Median rents are down in Berkeley and one property manager thinks that the increase in the number of new apartments for rent, like the Higby Apartments at 3015 San Pablo Ave., is part of the reason. Photo: Gerding Edlen

Rents are down in Berkeley in Oakland, even though many people still can’t afford to live in the newly built apartments that have been sprouting up in the East Bay.

Two industry groups – Apartment List and Zumper – are reporting that median rents in Berkeley fell anywhere from 3.8% to 15.9% in 2017, and dropped from 10.9% to 15% in Oakland. After going up for years, rents started to decline in June and have dropped ever since.

In contrast, rents went up in eight of the largest 10 cities in the San Francisco metro, including San Francisco, Concord, Walnut Creek and Petaluma, according to the reports.

One manager of about 1,000 apartments in Berkeley and Oakland confirmed the gist of the industry reports, although he put the decline in rents at about 5.8%. Sam Sorokin of Premium Properties said he calculated that number by looking at people who first started renting in August 2016 and moved out in August 2017. His company had to lower rents to attract tenants, he said.

“Something’s up,” said Sorokin. “All the economic indicators are great: strong job market, good wages, we’re not in a recession. Things just aren’t renting for as much.”

Sorokin said he thinks the drop in rents reflects what he and other building advocates have long been saying: constructing more housing creates more competition, which lowers rents.

“In 2017, a tipping point has happened,” said Sorokin. “The new construction has caused the rents to decline. There is no other reason I can think of.”

Since 2014, 910 units have been built across 11 projects, according to a “housing pipeline” study prepared by Berkeley city staff. There are an additional 525 units being built, or which have active building permits, in nine projects.

Interior of an apartment at Parker Place. Photo: Parker Place Apartments

Most of these apartments are aimed toward upper-income residents. They offer amenities like bamboo floors, stainless steel appliances, views, decks and in-house or nearby gyms. The complexes that have been completed in Berkeley in the past three years include The Dwight and Garden Village, both on Dwight Way, Stonefire Apartments on Milvia Street, Addison Arts and Avalon Berkeley, both on Addison Street, The Higby on San Pablo Avenue, Berkeley Apartments-Touriel and the Aquatic, both on University Avenue, and Varsity Berkeley on Durant Avenue, among others.

When the first of these upscale complexes was completed, apartments were snapped up because there was pent-up demand for newer units, said Sorokin. Many foreign students at UC Berkeley, whose parents could afford to pay high rents, moved in.

“These people paying high tuition – their parents are loaded,” said Sorokin. “They don’t want to live in some funky, ’60s style apartment. They want nice places.”

But now that so many of these units are available, the demand has dropped, he said. Units are sitting empty. So some property managers are offering a month’s free rent or are dropping prices to lure new tenants. Developers are feeling the pressure to fill buildings, too. They want to convert their more expensive construction loans to traditional bank loans, and that cannot happen until a complex is filled, he said. Lowered rents reflect those pressures.

Despite the drop in rental price averages, overall the influx of new apartments has raised the prices of apartments more broadly, said Sorokin. Landlords feel able to charge more when looking at the comparative higher prices being asked at the many new “luxury” apartment buildings. That has severely impacted those who don’t have high-paying tech or finance jobs or families with extra money.

When Equity Residential, one of Berkeley’s largest property owners, went to sell its eight complexes in 2015, the brokerage marketing the complexes boasted how much rents had gone up as a selling point.

“Market rents in Berkeley have increased 57% since 2010, and 13% in the last year alone,” read an email by Eastdil Secured. “Consistent demand from a large student population, a well-compensated workforce, and a shortage of new Class A supply have combined to generate an average vacancy rate of just 3.6% over the past six years.”

That upward trend softened starting in 2016, according to a report done by Zillow.

Berkeley rent growth over 12 months to November 2017. Source: Apartment List

Apartment List, a company that lists rentals online, reported in November that rents in Berkeley had declined 3.8% in the past year. The median cost for a two-bedroom rental in Berkeley is $2,530 (down from $2,81 in August), and the cost for a one-bedroom is $2,010. Oakland has the lowest prices in the region with the median price for a two-bedroom rental set at $2,170. A two-bedroom in San Mateo is $4,200 and a two-bedroom in San Francisco is $3,050, according to the study.

Those prices are way above the national average, which is $1,160.

Another firm, Zumper, had slightly different prices. It reported in late November that rents in Berkeley had dropped 15.9% over the previous year. The median price for a two-bedroom apartment was $3,000 and the price for a one-bedroom was $2,480.

Zumper said Oakland prices had gone down 10.9% in the past year. Its research showed that the median cost for a two-bedroom apartment is $2,550 and a one-bedroom is priced at $1,960.

These rent prices are prohibitive for many. In August, Berkeleyside reported on UC Berkeley students sleeping in sub-optimal conditions because they could not find an affordable place to stay. The Daily Cal recently had a story about a student living in a converted school bus because it was cheaper than university housing, which he could not afford.

Paola Laverde, a commissioner on the Rent Board, which oversees Berkeley’s 20,000 rent-controlled apartments, just had to look for a new place. Laverde has a good job with a state agency but found it difficult to find an apartment that fit her budget. She finally found a two-bedroom apartment for $2,100.

“I cannot tell you how scary it is for me,” she said. “I just earn enough to pay my rent and my bills.”

Frances Dinkelspiel, Berkeleyside and CItyside co-founder, is a journalist and author. Her first book, Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California, published in November...