Why is Housing So Expensive On the SF Bay Area Peninsula? - Peninsula for Everyone (2024)

Have you ever wondered why housing costs so much on the Peninsula in California’s Bay Area? Perhaps you’ve seen articles that mention Redwood City and Mountain View as having the highest rents in the country¹ . Or perhaps you’ve heard that a family of 4 with a household income of $139,200 is considered “low income” in San Mateo county². Or that you might have to save for over 10 years just to afford a down payment on a home³.

If you live in the San Francisco Bay Area, I’m sure you know: the cost of housing is high, and it’s especially high in the Peninsula region (San Mateo county & northern Santa Clara county). But the question is why? And can anything be done about it?

The Why

The explanation is, actually, fairly simple. The real estate market doesn’t have any monopolies or evil corporations who secretly manipulate prices behind closed doors. Housing prices are largely determined by demand (the number of people looking to rent or buy a home) and supply (the number of homes/apartments available). And basic economics tells us that when demand is higher than supply, there is more competition for less stuff, and thus prices increase.

And thus, the reason for the high prices on the Peninsula is that there are a lot more people looking for homes and apartments than places that are available to buy or rent.

To illustrate, between the year 2010 and 2015, San Mateo County added 72,500 jobs while only building 3,844 units of housing. That is nearly a 19:1 jobs to housing ratio.

An analogy: imagine finding a deserted island and starting your own country there. On this island, you build a factory that employs 19 people. You pay your new employees a lot and offer great benefits. But you only build 1 house, with 1 bedroom, on the island and sell it to the highest bidder on the open market. What would happen to the price of that house?

Why can’t we simply build the housing supply to accommodate this surge in demand? Politics. A web of bad laws block housing production, significantly slow it down, or make it cost-prohibitive.

Supply & Demand Factors

Demand

Thanks to a huge boom in the success of local tech companies such as Google, Facebook and Oracle (all Fortune 100 companies), jobs were added not only by building a lot of new offices (you may have noticed Facebook’s brand spankin’ new HQ in Menlo Park, for example), but by the fact that tech companies’ floor plans are able to accommodate a lot more workers than previous tenants might have.

Even though tech is the largest growing industry in the region, this is a trend amongst companies in general⁴ and there are other industries that have a large footprint in the Peninsula area such as food science and biotech.

Many people in the Bay Area blame the high cost of housing on tech. In our view, this is a bit like walking up one morning having smoked your whole life, eating avocado toast for breakfast, getting diagnosed with lung cancer that afternoon, and then blaming the lung cancer on the avocado toast and not the smoking.

Yes, tech companies have grown quickly and added lots of new jobs that attracted workers from out of the area, which has put pressure on housing. But that’s only a surface level explanation. Having more jobs is a sign of economic growth and prosperity. We should not be quick to get angry at companies for creating value and jobs. Historically, cities have always sought to have more job opportunities for its residents. So why is it that in this case, more growth and more jobs is problematic? Doesn’t that seem strange?

The problem lies on the supply side of the equation, which has been an issue slowly growing in magnitude since times way before the recent tech boom.

Supply

Historically, the Peninsula was a sleepy bedroom community with folks mostly commuting to San Francisco or San Jose for work. Local zoning laws, which dictate what kinds of housing can be built in the region, effectively cap the capacity of how many people can live in the area. Housing costs were already high before the recent tech boom, but the sudden surge in jobs in this area caught the region off guard. A lot of new jobs were added quickly, along with a lot of new office campuses, but housing was not built quickly to accommodate those new jobs.

Other reasons for supply not keeping up are state property tax laws, burdensome local approval processes for new housing, political opposition from local residents, and the rising cost of construction.

Why Does This Matter?

Some say that complaining about the cost of housing is just that – complaining. If you can’t afford it, move on.

At Peninsula for Everyone, we disagree.

We believe that housing should be available to Californians of all income levels, not just the wealthiest. And this isn’t only because we think that housing is a human right and not being able to afford housing is stressful. There are many negative effects of out of control housing costs:

• Increases in homelessness
• Displacement of families from their communities
• Worsening climate change & traffic congestion due to more and more people having to commute from farther and farther away (the number of “mega commuters” in the Bay Area – those with a 90+ minute commute – has spiked in recent years⁵)
• Closing or struggling local businesses due to inability to hire workers⁶
• Rising income inequality

… and that’s just a handful of the many issues that will continue to worsen if our housing costs aren’t brought under control.

What Can We Do?

The good news is – our housing problems are fixable. There are solutions out there, and Peninsula for Everyone is committed to making sure that we do all that we can to bring these solutions forward and get them implemented in order to make housing affordable for everyone.

As we mentioned earlier, the problem is mainly political. Because the problem is political, our solution is political: we mobilize community members to put pressure on lawmakers and change anti-housing policy.

And we could use your help!

If you recognize that California is in a housing crisis, and the Bay Area’s Peninsula is at the epicenter of it, there are many ways that you can help address our housing issues. Peninsula for Everyone is an action-based organization that offers many ways to get involved ranging from things that can be done from your computer/phone to showing up to meetings to contributing financially.

Some of the ways we get involved are:

• Supporting thoughtful new housing developments — both market rate and affordable housing — in our area
• Engaging with local governments during long-range planning processes (e.g. when a city creates a Downtown Plan), to ensure a balance between the jobs and homes created
• Encouraging and supporting well-written local and state legislation designed to alleviate the housing crisis
• Getting the word out to our community about the history of the housing crisis (e.g. exclusionary zoning) and opportunities to fix it

Interested? Sign up for our email list to find out about upcoming meetings and opportunities to advocate for housing.

1. https://sf.curbed.com/2019/6/7/18656642/apartment-guide-most-expensive-cities-redwood-city-housing-crisis-studio[↩]
2. As of 2020: https://housing.smcgov.org/income-and-rent-limits[↩]
3. https://www.car.org/en/aboutus/mediacenter/newsreleases/2018releases/buyer-survey[↩]
4. https://www.fastcompany.com/90220029/the-real-reason-your-company-switched-to-an-open-plan-office[↩]
5. https://www.sfgate.com/traffic/article/Bay-Area-commute-San-Francisco-traffic-12861808.php[↩]
6. https://www.mercurynews.com/2019/06/09/in-bay-area-small-retail-struggles-while-tech-booms/[↩]