Sacramento Emerges as Attractive, Affordable Apartment Alternative to San Francisco
As housing becomes a tough squeeze for consumers today, Sacramento is emerging as an affordable alternative to the San Francisco Bay Area, which continues to attract AI investment.
According to Apartments.com, average rent in Sacramento is $1,579 per month with a 6.5% vacancy rate, compared with $3,611 per month and a 3.6% vacancy rate in San Francisco.
Joshua Ohl, CoStar Group and Apartments.com's senior director of market analytics for the Sacramento area, told GlobeSt.com that Sacramento has served as an affordable outlet for Bay Area residents, particularly after the onset of the pandemic, which granted employees flexibility to balance their home offices through hybrid work arrangements.
Sacramento responded with a 20-year high in apartment development between 2022-24, primarily concentrated in Downtown, North Sacramento and Natomas. The fundamentals have fluctuated in recent years.
At its height, the under-construction pipeline exceeded 6,000 market-rate units in 2022. After driving vacancy to a 15-year high, rent growth slowed to its lowest level during that period, followed by a similar easing of development.
"As a result, the under-construction pipeline has since fallen to its lowest level in over a decade," Ohl said.
While these new units set a benchmark for rents in the Sacramento region – coming in at a 25% premium compared to average asking rents in older Sacramento inventory – they are still almost $1,500 per month cheaper than average asking rents across all of San Francisco.
"As Sacramento's demand stabilizes, landlords should have an opportunity to begin raising rents again in line with historical norms," Ohl said.
"While growth in the AI sector could provide an economic tailwind to the region, Sacramento's status as an affordable outlet for Bay Area residents should remain secure."
CoStar Group reported that Sacramento's population grew 2.2% over the past five years, while California's overall population declined 0.5%.
With apartment supply expected to become more measured in 2026 and 2027, Apartments.com expects both occupancy and rent growth to increase.
Source: GlobeSt/ALM