The Midpeninsula remains one of the most expensive and least-accessible rental housing markets in the nation, but it has slowed down and cooled off a bit in 2018.
"We did start to see changes in the market last year," said David Hunt, operations manager for WA Krauss & Co. Inc., a Sunnyvale-based residential property management company handling 450 properties in Santa Clara and San Mateo counties. His company's portfolio includes single-family homes, condominiums and town homes. "We were spoiled before. Houses were renting within days at any price. Today, it's taking a lot longer. Two or three months, in some cases. People are just not moving as much."
Unless a property is already well under market rate, Hunt said his company has stopped increasing rents in its inventory of residential units.
"In a few cases, we are even lowering rents if landlords really need to get a property rented," he said.
One of the reasons there was a relatively healthy number of units available was because several of his company's rental tenants have been able to buy homes in recent months, Hunt said.
According to RentCafe.com, a nationwide Internet rental service, rental housing units have seen single-digit rent increases over the past year 2 percent in Palo Alto, 4 percent in Mountain View and 6 percent in Redwood City. Average rents in July in Mountain View were $3,009; in Palo Alto, $3,036 in Palo Alto and $3,718 in Menlo Park.
The San Francisco metropolitan area, which includes San Mateo County, is the nation's most expensive for renters, according to a report titled "Out of Reach: The High Cost of Housing 2018" compiled by the National Low Income Housing Coalition. To afford the average two-bedroom rental housing unit, tenants must make $60 an hour, or an annual salary of $125,000. Santa Clara County is the second-least affordable, where a tenant needs to earn $48.50 an hour, or $100,000 a year, to rent a two-bedroom unit.
For those who can afford it, Hunt said a healthy inventory of housing units, including new residential developments, are helping "stabilize" the Midpeninsula market this year.
Kimm Terpening, real estate agent in the Menlo Park office of Coldwell Banker who handles both for-sale and rental properties in cities from Burlingame to Mountain View, agrees that residential rental inventory is plentiful this year. While compiling research for a client this summer, she determined there were 10 homes in Menlo Park available for more than $10,000 per month, and 26 more in that price category in Palo Alto.
Terpening said the relatively healthy rental inventory combined with the Midpeninsula's "fantastic schools and plentiful amenities" make it a favorable time and place for renters to be looking compared to the last few years. The area's close proximity to both San Francisco International and Mineta San Jose International Airports helps its desirability and marketability.
"The market has softened ever so slightly," she said of conditions this year.
Terpening said landlords or property managers use a number of factors in deciding at what level to set rents prices being charged for comparable homes in the area, the quality of local schools, and proximity to such amenities as shopping, entertainment and employment centers, among others.
As the stats show, prospective tenants must be in good financial shape to afford Midpeninsula rents. Terpening described many of her rental clients as married couples relocating to the region for high-tech jobs seeking top-notch public schools within walking distance for their children. They are often willing to pay up to $10,000 a month for a rental home. Others are young couples, nurses or educators seeking out one-bedroom apartments that rent for up to $3,000 a month, but offer comparatively short commutes to local schools, hospitals or tech companies.
Terpening said prospective renters with whom she works are from either end of the income spectrum, with those at the lower end unable to come up with a sufficient down payment to buy a home on the pricey Midpeninsula. On the other end, people are moving into the area for high-paying technology jobs who can afford $10,000-per-month house rents. She said the majority are coming here from Southern California, but also from Seattle, New York and Boston. She said many relocated tech employees receive financial help from their employers to cope with the region's astronomical housing costs.
Hunt said his company also sees many tech employees moving to the area temporarily for job assignments seeking to rent.
When rent levels are determined by his company, he said, owners' expenses aren't really considered.
"It doesn't matter what expenses a property owner may have, a tenant will be charged a rent the local market will bear," Hunt said. "We go to Craigslist and compare similar properties in a given area to our own. Of course, we are trying to maximize income for a property owner, but if their expenses are high, that does not have an impact on the amount of rent charged. It's dependent on what rent level is appropriate in a specific neighborhood."
Hunt said when a company like his is handling all management responsibilities for a property, the industry standard for its monetary share is 7 or 8 percent.
For some, renting a home locally is a quality-of-life issue. Terpening said one of her recent clients seeking a home in Menlo Park was spending four to five hours per day commuting between his job on the Midpeninsula and his home in the East Bay town of Danville.
Len Robinson, president of Menlo Park-based Robinson & Co. Realtors, said the influx of affluent tech workers into the Midpeninsula has created a decidedly mixed bag of a local rental market this year.
"If you have a single-family home on the market, the demand is still strong," said Robinson. Besides landlords and tenants, the company also handles for-sale residential and commercial properties and property management. "Rents have increased substantially in some places, but very little in others. Some rentals draw 10 applications, others can't make the phone ring."
The result is a rather "confusing" market for prospective renters and landlords, he said. Midpeninsula renters are mostly comprised of tech workers and the graduate students, postdoctoral researchers and visiting professors at Stanford University.
"We're a company town," said Robinson, himself a Stanford graduate.
Both Robinson and Terpening said they've seen a minor impact in Midpeninsula neighborhoods from such short-term residential rental companies as San Francisco-based Airbnb Inc. and VRBO, a subsidiary of Austin, Texas-based HomeAway Inc.
Terpening said her company requires a minimum one-year lease, while Robinson said his company forbids short-term rentals.
A measure on the Nov. 6 statewide ballot could also have an impact on the local rental market. Tenants, landlords and public officials on the Midpeninsula and beyond will be paying close attention to a vote on whether to repeal the Costa-Hawkins Rental Housing Act. Passed in 1995, Costa-Hawkins limits the ability of California cities to impose rent control. Among cities with some form of rent control at present include Mountain View, East Palo Alto and San Jose. Only 15 of the state's 482 incorporated cities have some form of rent control in place.
Currently, because of Costa-Hawkins, rent control can only be applied to residential units built before February 1995. Its repeal would allow municipal officials throughout California to expand rent control to encompass newer housing units.