When Kyle Williams returned to Sacramento eight years after leaving for college and job opportunities in Southern California, he could hardly recognize his hometown.
The central business district was now dotted with upscale restaurants, trendy stores and, of course, a shiny new arena.
All that was missing, he said, was an affordable place to live.
“I was thinking I was going to save money coming back to Sacramento,” Williams said.
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The 29-year-old fashion designer had budgeted $900 a month for a one-bedroom apartment with “modern amenities.” After scouring websites like Craigslist for over a month, he came up empty-handed.
Anything that caught his eye cost at least $1,500, which was more than the $1,300 he was paying for a North Hollywood studio.
Williams’ hunt for affordable rental units has become a familiar story, as Sacramento’s economy rebounds after the Great Recession. A healthy job market and population growth are fueling demand, while the supply of rentals remained stagnant as developers shied away from building during the past decade.
Sacramento’s rents are so high that the capital region is now the fastest-growing rent market in the nation with year-over-year increases of 11 percent, according to Yardi Matrix, the real estate research arm of Santa Barbara software company Yardi Systems. Occupancy rates have hit 96.8 percent.
“I’m very bullish on the Sacramento market right now,” said Doug Ressler, research manager at Yardi Matrix.
The surge in rents is most pronounced in the midtown and downtown areas, long championed by city officials as a key part of Sacramento’s revival. Landlords are gradually revamping aging units after deferring maintenance during the downturn and are passing along the cost in higher rents.
I looked at Arden Arcade, Elk Grove, south Sacramento, Carmichael, Fair Oaks. It’s kind of like where haven’t I looked.
Sheri Goldberg, 58, who left the Bay Area to escape rising rents there
“A lot of owners are starting to realize if they spend a little money updating … that could justify the higher rents,” said Scott Raymond, president of Raymond Management, which manages and owns several properties in Sacramento.
The Q apartment complex at Q and 24th streets in midtown is an example of Raymond’s success. The 1960s-era building had 25-year-old carpet, a broken elevator and a swimming pool that was essentially a mosquito pit when Raymond purchased the property in 2014, he said.
Rents for the 27 units then averaged $800 for a one-bedroom floor plan. Following almost a year of renovations that cost more than $1 million, Raymond now charges up to $1,595 for one-bedroom and $1,850 for two-bedroom.
“I just saw a vision in that building,” Raymond said, adding that the complex is now a favorite of “medical professionals with lots of discretionary income.”
Substitute teacher Sheri Goldberg, 58, moved to Rancho Cordova after she was priced out of Mountain View, where Google is headquartered. She is among Bay Area residents moving to the Sacramento region to escape the astronomical rents driven up by the high-tech sector.
With a budget of $800, she has been looking for a new Sacramento apartment for over a month after recently separating from her partner. While she prefers to live in midtown, she was floored by the asking prices. The one-bedroom units were going for $1,500, so Goldberg widened her search.
“I looked at Arden Arcade, Elk Grove, south Sacramento, Carmichael, Fair Oaks. It’s kind of like where haven’t I looked,” she said.
Goldberg has given up and will be staying with a friend in the interim.
The rental increases are displacing those who can’t pony up the extra cash. Average rents in the Sacramento market are hovering at about $1,173 a month, which consumes 30 percent of the typical renting household’s income, according to a report by CoStar Group, a commercial real estate information company based in Washington, D.C.
Volunteers at Loaves & Fishes have seen a surge in homeless families because of the sharp rise in the market.
We’re just not building. The lack of new construction is not keeping anywhere near the demand.
Jim Lofgren, executive director for the Rental Housing Association of Sacramento Valley, which represents landlord interests
“We have families literally with several children sleeping in cars,” said Joan Burke, director of advocacy for Loaves & Fishes.
The lack of cheap housing drives competition for units. Those with government housing vouchers “cannot find housing because the market is so tight,” Burke added.
Jim Lofgren, executive director for the Rental Housing Association of Sacramento Valley, blames the lack of new construction for the problem. The group represents landlord interests.
“We’re just not building,” he said. “The lack of new construction is not keeping anywhere near the demand.”
Sacramento City Councilman Steve Hansen, who represents the central city, said the elimination of state-funded redevelopment agencies in 2011 has hampered local officials’ efforts to promote new housing. The program was popular among cities, including Sacramento, which relied on its redevelopment agency to help fund urban infill projects and affordable housing.
Hansen, Mayor Kevin Johnson and other city leaders have touted an initiative to attract 10,000 units of housing to the central city over the next decade. But Hansen said the problem is not limited to midtown or downtown, adding that the area’s political and business leaders must develop a blueprint for the region’s housing needs.
As prices continue to skyrocket, it has Goldberg, a native Californian, wondering whether she should move out of state.
“I am considering it,” she said. “I’ve thought about Arizona and back east. There are nice areas where you would pay a lot less.”