Bay Area rents see biggest drop in 27 months

"The power dynamics shifted."

When Bridget Wack went looking for an apartment in San Francisco in 2019, she felt like the odds were stacked against her.

“It was so competitive,” she said. “People had filled out their application before seeing the apartment. There were people who were offering over the asking price. Some offered $400 more.”

Though she was eventually able to find a spot in the Sunset district, the hunt left her nervous about returning to the rental market when she and her boyfriend decided to search together for a one-bedroom in Oakland this fall.

What she found was an utterly transformed market. Listings offered one month free — sometimes even two. Rather than leaving work early to get to a showing, she found that landlords were happy to work around her schedule.

“Before it felt like you were chasing them, now it feels like they are chasing you,” Wack said.

This time around, Wack was even able to negotiate a lower rent — her landlord knocked $125 off the price of a 1,000-square-foot, one-bedroom apartment near Lake Merritt that originally went for $2,525.

Other renters are experiencing similar success. Across the Bay Area, rent costs are weakening, according to recent data from ApartmentList.com. In August, rent saw its biggest year-over-year decline in 27 months, dropping by 4.3% in the San Francisco/Berkeley/Oakland metro area, and by 3.1% in the San Jose/Sunnyvale/Santa Clara metro area. Rents across California were down 2.4% in August.

In the San Francisco metro area, where the median rent for a one-bedroom apartment was $1,892 in August, a 4.3% decline represents around $81 — enough for a tank of gas or a week’s worth of groceries.

Rent costs declined in the San Francisco metro area for the seventh straight month and for the third straight month in the San Jose metro area. Pre-pandemic, rents had grown at a moderate pace throughout the Bay Area but began to fall following COVID-19 lockdowns in the spring of 2020. They started to climb back during the fall of 2021, as inflation rose.

Here’s the breakdown of the rental declines by county as of August, ranked by the size of the declines:

• Contra Costa: $2,025 median monthly rent in August, down 4.9% in a year vs. 3% average gains during the previous four years. The vacancy rate was 5.5% in August vs. 3.9% a year earlier and 4.8% in 2018-19.
• Alameda: $2,068 – down 4.5% in a year vs. 1.1% yearly gains the previous 4 years. The vacancy rate was 6.2% vs. 5.1% a year ago and 4.7% in 2018-19.
• San Francisco: $2,207 – down 4.3% in a year vs. an average 2.5%-a-year dip in the previous 4 years. Vacancy rate of 5.2% vs. 5% a year ago and 4.1% in 2018-19.
• San Mateo: $2,478 – down 3.6% in a year vs. 0.4% yearly gains in the previous 4 years. Vacancy rate of 5.1% vs. 4.4% a year ago and 4.6% in 2018-19.
• Santa Clara: $2,560 – down 3.1% in a year vs. 1.6% yearly gains in the previous 4 years. Vacancy rate of 5.3% vs. 4.2% a year ago and 6% in 2018-19.

Supply and demand

Krista Gulbransen, executive director of the Berkeley Property Owners Association, attributes the drop in rents to an increase in new housing supply.

“Berkeley has been adding new housing at a really fast rate,” she said, noting that recent housing legislation has allowed more projects to be permitted faster. A law allowing for streamlined development of affordable housing projects added 587 new units in Berkeley since 2018, according to an August report by the Terner Center for Housing Innovation at UC Berkeley.

“If you add more supply, then it loosens the market and does bring prices down,” Gulbransen said.

With more choices for tenants, landlords are having to make accommodations. To keep their properties filled, some landlords are even offering rental discounts for tenants who decide to re-up their leases. Owners of older properties are under pressure to renovate to compete with newer rentals.

“Tenants are able to make more demands … whereas that hasn’t been true for so long in the Bay Area — it’s been the other way around,” Gulbransen said.

Still unaffordable for most Bay Area renters

But Sandy Perry, president of the advocacy group Affordable Housing Network of Santa Clara County, said the recent dip in rents is providing little relief for many low-income tenants.

“Rents are still so high, there’s just a huge amount of people who can’t afford them,” Perry said. “A temporary blip up or down isn’t going to change that.”

In 2020, nearly half of Bay Area tenants spent more than 30% of their income on rent, classifying them as “rent burdened” by federal standards, according to researchers with the Bay Area Equity Atlas.

To lessen that burden, Perry pointed to a bill passed Thursday by California lawmakers to build publicly owned housing that would be affordable for people with a range of income levels.

“That ties rental prices to people’s income, and that’s what’s needed,” he said. “Right now, rental prices are completely disconnected from anybody’s ability to afford them.”

Winter slowdown

After decades of sluggish apartment construction, however, nobody should expect the still-pricey Bay Area rental market to become significantly more affordable any time soon, said Rob Warnock, an analyst with ApartmentList, an online marketplace for apartment listings.

But he added that with the autumn and winter months approaching – the traditionally slow season for the market as fewer people seek out new rentals – apartment hunters could see prices continue their downward trend into the spring.

“It should be a welcome sigh of relief for people,” he said.