Bay Area housing growth: Government regulations inhibit housing production and increase costs

Vital Signs, Metropolitan Transportation Commission (Bay Area)

Housing Growth

In contrast to population statistics, which reveal past trends, information on housing permits acts as a leading indicator of likely growth in the near future. During the period of expansive growth across the Bay Area over the last half-century, most of the permitted units in the region were single-family homes. As growth returns to Big Three cities, permitting rates have shifted toward a prevalence of multi-family homes, which range from duplexes to apartment buildings. This trend is most noticeable in cities closest to the Bay. Most of the units permitted today will be constructed in the next few years.

19,800  units were permitted in the Bay Area in 2015.
    63%  of units permitted in 2015 were multi-family units.
       #3   Dublin permitted the third-largest number of units from 2010 through 2015.
      -10   housing units permitted declined by10% between 2013 and 2015.
      1/3  The Bay Area permits 1/3 the number of housing units per capita as 
              Houston (the national leader for this measure.)*
    41%  of units permitted in 2015 were located in Inland, Costal and Delta regions 
                 (farthest from San Francisco Bay). 

  Regional Performance 
Permits for new housing remain well below levels seen in the 1970s and 1980s, despite an affordability crisis and a significantly larger population.

The Bay Area housing market has clearly rebounded from the Great Recession, as reflected by the nearly 20,000 permits issued in 2015. Still, permit levels remain 26 percent lower than just one decade ago and well below the peaks of the 1970s and 1980s. Over the long term, much of this decline is attributable to slowing development patterns in Contra Costa and Alameda counties – as the region’s mid- and late-20th century suburban communities were built out. North Bay counties saw similar slowdown in units permitted. In Sonoma County, for example, the total number of units permitted has dwindled as single-family residential development declined in Santa Rosa.

 Local Focus 
Multi-family housing constitutes the majority of new units in the Bay Area, especially in cities encircling San Francisco Bay.

Since 2010, a whopping 95 percent of housing permits approved in the region’s three largest cities – San Jose, San Francisco and Oakland – were for multi-family development. This is a significant shift from just 25 years ago, when only 55 percent of approved units in San Jose and Oakland were multi-family. The shift towards multi-family development is not limited to the “Big Three” cities though. Other communities encircling San Francisco Bay increased their share of multi-family housing permits from 44 percent in the 1990s to 69 percent in the past five years.

 National Context 
Houston, Dallas, Atlanta and Washington have permitted housing units at significantly higher rates than the Bay Area since 1990.

For the last two decades, Houston and Dallas* have remained powerhouses for housing production, permitting double or triple the number of housing units per capita compared to our region. Atlanta, once the nation’s leader in housing permits, was hit hard by the Great Recession. While it has experienced a modest recovery since 2013, it remained well below its 1990s rate of housing production.

USC NOTE: * Texas prohibits rent control.  Only 4 states plus Wash. D.C. allow rent control: New York, California, Maryland, New Jersey, Washington DC