Economist Feels Record Rents In Bay Area Could Severely Stunt Economic Growth
SAN FRANCISCO (KCBS) – A new report released by RealFacts, which provides an apartment database and tracks rental market rates, has found that Bay Area apartment rents have reached record levels.
RealFacts said the average rent in the Bay Area for the first quarter of 2014 was $2,043, a nearly 10 percent increase from the same time period in 2013. The report looked at different types of units, including studios, apartments and townhouses.
Among the largest cities in the Bay Area: San Jose had an average rent of $2,066, Oakland at $2,187 and San Francisco at $3,057 during the first quarter this year.
RealFacts said that despite more rental units being built, rents continue to trend upward in the region. Many experts said the main cause is the Bay Area’s ever-improving job market.
Stephen Levy, Director of the Center for Continuing Study of the California Economy in Palo Alto, said the skyrocketing prices are having wide-ranging effects.
“There are two challenges to a hot economy. One is traffic and high rents and housing prices are a second piece,” Levy said. “Eventually, companies will be less likely to expand here [the Bay Area] because the people they are looking to hire will be looking at very long commutes or very expensive home prices and rents.”
Levy said the only answer right now in the Bay Area is “to expand capacity,” including improving public transportation and adding more lanes on California roadways, while also continuing to build more housing.
He said this is affecting all economic sectors. “We need to do a lot of building for people who want to live here, and also for the middle income folks who are seeing their rents go up because tech workers are bidding up everything because there’s not enough housing,” said Levy.
And on whether the “coolness” factor of living in the Bay Area or Los Angeles will wear off, Levy had some interesting thoughts. “I think people see these new high-rise apartment buildings that are selling out at these outrageous rents and saying, I don’t want one of them next to me,” he said. “I don’t think that’s smugness, I think people are struggling to deal with the fact that this is a hot area, we’re going to be more dense, and there’s going to be more traffic unless we handle it. It’s a challenge. If you want low housing prices and really good traffic, have a deep recession. That’s the problem. This is what comes with a hot economy.”
Levy said although it’s not an immediate concern, he could definitely see companies decide to locate their businesses elsewhere, where both traffic and housing construction and costs are less of a concern.