The headline is certainly encouraging but it begs the question: is it too late to matter? With San Francisco rents among the highest in the nation, leveling off still means that living in the city is out of reach for most people who are not willing to make significant compromises that include a limited selection of available units, taking on a roommate, or simply living beyond advisable means.
The San Francisco Chronicle has additional details:
“San Francisco leads the nation in terms of setting rents,” said Sarah Bridge, owner of the RealFacts apartment data service. “San Francisco seems to have reached a peak in the market at least for the moment. Rents were actually down $27 (on average for all apartment sizes) for the city from the third quarter to the fourth quarter.”
RealFacts’ data report that the average monthly asking rent for a San Francisco apartment in fourth quarter 2012 was $2,741, up 22% over a two-year period.
Using the “spend 30% of income on housing” guideline that is commonly advocated, that translates to an annual income requirement of almost $110,000 to live in the city. No wonder that sticker shock is driving would-be renters as far afield as Livermore in search of affordable housing. Closer in, the local effect has been contagious: also according to RealFacts, spillover into Oakland and San Jose has driven up rents in those cities by an astounding 28.5% and 20.7% respectively since fourth quarter 2010.
Rents leveling off at least offers the hope of relief, but is there any reason to believe rents could actually come down at all substantially? Maybe, if you have a modest definition of the word “substantial.” In November the San Francisco Board of Supervisors approved legislation allowing construction of hundreds of 220-square-foot residential units, so-called “micro-apartments.” SoMa is likely ground zero for a test-run development, limited to a cap of 375 units. Following a thumbs-up from subsequent impact studies, additional developments in other high-demand neighborhoods would likely follow.
Also, the Housing Trust Fund championed by Mayor Ed Lee will soon begin allocating $20-50 million a year toward affordable housing. It is hoped that this will result in the development of over 9,000 units of affordable housing over the next 30 years.
Whether these two programs are enough to see rents retrace (or at least maintain a holding pattern) is still uncertain. For now the confluence of skyrocketing demand and limited availability is driving the market and any hopes that a business slowdown will ease that demand are still whispered against the admonishment, “Be careful what you wish for!”