The Bay Area suburbs where renters are taking over the market

San Francisco Chronicle​

20 hours ago

For decades, the path from renter to homeowner in America looked like this: You rent in a big city when you're just starting out, then once you've settled into your career and personal life, you buy a house in the suburbs.
But high home prices combined with 30-year mortgage rates stubbornly stuck in the sixes have kept home ownership out of reach for many for the past few years, especially in the Bay Area. A new study from Point2Homes shows that renter households now outnumber homeowners in more than 200 metropolitan suburbs nationwide.
Point2Homes provided the Chronicle with data on the share of renters in the smaller cities around the San Francisco, Oakland and Fremont metropolitan area (the data excludes San Jose and most of the South Bay, which are considered a separate metro). In 24 of the 54 cities analyzed, the percentage of the population that rents is rising. In seven of them, renters now represent larger shares of the population than homeowners.
The trend is accelerating at an even faster rate on the East Coast, said Doug Ressler, the manager of business intelligence for data acquisition firm Yardi Matrix, who worked on the data cited in the Points2Homes study. Both companies are owned by Santa Barbara-based real estate software company Yardi Systems.
In 15 metropolitan areas, suburban cities transitioned from majority-owner to majority-renter between 2018 and 2023; in another 15, the number of renter households more than doubled. In the Dallas, Minneapolis, Boston, Tampa and Baltimore areas, the suburbs gained renters faster than the big cities they surround.
But that's not quite what's happening in the Bay Area. All the cities that are renter-majority as of 2023 in the San Francisco area were already that way in 2018. Of the 54 cities analyzed, the share of renters dropped in 30 of them, though in some of them not by a statistically significant amount.
Taken together, the 54 cities experienced a modest net 1.9% increase in renter household growth during that period.
The reason we're not seeing the same explosion in renting that some cities on the East Coast are is the same as the explanation for many of the Bay Area's problems: It's hard to build housing here.
'We don't build enough housing compared to the wealth and jobs we create,' said Matt Regan, senior vice president of policy for the Bay Area Council, a pro-housing advocacy group.
The urban cores themselves 'make it ridiculously hard to build,' he said, which leads developers to look for opportunities in suburbs and exurbs. But even in smaller cities and suburban areas, Regan said, many local governments have determined that the right place to build more homes and apartments is 'somewhere else.'
'The Bay Area has been ground zero for 'not in my backyard,'' said Jeff Ostrowski, a housing market analyst for Bankrate. A combination of growth restrictions, lack of land and income growth have created what he called the 'perfect storm for an explosion of property prices.'
As housing prices have risen, the age of the average first-time homebuyer in the U.S. has increased, meaning people are renting for longer. The median first-time homebuyer is now 38 years old, according to the National Association of Realtors.
The years 2018 to 2023 are an interesting period for studying housing trends in America. The COVID-19 pandemic created a drastic shift: Rents rose, mortgage rates hit rock bottom, and remote work vaporized commutes.
California's population declined by more than half a million people from April 2020 to July 2022, though it's bounced back since then. COVID played a dual role: Some people left because a fully remote job meant they could live somewhere more affordable. And the polarization of pandemic restrictions and vaccine policies drove some people to search for alternative political climates.
Some workers who were given free rein to move to Texas or Idaho found themselves recalled by return-to-office policies. But even now, many offices in the Bay Area have only partial RTO: Office visits are down 44.6% in San Francisco this year compared with 2019, according to a study from location data analysis firm Placer.AI.
That makes the suburbs a more appealing place to live, Regan said. Only needing to drive to the office two or three days a week instead of five makes an onerous commute slightly less daunting. So there's interest in more housing in the suburbs — but challenges to build it.
Regan said California's condo defect liability laws dissuade developers from building a type of housing that was traditionally a solid first rung on the property ladder. Many cities are out of space to build single-family homes. That leaves apartment buildings, which can be appealing to developers given the region's high incomes and high demand, but often face planning and permitting issues and anti-renter sentiment from homeowners.
A standout on the list of cities with a high renter share is Emeryville. The share of renters increased by 28% from 2018 to 2023, with the city adding more than 1,100 renter households.
Cities that have seen more renter growth tend to have certain things in common, said Ressler of Point2Homes. They're usually situated close to transit; have social amenities such as parks, community centers and museums; have less expensive land compared with the urban areas; and have local governments that are amenable to housing development. Regan said Emeryville's government has embraced housing growth alongside job growth from companies such as Pixar and commercial growth from major retailers including IKEA.
Emeryville has 'been willing to accept that with economic growth comes a demand for housing, and they have built a commensurate amount of new housing units to accommodate their economic growth,' Regan said. 'Most cities in our region are happy to take the jobs and then increase their tax base, but have traditionally not been willing to build the housing.'