How And Why Apartment Rents In San Francisco Rise 6.6% Every Year

Rents have gone up every year in San Francisco by 6.6 percent going back to 1956, according to some excellent new research by Eric Fisher who has posted his findings in his blog Experimental Geography here.

The rent increase was the same both before and after rent controls.

Eric Fisher writes in an excellent blog post that, “Everyone agrees that housing in San Francisco is expensive, and that the high costs are hurting the city. But there is a lot of disagreement about why the rent is so expensive, and what to do about it.” Fisher writes:

  • Sonja Trauss of SFBARF has argued that costs are high because there is not enough housing to go around and that the answer is to build more.
  • Tim Redmond of 48 Hills has argued that building more housing would make the problem worse because the people who would move into it are likely to be wealthy newcomers whose demand for services will increase low-income employment, putting further pressure on older, lower-cost housing.

How high are rents in San Francisco?

According to rental listing site, which tracks average market rents on a monthly basis, rental rates in San Francisco are the highest in the country. Average rent on a two bedroom apartment in San Francisco is $4,650, $1,000+ more than the number two city (New York) and $2,000 more than the rest of the biggest cities in the country.

Fisher’s blog is worth a read as it tracks the reasons for the rent increases, how they will probably continue, and the challenges to just hold rents to smaller increases.

His historical work is outstanding. He writes:

  • “In the 1940s there were very few apartments advertised for rent. It is not clear whether this was because there were extreme shortages of housing lingering from World War II or whether people typically found their apartments some other way. Nevertheless, there is at least some rough evidence that prices were dropping every year until they briefly stabilized in 1954,” Fisher says in his post.
  • “After this lull, in 1956, apartments began to be listed in increasing numbers, but their prices also began to rise. Overall, they went up 6.6% every year. Today's outrageous prices are exactly in line with the 6.6% trend that began 60 years ago,” Fisher says.

Rents in San Francisco and growth at 6% year over year

There are lessons in his blog for other cities as well such as Portland, Seattle, Austin, Denver, Minneapolis and others.

Eric Fisher's rents study makes him a hero

Michael Andersen here also has a good commentary on what Fisher has written.

“I don’t know anything about Eric Fischer except that he’s a freaking hero,” writes Andersen. “Much like everyone else who has recently attempted to live in San Francisco, Fischer is very interested in housing costs. However, unlike every other such person, Fischer decided to contribute to this conversation by doubling the depth of modern historical data about them.”

Fisher concludes that San Francisco is an expensive city because it is an affluent city with a growing population and no easily available land for development.

  • Sonja Trauss is right that building more housing would reduce rents of both high- and low-end apartments.
  • Tim Redmond is right that building enough housing to make much of a dent in prices would change the visual character of most streets, although the result could be more like Barcelona than like the Hong Kong that he fears.

The unsettled question is which of these is the higher priority?

“Building enough housing to roll back prices to the "good old days" is probably not realistic, because the necessary construction rates were never achieved even when planning and zoning were considerably less restrictive than they are now. Building enough to compensate for the growing economy is a somewhat more realistic goal and would keep things from getting worse,” Fisher writes.

"In the long run, San Francisco's CPI-adjusted average income is growing by 1.72% per year, and the number of employed people is growing by 0.326% per year, which together (if you believe the first model) will raise CPI-adjusted housing costs by 3.8% per year. Therefore, if price stability is the goal, the city and its citizens should try to increase the housing supply by an average of 1.5% per year (which is about 3.75 times the general rate since 1975, and with the current inventory would mean 5700 units per year). If visual stability is the goal instead, prices will probably continue to rise uncontrollably," Fisher says.