As the Bay Area and Silicon Valley face a massive affordability crisis, businesses, builders and residents are being forced to redefine what is “normal” through innovation. Because, at the end of the day, if people cannot obtain quality of life in the Bay Area they will leave. The most critical items are:
- Shortening the time spent commuting to work
- Producing housing that is affordable
Our Manager of Advisory, Michelle Sklaver, recently attended the 22nd Annual Fisher Center Real Estate Conference held in San Francisco. Almost every discussion came down to one central theme: It’s too expensive in the Bay Area, and it is not sustainable. As one of the conference speakers aptly joked about relocating to Denver, “I could learn to ski. Skiing isn’t so bad…”
The chart below illustrates the grim reality. In the San Francisco MSA, only 21.5% of residents can afford to buy a home. It’s even worse in the San Jose MSA, where only 15.2% of residents can afford to buy. This explains why people are looking to peripheral markets for the opportunity to own, some commuting two hours in each direction. Affordability is much better in the Sacramento, Stockton, Vallejo and Modesto MSAs, all ranging from about 40-45% of residents who can afford to buy. It’s still below the national average at 52.2%, but at least it’s in the ballpark.
The good news is that the Bay Area and Silicon Valley are slowly adapting. We singled out a few examples as to how the commuting issue is being addressed:
- Increase in telecommuting. To retain talent, an increasing number of Bay Area employers are adjusting the traditional 9-5 work day by offering increasingly flexible schedules and remote commuting. As Bay Area employees seek a better quality of life, many are moving to less expensive regions and commuting to the Bay Area once or twice a week. Santana Ranch in Hollister (a 1+ hour commute) has a lot of buyers and new residents that commute to Silicon Valley or the Bay Area. Some commute every day, but many make the drive only part time.
- Increase in company buses and ridesharing. An increasing number of companies are offering bus services to take employees to and from work, which is a more palatable solution for many than driving. There is enough space on the buses to work on an iPad or scrunch up with a small laptop. These buses give people access to more affordable housing, while not dipping into precious productivity time. Many companies do not post the bus schedules outside of their internal intranet systems, though they’re sometimes accessible through web forums and information sharing sites.
There are even some innovations and trends on the horizon that could change the way we think about affordable infill housing:
- A future of factory-built housing. Patrick Kennedy of Panoramic Interests has become a prominent leader in innovative building for his housing units, which mirror the concept of shipping containers (see their CitySpaces Micropad concept). They would be built in a factory (cheaper than building on-site) by robots and installed on-site. The savings could then be passed on the buyer. These units were originally intended as a solution for low income housing, but the conference was abuzz with opportunities for scaling the factory-built model to all types of housing.
- Car ownership is on the decline. Builders are asking for less parking requirements at infill sites, knowing that younger people do not drive as much as their parents did. In fact, teenagers are applying for driver’s licenses later, relying more on Uber, public transit, or walking. This means fewer parking spaces are needed and less cars parked on the streets. Parking issues often delay project approvals from the city, so fewer cars is a huge advantage. The Coloradan by East West Partners in Denver is a good example of shifting needs related to parking – their homes will include the deeded right to lease a space if needed.
Collectively, the goal is to create a Bay Area that isn’t just affordable, but also desirable for the long term. As the Bay Area and Silicon Valley pioneer new information technology and new modes of transportation, it will also be pioneering a new generation of how we live, work, and, of course, build homes.
Contact us to discuss how we can help you with affordability solutions in your market.