The San Francisco Bay Area has been facing a severe housing crisis for several years now, exacerbated in part by the runaway success of Silicon Valley’s booming tech industry. The irony has not been lost on residents of the area who attribute the growing homeless problem to a combination of outrageously priced rentals and homes, and excess demand fuelling price hikes. According to San Francisco Curbed, San Francisco rentals have increased 105% above the average, courtesy of recently collected raw data from online rental companies.
Newly released figures from the U.S. Census Bureau vis-a-vis San Francisco and the greater Bay Area, indicates that the median rental price for September 2019 was $3,550, up 0.3% from July, but moderately less year-on-year ($3,650 per month in August 2018). Two-bedroom San Francisco apartments on real estate platform Zumper rent for $4,750 per month. Other platforms for San Francisco rentals including Rent Cafe have median rental prices of $3,706 per month, and at Apartment List of $2,492 per month.
Yet, it is not San Francisco that has the highest single-bedroom rental prices in the Bay Area. Rental prices for single-bedroom apartments are much higher in many other areas. These include San Mateo ($3,569 per month), Redwood City ($2,829 per month), Pleasanton ($2,999), Fremont ($3,038), and San Ramon ($3,075). In San Francisco, the rental price for a single-bedroom apartment is $2,471. Housingwire.com reported that the monthly median rental price for single-bedroom apartments is $1,237, with flat price movements across the top 10 rental markets in the country.
San Francisco rental prices are on the decline. For example, Bay Area properties witnessed decreased rentals with one-bedroom apartment prices down 0.6% at $3,530, and two-bedroom apartments down 1.7% at $4,670. In other markets like San Jose, California and Oakland, California, sluggish price movements have been reported. Zumper’s data shows 1-bedroom apartment prices of $2,500 per month and 2-bedroom apartment prices of $3,000 per month. The National Rent Report pulls information from 1 million active listings across the country and aggregates the data accordingly.
Potential Solutions to the Housing Crisis in the Bay Area
The Mayor of San Jose, California has set up an ambitious agenda vis-a-vis delivering 10,000 affordable homes by 2023. However, the city has only built 946 of these units, with 2,441 under development. An estimated $520 million is needed to meet the goal of delivering 10,000 affordable housing units in San Jose. Between 2010 and 2018, rentals in San Jose have increased by 50%, with two-bedroom units renting at $2,600 per month. Low-income earners typically require significantly more resources in terms of subsidies for housing. In San Jose, the focus is shifting towards residential high-rise buildings for meeting these challenges. A figure of $100 million has been earmarked towards the development of affordable housing in downtown San Jose.
Oakland California is another city in the greater San Francisco Bay Area that faces housing challenges. Fortunately, a combination of public and private sector initiatives is helping to stem the tide of runaway rental prices. California Governor Gavin Newsom has been taken it upon himself to stem the tide. He’s active in the greater Bay Area trying to stabilize the California rental market. He recently signed a bill that prevents sudden rental increases. Such is the severity of the housing problem, that Oakland California has reported a 43% increase in homelessness over the past 2 years. Sudden and/or rising rental prices contribute to the homeless problem in Oakland, but local business leaders like Danny Haber of oWOW are rapidly turning things around. He is the CEO and co-founder of oWOW – a dynamic real estate company which remodels apartment buildings and transforms them into luxury accommodations below market price.
Part of the challenge with the Bay Area housing dilemma is how to keep costs low when excess demand keeps prices high. oWOW is meeting these challenges by adopting a unique solution to the housing crisis – vertically integrated management with small teams that take a hands-on approach to the situation. By using a flexible walls system known as Magic Walls to remodel a set square footage, it is possible to redesign a standard 1 bedroom, 1 bathroom, living room and kitchen unit into a multi-bedroom, multi-bathroom unit with all the luxury accoutrements in tow. These new units are known as MacroUnits. The completely-remodeled units are offered below market price, and they provide work/life apartments for an increasingly remote workforce. Haber commented that the 674 23rd Street project with 24 units was completely leased out within 4 weeks. The tenants include teachers, entrepreneurs, artists, employees at all levels of SMEs, and the like.
Other exciting new developments taking place in and around Oakland include 1919 Market Street, 960 Howard Street, and 316, 12 Street. Such is the fanfare around Haber’s projects – the Oracle of Oakland – that he has been endorsed by several leading public figures such as Elaine Brown (formerly of the Black Panther Party), and Annie Campbell Washington (former vice mayor of Oakland, California). The cost savings generated through oWOW are being passed down the line to renters in the form of lower prices. Not only does this help to reduce the rent burden on overly burdened Californians; it also makes it possible to divert resources to 401(k)s, savings accounts, rainy day funds, and to pay down debt. While Haber’s projects are few in number, they are having an outsized impact on the market, with developers now looking to cater to the ‘middle income earners’ just as much as the well-heeled earners in the greater Bay Area.