This is a major reason your rent remains too high in Merced County, study says

Despite a recent boom in rental construction, the share of rental units built in the last decade fell to an all-time low in the state, according to a study released Thursday, and it’s driving up rental prices in Merced County.

In 2000, the median rent for units in Merced built prior to 1960 was 15 percent lower ($576) than the median for units built in the 1990s ($677). By 2016, the median rent in Merced properties built before 1960 rose by 22 percent to $700 while rents for units built from 1990 to 1999 fell by 3 percent to $660, Apartment List said.

“In a healthy housing market, buildings become less desirable as they age, leading to falling rents,” the report says. “However, without a sufficient supply of new construction, demand will remain high for older buildings, preventing their rents from falling.”

That is a problem not only for low-income households but also middle-class renters, the report says.

In Merced, the share of rental units in buildings more than 30 years old increased by 15 percent from 2000 to 2016. During the same period, the share of units that are 10 years old or younger fell by 3 percent, according to national online broker Apartment List.

“Subdued levels of new construction seem to have increased the demand for older units and incentivized remodeling,” the report said. “This has hindered the filtering process, with older properties which have historically been a source of affordability now quickly growing more expensive.”

Merced has a notoriously low vacancy rate, and that goes for homes as well. Through the the 1980s, Merced issued more than 250 building permits every year, with a peak of more than 700 one year, according to Scott McBride, Merced’s director of development services.

The number of permits per year began dropping through the 1990s, and there were essentially none issued during several years after the housing market crashed in the 2000s. Many homes built in Merced are turned into rentals, he noted.

There are plans for hundreds of new apartment units in various stages of planning in Merced, he said. Some of them were market driven, while other builders came to town after being recruited by city staffers.

“We’re like everyone else. We can’t wait to see them get built, especially the ones that are already approved,” McBride said.

Merced issued 172 single-family home building permits in 2017, according to the 2018 Business Forecast report from Gökçe Soydemir, a business economics professor at California State University, Stanislaus. That is the fewest of any county in the Central San Joaquin Valley.

The housing crisis in California is an ongoing issue. Sen. Kamala Harris, D-Calif., proposed in July The Rent Relief Act, which would create a refundable tax credit for tenants paying more than 30 percent of their gross income on their rent and utilities.

Renters who pay 30 percent or more of their income for housing are considered cost-burdened, which accounts for about half of Merced renters. About a quarter spend half of their income on rent.

The credit would be limited to households earning less than $100,000, or $125,000 in high-cost areas like California’s biggest cities.

This story was originally published September 6, 2018 at 4:44 PM.