Bay Area Housing: Will Remote Work and COVID-19 Affect SF Rent?

The Jasper is a high-rise, luxury apartment building in San Francisco's Rincon Hill neighborhood near The Embarcadero. It’s got a sleek industrial facade, all frosted glass and tall white columns. Inside, there’s an on-site movie theater, pool and gym.

A one-bedroom apartment here costs more than $4,000 a month — at least, for now.

Like many other high-end apartment complexes in San Francisco, the Jasper's management is offering up to one month of free rent to prospective tenants right now because of the weakening market.

"If you go on Craigslist, you'll see at least four weeks — often six weeks — free rent," said Bay Area property manager and landlord Carlos Carbajal. "I've never seen anybody giving that much free rent as an incentive the whole time I've lived here, since 2003."

According to the rental website Zumper, the average cost for a one-bedroom apartment in San Francisco has dropped 5.4% over the past month.

With a slew of Bay Area companies, like Facebook and Twitter, now telling their employees they can telecommute for the foreseeable future, the San Francisco residential rental market is showing signs of a shift. But how much the softening at the top end of the market is impacting the rental ladder further down is an open question. 

According to the latest data from the San Francisco Apartment Association, nearly 20% of landlords said tenants had either broken a lease or unexpectedly given a 30-day notice to vacate over the past month.

Emily Grove is one of them.

"I moved to the Bay Area three-and-a-half years ago," she told KQED in a video interview. "And right now, I'm in Texas."

Grove and her software engineer boyfriend recently decamped for a small town in the Lone Star State to be near family. She said they gave up an apartment they were sharing with two other roommates on Van Ness Avenue after the pandemic hit.

"Everything in the building shut down," Grove said. "We weren't able to use the gym or the pool or any of these amenities that we were paying for."

Her boyfriend’s company told employees they could continue working remotely. In Texas, Grove said, they have their own private unit, her boyfriend’s still making his California salary and they’re paying about a third of what they used to pay in rent.

"Having made this move, at least for now, we're in a better financial situation," she said.

Despite the recent outflow of high-salaried, telecommuting workers from the Bay Area, local housing economist Issi Romem is quick to deflate the idea that the San Francisco residential rental market is likely to soften in the long term.

"There could be a temporary short-term exodus," Romem said. "But things will revert."

Romem said it’s only a matter of time before bustling urban centers like San Francisco become attractive to workers once again, and those workers will want to have in-person meetings — at least occasionally.

But the economist does see a longer-term trend — driven by the ongoing shift towards telecommuting — of people migrating to the suburbs.

"If you're only getting into the office once or twice a week, you have much more tolerance for long commutes," he said. "And that means that it's easier for people to live in far-flung suburbs, where there's more space to be had more cheaply."

Not everyone gets to be picky about where they live, though. In rent-controlled San Francisco, hanging on to a longtime apartment may still be many residents' best, and only, option.

But even that’s getting tougher, with the pandemic wiping out more than 100,000 Bay Area jobs. Romem said living conditions for the city’s poorer citizens are likely to get worse until employment bounces back.

"I think that as people can't afford housing, they're out of a job — they certainly can't hold onto what they've got," Romem said.

Romem said cohabitation is likely to increase as larger numbers of people cram together in smaller, less conveniently located spaces to save money during the recession.

And the current moratorium on evictions in California means there isn't much landlords can do about late or unpaid rent.

Landlord Carbajal said, for now, he wouldn’t evict his struggling tenants, even if he could.

"We're working together," he said of one pair of tenants who lost their jobs in the catering industry as a result of the pandemic. "I think they're gonna make a partial payment this month. But, you know, it's been really hard on them."

Meanwhile, some downtown office buildings are sitting vacant and likely to remain so.

Economist Romem said he's working on a study out of UC Berkeley on behalf of the state of California, looking at opportunities to convert some of these structures into residential properties.

"We want to find out exactly how much land will be made available to housing if certain amounts of commercial space are transitioned," Romem said. "I don't think it can be the only solution. But you could probably build densely enough in these areas to house a large number of people."