San Francisco Boom Lifting Oakland’s Real Estate Market

A new boom has come to San Francisco, and housing prices have skyrocketed in the past decade to new highs. As tens of thousands of white-collar jobs are …

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A new boom has come to San Francisco, and housing prices have skyrocketed in the past decade to new highs. As tens of thousands of white-collar jobs are created each year at companies such as Apple, Facebook and Google, construction cranes dot the skyline to keep up with the demand for housing

That success, though, comes at a price.

The city, long known for its artistic spirit, has become prohibitively expensive for some creative types, middle-class workers and nonprofit organizations. Many are fleeing the city’s rising price tag for less expensive, but less accessible, suburbs.

The Bay Area’s population has continually increased, thanks to job creation. San Francisco has grown from 776,000 people in 2000 to 805,000 in 2010, and the Bay Area as a whole has grown from 6.7 million people in 2000 to 7.1 million in 2010, according to census data. Job creation, mostly in technology, has fed the demand, with 33,400 jobs expected in 2015 and 45,700 created in 2014, according to data from real estate brokerage Marcus & Millichap.

Although these changes have boosted San Francisco’s economy, "the flip side is that we have not seen the kind of new supply that would help absorb the population growth," said Carol Galante, professor of affordable housing and urban policy at the University of California, Berkeley.

Housing prices can be a barrier to living in San Francisco. In 2002, the average monthly rent for a one-bedroom apartment was $1,524. This year, it’s $3,040 a month, according to Marcus & Millichap. The Bay Area has three of the nation’s top 10 priciest rental markets — San Francisco, San Jose and Oakland — according to a 2015 national report from rental Web site Zumper.

Employees who work for the aforementioned tech companies and others once may have settled in Silicon Valley itself, but office space construction has far outpaced residential construction in some sections of Silicon Valley. Thus, workers have migrated to the urban heart of San Francisco, Galante said.

When companies expand office space in Silicon Valley, the required residential construction doesn’t always happen, she said.

"There is room, but there is not necessarily the political will to enable it to happen," Galante said.

As tech workers with large salaries moved into the urban core of San Francisco, the demand for high-end housing increased. Companies created employee-only bus routes and expanded office space into areas with little corporate development, such as the traditionally artistic Mission District.

Facebook and Google software engineers in the Bay Area typically earn a base salary of at least $120,000 a year, according to Glassdoor.com, which tracks self-reported salary information. A San Francisco public school teacher, on the other hand, makes about $50,000 a year, according to Glassdoor.com, while the average salary for a waiter is about $51,000 a year, according to SimplyHired.com, a job search Web site that tracks salary data.

Google, Apple, Facebook and other companies set up bus routes along San Francisco’s public bus routes about five years ago. Prices along these routes, which extend into areas that typically housed middle-class workers and artists, have "gone astronomical," said Jim Laufenberg, a Coldwell Banker broker associate. 

These routes have led to discontent among some longtime residents due to increased rent prices and public bus delays caused by corporate buses using the same route. Some staged protests along these routes. In 2014, protesters filed a lawsuit against the city to stop the bus program. Companies have responded, some with charity. Last year, Google donated $6.8 million to give low-income children free public bus rides for two years.

With little space left on the peninsula for construction, old homes are often bought up by developers and demolished. Four thousand new apartments are predicted to go on the market this year, up from 3,000 new apartments in 2013 and 2,200 in 2012, according to data from Marcus & Millichap.

Some landlords evict tenants in order to convert old dwellings into offices or high-end housing. There have been about 12,200 no-fault evictions in the city from 1997 to 2014, according to the Anti-Eviction Mapping Project, a group that tracks evictions that proceed high-end development.

Prices have pushed past middle-class budgets, causing some workers to move to eastern suburbs, some more than an hour drive from the city and out of reach of the city’s rapid transit system.

The U.S. Census Bureau named the Bay Area as the area with the nation’s largest percent of "mega commuters," those who commute at least 90 minutes or 50 miles. Forty-eight percent of these commuters nationwide make less than $40,000 a year.

Some artists and creative types have fled east to Oakland, and collectives, street festivals and bohemian stores have flourished.

"I’ve seen data that rents in Oakland have been going up faster than San Francisco," Galante said, noting housing prices are more affordable than the urban core. "You are seeing a huge resurgence of arts and culture. It’s great for Oakland, to be frank."

The economic shift has brought more bars, clubs and hospitality workers to the city, but it’s also pushed out some nonprofits. Haight Street-based Homeless Youth Alliance couldn’t renew its lease about a year ago when the building was revamped for commercial space, so employees distribute health kits on foot, according to its Web site.

Laufenberg said homes in a western San Francisco neighborhood called Sunset once sold for $400,000 about 20 years ago. Now, even prices there have shot up.

"That’s about the only area you can afford to live in and afford for under $1 million," he said.

This article was republished with permission from TheStreet.

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