Priced Out: Is Rent Control Coming to Sacramento?
After a long day of looking at some potential properties with some clients of mine, we decided to stop in at Selland's Market Cafe and grab some lunch. While waiting for my mouth-watering french dip to arrive, I decided to pick up this week's edition of Sacramento News & Review and see if there was anything new going on in the real estate market.
And oh boy was there...
Priced Out: Rent Control Becomes Focus of Sacramento Town Hall on Housing
"Popular rent stabilization initiatives in Richmond and Mountain View face legal challenge, force other jurisdictions to consider idea."
As you've probably already heard, San Francisco, Oakland and San Jose have become some of the costliest markets in the nation to live in. And more and more people are looking to Sacramento as a much more affordable alternative. In fact, the percentage of people living in the Bay Area and searching for Sacramento homes on Redfin has nearly doubled since 2011!
I've also written more in-depth about this migration trend here if you're interested:
Anyhoo, Sacramento City Councilman Steve Hansen recently held a town hall meeting to discuss the issue and over 100 people showed up to the event. Sacramento Housing Alliance Executive Director Darryl Rutherford cited statistics showing that 50% of families in Sacramento County meet the federal classification of "low income."
According to Rutherford, this statistic is reinforced by the fact that the county's lowest paid renters are now spending over 62% of their monthly income on rent! Yikes!
"When asked about his position on rent control, Hansen stated it "...would be really popular in the central city, but it might cause a lot of important building and economic activity to just move to other parts of the city where developers didn’t have to deal with it.”
"That prediction didn’t go over well with downtown resident Jonah Paul, one of the speakers who addressed the town hall. Paul has been hearing more and more of his friends talk about the need for a Sacramento ballot initiative aimed at blocking excessive greed from unraveling the fabric of their community."
“Rent stabilization just means that the increases are reasonable, so landlords can still make a profit, but tenants aren’t getting gouged,” Paul told SN&R after the town hall. “There is a complicated dynamic in Sacramento between escalating prices and tenants feeling vulnerable. … What I heard at the town hall was a lot about the problems with NIMBY-ism, but it’s a little more complicated than that. We’re in a serious quagmire here.”
MY THOUGHTS ON SACRAMENTO RENT CONTROL
Rent control is currently a whisper, but with the slated increases of rents projected for 10% this year and 8.5% next year, the conversation will certainly grow much louder in the years to come.
Naturally, there are strong opinions on both sides of the fence. Renters are strongly for it (of course), and landlords are strongly against it (again, of course).
But the thing that separates Sacramento from the Bay Area is that you can move just 10-15 minutes outside the city center and pay DRAMATICALLY less in rent.
So if you don't want to pay high rents, don't live in downtown-midtown. 'Nuff said.
I used to rent a 1 bedroom apartment in Arden inside of a gated complex with low crime, a nice pool & spa, and an on-site gym for only $700 per month. Every time one of my friends said they were looking for a place I'd recommend it to them, and you know what they said?
"Nah... I want to live closer to midtown. I want to be where all the action is!"
Well then, you're going to pay for it. Duh. So don't complain about it.
CURRENT MARKET RENTS AND RENTING VS. BUYING
This isn't like San Francisco where you're forced to pay $3,000+ for a 1 bedroom in the hot part of town... you can find a 1 bedroom apartment in Midtown for less than $1,200. And if you look hard enough you can find them for less than $900 per month.
Still too much? Then move to North Sac and pay only $700 per month. There are PLENTY of affordable options for housing in Sacramento, so what's all the fussing for?
But what if a 1 bedroom place is too small, but the $1,600+ 2 bedroom apartment is too much for you? Hmmm... well then why don't you BUY A HOUSE! What a novel idea!
There are currently 253 two+ bedroom houses for sale in Sacramento for less than $235,000. With only 5% down your mortgage payment would be less than $1,600 and you wouldn't have to worry about your monthly payment going up 18.5% over the next two years.
But what's stopping those people from buying a house?
We just invited some friends over to show them that instead of renting a 2 bedroom house in Land Park for $1,800 they could own a 3/2 on a quarter acre with a pool in a low-crime neighborhood with great school districts like we do. But...
The husband doesn't want to move too far away from downtown. Why? Well frankly, he's an idiot. But it just goes to show you that many people are doing it to themselves.
So in sum, rent control is probably not going to happen anytime soon, but the conversation is already up for discussion, and will certainly grow right along with the rents.
But as long as your rental is outside of the city's core (which I'd recommend because prices are super inflated there anyways) you probably won't ever have to worry about it.
WHAT DO YOU THINK?
I'd love to hear some other opinions on the topic, both from landlords and renters, and other real estate professionals too. Is there something I missed? Do you think rent control would be good for the economy? Or worse? Have anything to add?
