_Housing affordability in the city: San Francisco
The global economic pull of neighbouring Silicon Valley has contributed to San Francisco seeing price growth of 70% in the last 10 years. This growth has resulted in a range of innovations such as: the expansion of co-living concepts; corporates creating staff housing; and a new movement that encourages development, YIMBYism (Yes In My Backyard).
These innovations are aimed at alleviating affordability pressures in the city for homeowners and renters alike.
Facebook is enticing staff with incentives of up to $10,000 to move closer to its headquarters
Corporates step in
The tech boom has transformed the fortunes of San Francisco, attracting tens of thousands of workers to the city. As wealth in the local area rises, along with its population, the housing market has seen resulting high price growth.
This has forced the tech giants to step into the fray to provide new housing for workers. In 2017, Facebook was offering staff incentives of up to US$10,000 to move closer to its headquarters but was still struggling to solve the issue. Its solution: creating a US$300 million campus for its workers 45 miles south of San Francisco. The Menlo Park development consists of 1,500 housing units and will be open to anyone, not just Facebook employees.
Google announced in 2017 that it was spending as much as US$30 million on buying factory-built homes for its staff, a trend that we are seeing in other global locations. Cambridge University in the UK, for example, has been building properties which will include homes for staff to let at affordable rents.
Shared living
For those unable to access housing through employment opportunities, co-living could provide an affordable alternative. Typically, co-living developments are smaller than traditional individual apartments, and include a private bedroom with an en-suite bathroom, complemented by communal space including: kitchens, shared spaces for working and socialising with other people, and fitness facilities.
The concept has proved popular with both developers and renters. Leasing multiple units with the opportunity of earning income from additional services is attractive to developers. For tenants, variable leases provide flexibility while central locations help them to stay close to work and local amenities.
In San Francisco, there is a cohort of co-living start-ups that have come to market offering shorter- term rentals, aimed at all ages and lifestyles. Start-up Roam was originally designed for ‘traveller types’ as an alternative to hotels. Daisy Onubogu, global head of community at Roam, says it is “a common misconception that co-living is just for millennials. In San Francisco the median age of occupants is 39, with residents ranging from 22 to 78 years old.”
Affordability pressures have lead to the rise of co-living startups such as Roam
Roam’s reach stretches from London to Bali and it currently operates one development in San Francisco. Their properties are usually made up of between 25 and 50 units and, while they are typically priced above other shared living options, they are far below the city-wide monthly average.
"In San Francisco, there is a cohort of co-living start-ups that have come to market offering shorter- term rentals, aimed at all ages and lifestyles. Start-up Roam was originally designed for ‘traveller types’ as an alternative to hotels."
Onubogu says this is justified given the high-quality amenities, ample space and community atmosphere. With their development in San Francisco being oversubscribed, Onubogu says that “hitting capacity has confirmed that we’re on the right path,” adding that further locations are planned in San Francisco.
Indeed the popularity of the concept has led to significant investment. “In the last four years, multifamily has been the recipient of the highest levels of investment of all property types in the United States,” says Michael Wolfson, multihousing specialist at Newmark Knight Frank.
For example, in May 2018 Brooksville Company and joint venture partner Rockpoint Group spent US$905 million on Starrett City, a 5,581-unit affordable multifamily housing complex in Brooklyn, New York.
Right on Alamo Square, overlooking the famous painted ladies, in the middle of San Francisco
Further growth may be limited in some locations, as policymakers struggle with the new concept and how to include it into existing zoning regulation.
“There’s simply no framework in place for us,” says Onubogu. “Governments are still finding their way so we are doing our bit to start discussions about zoning and licences and any other questions that come up.” Governments around the world will have to adjust quickly.
Changing the mindset
Existing homeowners can also contribute to a worsening of the affordability situation in San Francisco, and across the globe. Homeowners and local stakeholders block new housing developments to preserve the character of their locality, known as NIMBYism – “Not In My Backyard”.
Conversely YIMBY Action, a group set up to actively battle this viewpoint is gaining traction in the city. Laura Foote, executive director of YIMBY Action, states that “there is no solution to this crisis, which does not involve building large amounts of multifamily housing.”
More widespread adoption of this mindset globally has the potential to make a big impact on existing supply pressures. YIMBY Action now boasts 2,000 members in San Francisco, and their lobbying is starting to bear fruit.
According to the San Francisco Planning Commission’s Housing Needs and Trends Report, the city produced an average 1,900 new units per year since 1990, but this figure rose to 4,000 a year between 2014 and 2017.
The Knight Frank Affordable Housing team works on behalf of developers, Local Authorities, Registered Providers and private landowners in all aspects of Affordable Housing.