After a lull, Bay Area rents charge back up

Median prices in San Jose, East Bay, S.F. top the U.S. market

A dearth of new apartments and a swell of new jobs have pushed Bay Area rents higher in recent months, keeping the region’s title as the most expensive place in the country for renters.

Median rents rose 4.2% in San Jose, year over year, in the second quarter of 2019. In the Oakland and San Francisco metro area, monthly apartment payments grew 3.7% from the previous year, according to a new survey from listing site HotPads.

The median rent for all apartments — from studios to multibedroom units — in San Jose was $3,760, while in San Francisco and the East Bay prices rose to $3,560 a month. Those rents top the U.S. market, more than doubling the $1,545 median across the country.

Strong prices in the Bay Area rental market — a boon to property owners and bane to renters — have picked back up after a lull a year ago. Between

2016 and 2018, new highrise apartments and development added supply, and many property managers offered discounts to fill space, said HotPads economist Joshua Clark.

But applications for Bay Area building permits — the start of the long construction process — have slowed from a peak in 2015, he said. With tech companies adding jobs to the swelling Bay Area economy, he added, it’s hard to

see the rising-rent trend reversing.

Higher rental costs have driven California lawmakers to consider wider rent control and more protections for apartment dwellers. A bill sponsored by Assemblyman David Chiu, DSan Francisco, would limit annual rent hikes to about 10% on certain properties and make it harder to evict tenants. The measure, AB 1482, has faced stiff opposition from property owners but has won preliminary support in the state Senate.

Voters rejected a statewide expansion of rent control at the ballot box in November.

Little help has come to add new apartments, especially for low-income families.

Michael Lane, deputy director of the housing advocacy group SV@Home, said builders face several challenges developing market rate and affordable residential units in the Bay Area. Submitting plans and winning approval from local city councils takes at least three years and sometimes twice as long, he said.

Developers face challenges with few construction workers and higher costs for land and materials,

he said.

And right now, commercial buildings are more lucrative to build and easier to win approval from local governments, he said. Construction workers are pulled to commercial sites, leaving some residential developers with labor shortages.

“Unfortunately, the housing has never caught up,” Lane said.

Four of the five hottest neighborhoods in Santa Clara County were within San Jose city limits: East San Jose rents jumped 8%, Santa Teresa grew 7.8%, Evergreen increased 6.8%

and North San Jose went up 4.7%, according to HotPads.

In the East Bay and San Francisco, the Longfellow neighborhood in Oakland saw rents rise 10%, followed by the San Francisco neighborhoods of Bernal Heights (8.9%), Outer Sunset (6.3%), Inner Sunset (5%) and Nob Hill (4.6%), according to HotPads.

Neighborhoods near transit, such as Longfellow, with a livelier restaurant and entertainment scene, have tended to see greater increases in price, Clark said.

The influx of new residents,

many younger, single and willing to rent, also has pushed housing costs higher. “There’s no real cracks in the labor market,” he said.

Cities trailing San Jose and San Francisco in the nation’s top median rents in the second quarter were the Los Angeles metro ($2,985 per month), San Diego ($2,765), Boston ($2,450) and New York ($2,400), according to HotPads.

The Sun Belt had nine of the top 10 fastest rising areas. Rents in Phoenix grew 6.9% from the same period last year, to a median of $1,545.