San Francisco Chronicle - (Sunday)
Bay Area rents, after lull, starting to increase again
After two years of low to negative growth, Bay Area rents picked up steam in 2018, especially in the second half of the year, according to a quarterly survey of large apartment complexes by RealPage, a real estate analytics firm.
The average Bay Area asking rent grew 4 percent in the fourth quarter from the same period in 2017, its fastest pace in almost three years. But it’s still not close to the stratospheric rates that persisted from 2011 through 2015, when they often reached into the double digits.
Bay Area rents are expected to grow a little more slowly this year, thanks to an expected increase in new apartment
completions.
“The demand is there, but it’s tough to digest that much new supply at once, especially given the luxury price point for pretty much all of that product,” said Greg Willett, chief economist with RealPage.
Nationally, rents grew 3.3 percent in the fourth quarter. The fastest-growing large markets were Phoenix and Las Vegas, which each grew 7.4 percent. Among smaller markets, Midland-Odessa, Texas, topped the charts at 21.3 percent.
But rents in the Bay Area are still among the priciest in the nation. The average asking rent for all sizes of apartments in the San Francisco, San Jose and Oakland metro areas now stands at $3,335, $2,789 and $2,302, respectively, according to RealPage. The only pricier area is New York City, at $3,571.
Other surveys rank San Francisco as the nation’s most expensive market, but as I’ve pointed out before, there is no single, reliable source of rental data, like there is for home sales, which get entered into county recorders’ offices. Rental surveys differ, sometimes widely, depending on where they get their data, what type and size of rental units they cover and whether they look at individual cities or metro areas that usually span multiple counties.
RealPage data is based on a long-running quarterly survey of complexes with at least 50 units. The three Bay Area metro areas it covers include all counties except Napa, Solano and Sonoma.
According to its survey, Bay Area rent growth still lags the peak years of 2014 and 2015, when it ranged from 8 to 12 percent annually. It started slowing in 2016 and went negative in late 2016 to early 2017. After that it started slowly climbing back, accelerating in the second half of last year.
A survey of single-family homes and apartments listed for rent on HotPads, Zillow and Trulia, all part of Zillow Group, showed a similar trend.
“After months of stagnant or weakening rent appreciation in the Bay Area, rent growth has been increasing since this summer as mortgage rates rose and Bay Area homes continued to sell at higher prices — particularly in San Jose,” said Joshua Clark, a HotPads economist. Using a “repeat rent methodology,” looking at the same units being rented over time, he estimated that Bay Area rents in December were up 3.6 to 4 percent over December 2017. Allison Landa and Adam Sandler were bracing for the worst when they got an eviction notice in August from the owner of the one-bedroom cottage in Berkeley they had rented for 13 years. The owner, who lived in the main house, was selling the property.
After discovering, to their dismay, that their unit was exempt from Berkeley’s rent control laws, “we hit the rental market really hard,” Landa said. With a 3-year-old son and “two fairly rowdy dogs, we were scared to death. I thought, my God, will we have to leave the
Rents still on the rise
Bay Area rents are expected to continue rising this year, although not as much as last year, thanks to a surge of new apartments slated for completion in 2019.
RENT GROWTH
Year-over-year change for all size apartments in larger complexes for the fourth quarter of each year
U.S.
NEW UNITS COMPLETED
Year
S.F.
San Francisco metro
San Jose Oakland Bay Area?”
But Landa found the market “better than I expected. The open houses were not as competitive. We were offered several places. I wonder if the market is softening a little bit,” she said.
After a three-week search, the family rented a two-bedroom duplex in Berkeley for $2,800 a month. That’s a big jump from the $1,700 they paid on the cottage, but the new place is much larger and “more compatible with what we needed,” Landa said. After their son Baz was born, “we knew we needed to move, the fear of the market was keeping us from doing that.” They made sure their new place is rent controlled and hope to stay for many years. San Jose metro
Oakland metro
RealPage predicts that rises in rents will slow a bit this year — to 3.7 percent in the San Francisco metro area, 3.9 percent in San Jose metro and 2.2 percent in Oakland metro — thanks to a big jump in new construction. Most of that is luxury apartments, but in theory that will put pressure on rental pricing down the line.
In the San Francisco metro area, which also includes San Mateo and Marin counties, RealPage expects that about 4,000 new units will be completed this year, about double last year’s number. In San Jose metro (Santa Clara and San Benito counties), the number will nearly triple to about 6,400. And Oakland metro (Alameda and Contra Costa counties) could see as many as 6,800 completions compared with about 1,000 last year.
Essex Property Trust, a San Mateo company that owns and develops apartments on the West Coast, is projecting far fewer completions. In its thirdquarter earnings supplement, it projected 2,500 units being completed in San Francisco, 2,750 in San Jose and 3,500 in Oakland metros. It noted that a shortage of construction labor has pushed some completions from 2018 into 2019, and some expected in 2019 into 2020.
“For 2019, we expect 3.1 percent market rent growth in the Essex markets, with California slightly outperforming Washington and the best results in San Jose and San Diego. Oakland is expected to lag due to increasing apartment deliveries,” CEO Michael Schall said in a conference call.
Some people think that Oakland could become like Brooklyn, “where we have a saturation in rental housing,” said Cheryl Young, senior economist with real estate website Trulia.
Young thinks that won’t happen, because “the need for new housing (in the Bay Area) is really strong. The last time we ran our rent versus buy report, back in July, we finally saw that in San Francisco and San Jose, it’s cheaper to rent than buy.”
Normally “it’s almost always cheaper to buy if you stay in your house seven years,” she said. But in the Bay Area, “the rental market has been fairly flat while at the same time the price of homes has been escalating. As that keeps diverging, we will still need a lot of rental housing because homeownership is so unaffordable for so many people.”
Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender
the front page of the company’s website said nothing about switching from cigarettes at all, only that the Juul offered an “intensely satisfying vapor experience.”
Recently, Juul — now equipped with an army of lobbyists and a slick communications team that includes a former White House spokesman — has studiously revamped its image. Glossy profiles have been written about the company’s “lifesaving mission,” and new CEO Kevin Burns has gotten on message, emphasizing the company’s focus on adult smokers.
This abrupt about-face has drawn skepticism from critics. Matthew Myers, the president of Campaign for TobaccoFree Kids, characterized Juul’s new ad campaign as little more than a publicrelations effort aimed at lawmakers and regulators.
“Juul has engaged in all the traditional tactics of a company that is trying to fend off meaningful regulation, rather than actually change their behavior,” Myers said. “That is classic Big Tobacco.”
For all the hand-wringing, no one is suggesting that Juul’s nicotine pods are less healthy than cigarettes, or that the company should stop marketing itself as a smoking alternative. There’s every reason to believe that vaping is significantly less harmful than smoking.
But motives matter. And Juul’s shifty selfpresentation suggests that the company may not be entirely on the level.
Juul wants you to believe that it became a teenage sensation entirely by accident, that its products were only ever meant for adult smokers and that taking billions of dollars from Big Tobacco is consistent with the values of a company that has always put a priority on health over profits.
The truth is much hazier than that.
Kevin Roose is a New York Times writer.