Modesto Area Renters Pinched; Why It Could Get Worse

Saturday, August 12, 2017
Kevin Valine
Modesto Bee

Modesto resident Christine Thompson said it took her three or four months of searching to find her current home, a two-bedroom apartment that rents for $825 a month, is clean, in good repair and in a decent neighborhood. She and her two children have been living there since January.

Thompson – who works as a registered dental assistant – said she looked at about two dozen places before finding her current apartment in central Modesto. “I want to say it’s rough,” she said about finding housing. “If you find something affordable, it’s not in a good area. When you do find something, everyone else wants it and it’s super expensive.”

Renters are being squeezed by rising rents and a tight market.

The average monthly rent for Modesto apartments spiked from $788 in 2013 to $1,097 now, according to Rent Cafe, a nationwide apartment search website. Rent Cafe reports the average rent increased from $813 to $1,013 a month in Turlock and from $748 to $1,051 in Stockton over the same time period. This is for market-rate apartment complexes with 50 or more units, and the average rent is what complexes are asking new tenants to pay.

“It’s definitely been heating up since late 2016,” said Ben Sweet, owner of Modesto-based Sweet Properties, which manages 320 rental properties – primarily single-family homes – from Ripon to Turlock and from Modesto to Oakdale. “It was very tight then. But once we got into 2017, it became much more out of a balance. It’s a landlord’s market.”

He said the typical three-bedroom, two-bathroom, 1,200-square-foot home managed by his firm rented for $1,050 to $1,075 a month in 2014 but now rents for $1,250 to $1,300 a month. Sweet said he has never seen a market like this since starting his company in 1991. “Rents don’t spike like this,” he said. “This is more like a Bay Area market.”

The affordable housing calamity that has griped the Bay Area and other coastal communities has spread to the rest of the state, including the Northern San Joaquin Valley and Modesto. “Statewide, there is an affordable housing crisis,” said Robert Wiener, executive director of the California Coalition for Rural Housing. “It’s a catastrophe.”

Supply has not kept pace with demand

Wiener said not enough housing has been built in California to keep up with the demand. He said as people are getting priced out of the Bay Area they are moving to the Northern San Joaquin Valley for cheaper rental housing. But that has caused rents to rise here. “Local people earning local wages are being priced out of the market or paying more of their income for housing,” he said.

Hilary Leffler, vice president of residential management at Modesto-based Liberty Property Management, said her company is renting to Bay Area commuters among the properties it manages in Tracy, Lathrop, Manteca and even north Modesto. She also said now that the housing market has gotten better, owners are selling their rental homes, reducing the rental housing inventory.

Leffler said rents are rising among her firm’s properties. Liberty manages 3,000 single-family homes, condos, apartments and other rental housing from Sacramento to Fresno and from Oakland to La Grange in eastern Stanislaus County. She said Liberty has processed 700 rent increases this year, a large majority of them in the Central Valley, and the increases are $75 to $200 a month.

One newcomer to Modesto has first-hand experience with the rental market.

Harrison Shaffer, 70, relocated here about a year ago from Arizona to be closer to family. He first looked into moving about two years ago and researched rentals. He said apartments in his price range then were renting for $750 to $800 a month and there was a good selection. But when he finally moved here, those apartments were renting for $900 to $1,000 and there were fewer on the market.

“It was disappointing,” said Shaffer, who pays $1,000 a month for a one-bedroom apartment that comes with a tiny washer and dryer. The rent does not include water, sewer or garbage. “From my perspective,” he said, “rents are pretty high.”

More rent increases coming?

Sweet and Leffler said while the market has tipped in favor of landlords, that has not always been the case in the Northern San Joaquin Valley. Leffler said just a few years ago landlords were waiving security deposits and offering free rent for the first month to land tenants.

Sweet said he understands tenants don’t like paying more, especially the increases of the past two years. But he said the Modesto area goes through long periods when property owners cannot raise rents, but their costs continue to rise. For example, Leffler pointed to the steep water rate increases Modesto approved more than a year ago.

“You have a short window to recoup your increases,” Sweet said, “and we are in one of those now.”

He said it’s hard to know for certain but he believes Modesto is near or at the top of its current rent increases. He said local workers cannot afford to pay more, and if rents rise too much Bay Area commuters will decide it is not worth living in the Valley. But Leffler said she expects rents will keep rising until more housing is built.

The current increases can cause whiplash. For instance, Leffler said one unit in a Bodem Street duplex in central Modesto that her firm manages will go on the market for $925 a month. The tenants who just moved out had been paying $750, and four years ago the rent was $595. “That was really low,” Leffler said, adding the new rent is “very competitive and in line with the marketplace.”

Help could be on the way, but it would not provide immediate relief. And Wiener expects the affordable housing crisis to get worse before it gets better.

He said Gov. Jerry Brown and leaders in the state Senate and Assembly have vowed to work on affordable housing when the Legislature reconvenes Aug. 21 through a package of three bills. Weiner said one would place a $3 billion bond on the November 2018 ballot to build affordable housing, another would raise $250 million to $300 million annually for housing through a fee on some real estate transactions, and the last would make it easier to build affordable housing.

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