Sacramento deals with rising rents amid Bay Area housing exodus.
As home values and rents rise, city leaders face the challenge of trying to keep housing affordable and combat displacement Q&A >> Interview with Sacramento City Councilman Jay Schenirer
Sacramento’s relative affordability has attracted streams of people fleeing the high rents and housing prices in the Bay Area. Along the way, California’s capital city has become less affordable. Rents rose by a record 9.6 percent last year, one of the sharpest increases in the country, according to the real-estate data firm Yardi-Matrix, and by another 2.5 percent this year. A report by the Urban Displacement Project last year found that an astonishing 95,000 low-income households live in Sacramento neighborhoods that “are already undergoing or are at risk of becoming hotbeds of displacement.”
Home values in the city have risen too —by 30 percent over the past three years, according to Zillow — though at $315,000, the price of a median home is far less than it is in the Bay Area.
We sat down with Sacramento City Councilman Jay Schenirer, who represents one of the most quickly changing districts of Sacramento, to understand how city leaders are viewing — and reacting — to all of these Bay Area transplants.
Q
People in the Bay Area have discovered that they can move here and buy a house for less than a million dollars. What has this done to Sacramento?
A
Sell a garage there, and buy a four-bedroom house here. My understanding is we have about 120,000 individuals here who commute at some level to the Bay Area. That’s just crazy. It doesn’t help anybody. It doesn’t help our environment, it’s not good for housing prices and when you look at the number of people who have come up here and paid cash for their houses because they made so much on their house in the Bay Area that they can afford to buy something here, our housing prices, our rent prices have gone up over the last couple of years. It’s finally starting to get realistic, but a lot of that was pushed by folks moving here from the Bay Area because it’s affordable.
Q
Oak Park, a historically workingclass, African-American neighborhood in your district, is often cited as an example of recent changes in Sacramento. Can you describe the area and what’s happening there today?
A
Oak Park was separated from the city when they built Highway 99, and it went downhill pretty quickly after that. Over a period of time, the redevelopment agency put a lot of money into it. And as people decided that they wanted to live closer to downtown, and as you had millennials who wanted to own, the neighborhood got very popular. A lot of the folks who have lived there for a long time have been pushed out because rents have gone up so much. The housing stock, particularly in North Oak Park, it’s just beautiful, so I can certainly see why people would want to move in there. But the demographics are changing, becoming much more Caucasian. I ran for council again this year, and as I was knocking on doors, I was really surprised by how diverse parts of Oak Park were not.
Q
I imagine businesses in the area have been changing too.
A
Businesses have been changing. The area around 35th and Broadway, 34th and Broadway, is one of the coolest areas, I think, in town. You’re getting a lot of new restaurants and things like that. It has been gentrified — there’s no question about it — and the folks who are frequenting those shops are different than the folks who have lived in Oak Park for 20 or 30 or 40 years.
Q
When people can no longer afford the Bay Area, they tend to move farther away from the coast. When people can no longer afford Sacramento, where do they go?
A
That’s a good question. I think they have gone into our own suburbs. If you look at the building that’s going on in Natomas ... I think Delta Shores (a huge planned development in south Sacramento) will fill in at one point. We need about 3,000 units a year to keep up with growth in the area, so we have a long way to go to catch up. I think just further and further out, I assume.
Q
With so many people earning Bay Area salaries, how can locally employed people compete in the housing market?
A
I would make the argument that we’re still relatively affordable. We certainly have our challenges, but I don’t think we’ve hit that point where you can’t afford to work and live in the same area. Some people might argue with that, and we’re probably close in a lot of ways, but I think that if you’re two working spouses you can do it. I don’t know that our teachers or government workers, I know some of them have challenges, but I don’t know they are getting pushed out at that level, compared to the Bay Area. It’s much worse there. I mean, if you’re a teacher in San Francisco, there’s absolutely no way you can afford it.
Q
What is Sacramento doing to keep that from happening?
A
There’s no question we need to build more affordable housing. I’m hopeful with the $4 billion housing bond (Proposition 1 passing), another $2 billion with No Place Like Home (Prop. 2 passing) and the assumption that our next governor, Gavin Newsom, will re-create redevelopment agencies. So I think in the long term there is some hope there. I think the biggest challenge that we have right now is the next two, three, four years, so that people aren’t getting pushed out of their houses. We’re looking at some kind of rent control — I don’t know exactly what’s going to happen, it’s been pretty contentious — and trying to find a pathway that both the business community and the advocates can live with. It’s just not right that people are getting pushed out of their homes. So we need to figure that out. I don’t know if anybody’s found that answer but we’re certainly looking.
Q
When we talked before, you didn’t think rent control was the answer to Sacramento’s rising prices. But now Mayor Darrell Steinberg is talking about a temporary rent-control proposal. Has your mind opened to the idea?
A
I am open. I mean, you sit and listen to people’s stories every week, and we want to be a compassionate community. There’s a moral issue here. I think we need to act on that. If I’m right and the long term looks better than the short term, what do we do to bridge that gap? The housing market went up about 2.7 percent on rents this year, so that’s certainly calmed down quite a bit. So how do we work with our apartment owners, our developers to keep it in that range for a couple of years? There’s some proposals on the table that would be voluntary. I’d rather see it that way, but we’ll see what happens.
Q
Voluntary rent control? I’ve never heard of that.
A
There’s a proposal out there, it’s called 3-3-3, that for three years as an apartment owner — you can opt into it — that you will only raise rents 3 percent per year, and the city would actually then kick in another 3 percent to the owner. So the rent increase for anyone living there would be a maximum of 3 percent, year to year.
Q
We’ve talked a lot about the downsides of the Bay Area-to-Sacramento migration. What are the benefits, if any?
A
You know, we want a creative class here. We want folks who are going to bring something to add to our economy. We need to diversify our economy here in Sacramento; there’s no question about that. We’ve always been too heavily dependent on government and construction. What we do see is folks from the Bay Area are coming and bringing a set of skills and talents that we need to help build our economy. UC Davis wants to open a satellite campus in Oak Park. It could be 10,000 jobs if we do it right. We have to guard against the gentrification issue, we have to figure out how people are going to afford to continue to live where they’re living, we need to think about traffic. But that’s an exciting proposition, and I assume that that’s also going to draw folks from the Bay Area. So we want people to continue to want to move here and integrate them into an economy that’s going to continue to grow and diversify. kinds of systems,” Danske Bank analyst Jonas Guldborg Hansen said. “You’re pushing the high-end part of your portfolio, and you’re effectively locking in your customer,” since adopting the new kegs makes it harder for pubs to sell beers from more than one supplier.
Budweiser maker AB InBev and Dutch brewer Heineken are locked in a legal dispute over patents tied to their own new storage methods. Earlier this year, AB InBev filed complaints with the International Trade Commission to try to block imports of Heineken’s BrewLock into the U.S., contending that the Dutch brewer infringed on AB InBev’s patents. Heineken fired back in August that AB InBev’s Nova countertop cooler infringed on a patent of its own.
“We are confident in our position as the owner of the patented technology,” AB InBev said. Heineken declined to comment.
While Carlsberg estimates that the industry is shrinking at a rate of about 3 percent a year, the new kegs are helping the company and the bars it supplies maintain profitability, Carlsberg Chief Executive Officer Cees ‘t Hart said.
“For us and for the customer, it’s margin-enhancing, and we see a significant decline in churn,” the CEO said, referring to beers that are added on tap only to be removed a week later based on insufficient demand.
Carlsberg declined to detail its investment in DraughtMaster. The company cut off funding to develop the technology a few years ago after suffering losses tied to a weakening economy in Russia, one of its most important markets. The Carlsberg country manager in Italy was a believer, and used his own market’s purse to fine-tune the product.