San Francisco, Oakland saw biggest COVID rent declines in the US

Two of those three are in the Bay Area: Oakland’s median one-bedroom rent in August was 9.5% below March 2020 — the lowest growth rate of the 50 cities included in the data. San Francisco followed with an 8.5% drop over the same time period.

Minneapolis was the only other big U.S. city still in the red for rental growth, with the median price down 2.5%. All other cities saw growth, ranging from 3.9% for Washington, D.C., to 43% for Tucson, which had the biggest increase.

Many major cities saw rental prices plummet during the first year of the pandemic, from March 2020 to early 2021, as offices shut down, and workers fled for more affordable areas, including out of state. But while others have since rebounded, experts said several factors explain why Bay Area cities are slow to catch up.

“The slow rent rebound in the Bay Area is really concentrated in San Francisco, Oakland, and the Peninsula, markets with both the highest pre-pandemic rents as well as the highest share of remote capable jobs, per research conducted by our team last year,” said Rob Warnock, senior research associate for Apartment List, in an email.

According to U.S. census data, he added, from July 2020 to July 2021 the Bay Area experienced a net decline of almost 156,000 residents, with the highest population decline in San Francisco of 6.3%.

“This translated to a drop in rental demand, a surge in apartment vacancies, and a dramatic drop in rent prices that in some individual cities, remains today,” he said.

Tech companies overall have been slower to bring employees back to the office or pivoted to flexible work schedules. While San Francisco is seeing more signs of life, some companies in recent months have been downsizing or canceling their office spaces, or closing down their offices for good.

Some major tech companies have called employees back to the office on hybrid schedules, including Google, which began requiring that most workers return at least three days a week in April, and Apple, which recently announced that corporate employees would need to come in at least three days a week beginning Sept. 5.

Rent in San Jose, which also declined earlier in the pandemic, was up a modest 6.6% in August since the start of the pandemic — the fifth-lowest growth rate out of the 50 largest cities.

San Francisco is “denser and has smaller unit footprints, two features that housing demand moved away from during the pandemic,” Warnock noted. So as the San Francisco and San Jose markets rebound, he said it’s possible that the type of housing offered in the San Jose area is more attractive to new renters, “especially if they are working remote and proximity to the office isn’t a dealbreaker.”

Outer-lying Bay Area communities have seen bigger growth in rent prices since the start of the pandemic. For example, median rent in Fairfield in August was 21.9% above March 2020, and Santa Rosa saw growth of 17.1%.

Rent in Sacramento, a popular destination for people leaving the Bay Area during the pandemic, rose 23.1% from March 2020 to August 2022 — a rate that put it in the middle of cities nationwide.

Unlike the Bay Area’s biggest cities, other parts of the state didn’t experience such a significant population loss, Warnock said.

“As people moved around, one thing we witnessed universally was a flow of people from higher-cost to lower-cost cities, even within expensive regions,” he said.

In the larger San Francisco metropolitan area — defined as San Francisco, San Mateo, Alameda, Contra Costa and Marin counties — median rent has finally edged just above pre-pandemic levels: the median one-bedroom was $1,969 in March 2020 and $1,970 in August 2022.

Despite the sluggish growth, rents in the Bay Area remain much pricier than most of the rest of the U.S. The San Jose metro — which includes all of Santa Clara and San Benito counties — had the country’s highest one-bedroom median rent in August, at $2,295, followed by the San Francisco metro at $1,970.

In third place was the metro area encompassing Ventura County in Southern California, at $1,951. The New York metro area came in fourth with a median rent of $1,948.

Tight supply helps explain why Bay Area prices have remained so high, Warnock said.

“Despite a softening of the rental market … the Bay Area continues to suffer from a massive housing shortage, which props up prices,” he said. “Open houses may have fewer prospective renters lining up for a showing, but that does not mean that landlords are suddenly desperate for new tenants.”

Apartment List data shows vacancy rates remain below 5% across the Bay Area, Warnock said.

So what is in store for the future of Bay Area rents?

Nationwide, rent growth is decelerating, Warnock said, which is a “welcome sign indicating that the rental market is falling back into its typical, pre-pandemic seasonal trend.” In San Francisco, monthly rent growth in August 2022 was 0.7%, compared with 2.7% in August 2021.

“Last year is proving to be an anomaly, while this year is behaving more normally,” he said. “This doesn’t mean that prices will go down substantially, but rather that price increases should continue slowing for the remainder of the year, unlike last year when they accelerated throughout the fall and winter.”

Kellie Hwang is a San Francisco Chronicle staff writer. Email: Twitter: @KellieHwang

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