The price of something is meaningless on its own. It’s only significant when we compare it to the income of the people who need to buy it. Rather than obsessing over the price of rents in San Francisco, maybe we should be framing things in terms of the city’s affordability.
The Global Cities Business Alliance, a newly formed non-profit focused on the emerging importance of city government in economic policy, just released a study about housing costs in 15 cities around the world, including San Francisco.
While we of course had the highest rents of the 15 municipalities (using 2015 averages) — beating out even London, Hong Kong, and Abu Dhabi — we split the difference in terms of affordability. In Beijing, for example, the average monthly rent is only $789. But it turns out that’s nearly 123 percent of the average household’s monthly income.
In San Francisco, the average household paid out 50.5 percent of its income to rent. That’s pretty bad; worse than London, Paris, and Sydney. But New Yorkers paid more than 63 percent, so it could be worse. In fact, San Francisco is right in the middle of the list, flanked by seven more affordable cities but seven pricier ones too.
(Of the cities surveyed, only Boston, which has some of the highest rents in the US but also some of the highest household income, keeps prices to the prescribed 30 percent of monthly expenses, although Sao Paulo comes close.)
More illuminating: GCBA estimated that enticing workers to risk San Francisco’s housing market runs up wages 2.14 percent across all city employers. While that doesn’t sound like much, it still adds up to over a million dollars a year, which is never a number to sneeze at.
And the report estimates that if we could just hold housing prices to a mere 10 percent increase every year (right now they’re up 33 percent just from the period the study was conducted), the increase in consumer spending could buy 32,000 new jobs.
Of course, that does remind us: This data is out of date. GCBA used a 2015 rent average of $2,824/month. Today, Rent Jungle estimates the citywide average as $3,770/month. Have wages kept up?
SFHIP projects that the median household income in 2016 is $84,160 a year, barely more than $7,000 a month. If accurate, that would mean rents have crept up to 53 percent of monthly pay just since January 1. They’re not Beijing numbers, but it’s still a worry. Better start counting your pennies.