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File Number: 15-582 <br />Like many cities in the San Francisco Bay Area, San Leandro rents are rising. However, they <br />are rising at a lower level than the region. The average rent in the City increased 39% from <br />2007 through the 3rd quarter of 2015, less than the 51 % rental growth rate for the Bay Area <br />region (see Attachment A). The City's 39% growth rate over 8 % of a year represents a 4.5% <br />increase per year. <br />Key economic factors affecting the recent increase in rents in the City and the region include: <br />Under -supply of new housing construction. The San Francisco Bay Area region <br />has not built sufficient new residential units for decades to meet its population growth. <br />Consequently, increased demand causes the rents for the limited housing supply to <br />increase. Many local housing markets, including San Leandro's, have not fully <br />recovered from the 2008 recession and many cities are seeking more investment in <br />residential development. State law mandates that all cities and counties in California <br />provide adequate zoning for the development of their fair share of housing growth. A <br />minimal number of new housing, particularly market rate housing, was built during the <br />prior eight year Regional Housing Needs Allocation (RHNA) period from 2007-2014. <br />The RHNA, as assigned by the Association of Bay Area Governments (ABAG), for the <br />City's recently certified 2015-2023 Housing Element Update is 2,287 units, with the <br />largest income need category being market rate housing. Approximately 800 new rental <br />and for sale units are currently in the planning or development process. <br />High construction costs. New construction continues to be expensive for <br />developers/property owners, which is a major influence on the growth of residential <br />supply. <br />Spillover of renters from higher cost housing markets. Unaffordable rents in San <br />Francisco and more recently, Oakland, have caused renters to seek more affordable <br />rental housing, which has increased demand in more traditionally affordable housing <br />markets such as San Leandro. <br />New and existing landlords have been raising rents to make up for past years <br />with minimal to no rent increases (or even rent reductions). The majority of rent <br />increases that the Rent Review Board reviewed in the last year stemmed from <br />landlords seeking to bring their rents closer to market rate, making up for years of no <br />rent growth and/or rent reductions. The increased rents enable the landlords to catch <br />up with rising operating costs (i.e., utilities), obtain financing for improvements <br />(including deferred maintenance), and meet investor returns. <br />Despite the recent upward rental trend in San Leandro, the City remains one of the most <br />affordable cities to rent housing in Alameda County. In comparing year over year rent growth <br />rates among Alameda County cities in the 3rd quarter of 2015, San Leandro's average rent of <br />$1,580 is the lowest in Alameda County, and the rent growth rate of 11.9% (see Attachment <br />B) is 9th lowest among 13 cities in Alameda County. <br />The City's occupancy rate increased by 2.3% during the 2007 through 2015 period (see <br />Attachment A). Occupancy levels in San Leandro are higher than the Bay Area region <br />overall, which may reflect a lower renter turnover rate and represent a contributing factor to <br />City of San Leandro Page 3 Printed on 1211/2015 <br />