End of year seeing rent market cool

Apartment List analyst Chris Salviati suggested the recent drop is most likely linked to the market cooling typically seen in the winter months and not indicative of a total reversal, but noted other forces working in favor of renters.

“For the Bay Area as a whole, things have definitely slowed down,” said Salviati.

To illustrate his perspective, Salviati pointed to median growth rates suggesting rents increased by 4.4 percent in San Mateo last year, substantially less than when annual rate increases leaped by 9 percent in 2014, or 13 percent the year after.

“Growth is still significantly lagging the levels from 2014-2015,” said Salviati.

The trends resulted in San Mateo’s one-bedroom median rents ending the year at $3,490 and two-bedroom median rents landing at $4,390, according to the Apartment List report.

Critics of online databases claim the websites skew toward gauging luxury units, resulting in higher rates than those sought for older developments. To that end, reports from online competitors indicate rents are cheaper in San Mateo, as Zillow suggests a median rent for a one-bedroom unit was $2,543 in November. Website Rent Café claimed the average San Mateo rent for the same unit was $2,794.

Despite the differences of opinion over the local market’s exact prevailing cost, consensus among the websites exists in recognizing San Mateo’s rents are not growing rapidly.

Rent Café suggested San Mateo’s average rent for all units stayed flat throughout the year, ending at $3,123 — down $30 from where the market started 2018. Zillow meanwhile suggested the market grew by only 1 percent from last year, as median rents increased by only $20.

A downtick in rental costs would mimic similar trends in the home sales and commercial rental markets, where prices recently have fallen from the heights hit in previous years.

While the extreme growth may not be continuing, the local rental market still remains much more expensive than the rest of the nation, as median one-bedroom unit rents across the United States floated around $1,200 per month and $1,400 for a two-bedroom unit, according to online database Zumper.

Similar to the local trend though, a report by Salviati suggested the national rental growth rate is lagging comparable to years prior, as the 1.3 percent increase in 2018 is about 1 percent less than the previous year’s jump.

Looking ahead, Salviati suggested changes in development policies across the country could begin to take hold locally and improve the prospects for renters in the Bay Area.

Most notably, Salviati pointed to a decision to ban single-family zoning in Minneapolis — a shift in metropolitan development regulations with potential to set precedent for other areas facing an affordability crunch.

“I think we are starting to see the tide shift a little bit,” said Salviati, regarding trends turning in favor of those who advocate for dense housing development as a means of making rents less expensive.

More locally, he noted similarities between the Minneapolis decision and policies favored by state Sen. Scott Weiner, D-San Francisco, who resurrected proposed legislation aiming to facilitate transit-oriented development in an attempt to cut the state’s high cost of living.

“That Minneapolis example is a positive sign in terms of what Scott Wiener may be able to do with his new proposal,” he said.

Salviati said years of ongoing residential development along the Peninsula and throughout the Bay Area could also contribute to the dwindling rental rate growth seen recently, as supply creeps toward meeting demand.

“We are starting to see some benefit play out in the data, but I also think the scale of development still isn’t at a level where it will really make a serious dent in the housing affordability issues in the Bay Area,” he said.

Furthermore, he suspected the pending decision of some local tech companies such as Uber, Lyft or Slack to take their company public in the coming year may have a more profound impact on the rental market.

An influx of cash-laden renters potentially turning their attention to the home sales market may breed increased availability on the rental market, suggested Salviati, further driving rents lower. But volatility in the stock market will likely determine the decision of tech executives eyeing an initial public offering, he said.

Considering the mixed signals on the market, looking ahead Salviati projected prevailing trends to continue into 2019.

“We are talking about a slowdown in growth as opposed to rents coming down,” he said.

austin@smdailyjournal.com

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