Blogging Bayport Alameda

November 2, 2015

In the study

Filed under: Alameda, Business, City Council, Development — Lauren Do @ 6:02 am

One of the most interesting pieces to come out of the materials posted in advance of the big meeting on rising rents is the rent study, it’s the first Exhibit.  While some folks are concerned with the limited focus at the conclusion of the study of ways to preserve or increase the affordable housing supply, for me, it’s not that big of a deal given the healthy skepticism that exists on the City Council with regard to anything that is consultant produced.  And, besides, we already know of what can be done, it’s simply a matter of whether this City Council is bold enough to move forward with policies that currently exist to protect and increase the supply of affordable housing in Alameda.   We don’t have a shortage of ideas and practices that work in other cities, what we have is an issue of leadership.  Whether this City Council has the will and the ability to move forward these issues.

So let me pull out some of the more relevant facts that should inform this discussion about rising rents and should affect political positions on these issues.

Approximately 16,793 units, or more than 53% of Alameda’s total housing stock, are rental units.

Alameda has a higher percentage of renters households that the Bay Area in general and Alameda County.

renters

Homeowners median income vs renter median income:

The City of Alameda’s median annual renter household income, at just under $55,000 in 2013, was slightly less than half of the median for owner households, at almost $115,000. Households earning $55,000 can afford to pay approximately $1,370 per month in rent, including utilities.

And percentage of change in those incomes over a 13 year period:

income change

How renter income is distributed:

income dis

income type

Rental housing type:

housing type

Who owns Alameda rentals;

owners

But this, this is probably the most important slide of them all.  The vacancy rate:

vacancy

In 2013, Alameda showed an extremely low 1.4% vacancy rate, compared to a County rate of 3.8% and a Bay Area rate of 3.6%. Analysts consider 5.0% a healthy vacancy rate that provides adequate availability of units for renters while maintaining a strong market for property owners [emphasis added]

And how little supply Alameda has added to the multifamily housing market:

permits

Units that could be subject to rent stabilization:

units stablized

And, despite Tony Daysog’s attention to the matter, AirBnB has not contributed to the housing shortage in Alameda:

data provided by Airbnb indicate that there are 100 active hosts in Alameda, representing approximately 0.3% of the City’s housing supply. This figure includes hosts renting rooms in their primary residence, hosts that rent their homes while on vacation, and hosts with a second home in Alameda for their personal use that they also rent to earn extra income

Here are the scary figures, how many people pay more than 30% and 50% of their median income on housing:

cost burden

During the 2008-2012 period, 48% of Alameda’s renter households were considered low income. Of these, 5,125 had extremely low or very low incomes, and most of these households (4,140 households) could not afford their rent (paid more than 30% of income to rent) in 2012. The most acute affordability need was faced by the 2,975 very low-income renter households who paid more than half of their income to rent. These households are typically considered at risk of homelessness. Due to rising rents and lagging incomes, it is likely that more Alameda renter households face this severe cost burden today.

So while some folks want to focus on the fact that a very small, self-reported sample of renters have indicated that they have not received a rent increase (landlords in the audience, have YOU raised your tenants’ rents annually?) the fact that so many residents, particularly folks that are extremely low income and very low income are paying more than 30% and more than 50% of their income to their housing means that something is wrong.  Will the magic market do anything for these families once they become homeless because they are simply unable to bear another rent increase?  Or will the solution just be for them to drive till they qualify as has been the larger Bay Area policy for decades.  Somehow we are all supposed to feel empathy and compassion for the poor “housing providers” that toil and struggle turn a profit on an appreciating asset because they may or may not have had some lean years, but coldly proclaim that struggling renters are simply victims of blind market forces.

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19 Comments

  1. The landlords are not the problem. The out of control cost increases by healthcare companies, credit card companies, retailers, utilities, etc. are the problem. Landlords have to pay the same as we do for these items, thus they get hit hard with the same increases. The economy is not standing still. If you review the salaries for example of EBMUD management, you would have to ask the question – why do they make so much? Their compensation levels force residents to pay higher rates for our water. What is being said about them? If you review healthcare costs and how Congress is attempting to reduce Social Security compensation to those who have worked 40+ years to deserve it, why are we not attacking them? The landlords in most cases are simply trying to stay up with the outrageous increases in costs that surround them. The issues are larger than we, as a city can deal with it seems, but the landlords are not the problem.

    Comment by William Delaney — November 2, 2015 @ 7:55 am

  2. One thing this study does not address is the vile use of the “60-day notice” to push long-term renters out of their homes so that they can go in, lay some new carpet and automatically offer the property back on the “market” for twice what the long-term renter (who has been paying periodic increases through the years) can afford. It’s just “OK, screw your family. You’re on the street. You are no longer a human being to me (if you ever were one).” THAT is the practice that needs to be addressed and really hasn’t been talked about much.

    Comment by StartOver — November 2, 2015 @ 8:05 am

  3. Some articles trying to look at the other side of the economics of the issue: demand

    http://www.psmag.com/books-and-culture/fleeing-new-york-san-francisco-cleveland-87609

    http://www.psmag.com/books-and-culture/housing-affordability-supply-side-economics-87724

    Beyond the pure economics, government has always played a role in the market. Just hope those making policies decisions can weigh the trade offs of short term versus long term.

    Comment by Mike McMahon — November 2, 2015 @ 8:09 am

  4. Something like 60-day notices isn’t really a data point that is captured unless self-reported by either tenant or landlord. Absolutely it’s a practice that needs to be addressed, and it’s up to folks to put pressure on the City Council to take appropriate steps to address the problem.

    Comment by Lauren Do — November 2, 2015 @ 8:09 am

  5. Are there studies on the % of rental units in Alameda (city) that are duplex/2nd units or single family houses (exempt from many local rent control regulations)? I would guess but don’t know that the % is higher than in other surrounding cities. Something that should be weighed is the unintended consequence of those units getting pulled off of the rental market faster than they otherwise would by non-full time landlords who would rather sell in this market (including to buyers who would convert duplexes back to single family) than contend with an aggressive rent board

    Comment by MP — November 2, 2015 @ 8:54 am

  6. Then any “study” which doesn’t take the 60-day notices into account as a “data point” is fundamentally flawed, as far as truthfully reporting on this crisis and its impact on working families in this community! Was it a simple “slip up” or was it intentional that this “data point” was not considered? One has to wonder.

    Comment by StartOver — November 2, 2015 @ 8:56 am

  7. While it would have been good to see data about 30 day and 60 days eviction notices, it does not preclude this City Council from directing staff to draft legislation toward Just Cause evictions. The onus is on the City Council to create policy based on information: both anecdotal and data based that is presented.

    Comment by Lauren Do — November 2, 2015 @ 9:07 am

  8. I, too am concerned about this practice. We rent three units and absorb cost increases and maintenance, upgrading, etc. while our tenants stay with us. We do not raise rents on sitting tenants, but work with our real estate representative to figure out market and re-set between tenants. Our rental income is a part of our retirement income and we depend on it. I really don’t like the tone of a lot of the anti-landlord comments, as if we were are all gougers and bad folk and don’t have a right to have an income from our property, for which we pay mortgage, tax, insurance, sometimes utilities, repairs, and upgrades. A good deal of the current rental issues are the result of pressure on the market due to a lack of available rental units for people of all incomes. Those who do deal in unscrupulous practices should be dealt with, but please do not discourage those of us who are trying to do our best to accommodate people in need of housing and do so at a fair price. We pay business tax to the City; what we do with our units is a business and a reasonable profit should be expected. It is not a criminal enterprise. If you doubt what I am saying, you are welcome to interview our current and past tenants and see what they have to say.

    Comment by Kate Quick — November 2, 2015 @ 10:13 am

  9. 3. Mike, Supply and demand are a yin tang sorta deal, no? But, if increased demand is from high income people it’s easy to see how that skews things. The articles left me flat. Globally, rents of luxury apartments are in decline. How reassuring.

    Comment by MI — November 2, 2015 @ 10:39 am

  10. I can echo nearly everything Kate just said. We own a 4-plex and strive to only raise rents when someone moves out. Because we charge near low or below market rates, people tend to stay for a very long time and the most common reason they move is because they have saved enough to buy a home of their own. So, every 4 years we assess how our costs have changed and raise the monthly amount to cover the difference, usually dividing that amount between the four units.I say usually because some families would experience too much hardship so we give them a smaller increase. Even with the increases, the rents remain below market rate. (When one does become vacant, we too consult with a management company to set a new rate at the lower end of the range for the time). We have just completed a rate increase process. Since we last raised rents in 2011,our costs have increased $3060 per year. Most of the increase was in local property taxes and water expense with a small amount for garbage. We are just beginning an improvement project to include exterior painting and re-landscaping and do not anticipate charging our current tenants anything but do hope to realize some return on our investment when we have turnover. I also can add that when apartments do become vacant, we upgrade them at that time. I too am concerned about the rising rental rates but am tired of people asking me is we are among the evil landlords. I think most of us who provide living space in small rental properties (28 percent of the rental housing stock according to the report) are not the problem landlords and are trying to be part of the solution.

    Comment by Nancy Hird — November 2, 2015 @ 11:35 am

  11. 8. & 10. Kate and Nancy, you both sound amazing. By the sounds of how you operate, none of the proposed legislation would have much effect on how you manage your properties.
    I wouldn’t worry about whether some internet commenters seem to include you or not when they make their frustrated statements about the current situation faced in our housing markets. Let’s focus on what the best policy is and afterwards we can get the mayor to issue some proclamations recognizing the awesomeness of some of our Mom and Pop landlords.

    Comment by BMac — November 2, 2015 @ 12:09 pm

  12. Nancy and Kate. I was a landlord for one year, renting at cost, and the tenants did lots of minor damage but expected 100% refund of their security deposit. I decided to sell after the lease expired. I hoped to eventually increase rent to get above cost so that I could plan things like long term maintenance. Rent was determined purely by my purchase price at 9% interest, but attempt to rent occurred in a soft market. I would never have bought that property as income property. However if I had held it long term I would be able to rent it at a reasonable return today or have sold it for thousands in profit.

    As a tale of landlord woe, the sewer lateral which was probably compromised by Loma Prieta quake functioned for two years that my wife and I lived there, but when there were four tampons a month catching on a crack or tree root raw sewage backed up into the bathtub at 10 pm. Since the lease clearly stated not to flush anything but human waste, and specifically named tampons, I billed them $100 for rooter service which they never paid, but since the lateral was probably in some state of disrepair I ate the costs for lateral repair. My one year venture into property rental left me in the red.

    Landlords are generally expected to pay water and garbage. Water is often a sore point if tenants aren’t conscientious and love long showers or are simply wasteful. I don’t believe our water and garbage have gone up hundreds per year. (The cost of potable water is actually cheap when you consider how precious it is, but that’s a whole other subject.)

    If your costs are going up $800 a year, you should not have to wait four years to raise the rent. I guess after a one year lease many folks go month to month but renewing leases annually also seems reasonable. On four units, splitting $3060 over 4 years would be about $200 per unit which as a tenant might push my comfort level for an increase on an average one or two bedroom unit. Holding back until turn over to adjust rents makes for happier tenants which may be strategic. It would be helpful to know more about break down of that $3060. We’ve had about $1000 in parcel taxes over the last twenty five years, plus 2% basic tax increase per year. We get home owner deduction on taxes. I may not be as sensitive to other expenses rental property owners incur. It would be good to hear more detail to educate people about the reality of owning income property. Since half of us are renters, rental property owners obviously provide a service, but anybody who is in a position to invest in rental property has to acknowledge they have a level of economic mobility most tenants don’t. That doesn’t make rental property owners “exploiters” by definition, but the fundamentals elements for conflict are inherent.

    It is a simple fact that there are landlords whose prime objective is to maintain rents at whatever the market will bare and to adjust them at the earliest opportunity.

    Comment by MI — November 2, 2015 @ 2:20 pm

  13. Look on the bright side. At least renters pay rent. You could be living in the bucolic German village of Sumpte:

    http://www.nytimes.com/2015/11/01/world/europe/german-village-of-102-braces-for-750-asylum-seekers.html?_r=1

    Comment by vigi — November 2, 2015 @ 2:37 pm

  14. Mark, we have been lucky to have had very nice tenants over the thirty or so years we have been renting out. One or two nasty ones who didn’t want to pay the rent or who were destructive, but almost 98% super nice people. Since we live next door (or in the case of our basement apartment, in the same structure) to two of our units, we become neighbors and friends. We have found careful “vetting” up front gets us good, responsible people – even our pet owners have not let us down. We have rented to people who are single, families, dog and cat owners, of all races and ages and it seems to work. All I ask is that those who are concerned about bad practices remember that this is not a witch hunt and there needs to be some recognition that not all landlords are evil. Also, some recognition that if one is living in a space that belongs to and is paid for by another, it is reasonable for that person to charge for that occupancy both to pay their costs and to make a bit of a profit to live on.

    Comment by Kate Quick — November 2, 2015 @ 2:51 pm

  15. oops. Nancy I read your costs went up $3060 over the average four year occupancy you describe, not ONE year as you wrote. So now I really want more input on costs of income property because I can’t correlate comparable increases in owning primary residence, but our taxes are based on 1991 purchase price. You seem to describe having held the place for a while. Anyway, I suggest you both show up on Wednesday and state your case as I expect there will a lot of highly agitated tenants with some real horror stories.

    Comment by MI — November 2, 2015 @ 5:20 pm

  16. If these good landlords are as good as they say they are, then they shouldn’t be impacted by rent increase caps on current tenants. So long as vacancy decontrol exists, landlords should be able to continue to raise rents to market rates whenever a tenant moves out. Renters need protections from the landlords who do not have such scruples.

    Comment by Angela Pallatto Hockabout — November 2, 2015 @ 5:47 pm

  17. Mark, Comparing expenses for 2012 and 2015, mortgage payments went from $2041 per month to $2170 ($129/month which equates to $1548 annually with no change in interest rate, financing, etc ;Water from $99 per month to $210 per month so annually $1332; Garbage from $103 per month to $118 per month so $180 per year. We have owned this property for a long time and have had some pretty difficult years when the market was soft but it served our family and our future retirement plans well.Working on it has been my husband’s hobby as opposed to a cash cow. Our goal is to finish all the improvements before he retires and then we hope to see the financial benefits.It will be a time when we really will need the income we have planned for all these years. This is not to say we will suddenly be changing our management practices but we probably will not wait for such long time periods (4 years) to ask for expense based rent increases.

    I had plans to attend the meeting on Wed. night to speak as one to offset the crowd. As some of you have said, we will not be too affected by how it all shakes out but I really don’t like being regulated when it is the big apartment complex owners who are greedy.Unfortunately, we live on one of the properties that has been declared to be in a flood zone and a meeting about that is scheduled at the same time and that meeting really will affect us so that is where I will be on Wed..

    Comment by Nancy Hird — November 2, 2015 @ 8:20 pm

  18. One big flaw with the Rent Study is that it aggregates the rents for all unit types: studio, 1-2-3 bedroom and single family home, into one figure: $2,152 (p. 26). And does so only for projects with 50+ units; there’s literally no 2014-2015 rent data for smaller projects for any unit types. The aggregated number is completely unhelpful and does nothing to sort out what various households are dealing with. Two parents with two kids are NOT paying $2,152 for their two or three bedroom apartment or house – ditto for most other unit sizes larger than studios or low-end one bedrooms; and what about household types? It’s beyond me how such an important study could overlook or completely ignore information so basic and necessary to understanding the current Alameda market.

    Comment by John K — November 2, 2015 @ 10:10 pm

  19. What we really need to see in a report like this is which landlords charged the highest rent rent increases and at which complexes those increases took place. There is a great deal of anecdotal evidence that residents of the larger apartment complexes–often owned by corporate REITs and/or out-of-town owners–are the ones who are most often victimized by outrageous rent increases.

    No one on the renter’s rights side wants to nail the “mom and pop” landlords like Nancy Hird or Kate Quick (both friends of mine, BTW) who are more than fair to their tenants over time and have roots in this community. What renters cannot take any longer are landlords who evict long-term tenants unjustly–solely to raise the rents to “market rates” without making comparable–if any–improvements to the property. The renters who are being forced to move after being hit with these successive 20 to 35 per cent rent increases–often without any improvements being made at all–are truly being victimized, and that needs to stop.

    Comment by Jon Spangler — November 3, 2015 @ 10:11 am


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