In the upcoming Presidential election, the state of our economy will be especially important. The majority of people no doubt want a strong economy which will elicit investment, create jobs, and allow states to balance their budgets — hopefully without raising taxes on their citizens. But with a strong economy comes the ability for wealthy people to drive up the price of housing to the point that those closer to the poverty line are forced to live in substandard housing or become priced out of the rental market altogether.
This is happening in one of the biggest cities of the Nation, San Francisco. Much like the late 90s tech boom, a surging technology economy is flooding the Bay Area with wealthy individuals who are finding fortunes in apps and initial public offerings. These tycoons have the ability to get into bidding wars and pay enormous prices to buy and rent in Silicon Valley. Because of the stratospheric real estate prices there, many tech companies like Facebook have to run shuttle buses to surrounding San Jose and San Francisco – where their employees drive up the cost of rent. Affordable housing is scarce enough without the aid of rapid increases in prices.
Last month, the New York Times reported how the issue is affecting the rents in the Bay Area. One engineer from Google claimed to not be able to afford rents in the Mission District, despite an annual income of $100,000. The rents listed in the article for the Mission were $2,700 for a studio and $3,800 for a one bedroom. This is a hot button issue in San Francisco because of the damage it does to the ability of low and middle income residents to afford to rent in the Bay Area. Another factor mentioned in the article is the rising use of Airbnb, which is a service that rents out homes on a short term basis. San Francisco Law stipulates an annual limit of 90 days for such rentals, but an independent report found this could still mean over 1000 units in the area are unavailable to local renters because of this service.
This is on the other side of the country and could not happen in the District, right? After the election next year, there will be thousands of new people moving into the District. There will be new Representatives, Senators, Congressional Staff members, and new government agency employees all battling for rentals with solid government salaries in a very heated market. Landlords in the District are not going to pass up on the opportunity to increase rents because they know the new residents have no problem paying them.
A strong economy can be a huge advantage and can be enjoyed by many people, but a sizzling economy like that of the Bay Area can have serious unintended consequences. People want affordable housing, but the potential to realize huge profits by converting rental property to market rate is very tough for landlords to pass up. Many Mayors, including Muriel Bowser, have made the construction of more affordable housing units a high priority. It will be a fierce battle that will receive a lot of attention in a lot of races at the local, state, and federal level.
Arthur Johnson is a volunteer columnist focusing on Finance and Economic issues. He has Bachelor’s Degrees in Sports Management and Economics, and substantial experience working with people experiencing homelessness. If you have questions about this article or suggestions for topics you would like to know more about, please email [email protected].
