battle to build just 75 homes. Big Wave has been trying for over 10 years to do something. The city doesn’t have a clue about what to do with Beachwood. Something akin to World War III will happen if the PUDs try and get developed. Bottom line is there really haven’t been any big projects built here in a long time. And with all the time delays and endless appeals to the Coastal Commission, don’t count on any projects breaking ground soon.
Neither will anyone build inexpensive homes because of the high cost of the land, time delays, permits and building. Permit fees are sky high, too, costing $75,000 to $100,000 (including water connections). When you add it all up, it probably costs somewhere between $900,000 and $1 million or more to build a 2,000-square-foot home — hardly affordable housing. Water is also a limiting factor, especially in the Half Moon Bay and El Granada areas where water connections, if you can find one, are going for $50,000! In Moss Beach and Montara they are finally available — after a 30-year moratorium — and cost $25,000 for a connection.
What I’m seeing is that skyrocketing rents are forcing several families to live in one home or condo because they can’t afford anything else. I just sold a three-bedroom, one-and-a-half bath condo in fair shape that had 10 people living in it, including in the garage. In case you want to know, this is not only illegal but a huge safety issue.
Politicians are doing a lot of talking (what else is new?), but they are part of the problem because of the policies they created over time. Now they are kicking around the idea of some sort of rent control, but that will be a disaster and most likely create a series of evictions and huge increases before it takes place. Landlords will kick out tenants and then invite their relatives in for a short term, making some improvements, and then charge even more. I could also see many lengthy legal challenges as property owners feel their rights are being threatened. How serious our leaders will be about this remains to be seen as they may own income properties and won’t want to hurt themselves.
A minimal solution would be to allow legal in-law units on some properties. Currently, many homes have illegal in-law units. This solution would require a change in zoning and possibly approval from the Coastal Commission. Again, more time invested.
Sorry to say, but there really aren’t many quick fixes to this problem. You know the expression that a rising tide lifts all boats? Well, a rising job market lifts all rents. I guess we can blame Google, Facebook, Apple and Tesla for being too darn successful!