SAN FRANCISCO (AP) — Almost no one is moving to San Francisco to save money.
They might come for the tech jobs, the comfortable weather or even the artisanal espressos. But average home rent has jumped nearly 15 percent in the past year — to $3,129 last month — according to real estate data firm Zillow.
Across the country, rising home prices have been shifting many Americans into rentals, a trend that has driven up rents. Over the 12 months that ended in March, rents nationally climbed a seasonally adjusted average of 3.7 percent nationally, Zillow reported Wednesday.
The improving economy is the main reason. Employers have added 3.1 million jobs over the past year, an influx of paychecks that is being spent in part on apartment rents. But builders have been unable to ramp up construction to meet the demand, thereby causing an apartment shortage that has fueled higher rents.
“It’s very hard for housing supply to respond quickly to increases in demand,” said Skylar Olsen, a senior economist at Zillow.
Exacerbating the squeeze, rents are rising faster than most people’s pay. This means that all the new jobs are producing more people with money to spend, but rising costs are consuming more of people’s paychecks.
San Francisco epitomizes the trend.
Silicon Valley companies such as Google, Facebook, Apple and Yahoo are making it easier for their workers to live in the city by providing free shuttles equipped with Wi-Fi to cover the 30- to 40-mile commutes to their offices.
The influx of tech money helped fuel an average 14.8 percent increase in housing rent in the San Francisco metro area over the past 12 months. In the nearby San Jose area, the jump was 12.3 percent. Rents average more than $3,000 a month in these areas.
That’s roughly $600 more than rent in the Los Angeles area, $800 more than metro New York City, and $1,000 more than the Washington, D.C., area.
Houses and condos are so expensive in San Francisco that tech employees with comfortable six-figure salaries often have no choice but to rent. Home purchases are often driven by startup companies issuing publicly traded stock, which employees then use to finance a home purchase.
This phenomenon causes both home and rental prices to increase, said Andrew Tam, a data scientist at Apartment List, a San Francisco-based company that helps apartment hunters across the country find homes.
In San Francisco’s Castro District, a median-priced two-bedroom rents for $5,010 a month, Apartment List found. Two-bedrooms go for $4,730 in Nob Hill, an 18.3 percent increase over the past year. And in Hayes Valley, a two-bedroom lists for $5,730, or 14.6 percent more than a year ago.
Tech workers living in the San Francisco Bay area earn an average of $184,309 annually, according to the Joint Venture Silicon Valley.
The influx of technology workers has enabled landlords to steadily raise rents, despite controls designed to protect less wealthy tenants.
Landlords increasingly are evicting tenants for minor violations such as hanging laundry outside or parking bikes in driveways so they can raise rents, said Sara Shortt , executive director for the Housing Rights Committee of San Francisco, a renters’ rights group.
Joe Leung, 42, is among the lucky San Francisco tenants still protected by rent control. He pays $540 a month for a single room in a Chinatown complex. That’s about one-fifth the list price of a studio in Chinatown.
But Leung is worried after his rent recently increased $40 a month. He sees his landlord handing out eviction notices and charging up to $1,300 a month for other one-room spaces in his complex. As it is, he is barely scraping by on a monthly disability check of $1,100.
“If I lose this place, I will be homeless,” Leung said.
Prices are also climbing in cities without the same momentum from startups and venture capital. Rents rose more than 8.5 percent over the past year in Denver, Louisville, Kansas City and Nashville. In many cases, demand for rentals has outstripped the supply, causing prices to rise.
But a few other major cities are seeing a glut of rental properties. Rents have fallen over the past year in six of the United States’ 100 largest metro areas, including Chicago, Minneapolis, New Orleans and Rochester, New York.
More Americans have shifted to renting since the 2008 financial crisis and the housing bust, which caused an avalanche of foreclosures that depressed prices through 2012.
At the end of last year, 36 percent of Americans rented. That’s up from 31 percent before the Great Recession, according to the Census Bureau. Incomes have been rising at an annual pace of 2.1 percent, not enough for many families to save for down payments while paying higher rents.
Still, if one can afford to buy, the monthly costs of ownership remain lower than renting.
Monthly payments from owning a three-bedroom house are cheaper than renting a comparable property in 76 percent of U.S. counties, according to the housing data company RealtyTrac. The analysis released in April examined 461 counties with at least 100,000 people and sufficient housing data.
“From a pure affordability standpoint, renters who have saved enough to make a 10 percent down payment are better off buying in the majority of markets across the country,” said Daren Blomquist, vice president at RealtyTrac.