A shortage of apartment units--100,000 last year--is the major force behind skyrocketing rents. David W. Myers, editor of Real Estate Southern California magazine, pointed out that two-thirds of the 140,000 units scheduled to come on-line this year are targeted at upscale tenants.

Clyde P. Holland, group managing partner for Trammel Crow, blamed the shortage largely on city politicians, who acquiesce to constituent pressure and pass ordinances that limit development. "The only thing Californians hate worse than sprawl is density," he said, noting that the shortage is driving prices beyond the reach of ordinary people like teachers and police officers.

Stanley Michota, executive VP for Forest City Development added, "What we need is a rational approach to this crisis. Some people are spending 60% of their take-home pay on rent."

Holland suggested that industry leaders take the lead in initiating strategies to reverse this trend. He believes city fathers need to be educated about the consequences of their actions. He also feels that the industry should challenge municipal ordinances that conflict with state laws. For example, Holland points out that a state law requiring cities to zone for affordable multifamily housing is being ignored. "No one is challenging this in cities."

The growth of high-tech industries, which has created a population of young, affluent professionals, is influencing rental rates across the state. This is especially true in the Bay Area and Silicon Valley, where rents increased 35% to 40% over the past year and even more in popular urban districts. "There's no affordable housing in the Bay Area," said Holland. "Dot-comer's are going into areas and making them hip places to live, but it's pushing rents up."

John Eudy, EVP of Essex Property Trust, noted that some tenants in the Silicon Valley experienced $700 to $900 rent increases last year. "I don't know anyone who wouldn't complain about that," he said, noting that the problem got city hall's attention and the result was emergency rent control. He warns that owners should to be careful about drastic rate increases that could spur cities to implement long-term rent control measures. Eudy's comments were made at a previous RECG session, moderated by GlobeSt.com editor John Salustri.

Instant Insights /

Industry Leaders Challenged to Address California Affordable-Housing Crisis

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