MCLEAN, VA - Freddie Mac released its Insight for April, which uses the example of San Francisco to explore where low- and middle-income families live in high-cost metros, and how well. Even the highest-cost cities need a full complement of middle-income workers -- police, firefighters, schoolteachers, accountants, and the like -- in order to function.
The March Insight provides a ZIP-code-level look at some of the factors that drive the location decisions of ordinary families trying to live in one of the most expensive metros in the U.S. Can they buy a house or must they continue to rent? How long and expensive is their commute to work? Are high-crime and low-quality schools part of the price of living in an almost-affordable pocket of the San Francisco metro?
The overall cost of living in the San Francisco metro is roughly 50 percent higher than the national average. But housing stands out. The median sales price of a home in the U.S. in 2015 was just over $200,000. In San Francisco, the median sales price was $700,000 -- more than three times as much. The median asking rent in 2015 in San Francisco was almost twice the median for the U.S.
Salaries in San Francisco are higher than the U.S. average, but they don't make up for the higher cost of housing, especially for lower-income service workers.
The median family in San Francisco spends 32 percent of its income on housing, putting it near the high end of the U.S. distribution; however, these affordability metrics don't identify where a family can live, buy or rent, in the metro area. That decision involves tradeoffs between the cost burden of housing, the time consumed in commuting, and the quality of the neighborhood a family chooses.
Where service workers live, and how well
Despite the high cost of living in San Francisco, the share of service workers in the San Francisco area is similar to the share in the rest of the U.S.
A ZIP-level analysis reveals that service-workers in San Francisco tend to cluster in three types of locations:
In San Francisco: These areas provide easy access to the central business district and the amenities of city life. Two-thirds of the residents are renters, most likely unmarried or married without children. Crime is relatively high in these areas.
In the near-East Bay: Service workers living on the western border of Alameda County can use the Bay Area Rapid Transit (BART) system to commute to San Francisco without the expense of a car and parking. Two-thirds of the residents are renters; crime, poverty, and the unemployment rate are very high; and school test scores are low.
In the distant-East Bay: BART provides limited service to northern and eastern Contra Costa county. This is long-car-commute territory. In exchange, homeownership is higher and crime and poverty are lower. However, school test scores are low.
Where will the next generation of service and middle-skill workers come from?
Many low- and middle-income families in the San Francisco metro are "legacies." They bought their homes decades ago before housing became so expensive. Many wouldn't be able to move to San Francisco today.
Freddie Mac's Single-Family and Multifamily businesses have been working with city and county governments, lenders, and developers to address the challenges of affordability in the San Francisco metro area.
Sean Becketti, Vice President and Chief Economist stated, "The nature of the San Francisco Bay Area's urban ecosystem will be shaped in large part by how it reacts to the likely net loss of lower- and middle-income families over the next few decades. City and county government programs to subsidize or otherwise sustain housing affordability for lower- and middle-income families will play an important role in shaping the future of the Bay Area."