S.F. rents down more than any other large U.S. city
After years of rents creeping higher and higher, San Francisco is finally seeing real signs of a slowdown with several apartment listing and real-estate data companies noting lower rents and rising inventory. San Francisco rents were down 2.3 percent compared with one year ago, according to AppFolio—the biggest drop in the 20 high-population metros the property management site researched for its recent affordability report.
That’s right: San Francisco rentals are now more affordable than New York, L.A. and Miami, with workers in the South Florida city needing to spend 54 percent of their incomes on rents, versus 46 percent in S.F. The affordability calculations are based on the percentage of average monthly household income put toward the average monthly apartment rent, which is currently around $3,200 for a one-bedroom in S.F. (Check out the slideshow above to see what you can get around that price.)
That average rental cost has not been seen in San Francisco since April 2015, according to apartment market analysis company Axiometrics. It also found that the slowdown happened relatively quickly; the annual effective rent growth was still at 5.7 percent only one year ago. Similar slowdowns can be seen in San Jose, where the market has dropped 2.4 percent compared to a year ago, according to Axiometrics. Rents also dropped in Oakland, though by less than 1 percent.
While Oakland rents may be flattening out, they’ve still risen over 60 percent in the last five years, according to Amalia Otet at RentCafe. “If five years ago Oakland was the go-to place for those priced out of San Francisco, with rents around $1,500 a month in 2011, the huge influx of new people seeking cheaper housing has pushed up rents in the area to record highs,” she said. “Moreover, Oakland is rather timid regarding new apartment construction, with approximately 300 units delivered in 2016.”
San Francisco, on the other hand, added 3,600 new units last year, which all the researchers agree is one of the biggest contributors to the softening in the apartment market. “Supply is finally catching up with demand in the market, so rent growth is starting to slow,” said Nat Kunes, vice president of product management at AppFolio. “It took a few years extra after the recession to get to this point because during the recession construction effectively stopped as renter demand was still growing.”
But RentCafe’s Otet doesn’t believe the rental relief will last long. “Demand for apartment living is still particularly strong in S.F., and the high occupancy levels—measured at 95.6 percent by apartment research firm Yardi Matrix—maintain competitiveness among San Francisco’s renters,” she said.