Here’s why there aren’t enough Bay Area homes to buy
The Bay Area has one of the worst records in the country for building enough housing for its booming workforce, putting the region atop another national ranking for housing misery.
Between 2010 and 2020, the core Bay Area added roughly 6 jobs for every new home or apartment, one of the worst ratios in the country, according to a new analysis of census data by Apartment List.
The only regions with a worse ratio of job creation to housing construction were rust-belt cities — including Detroit, Cleveland, Toledo and Dayton, Ohio — where existing homes provided ample living opportunities to rebounding midwestern economies.
A healthy market should be adding a new home for every job or two, said Apartment List chief economist Igor Popov. “We’re really not building enough to keep up with job creation,” he said. “It’s a sad song we’ve sung before, but we freshen it up every once in a while.”
The analysis suggests a deeper Bay Area housing crunch, where rising prices for homes and apartments push more residents out of the region. With few homes on the market and a strong tech economy, Bay Area home prices have already hit record levels, topping a $1 million median price for a single family home in March and April.
Although rents remain among the highest in the country, they have fallen during the pandemic, as professionals quit higher-end properties and choose cheaper, more spacious accommodations to work remotely. The outward migration has pushed Bay Area residents into less expensive regions of California, usually outer suburbs and the greater Sacramento area.
The California housing crisis has been a boon to western states, Popov said. The top five fastest-building U.S. cities during the last decade were places popular with California transplants: Provo, Utah (30% increase in homes and apartments), Austin, Texas (29.4% increase), Raleigh, N.C. (23.5%), Boise, Idaho (22.5%), and Houston (20%), according to Apartment List.
Home prices in April jumped 27% in Idaho and 18% in Utah from the previous year, according to CoreLogic. California prices grew 13%, the same as the national median.
Between 2010 and 2020, the San Jose metro area built 48,000 new homes and apartments, increasing its housing stock by 7%, according to Apartment List. At the same time, the robust South Bay economy added 280,000 jobs. About 92,600 new homes were built in San Francisco and the East Bay, a 5.3% increase. That region added 546,000 jobs, flooding more people and families into an already tight housing market.
Surveys of renters find that affordable home ownership is a top concern for residents when choosing a region, Popov said.
The imbalance between Bay Area jobs and housing might be getting worse, by some standards. A study by the Bay Area chapter of the Building Industry Association found the region grew by 4.3 jobs for every new housing unit in the shorter period between 2011 and 2017.
The pandemic has also slowed construction across the Bay Area. Residential permits for new homes plummeted by one-quarter between 2019 and 2020. Pandemic safety measures slowed construction schedules, and higher labor and material costs drove up prices by about 20%, builders said. They worry the pandemic could have a ripple affect and slow down projects in future years, as well.
Paul Getty, CEO of San Jose real estate firm First Guardian Group, said investors are continuing to take advantage of the sellers’ market and leave the Bay Area. Many of his clients are small landlords eager to cash-in on their investment.
Getty is seeing more single family home rentals being converted into owner-occupied family homes in recent months, further reducing the supply of affordable rental housing. He said the region is clearly not addressing its housing needs, but added, “I’m not one to write off the Bay Area.”