100,000 Homes Sit Empty in the San Francisco Bay Area
Image from The Economist
It’s no surprise that real estate in San Francisco is expensive. Year after year, the city lands near the top of lists that calculate the nation’s priciest cities to rent. As of the summer of 2018, the average price of a rental in the City by the Bay was upwards of $3,500 — the average one-bedroom cost about $3,400 per month. This cost of living made it slightly less expensive than Manhattan, where the average rent lands somewhere around $4,100.
The Law of Supply and Demand explains why the price for rent is so high in cities like San Francisco. Prices spike because demand is high and the supply of property remains low. And yet, as of a March 2019 study, more than 100,000 homes in the San Francisco area sat empty. For those struggling to make it in such an expensive market, the figure’s shocking.
High Vacancy Rates?
The study analyzed vacancy rates in the 50 largest metropolitan areas within the United States. In San Francisco and its surrounding areas — Oakland, Hayward and others included — an estimated 100,025 homes sit unoccupied. And, while this number seems high, it means the city has a 5.6 percent vacancy rate. By comparison, other cities on the list had much higher numbers. Miami, for one, has a 17 percent vacancy rating, although, in destinations like Florida, many people have second homes. So, their properties sit empty for the majority of the year.
Of course, there’s a reason why San Francisco’s occupancy rate is so low — the city has a thriving job market and, as previously mentioned, high demand for property. As such, it’s a great time to be a seller in San Francisco. Buyers, on the other hand, will have trouble putting in a winning bid on a property. Lower budgets will undoubtedly price them out of a tight market, too.
A Frustrating Number
Even though San Francisco’s vacancy rate is relatively low, it might be frustrating for those who live in the city and know how big of a problem homelessness is. As of 2017, nearly 7,500 San Franciscans were homeless, with 58 percent — 4,353 people — sleeping outdoors instead of in a shelter.
Because so many people couldn’t find homes, United Nations Special Rapporteur Leilani Farha released a report in which she deemed homelessness in San Francisco to be a human rights violation. In many cases, Farha found, the homeless individuals had previously afforded rent. But, as the city became a more in-demand location to live, their apartments were sold and re-developed — and rent prices skyrocketed beyond their budgets.
A lot of this has to do with the number of businesses that have rooted in the area. Tech giants like Google, Apple and Facebook have certainly brought industry and jobs to San Francisco, but their high-paying salaries have pushed the rental market to reach exorbitant prices, leaving so many on the streets.
How to Fix It
Fixing San Francisco’s housing crisis won’t be an overnight fix, but, with 100,000 open properties, it’s clear there’s room for improvement — and space for those in need. One way to do it involves levying a vacancy tax on landlords who have properties sitting empty and idle. A vacancy tax typically pushes them to rent out the property ASAP, even if it means taking a lower price than what they initially asked. This can help drive prices down in the housing market, which San Francisco desperately needs.
Vacancy tax could also push landlords to sell or redevelop their property if it’s no longer appealing to their intended audience. This type of turnover keeps the real-estate market moving, and could help price some people back into the San Francisco market. To that end, the right pricing is a tremendous way to get people back into renting a property — landlords can also agree to longer-term leases or rent-to-own contracts to boost occupancy rates.
Cutting the 100k
In one of the most popular and populous regions in the United States, it’s no surprise that rental prices are high. But with open properties and homelessness on the rise, it’s clear something can be done to make San Francisco livable for more people.
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