The Sheridan Report
by Matthew C. Sheridan
Is the city turning around? Are we pulling out of the trough of our economic malaise? Are jobs returning? Several economic indicators present an improved picture of economic life for the city.
Unemployment is down, the creation of 6,400 new jobs in the past six months bodes well, and a noticeable return to the seasonal influx of new residents arriving in the city is evident. Asking rents remain steady, while tenant demand is almost level with them. Yet, housing continues to be one of the city’s most pressing issues. Home prices remain out of reach for almost all San Franciscans, with the current Affordability Index at 12. And according to the latest Housing Element, the city has failed miserably to promote the construction of moderate-priced housing, and the prediction is that this trend will continue for the next three years.
Migration Patterns
During this past summer there was an encouraging increase in the number of people moving into the city as compared to out. Data provided by U-Haul shows that 10 percent more people moved “into” San Francisco as compared to “out of” the city. Compiled from Memorial Day to Labor Day, this data demonstrates a growing increase of immigration into the city during the last three summers. In San Jose, however, migration patterns show a continuing departure of residents from that city. These data sets—representing the actual cities—differ tremendously from the data sets we covered in the premier issue of the Sheridan Report in February. At that time we covered the Metropolitan Statistical Average for the areas around San Francisco and Santa Clara counties, and that data indicated then a mild exodus from both regions beginning two years ago. A precise examination of the local migration, however, reveals a different trend
According to MetroRent, asking Rents were pushed up ever so slightly during the third quarter to $1,758. Tenant Demand, the maximum price a tenant is willing to pay for an apartment, was just $24 behind at $1,734 (all unit types).
This data mirrors the quarterly survey of asking rents in the San Francisco Chronicle conducted by Jim Forbes
| Demand | Asking | |
| Studios | $958 | $1,010 |
| 1 Bedroom | $1,449 | $1,520 |
| 2 Bedrooms | $1,795 | $2,033 |
| 3 Bedrooms | $2,522 | $2,506 |
| All Units | $1,734 | $1,758 |
New Residents
Reflecting the uptick in migration and jobs, a report card from the SFAA’s Tenant Screening Department exhibits the same improved numbers. According to staff, there was a noticeable upswing in credit reports run during the summer months as compared to the two previous years. An abundance of students, young people and newly married couples appear to be gravitating to San Francisco these days. An interesting factor, however, is that many of these potential tenants have required parental co-signers for their apartments, a clear indication that many were without jobs. The tenant screening numbers for early fall, however, were down from the highs of summer. Joe Preis, president of MetroRent, observes that these numbers sound just about right. Historically August is the busiest month for apartment searching. According to Preis, “Tenants found what they were looking for [the right apartment] in August,” leaving September fairly slow.
Housing Element
The Planning Commission is in the process of carefully revising the city’s Housing Element. This 247-page document is primarily comprised of two sections: Data andNeedsAnalysisProgram;and Objectives, Policies, and Implementation Program. After a series of public meetings and reviews by staff and the planning commission, the Policy section appears to have generated the most controversy, with the commissioners recently requiring an environmental review for the Housing Element.
While the Policy section continues to be tweaked, a close examination of the housing data reveals some startling facts about past and future housing production in San Francisco. From 1988-1998, San Francisco failed to reach its regional housing needs as set forth by the Association of Bay Area Governments (ABAG), meeting only 61 percent of its targeted goal of 23,328 new housing units. ABAG requires that 24 percent of the city’s housing needs should be for very-low income households, 16 percent for low-income households and 20 percent for moderate-income households. The remainder must be met by market-rate housing production. Falling 9,161 housing units short overall, the moderate-income production bore the brunt of the city’s failure to provide adequate housing, achieving only 12 percent of the targeted production (see chart 6).
In terms of regional housing needs, the city’s share for 1999-2006 was set at 20,370. Looking ahead, the Housing Element predicts an annual shortfall of 1,888 housing units though 2006 (see chart 7). The formula and methodology for determining each county’s housing needs is complicated, but government code dictates the specific income categories of housing production. A few months from now, some believe we will be looking back on the autumn of 2003 as a turning point for San Francisco. Others simply believe that we will continue to suffer under the usual economic doldrums that have defined San Francisco over the past three years. Let’s hope the optimists are right.
| San Francisco Index | |
| Unemployment | 6.0 % |
| Unemployed | 25,200 |
| Employed | 392,700 |
| Help-Wanted Index | 21 |
| Housing-Affordability Index | 12 |
| Median-Priced Home | $567,000 |
| Housing Production Target (‘99–‘06) | 20,372 |
| Housing Produced: | 2,887 |
| Average Asking Rent | $1,758 |
| Tenant-Demand | $1,734 |
| Lowest-Priced Rental | $540 |
| Office Vacancy Rate | 20.2% |
| Gallon of Gas | $1.98 |
Sources
Sources 1: California’s Employment Development
Department. Data is not seasonally adjusted. 2: U-Haul
Corporation. Dates presented are periods between Labor
Day and Memorial Day and Memorial Day and Labor Day.
3: U.S. Department of Labor. Data is not seasonally
adjusted. Region includes San Francisco, Oakland and
San Jose areas. Shelter is defined as rent of primary
residence, homeowners’ equivalent of rent, and
shelter away from home. 4: MetroRent. 5: The Conference
Board. Data is derived from help-wanted classifieds
in the San Francisco Chronicle and the San Francisco
Examiner. 6 & 7: Housing Element, San Francisco
Planning Department. 8 & 9: Phillip J. Boersma with
Arroyo & Coates. 10: Office of Federal Housing Enterprise.
11: DataQuick. Median home price includes all single-dwelling
homes and condominiums, new and resale.
San Francisco Index Sources: (in order of appearance) California Employment Development Department (items 1-3); Conference Board; California Association of Realtors; DataQuick; Housing Element, San Francisco Planning Department (items 7 & 8); MetroRent (items 9 & 10); San Francisco Chronicle; BT Commercial Real Estate; and AAA of Northern California.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. The Sheridan Report does not make any guarantee, warranty, or representation as to the completeness or accuracy of the information contained herein. Matthew C. Sheridan is the editor of the San Francisco Apartment Magazine and the PPMA News. For a complete version of the Sheridan Report, or to subscribe, visit www.sheridanreport.com.Copyright©2003by Sheridan & Associates.