The San Francisco Bay Area has recently seen a new population surge on the heels of surging tech sector job growth. With the lack of new housing construction to keep up with the pace, housing affordability has plummeted and the Bay Area has renewed its reputation as the U.S.’s least affordable major metro area.
According to a recent article put out by KQED, a new report (from the National Low Income Housing Coalition) indicates that to afford a market-rate 1-bedroom apartment in San Francisco, you need to earn $29.83 an hour, or $62,046 annually. Add a 2nd bedroom and your household hourly wage needs to hit $37.62 ($78,249 annually), the highest for any metro region in the country.
And it’s not much better for other parts of the Bay Area. San Mateo, Santa Clara and Marin join San Francisco atop the charts as 4 of the 6 most expensive counties in America. Oakland-Fremont, Santa Cruz-Watsonville and San Jose-Sunnyvale-Santa Clara join San Francisco in the top 10 most expensive metro regions.
According to data from 2010 to 2012 released by the U.S. Census Bureau, San Francisco has the highest median rent among the nation’s largest cities, beating New York handily. The census information comes at a time of heightened concerns in San Francisco about home prices, rental prices and the overall cost of living in The City. A survey in late September/2013 showed that 50% of those polled cited the affordability of living in The City as their No. 1 concern, above such things as public transportation and crime.
The economic recovery here in the Bay Area has also aroused concern about the new, young, highly skilled workers coming to The City and paying more for housing, potentially displacing lower-income residents through increased rents and evictions. If the peninsula suburbs and the city can’t make room for more homes over the next 5-10 years, the spillovers will continue into Oakland and potentially accelerate displacement of the EastBay’s historic black communities, which have already dealt with decades of disinvestment and redlining.
While we can thank social movements (to protect the environment and history of San Francisco) for preserving so much of the land surrounding San Francisco and the city’s beautiful Victorians, one side effect is that the city has added an average of just 1,500 units per year for the last 20 years. The US Census estimates that the city’s population grew by 32,000 people from 2010 to 2013 alone, but only added 4,776 housing units during that period.
With the local economy adding jobs the past 3 years and job growth continuing to rise, the resulting lack of housing has driven San Francisco (and Bay Area) rent (and home sale) prices up to an all time high. San Francisco’s current median rental rate for a 1-Br apartment is $2,775 and $3,450 for a 2-Bedroom apartment. Between Q1 2013 and Q1 2014, San Francisco median rents rose 9% and the increase between April 2013 and April 2014 is estimated to be a whopping 17%. Oakland and San Jose median rents have risen by nearly the same amount. Bay Area Home (Sale) prices have also risen by more than 35% the past the 3 years and are continuing to rise.
So, what are the average wage earners to do? Those fortunate enough to find such opportunities are renting rooms in apartments and/or houses in the city. Others are moving to outlying parts of the bay area (like Concord, Felton, Gilroy, etc). Others, especially families, have been moving out of the bay area, to places like Sacramento and Tracy, making tedious 4-hour round trip work commutes into Silicon Valley.
Further increases to minimum wage has been proposed, but I don’t think this is an ultimate solution. An increase in minimum wage will drive up the price of goods and services, leaving only a marginal cost of living benefit for minimum wage earners. For now, an obvious solution would be to greatly increase new housing construction, especially of apartments and low-income housing units. Converting more Commercial and Industrial land to Residential and Re-zoning building sites to allow for more high rises would open up the space to do so.
San Francisco’s housing affordability crisis has pushed protesters into the street and low-income earners out of their homes. It has also inspired a flurry of activity at City Hall, where politicians have been touting proposals aimed at fixing housing problems and easing the city’s simmering class tensions. Mayor Lee’s latest effort calls for cutting red tape in the cumbersome review process for new projects and giving priority to proposals that include units for lower-income residents.
Mayor Lee gets much of the credit for San Francisco’s surging economy because of his pro-business policies, including overhauling the city’s business tax and offering tax breaks that have benefited tech firms in particular. But he also gets some of the blame for a spike in evictions in a city where the rents are the highest in the country and the median home price has hit $1 million.
The affordability crisis has fueled a backlash against the tech sector that Lee helped grow. It has resulted in the displacement of some nonprofits, forced some longtime residents from their homes, and left many residents uncertain about their ability to afford housing in the future. And the housing problem isn’t just the result of the tech boom. Other causes include years of organized opposition to development, the economic collapse in 2008, and the quirk of geography that makes San Francisco so beautiful and confines it to just 49 square miles.
Lee will propose a 7-point plan that includes building housing over existing city facilities and doubling the amount of down-payment assistance that the city will provide to middle-income home buyers, up to $200,000. He wants 5,000 new homes built or rehabilitated each year over the next 6 years. In 2011, only 348 housing units were completed. In 2009, a banner year for city construction, the number was 3,500.
With the city’s economy growing, construction is already speeding up. This year, more than 10,000 housing units are under construction or are holding building permits and are ready to be built. Lee’s administration is reporting that another 12,000 units are in the permitting pipeline, with an additional 25,000 part of already adopted development plans.
Some of the new market-rate homes, like the townhomes being built at the Hunters Point Shipyard, or some of the 1,600 units planned for the former Schlage Lock site in VisitacionValley, will be affordable to the middle class by virtue of their far-flung location. A 2-bedroom townhome at the Shipyard, for example, will go on the market for less than $600,000.
But Lee feels that building new homes isn’t enough and the city needs to preserve its existing housing, particularly rent-controlled apartments, which are often occupied by long-term tenants. A recent report by the city controller found that the city has lost rent-controlled units at least 3 years in a row, including more than 1,000 units in the past 2 years. Those apartments have been converted for sale, taken off the rental market by an owner or replaced with new construction not subject to rent control. Others say that the number is higher.
To help preserve rent-controlled apartments, Lee’s plan includes an effort to amend the Ellis Act to provide greater protections for tenants; protection from real estate speculators who buy apartment buildings, kick out the tenants and convert the units for sale, a practice that is allowed under the state’s Ellis Act law.
Another part of his plan is a new program to offer financial incentives such as no-interest loans to housing non-profits like the Tenderloin Neighborhood Development Corp. or ChinatownCommunityDevelopmentCenter. Those loans would be used to buy smaller buildings, with between 5 and 15 units, so that the tenants could remain in place.
Such non-profits typically focus on building and operating larger buildings, but the smaller buildings are the ones speculators/investors most frequently “attack”. Theoretically, the program would enable nonprofits to buy up buildings like the one that elderly renters Poon Heung Lee, his wife, Gum Gum Lee, and their mentally disabled daughter were evicted from in October. They’d lived there for 34 years. The Lees became the public face of the housing problem.
The mayor’s housing plan includes the construction or rehabilitation of 30,000 housing units over the next 6 years. One-third of those units are intended to be affordable to residents with low incomes – those making less than 80% of the median, or up to $77,700 for a family of 4 – and moderate incomes, those making less than 120% of the median, or $116,500 for a family of 4. Another 20% would be affordable to middle-class people making up to 150% of the median, so in total, more than half of the homes would be affordable to people making up to $145,650 for a family of 4.
In light of the current housing crisis, San Francisco has 2 choices to consider. The first is to disallow any expansion of housing, keeping the existing mix of homes and small apartments. This would allow The City to retain its current physical structure and not grow to a giant metropolis. But then the cost of housing would continue to increase substantially and The City would become a high priced country club void of the economic, cultural, and sociological diversity that had made it so special.
The other alternative is to re-zone and allow taller apartment buildings. This would keep housing prices under control, but at the cost of dramatically increasing the number of people in the city and turning many streets into the look and feel of a typical giant metropolis. With the increase in people, San Francisco would turn from the unique, special city that it is into yet another generic gigantic city that is nothing special.
To me, San Francisco is great and unique for its spirit of inclusion and tolerance for people of all walks of life. The current housing crisis has put a strain on that spirit and I hope that the Mayor’s housing plan will help to mitigate the current housing crisis, while maintaining San Francisco’s uniquely free spirit and natural beauty.
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