The Ghost Ship tragedy, in which 36 were killed, shone a harsh light on the housing crisis in Oakland and its consequences for artists and low-income residents. Photo courtesy of KQED.
What Happened:
East Oakland experienced the Bay Area’s most explosive growth in home prices.
What It Means:
More and more people with the means to purchase a home are turning to the few places left in the Bay Area that are still (relatively) affordable. This has led to our current phenomenon of displacement without development.
The economic boom is picking up its pace in the East Bay. In July of 2016 alone, the East Bay added 9,600 jobs and the Bay Area as a whole added 26,600 — more than at any time since fall 2010. In most places, in most times, a boom like this would be cause for celebration. In fact, delegations from around the world regularly visit our region to learn how they might replicate our growing economy.
In the Bay Area, though, not everyone is cheering. In August, for example, the Mayor of Palo Alto stated that we need to think about slowing “reckless” job growth in the Bay Area [1]. That some are finding fault with our booming economy can be traced to the fact that the boom has not extended to one critical segment: homebuilding. This, unfortunately, is true for all parts of the region, not just the East Bay.
There are many reasons for the region’s failure to build suitable amounts of housing, and they have been summarized many times [2]. The results of this failure are clear: Median home prices across the region have skyrocketed, to nearly $2.5 million in Palo Alto and to more than $1.1 million in San Francisco. Rents in San Francisco average $3,500 for a one-bedroom and $4,700 for a two-bedroom [3,4]. The jobs boom is accompanied by population growth, as people from around the world have moved here to work. It should be noted, though, that our current pace of population growth is nothing that the Bay Area, and the rest of California, hasn’t experienced before. The difference is that in the past we built more housing for the new arrivals, and now we are not. As a result, more and more people with the means to purchase a home are turning to the few places left in the inner ring of the Bay Area that are still (relatively) affordable. This has led to our current phenomenon of displacement without development.
The Roots of Displacement in East Oakland
As home prices in other parts of the Bay Area soar, middle- and upper-middle-income homebuyers are setting their sights on East Oakland. In fact, Oakland Magazine reports that East Oakland has had the Bay Area’s most explosive growth in home prices, noting that Zillow, in its 2016 Home Value Index, expects East Oakland to have the greatest real estate price appreciation this year [5]. In the Bay Area, affordability is in the eye of the beholder, but in East Oakland neighborhoods such as Oak Knoll-Golf Links, Havenscourt and Cox — all of which are west of Highway 580 — a house that doesn’t require extensive remodeling can still be had for under $500,000. For some, this is too tantalizing an opportunity to pass up. Among real estate agents, tales of young attorneys and engineers moving into the neighborhood abound. For others, this is a disaster — the latest in a series of shocks to an already unstable and precarious existence.
Just how precarious that existence has been can be seen in the dramatic instability in the East Oakland housing market. From the height of the housing bubble in August 2007 to the lowest point in February 2010, the median single-family home sales price in Oakland declined 73 percent (from $628,500 down to $169,250), and in East Oakland the median price declined 79 percent.
Analysis by the Urban Strategies Council shows that as of October 2011, investors had acquired 42 percent of all Oakland properties that went through foreclosure since 2007 — and that 93 percent of these are in Oakland’s flatlands. In other words, the foreclosure crisis transferred wealth upward by stripping low- and modest-income home-owning families of their most significant asset — providing an opportunity for developers and more affluent folks to acquire those homes at fire sale prices. Now, young professionals are eagerly scooping up those same homes at what seem to them to be reasonable prices, thus beginning the process of asset building themselves.
That displacement should be happening in the very neighborhood that a few years ago was the epicenter of the East Bay foreclosure crisis should not come as a surprise. It is well known that the impact of political inaction is felt most profoundly by the most vulnerable. California’s Legislative Analyst’s Office has found that residential displacement is more than twice as likely to happen in low-income census tracts with little market-rate housing construction than it is in low-income tracts with high construction levels.
Market-rate construction levels in Oakland have indeed been low. Between 2010 and 2015, 3,489 units of housing were built citywide, 2,080 of which were affordable. In the East Oakland zip codes 94601, 94603 and 94605 — an area with a population of more than 120,000 — just 830 units of market rate housing were built. Add the 482 units of affordable rental housing built by nonprofit housing developers, and that brings the total, during a historic jobs boom, to 1,312. With such a small amount of development happening, the notion that development is causing displacement — a theme common among many affordable housing advocates — is clearly inaccurate in East Oakland, as it is in the rest of Oakland.
When people are being pushed out of a hot housing market that has had little new housing built for the last seven years, the answer to the question of what should be done to alleviate the problem seems almost too simple to need stating. Clearly, more housing needs to be built — a lot more. Of course, this is not the only thing that needs to be done, but it’s unlikely that displacement can be averted without it.
Endnotes
[1] McDermid, Riley, "Palo Alto Mayor: Slow job growth so housing becomes affordable again." San Francisco Business Times. August 24, 2016.
[2] Karlinsky, Sarah, "What Is Oakland Doing About Its Housing Crisis?” SPUR. June 10, 2016.
[3] Trulia, "Palo Alto Real Estate Market Overview." 2017
[4] Trulia, "Real Estate Data for San Francisco." 2017
[5] d'Viola, Ramona. "East Oakland Real Estate is Hot." 2016