Berkeley rental rates skyrocket, causing headaches for students and those on middle incomes

An apartment for rent on Spruce Street. Photo by Melati Citrawireja
An apartment for rent on Spruce Street. Photo by Melati Citrawireja

By Gill South

This is the second in a Berkeleyside series on housing. Read our first story on short term rentals.

The heated economy has pushed Berkeley rental rates significantly higher this past year, a jump of anywhere from 10% to 30.9%, depending on which study you look at, forcing some students to double and triple up in mini-dorm-like situations, and middle-class workers to stretch to meet their rents.

At the same time, technology workers and those in finance or other well-paying professions are snapping up luxury apartments that can cost from $2,500 a month for a studio to $5,400 for a three-bedroom, two-bath pad.


“The problem is that we are an extremely desirable community,” said Mayor Tom Bates. “With high rents in San Francisco a lot of people choose to be here. As a consequence we have huge demand.”

RealFacts, a company that does quarterly analyses of rental trends in the Bay Area, reported recently that rents in Berkeley had risen 10% to 12.6% since last year. The Berkeley Housing Element for 2015 to 2023 said median rents for studios and one-bedroom apartments in new developments are 25% higher than in 2012. For two-bedroom units, the increase was 37%.

But Zillow, an online real estate firm, released an analysis last week that said Berkeley rents for all types of units, from studios to homes, were 30.9% higher than this time last year. Zillow sets the median rent for homes and apartments in Berkeley at $3,526.

Zillow Rent index. Source: Zillow.com
Zillow Rent index. Source: Zillow.com

The last time rents rose so crazily was 15 years ago during the last technology boom, and history seems to be repeating itself.

“In 2000, the dotcom boom market, rents skyrocketed and now we are dealing with some of the same issues,” said Nick Traylor, a manager at the Berkeley Rent Stabilization Board.

Some landlords are even increasing rents by $400 to $1,000 a month if they have a tenant vacate a unit, said Traylor. He stressed these substantial increases are on top of the already high market rates being charged to the previous tenant.

Elaine Perkins, who runs the Cal Rentals office at UC Berkeley, said students are living in cramped conditions to afford decent accommodation.

“Gone are the days when they moved out of halls with their peers and had their own room – they are moving back to doubling up or tripling up,” she said.

“Techies, on the other hand, can afford six months’ rent without blinking. They can afford more than the asking price too,” she said.

“What I find appalling, what makes me sick to my stomach, is okay, you want to raise your rent but to raise your rent and not do improvements, that’s very hard to swallow.”

“If people are going to start charging premium rent then it takes a premium product,” she said.

The heightened demand for a rental pad in Berkeley is also leading to fraud, Perkins said. She has heard stories of prospective tenants being asked to pay $1,000 deposits just to view accommodations. In other cases, fake houses are allegedly being put on Craigslist for rent. Scammers borrow the photos from a house that is for sale online. Her message: do not rent sight unseen.

For Rent signs on Spruce Street. Photo by Melati Citrawireja
For Rent signs on Spruce Street in Berkeley. Photo by Melati Citrawireja

Aimee, a young Berkeley landlady and artist who shares her North Berkeley house with three tenants, is horrified by the stories she hears when interviewing new roommates. (She asked Berkeleyside not to use her last name.)

“I have heard a lot of complaints about bait and switch. An ad is posted for a room at a reasonable rate, the person gets there and it’s: ‘Oh, we just rented that one, but we have this other room that costs a bit more and you would be sharing,’” she said.

There are also stories she hears where families rent out a room but they don’t allow the student to use the kitchen, and they don’t want them to spend much time in the home at all, she added.

Mayor Bates said part of the problem can be traced to a time when no new rental housing was built in Berkeley. When his wife, Loni Hancock, was mayor, from 1986 to 1992, only one new apartment building was constructed in the city.

“There was a time in the city’s history where we didn’t build hardly any rental units at all,” said Bates. “There is a huge, huge demand and supply has been extremely limited. As a consequence, rents are sky high. It has caused problems for people who want to have affordable, livable housing in Berkeley.”

Berkeley’s population grew 9% to 112,580 from 2000 to 2010, according to the Berkeley Housing Element. The city issued building permits for 1,190 units from 2007 to 2014. Most of those were designed for people with above moderate income with only a handful set aside for very low income, low income, or moderate income people, according to the Berkeley Housing Element.

From Jan. 1, 2014 to Sept. 1, 2014, the city of Berkeley approved building permits for 137 dwelling units and gave conditional use permits to 165 units, according to the Berkeley Housing Element report. There are another 1,103 dwelling units that have been approved, but for which no building permits have been issued.

The report says Berkeley needs to construct 2,959 units by 2023 to meet the housing goals set by ABAG, the Association of Bay Area Governments.

Rent-controlled properties are not immune to market pressures. While the Berkeley Rent Stabilization Board controls the amount landlords can increase rents each year (In 2015, they went up 2%), vacancy decontrol lets landlords increase rents as much as they want after tenants move out. California legislators adopted the Costa Hawkins law allowing vacancy control in the 1990s. It went into effect in 1999.

Bates said that 85% of the rents in rent-controlled housing in Berkeley have been increased to market rate. Those tenants may still be paying lower rents than tenants in new buildings, but rents are high.

“The market rent is the amount that the landlord and tenant agree upon at the outset of the tenancy,” said Traylor at the Berkeley Rent Stabilization Board.

This has led to enormous discrepancies between tenants’ rents in the same building.

In one rent-controlled building in Berkeley, you will find one tenant is paying $1,400 a month for a two-bedroom apartment while next door, in an identical apartment, the occupiers are paying $2,700 a month and are having to take in roommates to make it work.

Escalating rents also motivate landlords to evict tenants so the rent can be reset, said Traylor.

“If the landlord can find a good cause to evict, they are more likely to take advantage of their right to evict in the current market,” he said.

By contrast, these rates are still well below the rates being set by the slew of new upscale apartments recently built or under construction in Berkeley. There are more than 1,000 apartments that have been built or are proposed for the city, according to a 2014 analysis by Berkeleyside.

Colisha Church is a leasing associate at The Varsity building at 2024 Durant Ave., which is scheduled to open in July. Her employer is Greystar, a Houston-based developer and real-estate management company that owns or manages more than 400,000 apartments around the country. In Berkeley, it owns or manages five buildings, including Berkeley Central on Center Street, Hillside Village Apartments at 1797 Shattuck Ave. in the Gourmet Ghetto, Library Gardens Apartments at 2020 Kittredge, right near the Berkeley Central Library, and Telegraph Commons Apartments at 2490 Channing Way.

Church said she was getting a number of student inquiries for The Varsity and tenants are allowed to put two people into a studio, five into a two-bedroom apartment and seven into a three-bedroom apartment.

Berkeley market rents. Source: Berkeley Housing Element, 2015-2023
Rates of apartments under rent control. Source: Berkeley Housing Element, 2015-2023

Rents, which are non-negotiable in the 79-unit building, which characterizes its units as luxury apartments, are $2,550 to $3,200 for a studio, $3,550 to $3,750 for two-bedroom, one bath apartment, $3,900 to $4,200 for a two-bedroom, two-bath apartment, and $4,700 to $5,400 for a three-bedroom, two-bath unit.

“We are getting interest from all kinds of people – students in the UC Berkeley graduate program as well as sophomores. We do have a couple of techies who like the location,” said Church. She is expecting interest from Google and Apple workers heading to the West Coast soon.

The demand is certainly there in Berkeley for Greystar, she said. The company plans to build three more complexes. “It looks like we are going to be doing another one on Milvia. We are breaking ground (there) at the end of this year, and two more after that in downtown.”

These heady new prices for Berkeley are a function of how the market works, said Sid Lakireddy, president of the Berkeley Property Owners’ Association. He is not surprised that the rents are heading in this direction.

“San Francisco is now an international city like New York and London,” said Lakireddy. “Companies are not building these developments as a “not-for-profit,” he said. “Ultimately they are going to be responsible to someone on Wall Street, that’s the way the system works.”

Incoming new faculty to UC Berkeley are another group coming into a much less welcoming property market. Rebecca White, a rental housing counselor who helps new Berkeley faculty find accommodation on behalf of UC Berkeley’s CALcierge office, said search conditions have become far tougher.

“Generally, I am seeing almost a 25% increase in rents for quality one-bedroom apartment and two-bedroom apartments and small houses over last year, ones proximate to campus, nice neighborhoods such as Elmwood, north Berkeley, with upgraded kitchens,” she said.

“The main problem is the inventory of duplexes and houses is very thin, and there’s a lot of competition from well-paid employees in the tech industry. It is not uncommon for a nice rental in a good area to have a long line of eager applicants show up for rental Open Houses, completed applications in hand,” she said.

The farther you are willing to commute from campus, the easier your housing search should be and hopefully less expensive, she said. “Think five or more miles if you possibly can. Cal students can ride the AC Transit buses for free, and some employers offer transit benefits.”

Middle-income workers, who can’t afford to buy in the Berkeley market, are also not feeling very valued in this competitive environment.

Kelly, who asked that Berkeleyside not use her last name, is an educator with a partner working in the media. She feels in a perilous position as their rent keeps going up every year by more than $100 a month. Paying below market rent, they don’t feel they can protest, but it has made them feel vulnerable.

On top of this, the landlord is now taking much less care with maintaining the development.

“Now everybody feels like you raise the rent and things are not getting done. It’s hurt the goodwill,” said Kelly.. And the tenants know how much the landlord is clearing on the units, she said.

“Berkeley used to be the place you could move to – I don’t know if our daughter could afford to live here after she has finished college. I don’t think that is right,” she said.

“Having grown up here, Berkeley is about fairness and equality. We moved back from San Francisco for that.”

But that is what makes Berkeley so appealing to others like her.

Long-term Berkeley landlord, Mark Tarses, who has five properties, and prides himself on renting at below market rate, has rented to tech workers recently. He had three tech tenants who stayed a year, all working for the same company in San Francisco. They paid $3,500 a month rent, which they considered a bargain compared with paying $3,500 a month each for a studio in San Francisco. In their Berkeley house they had one spare room and kept a banjo in it and a chair.

“A 200-square foot room!” said Tarses. He thinks more techies will base themselves here as their companies move to San Francisco to help attract the kind of talent they need. Berkeley is an easy commute for San Francisco and still offers more value for money  .

“The center of gravity has been shifting from Palo Alto back into San Francisco which brings Berkeley into its aura and students have to compete with this,” he said.

“It is very sad what has happened to the housing market in Berkeley – people forget that the hippies of the ’60s came here because it was a cheap place to live, it was about the counter culture – they wanted to go somewhere cheap – now people can’t do that.”

Related:
Short-term rentals are squeezing out Berkeley renters (05.26.15)
Officials to relax rules for Berkeley’s ‘granny flats’ (03.25.15)
Is the tech boom putting pressure on Berkeley rents? (07.03.14)
‘Explosive” downtown Berkeley housing boom under way (01.14.14)
1,000 new apartments planned for downtown Berkeley (02.07.13)

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