Open Letter to Bay Area Homeowners

If you live in the Bay Area, you have probably heard of the rapid rise in local housing costs. If you are settled in the middle of a great mortgage or have your house paid off, you might be wondering how this all affects you.

Let start my response to this by saying I am not a finance/real estate/economics whiz, nor am I psychic. I am just sharing the real-world ways I have observed that these housing costs might affect you.

Rental Property

If you own a piece of rental property, you are going to be raking in the dough by cashing in the new higher rental rates. However, you might also notice a few more unwanted complications:  late rent payments and more people asking to break their lease. It is taking more working hours to cover the high cost of renting. This will mean that “getting the rent by the first” will be tougher for more and more renters. And, as that rental price rises, more renters might need to leave the area for cheaper markets. This may not be able to wait for a lease renewal, hence the broken lease requests.

Neighborhoods

Many homeowners do not like rental properties on their street; the reasons for this range from constantly changing renters to lack of property upkeep. The initial thought is that higher rents will filter out the “riff-raff.” Another thought to consider: more combined households. It is getting very common for multiple households to pool their resources and share a tiny house together. More people = more drama, kids, and cars taking up street parking.

Also, homeowners without a rental property have found they do have real estate they can charge for—extra rooms, backyards, and garages. While renting out a room has been common practice for decades, there has been a huge increase in this recently. I work with many people that have been forced into this arrangement and have to live with strict rules—they can’t even receive packages at the residence!

Business

Speaking of work, if you own a business or manage one, you might notice some issues with employees.  They might be coming in late to work because they have to move to a cheaper area and now commute for hours—yeah hours—to get here. Or, if they still live here, they may have given up their car (and the cost of repairs and insurance) to afford their rent.

Prospective employees might be demanding a higher starting wage and current employees may be working up the courage to request a raise. 

And the Gig Economy is here! More and more employees are holding down multiple part-time jobs (guilty as charged!). They may have to weigh out taking a shift you need covered and a possible shift at another employer—who pays more, which one is closer to home, who pays quicker?

Okay, so this is my two-cents, my reminder to home owners. This real estate bubble might look attractive from a financial standpoint, but it has real world consequences for everyone in the Valley.