An Insider’s View of the Bay Area’s Housing Affordability Crisis
Randy Tsuda, president & CEO of Alta Housing, discusses why the Bay Area continues to be one of the least-affordable regions in the U.S.
The Bay Area’s affordability issue has long reached a crisis point. Due to high land and construction costs, the region is notorious for providing limited opportunities for new development.
“The core of the Bay Area has some of the highest land and construction costs in the country. It’s also where the need for affordable housing is the greatest,” Randy Tsuda, president & CEO of Alta Housing, told Multi-Housing News.
Alta Housing has more than 450 units in various stages of planning and development across Silicon Valley, so Tsuda knows the ins and outs of the current affordable housing landscape in the Bay Area. In the interview below, he talks about the challenges developers face when it comes to building affordable properties in the region and discusses how the pandemic has further deepened the housing affordability crisis.
How has the health crisis impacted the affordable housing segment in the Bay Area?
Tsuda: There’s no doubt that the pandemic has impacted the lower-income segment of our communities most severely. Many of our residents have experienced a loss of work and income. Our resident services and property management teams have focused on checking in on our residents and connecting them with the support services they need, such as income or rental assistance. We also significantly increased the amount of meal and grocery support we provide to our residents.
The pandemic has prompted many residents to leave the Bay Area and move to smaller nearby markets. Do you expect this trend to affect the housing market in the region?
Tsuda: It’s hard to say to what degree this will be a long-term trend. Yes, rental prices for market-rate apartments near major job centers have declined significantly, but there are signs that rates have bottomed out and may begin to rise again. The closure of offices and the pivot to remote work have allowed some people to leave the Bay Area. Eventually, companies will reopen their offices and will have standards or a culture that expects employees to be in the office for some proportion of time, and this may bring residents back to the Bay Area.
What can you tell us about Alta Housing’s strategy to tackle the affordability issue in the Bay Area?
Tsuda: We focus on providing affordable housing in the heart of Silicon Valley. Our strategy in developing housing is to go deep in the cities we serve, allowing us to be very invested in these communities. We tend to be hyperlocal. Our board’s composition reflects this. It is made up of people from the communities where we serve and would like to serve. In this way, we can help our residents take advantage of the local resources and become part of the community fabric.
How has the coronavirus outbreak impacted your projects and timelines?
Tsuda: We have been very fortunate in that we have been able to keep construction and entitlements progressing during the pandemic. Early on, affordable housing was designated as an essential business, and once our contractors established their safety protocols, we could keep building.
Fair Oaks Commons, our latest project in San Mateo County, finished on schedule in November 2020, and two other projects broke ground last year amid the pandemic. San Mateo County did a phenomenal job responding to the pandemic and quickly established new inspection procedures that allowed us to keep building.
How do you expect these projects to impact the region’s housing market in the short and long term?
Tsuda: We are pleased to be contributing to the stock of affordable housing, especially now when the need for stable, safe, affordable housing is so great. Each project that Alta and all of our fellow affordable housing developers build enlarges the Bay Area’s portfolio of affordability, but there is no shortage of need.
What are some of the challenges when it comes to developing affordable housing in the Bay Area?
Tsuda: There’s no shortage of challenges—land costs, construction costs, availability of contractors, the competitiveness of accessing funding and the difficulty of building infill housing, to name just a few. The core of the Bay Area has some of the highest land and construction costs in the country. It’s also where the need for affordable housing is the greatest.
When do you expect the San Francisco Bay Area to return to a sense of normalcy? What are your predictions for the region’s affordable housing market?
Tsuda: Maybe the question ought to be “What will normalcy look like in the future?” The pandemic has impacted the Bay Area in innumerable ways and has triggered a great inquiry into how and where we live and how and where we work, seemingly overnight. It’s fascinating to contemplate which changes are temporary and which will have longer-term roots. The intersection of pandemic-triggered trends in public health, the workplace, municipal finance, education and public transportation will be our future normalcy.
Specifically, the next few years will be challenging on affordable housing due to the competition for limited funding at the local and state levels. Most cities are impacted by declines in sales and transient occupancy taxes. Simultaneously, a slowdown in market-rate development will reduce the collection of impact fees, including housing fees used to invest in affordable housing.