Home Real Estate Rents spiral worldwide but not in San Francisco — why?

Rents spiral worldwide but not in San Francisco — why?

by Ozva Admin

Earlier this year, Lindsey Bourne, 33, started looking for a new apartment to rent in Oakland, the city across the bay from San Francisco. She last moved in 2019. This time, she was looking for a bigger apartment in a smarter neighborhood. Her budget was between $2,500 and $2,800 per month, but she thought she might have to pay more.

In the wake of the Covid lockdowns, rental prices across the country rose rapidly as residents returned to US cities. Prospective renters reported that apartment showings were packed with other hopefuls, which it resulted in bidding wars and houses being contracted for much more than their original list prices.

But while Bourne says the showings he attended were well attended, when he found a house he liked and made his first offer of $2,200 a month, the owner immediately accepted it.

“I’ve doubled my square footage and this house has better light. I got what I wanted for a price well below my price range and I didn’t have to rush it,” she says.

One in four office buildings in San Francisco is vacant
One in four office buildings in San Francisco is vacant © Shutterstock

Rental price growth in the Bay Area’s three largest cities, San Francisco, Oakland and San Jose, has remained relatively subdued since the start of the pandemic. In September, the average rental price in San Francisco was 7 percent higher than in March 2020, according to the real estate portal Zillow; San Jose was up 9 percent. The average for US cities was up 26 percent.

While still among the most expensive cities to live in the US, before the pandemic, the median rental price in San Francisco was 10 percent higher than New York. In the summer, prices in New York surpassed those in San Francisco.

“Many of the tech workers who moved from San Francisco when the pandemic came to find cheaper places to live they just haven’t moved again,” says Patrick Carlisle, head of research at Compass, a real estate agent. “On top of that, there is growing concern about crime and homelessness, especially in those areas where high-tech offices were clustered but now remain mostly empty.” Many of those who aren’t needed at their company desks still choose to rent or buy somewhere out of town.

Christina Trifero, a writer for a tech company in her mid-30s, is among them. “I think I must have the best deal in the country,” she says of her 2,000-square-foot apartment in Outer Sunset on the city’s western shore near Golden Gate Park, which she rents for $3,500 a month.

Map of San Francisco California

However, he is making plans to leave the city after 14 years of living there. His new employer, Zapier, has a mailbox in San Francisco, but no offices for its 800 employees, who work around the world in more than 40 countries. Trifero plans to spend a few months renting in Nashville, Tennessee, and St Petersburg, Florida, before deciding where to settle.

“I feel like I would win being a tenant at any of those places,” she says. “Homeowners pay more care and attention to their homes than in San Francisco.”

Many of the Bay Area’s tech companies established remote work practices before the pandemic and have generally been more accommodating to employees’ wishes to continue working from home, though some, including Google and Uber, have asked workers to return to the office for at least a few days a week.

At the end of last month, office attendance in San Francisco was 40 percent, compared to the 48 percent average of the top 10 US cities tracked by Kastle Systems, a property security company US Office vacancies have risen faster in San Francisco than in other major cities, according to real estate company JLL; by the third quarter of 2022, one in four offices in the city was vacant.

Line chart of average monthly rental price ($) showing Since the pandemic, rental prices in the Bay Area have increased at a slower rate than most other cities

This has changed the atmosphere both in the center and in the city in general, Trifero says, reducing its appeal. “It seems that the people who now want to be in the office are workaholics who are not in touch with their true soul. Working in the city seems to be a hustle and bustle. The energy was once relaxed, free-thinking, and entrepreneurial; now it feels like you’re more of a cog in a wheel.”

Before mortgage rates began to rise in the US this year, many families jumped at the chance to buy homes beyond San Francisco, leaving the city’s battered rental market.

“My husband and I have six-figure salaries, but there’s no way we can afford to buy a house in Oakland or Berkeley; owning in San Francisco is even more ridiculous,” says Carissa Justice, 38, who left Oakland in late 2020, buying a house in Atlanta. The house has one more bedroom, a garden and much more space for the couple’s two young children. Justice says she has had no difficulty serving clients of her corporate-branded business, most of whom are based in San Francisco, from Georgia; she travels to the city every three or four months to visit them.

Home prices in San Francisco have fallen recently, falling 8 percent between their peak in May and October, according to Zillow. But at an average of $1.37 million, they are still among the highest in the US.

It’s not just housing that’s cheaper beyond the Bay Area. This week the average price of a gallon of gasoline in Atlanta was $3.26; the average in San Francisco was $5.65, according to AAA, the American motoring association.

Median property price line chart showing that home values ​​were rising sharply in San Fran, before mortgage rates started to rise

California’s high state taxes are another obstacle. Justice estimates that her and her husband’s combined income tax was cut by almost half after the move. Trifero estimates that her after-tax take-home pay will increase by about $30,000 a year if she moves to Tennessee. (And Florida has no state income tax.)

Crime is a growing concern for some who live in or near San Francisco. Total crime rates are up 7 percent this year, according to the San Francisco Police Department’s dashboard, with increases in both robberies and assaults.

Marcus Rocha, a television cameraman, recently moved to Los Gatos, outside of San José, with his family. He often hauls expensive camera equipment to and from shoots in San Francisco and is concerned about crime in the city. “When I’m shooting in hotels there these days, the receptionist always warns you not to leave anything in your car.”

He is also worried about the city homelessness problem. Although the number of homeless people has decreased in the last three years, many residents report that the decrease in office workers has made the problem much more visible downtown and has also changed the character of some parts of the city. “I’m just not sure I want [my children] grow around that; I’m not even sure I can handle it these days,” says Rocha.

The colorful and eclectic architecture of San Francisco
The colorful and eclectic architecture of San Francisco © Shutterstock/travelview

Growing challenges for San Francisco tech companies may keep demand for the city’s rental housing in check.

The Nasdaq Composite Index, which includes many of the city’s and Bay Area’s most famous companies, has lost 34 percent this year. With the US economic slowdown, many of the area’s top tech companies are cutting jobs. Last week, Twitter began a major layoff campaign under the leadership of its new owner, Elon Musk; Meta has announced massive layoffs; Ride-hailing app Lyft and online payment giant Stripe have also announced major job losses.

Meanwhile, the reluctance of tech workers to return to the office will mean many parts of the city will continue to lack their pre-pandemic appeal. Even in JLL’s best-case scenario, one in five San Francisco offices will still be vacant in 2026.

This bodes ill for the city ​​economy. “Office-based industries generate nearly 75 percent of San Francisco’s GDP,” wrote Ted Egan, chief economist for the city and county of San Francisco in a report to the city council in October. “If the expansion of working from home turns out to be a permanent feature of work, it will affect virtually every aspect of San Francisco’s economy.”

Those starting out looking for a new rental home in the city may feel, like Bourne, that they can take their time.

Shopping guide

  • The median sale price of a two-bedroom condo in San Francisco’s downtown district fell 14 percent in the year through October, compared with 4 percent in the rest of the city, according to Compass, a real estate agent. .

  • Direct flights connect the San Francisco airport with New York in 5 hours 30 minutes and with Los Angeles in 1 hour 30 minutes.

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