Real Estate

Renters feel the squeeze in Palo Alto

Competition, price keeping many out

by Rye Druzin

Palo Alto's housing market is known for its million-dollar homes and exclusivity. But for those looking to rent, the rates and lack of supply have begun to squeeze many out of the market altogether.

Matt Bauman, a 28-year-old business student at Stanford, has faced the struggle to rent a home in Palo Alto for the last few months. Bauman, who currently lives in a Stanford apartment with his wife and two young girls, wants to move his family to Palo Alto this summer. He said that the process of finding a home to rent is both frustrating and stressful.

"Not only are there a lot of people, there are a lot of people who also have the same trouble finding a place who are perhaps more financially able to offer more money than us," Bauman said of Palo Alto's housing market.

With an upper range of $3,000, lately Bauman has found just two listings within his budget. Three-bedroom homes on Craigslist in March ranged from a $4,000 duplex to a $7,000 Midtown home.

Some people have attributed the rise in rents over the last few years to the boom of highly paid high-tech jobs. These workers are attracted by Palo Alto's amenities, good schools and relative safety, according to Realtor John Chao of Action Properties, Inc., Mountain View.

"It's fierce," Chao said about the rental market. "You have to be ready to be rejected several times. There are many potential renters coming to see homes as soon as they get listed. For most of the folks, it's just a fierce competition, and it's very hard."

Lena Chow, a landlord in Palo Alto who has rented out a cottage on her property since 1997, knows the competition firsthand. She described her latest open house as "a real zoo."

"There were probably more than 20 people who came through to look at it, and seven strong applicants completed the application," Chow said.

During the open house, at least two potential renters made comments that hinted that they were willing to pay more due to the competition, a practice that can start bidding wars for homes. Would-be renters interviewed for this article said that they had witnessed such offers.

For some the housing market in Palo Alto and the surrounding area has become so competitive that they have been forced to move elsewhere in the Bay Area.

"Facebook, Yahoo and Google have knocked up these prices because they pay their people so well," said Susan Kudelka, a personal assistant whose clients live in and near Palo Alto. "Those of us who live and work in the vicinity cannot live in the area. It is so hard for me to commute across the bridge for my work that I am trying to buy my way out of my lease and move back onto the Peninsula."

Kudelka, who makes around $50,000 a year, lived in East Palo Alto for eight years until August 2013, when her landlord decided to sell the home. When she started looking around for a new rental, she said she suffered "sticker shock" due to the rise in prices since she moved to East Palo Alto in 2005.

Kudelka ended up renting in Newark where she pays $150 more a month for an apartment she shares with her dog, in addition to more than $300 a month on tolls and gas for her commute. She said that she believes there is little chance for her to find a home on the Peninsula in a place she would be comfortable with.

"The people who are being paid outrageous salaries are able to offer more money and snatch up the property," Kudelka said. "It quashed my chances, is an emotional downer, and the other emotion that arises is my resentment towards the companies."

For Bauman, just finding a place with rooms and space for his family has proven to be a struggle. While he admits that the market is limited, he says that starting to look six months before his lease runs out has taken off some of the pressure. But the problem of getting the right home has raised concerns for him.

"(Finding a home) is literally the one piece of the puzzle that would make our lives amazing," Bauman said. "All of my stuff is perfect -- my friends, my family, my job -- but this one piece is missing. It feels extremely unlikely that we'll find an amazing place to live, and it's a little stressful and consumes a lot of time and energy to be checking and everything. And if something comes up then the stress increases because of the competition."

Bauman echoed Chao's statement about what draws people to Palo Alto, saying that "we don't live here for the housing, we live here for the people, the recreation, the entertainment. We have our group of friends nearby, and University Avenue is fun. You can find that in other places, but I think Palo Alto has a special feel."

Bauman may have time to find a place, but finding the right place is always on his mind. When asked what advice he would give to other would-be renters, he replied that "it's about getting on the ball early, because it will take a while unless you get really lucky."

Freelance writer Rye Druzin can be emailed at rdruzin@gmail.com.

Comments

 +   Like this comment
Posted by My Take
a resident of South of Midtown
on May 1, 2014 at 10:01 am

Although it is true that housing is very tight in Palo Alto, this article suggests that people are just now being squeezed out of the rental and, or buying market for housing here. This has been the case for many years, and countless people have been unable to afford housing in Palo Alto. This is also the case in San Francisco, where housing is not only limited, but is also very expensive. The reality of living in an area with a strong job market, great environment, allegedly good schools, and all the other amenities these two communities offer is that a lot of people want to live in them. To pretend this is something new, and is the fault of a few successful companies is not only inaccurate, but it erases from the equation all of the hard working people who managed to get a foothold in either place, or who have long since had to go elsewhere.


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Posted by Boo Hoo
a resident of Downtown North
on May 1, 2014 at 10:27 am

While I agree with M"My Take" I think the individual the article has chosen to use (Bauman) is poor. he is a GRADUATE STUDENT. yes, wouldn't it be lovely to live in a 3 bedroom house as a STUDENT. He forgets that when he graduates and works for some dot com company he will be joining precisely the same group of people who are squeezing him out of the market now. I can tell yo know know Professionals (i.e. those that WORK at hospitals and companies etc) who squeeze in as couple into studios and plenty of families of 4 that live in two bedroom houses and apartments. As a STUDENT he should take this up with his school (Stanford) to make enough housing on campus


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Posted by Impossible Dream
a resident of Evergreen Park
on May 1, 2014 at 10:54 am

My son and his wife looked into renting a 2 bedroom, 2 bath house in Palo Alto last fall. The ones they found were renting for about $5000/mo. That would have been more than half their combined take-home pay. They "settled" for a three bedroom, 2-1/2 bath house with a large back yard and a large garage in Sunnyvale. The rent is "only" $3000/month


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Posted by abnormal utopia
a resident of Midtown
on May 1, 2014 at 11:32 am

Many of our friends have kids in PAUSD and are having to move and disrupt their lives and those of their kids because buying has stayed out of reach for people without stock options, overseas money or a trust fund. These are double income, university educated families being pushed out by greedy landlords who inherited grandma's house and are increasing rents by 20% or more each year.

I'm all for market economy, but it is still speaks sadly that the only families gaining entry to our schools are either tech workers, overseas investors, trust fund families and a few who have been here for decades, but feel increasingly priced out of every other aspect of living here.

I also agree the guy in the article is a non-sympathetic example. He states his life is perfect, all except for not yet finding an amazing home. I feel far more for the woman who has to commute to her respectable job and for the thousands of others in her shoes.


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Posted by Eric F
a resident of Downtown North
on May 1, 2014 at 11:53 am

What we're seeing here is a consequence of the massive buildout of office space in Palo Alto over the last five years, much of it involving "PC" and other city-approved zoning exemptions. Of the last two decades' nonresidential area increase in Palo Alto, almost half came in 2012 and 2013.

As a result, Palo Alto now has the highest jobs-housing imbalance in Santa Clara county. Skyrocketing local rents are a direct result. Anybody with a four-function calculator should have been able to see this coming.

(Stanford expansion next door has undoubtedly also contributed.)


 +   Like this comment
Posted by PA renter
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 12:17 pm

The other odd thing about the market is the wild inconsistency -- some longer term renters have had landlords of long term family homes, who value stable long term income with good tenants and so have (comparably) reasonable rates, while newer investment purchasers are content to continue driving the price upward and upward even if it means tenant turnover and empty periods. If you get thrown from the former situation into the latter for whatever reason, it can be the end of living here. Occasionally, of course, the long term family owned houses decide to jump the rent way up to match the new market too.

Like many renters, we moved here in the past decade from out of state for work and settled in PA for the schools. We have owned a home elsewhere, but not in a place that increased in value to pay a massive cash-out at sale, nor did we win the stock option lottery. With just plain old good professional jobs with good incomes, buying a home is well out of reach unless we go the extremely-long-commute route, and that kills family life.

I was hoping to get my kids through the school system here, and now they have been here long enough to be deeply settled (and we are very integrated into the school and donate, volunteer, etc.), but we are likely to be priced out very soon if it keeps going the way it's going. Oh well.


 +   Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 12:22 pm

Note the 1985 date crossed off and 2014 inserted (after some other dates in between). This is old news. What is new news is the idea that people deserve to live in a high priced area and that government should ruin the quality of life and sacrifice the natural environment in order to make everyone who already lives there pay for it.

When my spouse and I moved here and couldn't afford Palo Alto, we both lived in areas and under conditions that I would be glossing over to call "paying our dues". The ultimate goal wasn't to live in Palo Alto, believe it or not, it's not the center of the universe and there are nice communities all around us. We continue to sacrifice mightily to live here, but we recognize that the trade we are making is stability and investment versus having any money at all leftover after paying for the high-priced hovel. Renting in this area has ALWAYS been difficult.

As recently as 8 years ago, we lived in a really nice apartment complex in Sunnyvale, immaculate, well-designed, high ceilings, individual laundry room, included alarm system, lots of storage, balconies, nice pool, play area, and an easy drive to Palo Alto on Central Expwy. The rent was astonishingly low compared to rents in Palo Alto and Mountain View.

Eric F is right. And right now, it can be harder to get across Palo Alto than to get to some of those massive office spaces from elsewhere.

@abnormal utopia - You're repeating an old refrain. If you want to own a home in an expensive area, you find something in the area, maybe not where you want, buy in (probably fix it up), and move up over time. That's how we're barely affording to live in PA. Actually, if it hadn't been for leaving the area/market for awhile, we would be able to live here without paying much at all. That's the reality of wanting to live in an expensive place. I'm sure we would all like to be driving energy efficient Tesla's, too, and it would mean fewer emissions, but that's life.


 +   Like this comment
Posted by Paly Native
a resident of Palo Alto High School
on May 1, 2014 at 12:36 pm

I grew up here, lived out of state for two decades, and moved back to sticker/diversity shock in the early 2000s. I know of too many families who are housepoor. Is it really worth it?! Sure, this is a convenient place in which to live, the schools are "good", but people, it's not nirvana. Our house is minuscule compared to what we can buy out-of-state or out of Silicon Valley. Academics are rigorous in middle/high school because only nerds can afford to live here. Yes, we love it here, but if we didn't have enough leftover money to enjoy our lifestyle, we would move out of Palo Alto.

Again, I feel very fortunate to live here, but people need to be practical and not spend all their money on their mortgages or rent. And rent just goes to a landlord - how practical is that? What about retirement savings? Get real - you can be happy elsewhere!


 +   Like this comment
Posted by Pixie
a resident of another community
on May 1, 2014 at 1:30 pm

We moved out of our house in Palo Alto five years ago because it just became too expensive to stay there. We moved to a mobile home park in Mountain View, and are quite happy here. We rent the land for $1,000/month, and have a two bedroom, two bathroom home with dining area and large living room. Luckily, we were able to send our sons through the PAUSD before it became prohibitive to keep living in Palo Alto. While I scoffed at the idea of living in a mobile home park, I now enjoy life here. New friends, no yard to keep up, and no $3,000/month mortgage! I am glad we moved when we did.


 +   Like this comment
Posted by Joe
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 2:02 pm

(Post moved from a duplicate Town Square thread.)
[Post removed.]


 +   Like this comment
Posted by neighbor
a resident of another community
on May 1, 2014 at 2:03 pm

(Post moved from a duplicate Town Square thread.)
[Portion removed.] Without Stanford, and the computer industry it birthed and continues to help develop, your property values might resemble those in San Carlos or San Mateo. Inflated also, but hardly like Palo Alto. Maybe you should take your outrageous house profits and move to community that is not interdependent with Stanford. [Portion removed.]


 +   Like this comment
Posted by randy albin
a resident of Mountain View
on May 1, 2014 at 2:03 pm

(Post moved from a duplicate Town Square thread)

well, isn't this a fine how do you do. why not save up for a down payment? for long-time bay area people this is outrageous. good luck with this. it is needed. - See more at: Web Link


 +   Like this comment
Posted by Mike
a resident of University South
on May 1, 2014 at 2:07 pm

(Post moved from a duplicate Town Square thread.)

Joe says, "Mr. Bauman seems to be talking out of both sides of his mouth..."

How so? Please explain.

He says its hard to find housing he likes and can afford. Many people find that difficult. - See more at: Web Link


 +   Like this comment
Posted by Joe
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 2:07 pm

[Post removed.]


 +   Like this comment
Posted by graduate housing
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 2:08 pm

(Post moved from a duplicate Town Square thread.)

Stanford graduate housing IS great. The problem is that once you graduate (or once you've been a grad student for 5 years w/o graduating) you need to move out. It's only then that reality hits. - See more at: Web Link


 +   Like this comment
Posted by Palo Alto Native
a resident of College Terrace
on May 1, 2014 at 6:39 pm

Important to cap office space developments and the demand they place on housing. Spread the wealth. More silicon valleys in the East Bay, EPA, and outside CA. We can still save Palo Alto from becoming an even worst urban nightmare. We have that choice. Elect a new council majority to freeze developments (office & dense housing) and/ or we continue to use the referendum vote to override the excessive overdevelopment that started in the early 1980s. I own 4 homes in Palo Alto. One would think (out of pure greed) I would want my rents to increase. Not so. Quality of life is being lost for me and my tenants. Too much traffic, pollution , aggressive drivers (stress of high prices) , lack of parking. I rarely go to downtown anymore. I know I can not go back to my beloved town of 1960; but I also know I do not want the development curve to continue to undermine the quality of life here in my hometown. Stanford has done an excellent job adding graduate and faculty housing in the last 15 years. I also recognize we have now become an executive community (like LAH, PV, Woodside and Atherton). Thus, fresh out t of grad school will require another community for at least the first 10 years before moving back to PA or the other communities noted above. Not ideal but reality. I can relate. I use to live in EV too. But that was a pre Silicon Valley era.


 +   Like this comment
Posted by stacey
a resident of Charleston Meadows
on May 1, 2014 at 6:50 pm

[Post removed.]


 +   Like this comment
Posted by Hmmm
a resident of East Palo Alto
on May 1, 2014 at 8:49 pm

Hmmm is a registered user.

My Take - yes, this has been a problem for a long time, but it's looking like this is the worst yet, not just due to housing costs overall, but lack of space to build out. That's the thing w/being on a peninsula, like Palo Alto, or the edge of an ocean and bay, like SF.

The other really crappy part is that renters in PA are treated like 3rd class citizens, and they always have been, despite some of the good landlords.

My suggestion to long term tenants in Palo Alto - organize and assess your rights. You have strong economic oomph, so it's smart to share information and understand your rights.


 +   Like this comment
Posted by My Take
a resident of South of Midtown
on May 1, 2014 at 8:49 pm

The primary source of the intolerable market pressure on Palo Alto housing is the lack of funding for California schools. For information on why this is, and what you can do right now to help relieve the pressure, see: Web Link, and Web Link Both sites have information and petitions you can sign right now to help restore funding to schools all over California. Once all students in the state have access to a better education, Palo Alto will lose its somewhat dubious status as the ultimate in education for people all over the world. Become informed, sign the petitions and join the effort to make all California schools better. It will make Palo Alto better as the result. And by the way, let's all stop pretending our schools are rolling in greenbacks. We have a lot of tutors, a lot of parent volunteers and a big PIE every year, not to mention school funding bond measures we've voted for ourselves. Without these, we'd be in the same tank as many other districts around the state. Do you have the courage to raise the bar and risk our special status? I do.


 +   Like this comment
Posted by Janet
a resident of Midtown
on May 1, 2014 at 9:19 pm

"The primary source of the intolerable market pressure on Palo Alto housing is the lack of funding for California schools"

I am not too sure that is the reason, but if you think so, the obvious solution is educational vouchers, throughout the state.


 +   Like this comment
Posted by My Take
a resident of South of Midtown
on May 1, 2014 at 9:39 pm

No Janet, a voucher for not enough funding is still a voucher for not enough funding. Please take my advice and educate yourself about California school funding. Hint, we're pretty much dead last in both funding and outcomes. It's not that difficult to understand, but a person has to be willing to do more than issue a platitude like yours.


 +   Like this comment
Posted by PA renter
a resident of Another Palo Alto neighborhood
on May 1, 2014 at 9:47 pm

Not sure whether it's lack of funding specifically, but it's certainly at least the perception of generally poor school quality in California. Anecdotally, the vast majority of fellow renters I meet are not here because they are chasing a prestigious address or because they think PA is so much better than the surrounding communities -- they are here for the schools.

At some point people may rethink that, but it doesn't seem to have happened yet.


 +   Like this comment
Posted by Janet
a resident of Midtown
on May 1, 2014 at 9:59 pm

"a voucher for not enough funding is still a voucher for not enough funding"

Let the parents decide if the funding is enough, for their own choices for their own kids. It should not be up to you.


 +   Like this comment
Posted by neighbor
a resident of another community
on May 1, 2014 at 10:16 pm

Editor -- you had this story in 2 places. I, and others, were in a discussion on only one but then the story appeared on Town Square as well.


 +   Like this comment
Posted by OPar
a resident of Duveneck/St. Francis
on May 2, 2014 at 1:03 am

Vouchers won't do a thing to fix the inequities in funding across the state. Nor will private schools, which can pick and choose students, compensate for underfunded public schools. Indeed, vouchers, which transfer public money to private hands are a boondoggle. The vouchers will not help truly poor families because private-school tuition is much higher than any voucher would be. Castilleja, for example, is around $30K a year--actually, I think it's more.

Voters in California, in case you don't remember, voted down vouchers several years ago. Public money should pay for public schools, not private ones.

I, for one, strongly support a revision of Proposition 13 that ups the share of property taxes paid by commercial real-estate owners. They've had a free ride for nearly 40 years at everyone else's expense.


 +   Like this comment
Posted by RussianMom
a resident of Old Palo Alto
on May 2, 2014 at 9:52 am

Friends are coming for a year from out of state and were searching for a rental. Plenty of 1-2 bedroom apartments in $2600-$3500 range. House rental is a luxury, that comes with a price. Can't afford it, can't have it. Why such sense of entitlement?


 +   Like this comment
Posted by Hmmm
a resident of East Palo Alto
on May 2, 2014 at 11:39 am

Hmmm is a registered user.

Opar nailed it again!


 +   Like this comment
Posted by White Collar Wage Slave
a resident of Walter Hays School
on May 2, 2014 at 3:10 pm

What is sad about all the landlords and high rents is that Palo Alto is being denied much property tax income. Even though I have always rented in Palo Alto, I would like to see if there was a way that we could implement a renters' tax. As of now, landlords have been enjoying all the fruits from the increase in rents, while the property tax base has not been expanding. Also, renters, if they have children, will use more resources than what the property tax being paid by the landlord would cover.

As an example, imagine a house in Palo Alto that currently has an assessed value of $200,000, so it is paying $2,000 a year in property tax. If the landlord were to sell the house, he/she could sell for $1,500,000, so the property tax would rise to $15,000. In essence, Palo Alto is being denied $13,000 a year in property tax because the landlord chooses to hold onto the property instead of selling it. The lack of sales velocity in the Palo Alto home market has kept property taxes lower than they otherwise would be.

Let's say the landlord is renting the house for $6,000 a month. The landlord can choose whatever rent he/she wants, and has chosen $6,000. In essence, the landlord has just given us what he/she believes the assessed value of the house is. If someone else were to own the house, and we converted the $6,000/month into a mortgage payment, we could say that the landlord has assessed the value of the house at $1.25 million. A $6,000 monthly mortgage payment on a 30-year mortgage with a 6% interest rate yields a $1 million present value, then divide by 0.8 to assume that you would also have put down a 20% deposit, leading to a "purchase" price of $1.25 million.

So, from an actual assessed value of $200,000, we get a calculated assessed value of $1.25 million, and Palo Alto gets an additional $10,500 in property tax. A landlord would pay the higher of the actual property tax or the calculated property tax each year.

Some other points:

1) This system would only apply to actual rental properties. Owner-occupied homes would not be subject to this assessment. We could cross-reference the names on utility bills against the names in the property databases to determine what properties are owner-occupied and which ones are not.
2) As a renter, I recognize that this may increase my rents, but then again, it may not. Rental prices are based on both what landlords want to receive and what renters can pay. While the additional cost of the calculated assessed value will be borne by the landlord and the landlord will certainly pass that cost on to the renter, I doubt the entire additional cost could be passed onto the renter. In my example above, could the landlord raise that $6,000 rent to $7,000 (to cover the additional property tax)? Likely not.
3) The chance of this renters' tax passing is probably nil. I understand that more than 50% of the residents of Palo Alto are renters, so there must be quite a number of landlords who would be against this. And I don't know if renters would want to vote themselves in a tax.
4) Then again, this can be a real test case of Palo Altans' liberal values. Are we willing to tax ourselves more? In actuality, my plan is one of tax fairness, more closely equalizing the property tax between housing that has new occupants (it just so happens that one set of occupants rents and the other set owns).
5) Also, as many renters tend to be families with children who want to attend Palo Alto schools but cannot save up the money to buy a house, my plan would spread the burden of supporting our schools more equally onto the properties that are supplying much of the burden on our schools.


 +   Like this comment
Posted by palymom
a resident of Community Center
on May 3, 2014 at 9:09 am

My last child graduates from Paly soon. Sad to leave, but the place on University I rented when I came here 11 years ago now goes for $1100 MORE a month. The crowding and techie feel Palo Alto now has just isn't this public school teacher's thing. So I'm moving an hour south to a two bedroom at $1600. No crowds, fewer techies, no Google buses.


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