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Bakersfield's apartment market sets two new records

20201229-bc-rentals

Park West at Heath Road and Stockdale Highway, shown here in late 2020, offers 312 upscale apartments.

Evidence continues to mount that Kern County's rental-housing market has entered uncharted territory.

The latest signs that demand is badly outpacing supply arrived in a second-quarter apartment survey showing Bakersfield's vacancy rate has dipped below 1 percent and rental units in three separate categories have surpassed $2,000 per month.

Both results are unprecedented, according to the company that puts together the report, ASU Commercial.

"I thought the first quarter of 1 percent (citywide vacancies) was amazing, but the fact the rate has fallen even lower is remarkable. It just emphasizes how tight the current rental market is," ASU Senior Vice President Mark Thurston said by email.

Across Bakersfield, rents have risen a little more than 9 percent on average during the past year, Thurston reported.

FILLING FAST

Local landlord Frank St. Clair said his company's vacancies mirror the ASU report at less than 1 percent. Its response has been to raise rents $50 per month across the board for incoming tenants.

"We still have no problem filling them fast," he said, adding that, compared with two years ago, many of the company's properties cost $100 more per month to rent after they've been vacated.

Rent increases on the city's existing tenants are to be capped, starting Aug. 1, at 9 percent per year. That's up from 6 percent since the enactment of 2019's Tenant Protection Act, passed by California's Legislature as a form of statewide rent control. There is no such limit on prices landlords can charge new tenants moving in for the first time.

Given current market conditions and the strength of the economy, St. Clair said he thinks a significant share of local landlords will increase rents close to the maximum amount allowed.

Local observers and market participants point to a few main factors driving the market tighter: People from coastal areas find Kern to be far more affordable, and more people have been able to work from home during the pandemic.

"Because of the pandemic, Bakersfield has become even more of a desirable destination for those seeking a high quality of life outside the major metropolitan areas of California," Anna and Austin Smith, owners of Bakersfield high-end multifamily rental developer Sage Equities, said by email Friday. "We are situated directly in the center of the most populous state in the country, between two major metro areas, and will increasingly become a landing spot for mobile professionals."

Another likely contributor is a lack of homes available for sale. Bakersfield's single-family home market has broken price records several times this year as a tight supply strains to make room for newcomers.

NO VACANCY

ASU's data shows Bakersfield's tightest market is in the eastern part of the city, where no vacancies whatsoever were reported during the second quarter. The part of town with the most availability — the northern portion — had 2.7 percent vacancy for one-bedroom units and 7.7 percent among three-bedroom apartments.

The apartments where rents topped $2,000 were in the city's northwest, where ASU found the priciest three-bedroom places went for $2,161 in the second quarter, and the southwest, where two-bedroom rentals cost as much as $2,002 per month and three-bedroom units reached $2,184.

Thurston said apartment owners in Bakersfield have never before been able to charge rents that high.

"I am certain that those investors who specialize in single-family (house) rentals have achieved this level in the past," he wrote, "but I am not aware of any multifamily (property) owner who has achieved rents above $2,000."

The Smiths wrote that they see no reason to believe Bakersfield has hit a ceiling of high rents and low vacancy rates in our community.

Stephen Pelz, executive director of the Housing Authority of the County of Kern, declined to predict what lies ahead but said by email the market could potentially cool down if there were some sort of local exodus or an increase of new housing construction — or a recession.

Short of any of those, he sees recent market conditions accommodating new investments, particularly for pricier properties.

"It has made it easier to build higher-end apartments because they pencil easier with the new higher rents and low vacancy rates," he said.