Peninsula's Job Growth Resulting In Crunch For Housing
Rapid job growth throughout the Peninsula is creating additional demand on housing stock. Developers cannot build market-rate and affordable housing fast enough. Housing prices are soaring, and many Peninsula residents are being forced to move to the outskirts of the region.
Part of the problem is people often think affordable housing is only for poor people, Bridge Housing Chief Information Officer and Executive Vice President Diane Olmstead said during Bisnow's Peninsula New Frontiers and CRE Outlook event Wednesday. But there are pockets of need for affordable housing from low-income families to middle-income families. Middle-class wages are often far below the area median income. In San Mateo, average incomes are about $110K, but a teacher’s starting salary is about $50K.
“That [teacher] is your poor person,” she said.
From 2012 to 2015, evictions of people who could not pay rent increased 59% while no-cause evictions rose 300% in the Peninsula. Displaced households averaged about $25K for income. San Mateo County also lost 49% of non-subsidized affordable housing, which is naturally occurring housing that happens to be affordable, during this time period. While there are some subsidies in the works for the homeless population, there are currently no subsidies for middle-income housing.
Because of the loss of affordable housing, 33% of displaced residents left San Mateo for the Central Valley or the outer East Bay. She said all of these statistics are likely even higher since 2015 because of the current economic boom.
Bridge Housing is working on a 68-unit project at Bay Meadows in San Mateo and a second modular housing project, which could help decrease construction costs and save time, but prefab housing has been controversial because of its impact on unions and union jobs.
Another challenge affordable housing developers will face is reductions to Low-Income Housing Tax Credits, which fund 90% of affordable housing projects nationwide.
“Just the rumor of tax cuts has caused tax credits to lose value,” she said.
She said all projects in process have investors that have stuck with their original commitments, but much is unknown about new projects. Many developers just cannot do projects they expected to do and have to start over because they cannot secure new capital.
Can Developers Solve The Affordable Housing Crisis?
Many cities are turning toward local developers to build their way out of the affordable housing crisis, but SyRES Properties Senior Vice President Glen Ceridono said that is shortsighted.
“There is no way we can build all the required housing from a market-rate standpoint,” Ceridono said. “Everyone acknowledges it is a regional issue.”
He said building 300 units with 30 affordable units does not solve the whole problem. Syres typically redevelops commercial spaces and prefers infill sites along transit corridors. Many of its projects center around a movie theater, which used to be at the edge of town, but is now moved toward the city center, such as seen with its Sunnyvale Town Center project.
Universal Paragon Director of Development Jonathan Scharfman said while the region has done a great job in accommodating job growth along the Peninsula and in San Francisco, there has not been similar investment in transportation infrastructure and housing.
Tech companies and others are starting to pay their workers to relocate to other markets that have better transportation and adequate housing stock. Housing stock in Seattle and Portland have met job growth at three times the rate compared to the Bay Area. Portland’s average housing price is more than $350K compared to the Bay Area, where it is over $1M.
“There are 20 cities making independent decisions and there needs to be better regional coordination,” he said.
Universal Paragon is working on a project near the Brisbane Caltrain station, the least-utilized station in the Caltrain system, to redevelop the former railyards. It is working on up to 1,700 housing units and a retail center on the San Francisco side. The developer has plans for the 600-acre site on the southside for medium- to high-density housing and transit and large corporate campus sites east of the tracks. Brisbane is in the final deliberations for the future of that project.
Cities are becoming more transparent in what they want with development, which has made things easier on developers. Cities are promoting specific plans that help provide a framework for what cities and communities want, according to Sares Regis Group Northern California Senior Vice President Ken Busch.
“[The specific plan] doesn’t give a sense of certainty, but it gives a higher sense of comfort,” Busch said.
Cities are defining where they want higher density, which has typically been around transit in downtown where developments can support businesses. By having these plans, developers can approach cities with a plan that fits within this framework. South San Francisco has completed a plan, and San Mateo and Sunnyvale are working on plans.
Developers also have been pushing forward with mixed-use developments and creating live-work-play communities. Oyster Point Development’s 42-acre project in South San Francisco will not only add 2.5M SF of office and life science space, but also 1,100 homes and 22K SF of retail, according to Oyster Point Development CEO Taotao Song, who was the keynote speaker at the event.
A state study revealed the Bay Area would need to build 184,000 units through 2022 to meet job growth and population demand. He said South San Francisco recognized the need and has supported the developer with existing entitlements and adding the housing component.
“Housing within walking distance of office units will put fewer cars on the streets and provide a better quality of life for workers and their families,” Song said.