How Skyrocketing Housing Costs and Policy Choices Reshaped the Bay Area

The carefully curated flower pots, matcha mixing bowls and Buddhist prayer beads at Kogura Co. in San José’s Japantown have drawn shoppers for decades.

Richard Kogura’s family has operated the Japanese gift and home goods store, now near the corner of Jackson and North Sixth streets, since his grandfather Kohei Kogura started the company in 1928.

Over the decades, the store’s inventory has shifted — from radios and sewing machines to home goods and gifts — mirroring the changes unfolding outside its doors.

Just as the wares have changed over the years, so has Japantown: evolving from a working-class neighborhood to a haven of high-priced apartments as handsomely paid tech workers and developers have flocked to the area.

“As I look at folks that are moving into our neighborhood,” Kogura said, “the only people who can afford to move into the neighborhood right now are the high-tech.”

Across the street from his shop is Sixth and Jackson, a 518-apartment complex opened two years ago that lists studios for rent beginning at roughly $3,000 per month, climbing to roughly $11,000 for the highest-end three-bedroom units.

“The sponsors of our Little League teams were the Plumbers, the Carpenters, the Teamsters,” Kogura, 70, recalled as he walked the aisles of his family’s shop on a sunny Tuesday in March and reflected on his upbringing.

“If you needed a job, there was always work because of the canneries,” he said, referring to companies like Del Monte that once anchored the local economy.

Those jobs are gone. In their place: a tech-driven economy that brought immense wealth — and costs that many longtime residents can no longer afford.

Over the past half-century, the Bay Area has transformed from a region where working- and middle-class families could build stable lives into one of the most expensive places in the country.

That shift was driven by the collision of explosive tech-fueled wealth with decades of constrained housing growth, shaped by local opposition to development, environmental regulation and tax policies like Proposition 13.

The result is a region where soaring home prices and rents have outpaced wages, deepened inequality and pushed longtime residents to the margins or out altogether — forces now reshaping communities like San José’s Japantown and affecting the people struggling to remain in them.

Powered by decades of tech expansion, limited housing construction and policies that restrict turnover and development, the region’s cost of living first got out of sync with the rest of the country around 50 years ago, experts say, with more recent tech booms only furthering sky-high costs and wide disparities.

“The Bay Area is rich and prosperous, and that creates a very high demand for housing, and that drives up prices,” said Richard Walker, professor emeritus of geography at UC Berkeley and an expert on California history.

Spurning growth

Beginning in the 1970s, communities across the Bay Area pushed back against rapid development, reshaping how — and whether — new housing would be built.

A hard shift toward anti-growth policies and environmental regulation flourished, as residents fought displacement and sprawl caused by major urban and suburban development efforts, such as highways and commercial projects. Their effects linger today.

“In the same way that California was the poster child for uncontrolled growth in the first two and a half decades of the post-war era from the mid-1940s to the mid to late 1960s, not coincidentally, it is the epicenter of the most concerted and most politically successful effort to reign in growth into the ’70s, ’80s, ’90s,” said Jacob Anbinder, a research fellow at Cornell University, who is writing a book about the roots of America’s housing crisis.

Until last year, when the Legislature enacted major reforms, the California Environmental Quality Act — the state’s landmark environmental law, passed in 1970 — hamstrung projects of all stripes. Meanwhile, a Byzantine patchwork of county and local policies slows down and limits new housing.

The region’s collective failure to build enough homes has made it tougher for everyday workers to secure reasonably priced housing. Over the last nearly 50 years, the Bay Area has had one of the lowest permitting rates for new homes per capita in the nation, compared to other major metros, according to an analysis by the Stanford Institute for Economic Policy Research performed for KQED.

Phil Cosentino’s livelihood has been shaped by the rise and fall of that pro-building ethos.

After World War II, as defense and technology companies grew and hastened the rise of Silicon Valley, developers built out suburbs that sprawled farther and farther from job centers, prompting the construction of more roads and highways to transport more workers to offices throughout San José and the Peninsula.

When Cosentino’s father opened a family farm in South San José 81 years ago, the property stretched 10 acres. But it was whittled to about two acres after California officials used eminent domain to buy the land in the 1950s to build what is now Highway 85, which cuts along the edge of the farm.

Now, the 96-year-old’s small farm is sandwiched between the highway and a residential neighborhood that sprouted over the decades as developers bought up neighboring farms.

“It was closing in, closing in, closing in, and there was nothing we could do about it,” he said.

Today, homes in the area sell for well above $1 million to tech workers drawn in part by easy access to the highway. The orchards that helped sustain generations of Cosentinos, however, some years fail to break even.

“The situation we’re living in today is the product of decisions that were made not just 10, 20 years ago, but 50, 60, even 70 years ago,” Anbinder said.

Even as a range of factors constrained housing supply, the region’s economy continued to boom, bringing in more residents and driving up demand and prices.

“About 50 years ago, you can start to see a very clear upward movement in housing prices that deviates from the rest of the country by California, and also even more so by the Bay Area,” Walker said.

Rising housing costs

Around 1970, the median home value in the U.S. was about $20,000. In California, it was roughly $23,000, and in the Bay Area it was higher still — reaching $28,000 in San Francisco, according to the U.S. Census.

By 2024, the census found, the median home value in the city was around $1.4 million, compared to less than $400,000 nationally.

The rise in real estate values has far outstripped the growth in average wages, greatly diminishing buying power for many.

At the same time, the tech industry has fueled extreme wealth and financial stability for a significant number of residents capable of scooping up much of the available supply of homes.

“Why is our housing more expensive than anywhere in the country? It’s because we are richer than anywhere in the country, on average,” Walker said.

Kogura and his grown children have been able to maintain family-owned homes in Japantown. But that’s largely because his grandfather and parents were able to buy and pass on properties before prices skyrocketed.

He doesn’t think his kids would be able to buy their own homes now due to the high prices and property taxes, which he said are exacerbated by investors who buy and sell historic buildings in the area in hopes of redeveloping them and cashing in on the neighborhood’s cachet.

Erika McEntarfer, the former head of the U.S. Bureau of Labor Statistics and a research scholar at SIEPR, said that while tech wages have long dwarfed those of other professions like nurses, teachers and retail or sales workers, a tech boom in the years following the great financial crisis of 2008 pushed compensation in that industry even higher, with direct impacts on housing.

“You can see it in the housing price statistics. You can see it in income data. The Bay Area starts to have housing prices that increase faster than other cities, right as the tech boom is taking off and incomes are also going way up,” McEntarfer said.

That takeoff in earnings didn’t happen for everybody. The latest U.S. Census data shows median Bay Area tech worker income hovering a little above $180,000 annually in 2024, compared with just over $120,000 for nurses, while teachers and sales workers earned less than half of that.

Tech compensation

Rachel Massaro, vice president of Joint Venture Silicon Valley, a think tank that studies the region, said inequality is “escalating exponentially” in the area.

What high earners are able to pay for a good or service affects what people will charge, Massaro said, which impacts everyone. Tech workers are willing and able to pay more for everyday essentials, from housing to child care, influencing costs for the whole region and exacerbating historic imbalances.

This year’s Silicon Valley Index, an annual snapshot of the region published by the nonprofit, highlighted that investment income — such as dividends from stock portfolios and earnings from rental properties — is “overwhelmingly concentrated among higher-income households,” bringing in $200,000 or more each year. For households earning less than that, “investment income is nearly absent,” the report said.

Those investments, Massaro said, can generate much more income than wages alone.

In practice, those assets for tech workers can feel like bonuses, making it easier to snap up a rental property or to upgrade to a bigger home, “things that might seem out of reach for a lot of other people in our region,” Massaro said.

Compounding all of this is the fact that the Bay Area — in addition to being flush with well-paid product managers, engineers, programmers and marketers — has one of the highest concentrations of billionaires in the country. Executives and founders like Meta’s Mark Zuckerberg and Nvidia’s Jensen Huang are some of the 126 billionaires who call the area home.

“A lot of people across the country talk about the wealth gap in terms of the top 1%. But in Silicon Valley, the concentration goes way beyond that. It’s the top 0.001% alone that holds 18% of all of our liquid wealth,” Massaro said. “And the top 1% hold roughly a third. So things are different here, particularly because of billionaire liquid wealth.”

Other indicators reaffirm the Bay Area’s higher cost of living, including data from the Bureau of Economic Analysis, which researchers from SIEPR analyzed.

“Between 2012 and the pandemic, prices in the Bay Area increased faster than other metros and the nation at large,” researchers at SIEPR said.

“One way to think of this is that if you make $100,000 in San Francisco, the purchasing power it gives you relative to living in Houston is $85,000,” McEntarfer said. “And relative to living in Birmingham, Alabama, that money would go [as far as] $110,000.”

Bay Area workers looking to stretch their dollars have fled San Francisco and Silicon Valley for the East Bay and beyond in search of a lower cost of living. But as more people make that move, the limited housing supply has meant rising prices in previously affordable neighborhoods, which has pushed many families out of the region entirely.

Proposition 13

McEntarfer said economists sometimes compare housing stock to lasagna, where layers accommodate the different circumstances people experience in their lives and careers.

California’s controversial Proposition 13 and high home prices have complicated that notion locally, with many older residents staying in larger homes after their children have moved out and partners have died because downsizing is too expensive.

For those who have already secured a home in the Bay Area, especially members of the Baby Boomer generation, the nearly 50-year-old Proposition 13 has shielded them from high annual property tax increases.

Enacted in 1978 by California voters frustrated about unpredictable inflationary pressures and increasing property tax bills, Proposition 13 requires the state to assess properties based on their purchase price, not current market value, and caps the annual increase in assessed value at 2%.

It means, for instance, that the buyer of a house who purchased the property in 2022 pays dramatically more in property taxes than their neighbor who bought a comparable home in the 1970s.

The law benefits residential and commercial property owners, but disincentivizes them from moving and severely limits funding for schools and other municipal services, prompting officials to more frequently ask local voters for tax increases and bond measures.

“It definitely transfers the burden of paying for all of the expensive services that we have to pay for in communities to the younger up-and-coming working families,” said Kelly Snider, a developer and professor in the Department of Urban and Regional Planning at San José State University.

Some analyses have shown that Proposition 13 disproportionately benefits white and wealthier homeowners in higher-value neighborhoods because the difference between their homes’ assessed value and market value is greater.

The upshot, McEntarfer said, is that in the Bay Area, “even relatively well-off working professionals like the nurses, educators, people with good middle-class jobs, they can’t afford to buy a house anymore, so they’re renting.”

Average rental rates in the San José and San Francisco metro areas hover around $3,000 a month for apartments, and about $4,200 a month for single-family homes, the Silicon Valley index reported.

A.J. Fernandez pays far less than that — just $600 a month.

He’s the grand-nephew of Louis Chiaramonte, the 81-year-old proprietor of Chiaramonte’s Deli & Sausages in San José’s Northside neighborhood, which has operated for 118 years.

Chiaramonte said people of his generation could buy a home “even with a regular type of job where you didn’t have to have a special education or special talents,” but Fernandez said he “couldn’t do that in my lifetime.”

The 34-year-old, who works crafting the deli’s housemade Italian sausage sandwiches, rents a room in a family-owned home with his grandmother. “They charge me very modestly, and even then, it’s hard to live in the Bay Area,” he said.

“There’s this huge crunch in terms of how expensive it is to just simply have a roof over your head,” said Stasia Hansen, the research and policy director for East Bay Alliance for a Sustainable Economy, a nonprofit that advocates for economic, racial, and social justice.

Hansen said that when the pinch of increasing housing costs pushes people farther from the region’s major job centers, it disconnects them from their families and communities and adds to their transportation costs as commutes increase.

Moving from bigger cities like Oakland to smaller burbs in Contra Costa and Solano counties also means tenants often give up renter protections, she said.

One consequence of all that movement has been an explosion of supercommuters, people who commute more than an hour to their workplaces. In the Bay Area in 2019, just under 9% of regional workers identified as supercommuters, according to U.S. Census data, nearly double the national rate at the time.

The pandemic-driven remote work wave “took the edge off of the number of supercommuters in the Bay Area,” McEntarfer said, but the percentage of these commuters in the region in 2024 was still well above the national average.

Increasing strain

As more people fan out in search of housing they can afford, that puts pressure on lower-income neighborhoods and the people who live there. Black workers have historically been underrepresented in tech and other white-collar sectors, Hansen said. They are also more likely, according to the index, to be paid less even when they do hold the same degrees and jobs.

About half of Black workers in the East Bay were considered rent burdened, meaning they paid more than 30% of their income toward rent, according to an October report from UC Berkeley’s Labor Center. More than four in every 10 Latino workers were rent-burdened, compared to about a third of white renters.

Kassandra Gutierrez said the financial strain of trying to stay in the Bay Area has taken a huge toll on her emotional well-being. She works full-time and is a single parent to a 4-year-old.

“I’ve been trying to see if I can get a second job just to make sure I can maintain a roof over my son’s head. It’s very mentally frustrating, mentally draining,” she said.

Gutierrez, 24, is a case worker at a mental health care agency in Oakland, where she serves up to 30 clients at a time. Despite living in an affordable apartment complex in Richmond, she worries she could face eviction because she’s struggling to pay a recent $250 increase in rent.

Raised in Oakland, she said, “everything was easier” when she was younger, and it’s been painful to see the costs of daily life spiking.

“When I first started driving, gas was like $2.50, so filling up [my car]

wasn’t such an issue. Just seeing that increase in gas, seeing an increase in groceries, just buying a pack of strawberries is already almost 10 bucks, or a gallon of milk is six bucks,” she said.

“It’s such a fast increase that no one can really catch up.”

What comes next?

Walker, the Berkeley professor emeritus, said the inequality gripping the Bay Area is difficult to escape without drastic action.

“What comes next? Well, nothing. It’ll just be more of the same unless you get a mass popular movement and significant political change. We need to reclaim our state and reclaim our country from the rich,” Walker said.

He suggested everything from higher taxes on the wealthy and corporations, to stricter AI regulation and more subsidized housing like the public housing projects of the New Deal era that helped house the burgeoning workforce of the Bay Area after WWI. A proposed one-time 5% tax on billionaires in the state has gained momentum in recent months but faces vehement opposition from the subjects of the tax.

McEntarfer, who moved from Washington, D.C., to the Bay Area in the fall and lived in accessory dwelling units before finding an apartment, said she loves the region.

“It’s really easy to see why the area is in high demand,” she said. “There is great weather, natural beauty and a lot of jobs. There are very few places in the U.S. that are blessed with all three of those things.”

But those blessings come with a downside.

“Silicon Valley, San Francisco — they’ve created an enormous number of jobs, but they haven’t built enough housing to house all of those workers. And it’s pushing up prices, it’s pushing people to take very long commutes to try and find some affordable housing,” she said. “Consistently, what you hear on the East Coast about San Francisco and the Bay Area is that it’s lovely but it’s unaffordable.”

For Kogura, whose family business is approaching the century mark in Japantown, the rising costs are eroding the close-knit neighborhood he grew up in.

“Our people know each other, and it’s a real small community,” he said. “But we’re losing that, and it’s almost inevitable.”

KQED’s Erin Baldassari contributed to this report.