San Francisco has long made headlines for its sky-high rents, but now our rents are making news that they are falling more than any other city, hitting new lows not seen since the Great Recession.
And yet, while story after story is being written about San Francisco becoming a rental market, it is important to remember that even dramatically falling rents are not news-making phenomena – they are simply the laws of supply and demand for them the work in our housing markets. And it’s the same laws that will continue to apply, regardless of whether we live in a world before, after, or after the pandemic.
No wonder, then, that when COVID made working from home the new normal, many San Francisco renters wisely chose to work in cheaper cities. This has driven up vacancies and reduced demand, and prices have fallen accordingly – all according to the laws of supply and demand.
Just as these supply and demand dynamics drove prices down, they will be the reason house prices rise again at the beginning of our economic recovery. Because of this, we should add significantly more homes in this downturn to be better prepared for the upturn.
The housing affordability crisis in San Francisco has always been self-inflicted, as we haven’t built enough homes for decades to meet the growing demand for housing due to employment and population growth. Our dramatic housing shortage has long pushed prices up for both renters and home buyers.
We made this mistake during the Great Recession when the city slowed housing construction as if the economy was never going to recover. When San Francisco led the nation in post-recession economic and employment growth, we were completely unprepared for renewed housing demand. That experience should have taught us to learn from our mistakes instead of doing the same thing over and over and expecting a different result, the well-known definition of insanity.
Even in this most unusual 2020, San Francisco should add 5,000 new homes this year alone. And another 5,000 a year for the next two decades, according to the city’s chief economist Ted Egan, just to keep house prices rising in line with inflation. The fact that our actual home production has been largely anemic 1,800 new homes a year for the past 20 to 30 years explains why our home prices are the highest in the country.
If, during a pandemic, we fail to build enough homes that are accessible to residents of all income levels, we end up in a completely predictable situation when we are no longer able to. And when that happens, the affordability and displacement crisis in San Francisco will again cause a stir. That’s why we’re ready to work with local and state lawmakers in 2021 to make the Bay Area and California a place where more neighbors can call home.
Todd David is the Executive Director of the San Francisco Housing Action Coalition. Contact him at firstname.lastname@example.org.