July 20, 2004
SUBJECT: INFORMATION REPORT VACANCY AND RENT SURVEY
REPORT IN BRIEF
The purpose of this report is to provide the City Council with the results of a Vacancy and Rent Survey completed during the month of June 2004.
Information collected by this survey indicates a vacancy rate of 4.77% for apartment complexes in Sunnyvale. The two prior semi-annual surveys indicated a vacancy rate of 5.81% in June 2003 and 5.94% in December 2003. This is the seventh consecutive Vacancy Survey over a period of forty-two months indicating a vacancy rate of 3% or more. In accordance with the Municipal Code, apartment owners may submit an application to convert their complexes to condominiums.
Sunnyvale Municipal Code, Chapter 19.66, amended on February 4, 2003 by City Council, requires that rent information collected from this survey be used to determine whether rent increases will be allowed for Below Market Rate (BMR) rental units. The results of the survey show that a decrease in average rents has occurred. Therefore, no rent increases are allowed at the present time. Initial base rents for new rental complexes are currently calculated at 80% of median rents therefore, rents for studio to three bedroom units would be $650, $796, $987 and $1,294, respectively.
BACKGROUND
At various times apartment owners have applied to the City for conversion of apartment complexes to condominium status. The Sunnyvale Municipal Code restricts apartment conversions to condominium status until there is a vacancy rate surplus for one full year prior to a conversion application.
In order to determine if an apartment vacancy surplus exists, Section 19.70.030 of the Municipal Code requires the Director of Community Development to determine twice each year, on the basis of a representative sampling of apartment buildings, the vacancy rate for apartments within the City. A vacancy surplus is defined as any number of apartments offered for rent or lease in excess of a three percent apartment vacancy rate. The intent of this ordinance is to prevent the conversion of apartment complexes to condominiums at times of low vacancy when affordable rental housing is in short supply.
If the appropriate vacancy rate allowing conversion is attained, the City would require a project to receive approval of a Use Permit or Special Development Permit, as well as a Tentative Map. The zoning code allows applications for conversions to be submitted semi-annually in the months of May and November. If the number of applications received exceeds the number of units allowed by the vacancy rate, then projects are evaluated based on criteria in Section 19.70.060 of the Municipal Code.
On February 4, 2003 City Council adopted Ordinance No. 2717-03 amending Chapter 19.66 of the Sunnyvale Municipal Code. Chapter 19.66 now requires that the semi-annual Vacancy and Rent Survey be used to determine whether rent increases will be allowed for apartments in the BMR Rental Program. The amended chapter now requires that increases in rental prices “shall be either an increase of five percent or the increased percentage of average annual rent based on the Sunnyvale vacancy and rent survey, whichever is less.”
EXISTING POLICY
Housing and Community Revitalization Sub-Element - January 2002
Policy D.4 Provide a mixture of owner and rental housing opportunities by allowing conversion from apartments to condominiums or cooperatives when a benefit to the over-all city housing situation can be shown and when the citywide vacancy rate for rental units warrants.
Policy D.4.a Continue the Condominium Conversion regulation that provides a system for evaluating condominium and cooperative conversion proposals.
The regulations require the City to conduct a survey of apartments every six months to determine the vacancy rate. Conversion to condominiums are permitted only if a vacancy surplus exists (defined as a vacancy rate exceeding 3 percent). The ordinance also provides protection for tenants of converted projects, including ownership opportunities and provisions for BMR units.
Goal E Maintain and increase housing units affordable to households of all income levels and ages.
Policy E.1 Continue to require a mix in the price of housing units in new subdivisions and apartment complexes as a way of distributing low and moderate cost housing throughout the city.
Policy E.1.a Continue the Affordable Housing requirement in the zoning code.
DISCUSSION
The 97 apartment complexes selected for the survey represent the various geographical areas in the City.
The survey results show that out of a total of 97 complexes with 14,050 units, 670 units were vacant at the time of contact. This equals a vacancy rate of 4.77%. A 4.77% vacancy rate represents a substantial decrease from the December 2003 vacancy rate which was 5.94%.
Apartment rental rate information was collected during the survey period. The information reflects the actual range of rents, including the average rents for apartments in the complexes surveyed.
|
June 2004 Actual Rent Range |
| |
Low |
High |
Average Rent |
Median Rent |
Calculation of Initial BMR Rent |
| Studio |
$695 |
$1,003 |
$807 |
$813 |
$650 |
| 1 Bdrm |
$749 |
$1,925 |
$1,013 |
$995 |
$796 |
| 2 Bdrm |
$925 |
$2,400 |
$1,307 |
$1,234 |
$987 |
| 3 Bdrm |
$1,200 |
$2,845 |
$1,720 |
$1,618 |
$1,294 |
| |
|
|
|
|
|
| A comparison of the Average Rents for June 2004 versus the Average Rents for December 2003 are as follows: |
| |
|
|
|
|
|
| |
December 2003 |
June 2004 |
% Rent Decrease |
|
|
| Studio |
$807 |
$807 |
-0 |
|
|
| 1 Bdrm |
$1,053 |
$1,013 |
-3.80 |
|
|
| 2 Bdrm |
$1,346 |
$1,307 |
-2.90% |
|
|
| 3 Bdrm |
$1,730 |
$1,720 |
-.58% |
|
|
On September 30, 2003, Council approved guidelines for establishing initial base rents in BMR rental units by utilizing the lower result of two formulas. The first formula utilizes 30% of income of households earning 65% of HUD Area Median Income (AMI), which would result in rents for a two bedroom unit at $1,544 per month. The second formula utilizes this survey's results for current market median rents and initial rents are set at 80% of market rent. This formula would establish initial rents at $987 for a two bedroom unit, resulting in a substantial rental reduction due to current market conditions.
FISCAL IMPACT
No fiscal impact to the General Fund will result from the information provided.
PUBLIC CONTACT
Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City web page, and the availability of the report in the Library and the City Clerk’s Office.
RECOMMENDATION
No Action Required.
Prepared by:
Lupita Gaeta
Housing Program Analyst
Reviewed by:
Annabel Yurutucu
Housing Officer
Reviewed by:
Robert Paternoster
Director, Community Development
Approved by:
Amy Chan
City Manager
Attachments
A. Vacancy Rate Graph 6/99-6/04 (pdf format)
B. Average Rent Graph 6/99-6/04 (pdf format)
C. Median Rent Graph 6/99-6/04 (pdf format)