Amazon HQ2 Would Add More Heat to the Sacramento Rental Market

Thursday, October 19, 2017
Alexa Renee
ABC (Sacramento)

The race is on for the chance to become the home of Amazon's second headquarters.

The Greater Sacramento Economic Council announced the region's bid for Amazon's second headquarters Wednesday morning outside Golden 1 Center. Sacramento is among a number of cities -- San Diego, Houston and Minneapolis to name a few -- competing for the headquarters. Amazon says they'll hire as many as 50,000 employees with an average annual salary of more than $100,000.

Proposals are due midnight Thursday.

The online retail giant would bring thousands of jobs and help boost the local economy, but the impact that comes with high-paying salaries would be felt heavily in the rental and housing market.

A report released by Apartment List found that in Seattle, the home of Amazon's current headquarters, the influx of the company's high-paid workers coincide with the rent hikes that outpace nearly all U.S. cities and the fastest growth in home prices across the country. The apartment search company looked into the potential impact on rent in 15 metros competing for the HQ2, and is predicting an additional rent of up to two percent annually, on top of the rent growth each metro would experience without the presence of the headquarters.

Rent is rising quickly across the nation and half of renters are already spending more than 30 percent of their income on rent, according to Apartment List.

So, an additional two percent increase in rent would place an even heavier burden on those already struggling with rising rent costs. Pittsburgh, Baltimore, San Jose and Raleigh, North Carolina would see the highest rent growth with the addition of HQ2, according to the report.

The study didn't include Sacramento-- however, ABC10 contacted Apartment List to find out how rent in the Capitol City would be affected if it were chosen as Amazon's new home.

The rising rent in Sacramento has been the talk of town for the past couple years. Sacramento currently ranks number 10 on the list of cities with the fastest growing rent in the U.S., according to Rent Cafe, a Yardi Matrix service.

Rent Cafe reports, rentals in the city have spiked 8.1 percent since last September and average $1263 a month.

This is a drop from months in the past but is still a staggering hike for renters to keep up with.

"We'd expect pretty steep rent hikes in Sacramento with the Amazon HQ2," said Andrew Woo, data scientist for Apartment List in an email to ABC10.

Researchers at Apartment List predict an additional rent growth of 1.5 percent to 1.7 percent a year, meaning the increase would be added on top of the metro's baseline rent growth.

One of Sacramento's biggest factors behind the skyrocketing rent in Sacramento is the slow building construction and lack of new rentals. The city is simply not keeping up with supply and demand. With the addition of Amazon's HQ2, rentals would become even more scarce and expensive.

But, Sacramento could soften the impact by speeding up construction significantly, according to Woo.

The good news?

Although Sacramento's rent is expected to continue to climb over the next 10 years, it's not expected to grow as fast as it has in the last two years. Amazon HQ2 would definitely contribute to the local renter's headaches, but not in such a forceful way as it would if it were ready for business this year or next.

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