Is the ‘Great American Dream’ of homeownership dead in Santa Barbara?

Venturelli Group September 25, 2014

In the Sept. 18 issue of the Santa Barbara Independent, reporter Tyler Hayden explored the provocative question of renting vs. owning a home in the city and county of Santa Barbara. Claiming there is very little to no room at the inn, due to the rise in monthly rents and dwindling affordable real estate on the market, Hayden sought out to determine what, if anything, might be done in the near future to improve opportunities for renters amidst the rising cost of renting in our world-class pacific paradise. It seems there is a dividing line between the have and have-nots, a monetary bridge to affordability that is stifled by wage earners who are stuck in the center of a battle for decent abodes. Add to this, that classified notices announcing rental openings are snapped up in mere hours. Replenishing the rental market has been troublesome, if not impossible. Hayden writes that a healthy housing market is considered to be healthy with 5 percent vacancy rates. To compare, New York’s Manhattan vacancy rate hovers around 1.8 percent while last April Santa Barbara saw only 0.6 percent. In a city that is comprised of 60 percent renters, this is beyond alarming.

So, then, what has happened to the “Great American Dream” of owning a home with a white picket fence, 2.4 children and a dog in the backyard? With the recession and economic impacts that have had a definite and lasting impression, has that dream all but died? With rental inventory disappearing and rents skyrocketing, where do we invest? Hayden writes “Since World War II, we’re the first generation, all 80 million of us in our twenties or thirties, to be financially worse off than when our parents were starting out. We’ve delayed crossing traditional milestones of adulthood, such as getting married, starting a family, and paying a mortgage. But now, as the economy improves, millennials are beginning to set off on their own in earnest. They’re moving out of their parents’ homes and hoping to live without roommates. This social shift is the biggest factor driving housing demand across the country.” Dawn Dyer with Dyer Sheehan Group, a commercial real estate and consulting firm in Ventura, recently completed its analysis of the South Coast rental market for the 2014 UCSB Economic Forecast Project. Of the Millennials of this generation, she said, “These are critical members of our work force but they often don’t have the desire or capacity to buy. Besides, with the median price of a South Coast property at $1.1 million, how can you possibly save enough?”

Dyer’s survey resulted in a thorough examination of the city’s 2,132 market-rate rentals that includes approximately 21,000 renter-occupied units in the city. Of these figures, 36 percent are one-bedroom units that rent for an average of $1,378 per month. Two-bedroom units make up 39 percent and have a monthly average rent $1,996 while three-bedrooms rent for, $2,740. An average studio will cost $1,114 a month. The kicker? In Santa Barbara the median annual salary is just $36,773. Do the math on that, folks. Echoing the sentiment of Dyer regarding affordability of the market, how can people possibly save enough to enter homeownership when the rental market is so limited in its vacancies? Hayden also wrote that Rob Pearson, director of the city’s Housing Authority, was shocked by Dyer’s UCSB report because the organizations’ mission is to serve low-income families, seniors, and the disabled through Section 8 public housing and other programs. It is a difficult situation to only have an inventory of 3,605 units and a waiting list that has 11,699 applicants. Troubling, indeed.

The xenophobic stigma sometimes attached to renters has started to wane in recent years, advocates also noted, but many homeowners still come out of the woodwork to complain when a new development is proposed nearby, Hayden writes. “A lot of people don’t realize that many renters are young professionals,” said analyst Dawn Dyer. “They are young doctors doing their residencies; they’re police officers, teachers. But if you want to keep them around, you need to provide a variety of different types of housing at different price points.” “A community is a living thing, she summed up. “It’s constantly in change, and if it’s not growing or evolving, it’s moving toward death.” Source: Santa Barbara Independent

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