More than 80 percent of new Silicon Valley homes unaffordable for first-time buyers and renters

Even as thousands of residents across Silicon Valley struggle to find housing they can afford, most new homes being built in the region are for the luxury market.

The result, as the latest Joint Venture Silicon Valley report made clear, is that more than 80 percent of residential permits issued in the region in the last four years were for homes that are unaffordable to most first-time buyers and renters — say a family of four making around $150,000 in Santa Clara County.

“That’s stunning. It really leapt off the page,” said Russell Hancock, president of the organization. “The housing we are building is not affordable.”

Housing experts point to various factors. Building in the Bay Area — from land costs to labor — is more expensive than anywhere else in the country and navigating the permit process can mean months or even years of financial uncertainty for developers. Cities often impose fees and sometimes require costly extras like soccer fields or walking trails. Consequently, builders say high-end housing developments are the only projects that pencil out.

And as high as demand is for new housing targeted at those with moderate incomes, like teachers or police officers, the luxury homes developers build continue to fill up because there are still enough people in and moving to Silicon Valley for high-paying tech jobs who can afford them.

“The market works for them,” Hancock said. “It’s totally working.”

The problem is it’s not working for other people, including long-time residents of the Bay Area who don’t work in high-paying fields like tech.

“The school teacher, the police officer, the nurse, they have the biggest challenge because they don’t make enough money to live or buy a market-rate unit, but they make too much to live in most current subsidized affordable units,” said Erik Schoennauer, a local land-use consultant. “They’re stuck.”

The report analyzes Santa Clara and San Mateo counties, Fremont, Newark and Union City in Alameda County, and Scotts Valley in Santa Cruz County.

Hancock pointed out that lawmakers across California have introduced a flurry of housing legislation after being in denial about the state’s housing crisis for decades.

“There’s been a tide change for sure,” he said. “The culture is changing.”

But he’s not entirely optimistic that help is on the way for most residents. Sweeping bills that would significantly overhaul how and where housing gets built — like last year’s Senate Bill 50 from Scott Wiener — have failed to drum up enough support and pushback from residents opposed to boosting density in their neighborhoods has been fierce.

To get anything built other than market-rate housing, which is running north of $1 million in Silicon Valley, said Schoennauer, requires some kind of subsidy. Traditionally, housing subsidies have helped build homes for low-income workers like cashiers or baristas. More recently, subsidies have gone to house the formerly homeless. And more of these types of affordable housing units were approved in fiscal year 2018-19 than in any other year in the past two decades, according to the Joint Venture report.

But housing subsidies haven’t typically gone to build homes for families earning moderate incomes. Those families — full of teachers and nurses, firefighters and many government workers — generally can’t afford to buy a home but they also don’t qualify for much of the limited assistance available.

“I say this with no intention to overturn the capitalist order,” said San Jose Mayor Sam Liccardo, “but the market is not going to solve this problem by itself.”

Wil Fluewelling, a nonprofit executive, and his wife, a therapist at a high school in Sunnyvale, together earn six figures and currently rent a place in Cupertino.

“I don’t really expect to own a home anytime soon,” Fluewelling said.

And while the couple and their first-grade son love their home, they may need to move soon. The former owner passed away and said in his will that it should remain a rental for five years. But that time is drawing to a close.

“Of course it’s grinding on us,” Fluewelling said.

That includes their son. The six-year-old recently shocked his dad by asking if the family was going to be homeless.

“I was not expecting to have this conversation with my first-grader,” Fluewelling said.

According to the report, Silicon Valley surpassed its state-mandated housing goals for residential units in the above-moderate-income category by 2018, meaning homes affordable to households earning more than 120 percent of the area median income. But it met just 20 percent of its goal for moderate-income housing — for those earning between 80 percent and 120 percent of the area median income.

“Someone has to pay the subsidy because you can’t build below-market-rate housing without the subsidy,” Schoennauer said. “People have an aversion to supporting affordable housing in their neighborhood, but what we’re talking about when you say affordable are those people working in our neighborhood.”

Subsidies to spur development of significant amounts of housing for middle earners don’t appear to be materializing anytime soon.

Instead, Hancock sees one of a couple of futures materializing. Either an economic downturn happens where enough residents decide the area is too costly that they leave and prices drop, or the Bay Area ends up like Manhattan, where mostly wealthy people reside in the borough and everyone else commutes in.

“We seem to be headed that direction,” Hancock said. But, he added, the Bay Area is a much more sprawling environment with less reliable public transportation, which “makes our problems really challenging.”

For now, people are finding ways to cope. According to the report, household sizes in Silicon Valley have ticked up, “presumably (at least partially) in response to a lack of available and/or affordable units.”

More young people are staying at home after they graduate from school and multiple generations, even multiple families, are living under one roof for extended periods of time.

People are also enduring hours-long commutes each way to survive. San Mateo is converting part of an old fire station into sleeping quarters for police officers because many of them are commuting two-and-a-half-hours to the Peninsula from places like Oakley, deep in Contra Costa County.

“Families can’t afford to live here,” Fluewelling said. “It’s going to get worse before it gets better, I’m afraid.”

Liccardo would like to see creative approaches to building and adding housing that drive costs down, from more prefabricated or modular construction to a sharp uptick in the number of accessory dwelling units or granny flats going into backyards and garages.

Any change that creates more housing most residents can afford will be a slow process, Schoennauer said, and involve not only building lots more housing at all levels, but improving regional public transportation. First-time homebuyer programs that provide loans to help with down payments could be expanded, he said, with repayments going to fund more loans.

And, he said, lawmakers could look at big changes, like reforming the state’s controversial environmental law, which is often invoked to stop new projects, and the way property taxes are distributed.

“We’ve got to rise to the challenge,” Schoennauer said. “It doesn’t have to be depressing.

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