Slim pickings in Morgan Hill rental market

Apartments for rent are few and far between within the Morgan Hill city limits, and those that do become available cost an arm and a leg as an overwhelming demand for a limited number of rental units drives up monthly payments.
“The rental market in Morgan Hill is a problem and it’s a big deal,” said Morgan Hill Mayor Pro Tem Larry Carr. “The City Council is very aware of it.”
Even with 73 percent of Morgan Hill’s apartment complexes designated affordable housing—which allows for lower rent prices for qualifying families based on household income—the ability to find a unit that just opened has turned into quite the adventure. At some places, the waiting lists have grown so long they are now closed.
As for the rest of the in-town apartment rentals that are market-rate—which will run a renter at least $1,800 per month for a one-bedroom, one-bath unit—the availability is just as bare.
At the next level, those with comfortable enough incomes to look into renting a house, listings remain limited and monthly rental rates have begun to eclipse $3,000 for a three-bedroom or four-bedroom home.
“It’s tough on the renters right now,” said Brad Leach, president of Morgan Hill-based Prospectors Property Management. “There are not too many homes available for them and we’re getting premium rental prices.”
Leach, however, noted that Morgan Hill rents are not even close to similar units in towns such as Saratoga, Palo Alto, Campbell or Cupertino.
“For the same amount of rent to have a single family home here, although (the rent) is high, for the same price you’re looking at an apartment or townhouse in the San Jose Area,” Leach added.
Prospectors, which Leach has owned for the last 15 years, manages about 400 residential units throughout South County.
Scarcity of affordable rentals alarming
Morgan Hill does not have any rental control policies in place, except for a seldom used mobile home ordinance that prevents steep increases in rent, according to Assistant City Manager Leslie Little. At income-restricted (affordable) apartment complexes, which make up nearly three-quarters of the rental market in Morgan Hill, rents are kept under control.
Little touted the city’s partnership with Eden Housing, which purchased South County Housing Authority in January 2014.
However, Eden Housing has no available units and has closed the waiting lists at all eight of its Morgan Hill housing sites—totaling 285 affordable apartments—according to Jennifer Reed, Eden’s Director of Fund Development and Public Relations.
“Morgan Hill is not unique for us; we have long waiting lists everywhere, although there is more demand in some areas,” said Reed of Eden Housing’s 1.15% vacancy rate and more than 20,000 people on waiting lists across 8,500 units the company owns throughout the Bay Area.
“We are always looking to build new housing but don’t have anything specific in the works in Morgan Hill right now,“ Reed added.
Other income-restricted complexes such as Terracina at Morgan Hill and Murphy Ranch have no units currently available. At Murphy Ranch, which has 100 affordable and colorful townhouses on nearly 7.2 acres off Dunne Avenue , the annual household income can’t exceed $68,340.
“I think you do find that all of our affordable housing apartments have huge waiting lists,” Little said. “I get calls all the time from people trying to find places to live.”
Even market-rate complexes are at a minimum in and around town, and the city is “trying to respond to it,” Carr added. “Under the market conditions….it’s not easy to do.”
Carr said the city is working with a developer to build a 200-unit rental facility on Butterfield Boulevard at Jarvis Drive. That project, however, still needs permits, council approval and a General Plan zoning amendment that will allow housing there.
“It has to be done in a way that they can get a lot of housing allocations in a one-year or two-year cycle so they can build it all at once,” Carr explained.
Market-rate rentals continue to rise
Leach attributed the high demand and low availability to an increased number of people living in the area, including tech professionals drawn to Silicon Valley. A lot of these new residents rent at first to “test the waters” before committing to a new home purchase, adding to the demand and pushing up the rental prices, Leach explained.
Little described the local renter demographics as “a big mix” of young professionals who can’t afford to purchase a house, people who rent by choice, senior citizens (Morgan Hill has an array of senior-only complexes), families, couples and empty-nesters. Most units in Morgan Hill are one and two bedrooms, according to Little.
Carr said he regularly gets calls from employers based in the local business parks who are troubled because they can’t find housing for new employees in Morgan Hill.
“Not having a place for people to come and live in town is a problem,” Carr said.
California rents are growing nearly twice as quickly as the national average, according to a review done by San Francisco-based Apartment List. Same unit rents have increased 5.1% over the last year compared to 2.7% nationwide for two-bedroom units, the research concluded.
“We’ve been able to increase (our rent prices) locally, yes. But we’re not in Saratoga or Los Altos Hills where rent can increase 10 (or) 15 percent a pop,” Leach explained.
Morgan Hill has an affordable housing program in place within its Residential Development Control System, Little added. Each housing development that goes up must set aside at least 10 percent of the units for below market rate (BMR) sales.
“We have the largest number of for-sale affordable units anywhere in California per capita,” Little said.
Carr also touted the city’s commitment to affordable housing.
“Of the cities throughout Silicon Valley, Morgan Hill is one of the best when it comes to helping build affordable housing,” Carr said.
However, the Neighborhood Housing Services Silicon Valley, which held local workshops and acted as facilitator for families interested in purchasing BMR homes,, announced it is suspending its services after 20 years of “providing affordable housing solutions.” They had done so in Morgan Hill, Gilroy, San Jose and throughout Silicon Valley.
When a family does find a place to call home, they usually stay put, as is the case at the completely full LaCrosse Village Apartments, located off LaCrosse Drive. The waiting list is between 30 to 40 families, according to Resident Manager Carolyn O’Connell. The southwest Morgan Hill market-rate complex—which prices a 670-square-foot one bedroom, one bath unit between $1,795 and $1,875—is the only local listing on apartments.com so calls have flooded in from prospective renters.
“A lot of people here are staying. They are not moving unless they are buying a home or being transferred from work,” O’Connell said. “I think a lot of people really like our town and want to move out of San Jose.”