Overview
The San Francisco Bay Area’s economy has benefited greatly from the tech boom, but the influx of tech companies and their high-income employees has led to a housing shortage and a lack of affordable housing stock. After the great recession, the city’s tech economy bounced back more quickly than construction did, which made it even more difficult to find affordable housing. In 2010, only 300 new housing units were permitted (State of the Cities Data System, 2017); however, by 2011, over 36,000 new jobs were added back into the city (Lamb, 2013). As a result of the pressure placed on the housing market by new higher-income residents, housing affordable at lower and middle-income levels is especially difficult to find. The median home price in the Bay Area rose to an all-time high of $820,000 in 2018 (Pender 2018), while the median monthly rent for a two-bedroom apartment in San Francisco was $3,103 (Apartment List, 2018). San Francisco’s 2017 median income $103,801, neither of these options are likely to be affordable (Thadani, 2017).
The San Francisco Bay Area’s economy has benefited greatly from the tech boom, but the influx of tech companies and their high-income employees has led to a housing shortage and a lack of affordable housing stock. After the great recession, the city’s tech economy bounced back more quickly than construction did, which made it even more difficult to find affordable housing. In 2010, only 300 new housing units were permitted (State of the Cities Data System, 2017); however, by 2011, over 36,000 new jobs were added back into the city (Lamb, 2013). As a result of the pressure placed on the housing market by new higher-income residents, housing affordable at lower and middle-income levels is especially difficult to find. The median home price in the Bay Area rose to an all-time high of $820,000 in 2018 (Pender 2018), while the median monthly rent for a two-bedroom apartment in San Francisco was $3,103 (Apartment List, 2018). San Francisco’s 2017 median income $103,801, neither of these options are likely to be affordable (Thadani, 2017).
While San Francisco’s affordability crisis has many causes, they generally fall into one of two categories: geography-related or regulation-based. Although the crisis has been exacerbated in recent years, housing has always been in high demand in San Francisco due to its geographic limitations (Barton, 2011). Development in the Bay Area is constrained by its coastal and mountainous location, and outward expansion was essentially halted altogether by the year 2000 (Barton, 2011; Romem, 2016). This lack of expansion limits new construction to more expensive infill development and contributes to chronically high land values (Romem, 2016). Housing prices are also particularly high due to the area’s stringent regulatory policies. The city of San Francisco is predominantly zoned for low densities, heavily restricting the areas where more affordable multi-family units can be built (Hogan, 2014). Another challenge facing developers is the region’s strict interpretation of the California Environmental Quality Act (CEQA). The extensive reviews required add 18 months to development on average, and the process can easily be stalled to discourage developers (Hogan, 2014).
While San Francisco’s affordability crisis has many causes, they generally fall into one of two categories: geography-related or regulation-based. Although the crisis has been exacerbated in recent years, housing has always been in high demand in San Francisco due to its geographic limitations (Barton, 2011). Development in the Bay Area is constrained by its coastal and mountainous location, and outward expansion was essentially halted altogether by the year 2000 (Barton, 2011; Romem, 2016). This lack of expansion limits new construction to more expensive infill development and contributes to chronically high land values (Romem, 2016). Housing prices are also particularly high due to the area’s stringent regulatory policies. The city of San Francisco is predominantly zoned for low densities, heavily restricting the areas where more affordable multi-family units can be built (Hogan, 2014). Another challenge facing developers is the region’s strict interpretation of the California Environmental Quality Act (CEQA). The extensive reviews required add 18 months to development on average, and the process can easily be stalled to discourage developers (Hogan, 2014).
The lack of affordable housing stock in the Bay Area has had serious repercussions for residents and the economy. As previously mentioned, the Bay Area’s strong tech economy is a contributor to the housing crisis, but the exorbitant prices of land may limit the area’s future economic growth. One recent study found that a lack of housing affordability may lead to slowed employment growth in cities where rents are high enough to discourage the attraction of new businesses and employees (Chakrabarti & Zhang, 2015). This implies that San Francisco’s booming economy could see significantly slowed growth if land prices remain high. Beyond slowing the influx of new occupants, existing residents suffer due to high land rents as well. Many low-income and working-class residents of the Bay Area are being evicted from their homes because they cannot afford their rising rent (Smooke & Ruiz, 2015). Rising land values also affect homeowners: increasing property values lead to higher, often unaffordable, property taxes, and foreclosure is a common trend in many mid- and low-income neighborhoods. Experiencing foreclosure has been found to contribute to anxiety, depression, and violent behavior, and people living in unaffordable areas report high stress levels and low utilization of health resources (Downing, 2016).
The lack of affordable housing stock in the Bay Area has had serious repercussions for residents and the economy. As previously mentioned, the Bay Area’s strong tech economy is a contributor to the housing crisis, but the exorbitant prices of land may limit the area’s future economic growth. One recent study found that a lack of housing affordability may lead to slowed employment growth in cities where rents are high enough to discourage the attraction of new businesses and employees (Chakrabarti & Zhang, 2015). This implies that San Francisco’s booming economy could see significantly slowed growth if land prices remain high. Beyond slowing the influx of new occupants, existing residents suffer due to high land rents as well. Many low-income and working-class residents of the Bay Area are being evicted from their homes because they cannot afford their rising rent (Smooke & Ruiz, 2015). Rising land values also affect homeowners: increasing property values lead to higher, often unaffordable, property taxes, and foreclosure is a common trend in many mid- and low-income neighborhoods. Experiencing foreclosure has been found to contribute to anxiety, depression, and violent behavior, and people living in unaffordable areas report high stress levels and low utilization of health resources (Downing, 2016).