Arcata’s Community Development Director David Loya explains his version of how single-family houses will become available for sale. This is from a recording taken at the Creamery District meeting on May 16, 2023.

It’s simple, according to David Loya. As more apartments get built at higher densities, renters will have a choice. He presents the thinking of a new resident of Arcata, in the form of a student:  “If you’re a student who’s just come to this community,” he said, “and you’re weighing the options of ‘Do I move into a brand new Kramer Investments rental property? Do I move into a new high-density development that got built here in the Creamery area, in the Gateway area?'” Or, David Loya continues, does that student move into an older house that perhaps hasn’t been maintained so well. 

David Loya believes that the student is going to choose the apartment. And then the single-family rental homes will start having vacancies. And then the investor-owner of that rental home will not be getting a good return on his or her investment. And then the owner will sell, and that house will be available for someone to buy.

What’s wrong with that picture? Lots.

1. His reasoning is based on there being an increasing supply of places to live — and a relatively constant number of people who are looking for a place to rent. But that’s not reality. Here in Arcata there already is more demand for housing than there is a supply of housing. He talks about the supply of housing increasing — and ignores:   
   a) The demand is already greater than the supply.
   b) The demand will continue to grow, and will be growing at a rate that is faster than the supply is increasing.
   c) While building more apartments can be considered a good thing, the basic problem of a housing shortage will be increasing faster than apartments can be built.
2. David Loya portrays a scenario involving what he labels as students. Students come and go, and might stay in Arcata for a year or two. Some do stay longer, and some have their homes here. In the beginning, a new apartment might be what they want. For the longer-term residents of Arcata, I’ll propose that they want houses. There will always be a larger demand for houses than there is for apartments.
3. At what point will there start being single-family home vacancies that David Loya describes — or even a lowering of rents? After 500 apartments are built?  After 1,000? After 2,000? 
   I propose that there will not ever be vacancies in single-family houses for rent, regardless of how many apartments are built.

It might take 20 years before we see 500 or 1,000 apartments built. There is already a demand that would immediately fill 1,000 apartments today — right now — if they were  all of a sudden magically instantly available.

Construction of new houses that are intended for the rental market can be viewed as non-existent — as zero. The demand for renting houses is strong, and will get stronger. With the Cal Poly expansion, it’s not just students who’ll be looking for a place to live — it’s faculty and support staff too. Vacancies in rental houses are not likely. 

• There are somewhere in the vicinity of 1,900 rental houses in Arcata. (That figure may be off be a few hundred — the difference does not affect the outcome of this logic.)
• There are somewhere around 3,500 apartments.
• Houses have an average of perhaps a little under 3 bedrooms each — so figure around 5,200 – 5,500 bedrooms there.
• Apartments are an estimated average of 1.2 bedrooms, so figure around 4,200 bedrooms there.
• There is already a built-up demand for housing in Arcata. We acknowledge that new people are arriving all the time. The projections from the university show a shortage of somewhere around 5,000 beds as Cal Poly continues to expand.
• There’s also this: If a single-family home that’s been a rental gets removed from being a rental and is sold to a new owner-occupant, that house is no longer on the rental market. And the two or three or four people who rented it and lived there will now need housing. Will they need two apartments? Or another house? When a house is removed from being a rental, the demand for rental houses increases. That’s just the way it is.
  

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Here’s David Loya speaking about Home Ownership as a result of theoretical vacancies in single-family homes

[This is what David Loya said, speaking that the Creamery District meeting, May 16.]

So backing up a little bit, the ownership opportunities — We do have a community benefit for people [that is:  for developers] who are going to provide ownership in their projects. And so right now, at the densities that we allow for Arcata, it’s just not feasible to do a condo. But we think that in the future, it will pencil, you know. So not likely to see a whole lot of that [condos] in the near term. We might see more like —

Question from participant:  But, why? Why?

It’s really expensive to condo a project. But you can see — it’s less expensive to do townhouses. So I do think we’re going see more of those in the near term. So there’s a specific incentive to give us ownership. There’s specific incentives to give us low-income ownership. And there’s, and the other thing is — and this is sort of like, you know, a little bit of hand waving, I’ll acknowledge — but the housing stock, Chris, as you mentioned, we have 30%, around 30%, home-ownership. [Actually about 36-37%.]

Single-family housing stock is largely held up in the investment market, in the rental market. If you look at many of the neighborhoods, low-income — this isn’t so much in Sunnybrae, but, you know, near the university, you know, all the way out to the Bottoms — you see high rental rates in those areas. And so, and then, to further this narrative, many of those units really haven’t been maintained. I mean, people are living in these really horrible conditions, because the owners know that they’re going to get a fresh crop of students every year. So they don’t have to do anything.

So part of the transition here is if you’re a student who’s just come to this community, and you’re weighing the options of “Do I move into a brand new Kramer Investments rental property, or one [an apartment] that’s been maintained over the years? Do I move into a new high-density development that got built here in the Creamery area, in the Gateway area?” 

Or do I move into one of these houses that, you know, like my first house, when I moved here to Arcata, actually grows mushrooms out of the walls. If you’ve got options, you’re going to choose the other.

And then these investment properties, when they’re not getting seven percent return on their investment year over, you know, with the 7% increase in rental rates, year over year over year. And instead they’re having vacancies — they’re going to start thinking about selling those properties. And the idea is that, you know, those become a single-family homes potentially when there’s less of a market for an investment. That’s a long view, and that’s not going to happen overnight. That’s going to start happening as we start getting into higher densities [of new apartments].