To the Editor:
I have wondered for some time why people are unable to locate an affordable place to live, despite all the new construction.
It is common for housing advocates to claim that the reason for the dearth of housing is that people are moving to California. However, statistical evidence shows that this is untrue. Population statistics show that the Bay Area population has been declining since 2019, and this decline has continued post-pandemic. Per the San Francisco Standard of May 10, 2023, about 7,549,000 people lived in the Bay Area on Jan. 1, 2023, according to estimates from the California Department of Finance, approximately 34,000 fewer residents than January 1, 2022—a nearly 0.5% decrease, and a slightly faster rate of decline compared with the entire state, which shrank about 0.4% in 2022. Alameda County’s population decreased by about 8,100.
One would think that with that many people moving out, there would be a buyers market in housing, but that apparently is not the case. Three items helped me to understand the housing problem. The first was an article posted on Firefox Pocket. The writer argued that the housing crisis was caused by California losing affordable housing faster than it was building affordable housing. Loss of affordable housing, the author stated, was mostly due to rising rents. This is despite rent control. When investors buy income property, they rehabilitate it and are then allowed to increase the rent—often to the point where tenants could no longer afford to live where they had been living. I then looked for evidence to support this theory.
Anecdotal evidence soon appeared on the CBS radio news. A 39-unit apartment building in Sausalito was being overhauled, and all the tenants had been issued 60-day notices. Few could afford to move back in, as the rents were increasing significantly after the rehab.
The new housing being built in Alameda is not affordable by many people.
The third item, released by the A-Mark Foundation, was about the impact of low-income housing on property values. “Two of these studies concluded that low-income housing had a negative impact on property values if built in affluent or higher-income areas, but a positive impact if built in areas with lower income residents or a lack of existing investment,” the release stated. A “positive impact” on property values in low-income areas is generally seen as gentrification. Here was more evidence of rising rents causing formerly affordable housing to become unaffordable.
A person earning $15 per hour—not an unusual rate for retail positions—makes $31,200 per year, assuming that person can find a 40-hours-a-week job. This works out to $2,600 per month gross, before taxes. It is generally held that a renter should not pay more than a third of their gross income for rent, which in this case would be $867 per month. The Alameda County Housing Portal has 45 listings for affordable housing, none with vacancies. Of those 45 listings, 18 had units that were supposedly affordable by a person making $15 per hour. Some of those “affordable” units were renting for over $2,000 per month.
A little research uncovered more evidence. Per Zillow, the median rent in the Bay Area is currently $4,800, which is an increase of $700 per month over one year ago. In Alameda, the median rent is $2,595. In January 2022, the median rent was $2,350. Per the Mercury News, rent in Oakland increased 108% between 2010 and December 2019. This is despite the highly touted building programs.
The new housing being built in Alameda is not affordable by many people. According to these developments’ websites, Alta Star Harbor is renting one bedroom units for $2,749 per month and up. Aero in Alameda Point is renting one bedroom apartments for $2,955 per month. A lot of these new units are vacant—Trulia lists 166 rentals available in Alameda, and Gallagher and Lindsey has three pages of listings—but very few of these listings are affordable by anyone with less than a six-figure income.
The State of California has redefined income levels so that people with substantial yearly incomes can be classed as “low income.” The State Housing and Community Development agency has five classification levels. They have recently added a classification for “acutely low income”, which is 0 to 15% of average median income (AMI) for each county. In Alameda County, AMI for a one-person household is $103,600 per year. The remaining four categories are “extremely low income,” or 15-30% of AMI. Since 30% of AMI is $31,050 per year, our retail clerk or Starbucks barista is just barely above the “extremely low income” level, and at the lower end of the “very low income” level. Many school teachers can be classified as “lower income,” i. e. 50% ($51,800) to 80% of AMI. “Moderate income” means 80% ($78,550) to 120% of AMI. This is why you can have a housing development with units that rent for over $2,000 per month and claim that it is “affordable.” It is—by State of California standards.
A vacant apartment may be more valuable to the landlord than an apartment rented at a lower rate.
New housing costs a lot to either buy or rent because it costs a lot to build. In addition to the cost of land, the developer has to pay for building supplies. Per the Levelset price tracker, the price of cement, metal construction materials, drywall, and asphalt shingles have all risen significantly in the last year and a half. Skilled labor is not cheap. No developer builds with their own money, and the cost of credit has skyrocketed in the last year.
It has been estimated that building an ADU, the cheapest form of new housing, costs between $250,000 and $500,000 in the Bay Area. In 2022, The Real Deal estimated that each apartment unit of affordable housing cost $1 million to build. It is therefore not commercially feasible for a developer of new housing to rent at reasonable rates. However, a quirk of tax law allows a landlord to write off vacant apartments, possibly indefinitely. Thus, a vacant apartment may be more valuable to the landlord than an apartment rented at a lower rate. Some cities are proposing vacancy taxes to alleviate the problem of apartments sitting vacant while so many are on the streets, but large landlords are fighting these proposals tooth and nail.
It is thus evident that current programs to encourage apartment building by for-profit entities are not fulfilling their promise. Rents are still going up while thousands of Californians are homeless. In fact, a recent CNN report stated that the number of homeless people is increasing. The CNN report suggested that it might be cheaper and more effective to pay the rent of people on the brink of eviction while providing social services. Government entities might want to try this suggestion.
Editorials and Letters to the Editor
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