A year from now, what will your Monday morning look like?
After your umpteenth consecutive weekend hugging your mother, your friends and complete strangers in poorly ventilated spaces, do you picture yourself pouring coffee in your thermos to begin your bleary-eyed commute into work? Or are you about to begin your bleary-eyed all-staff on the morning Zoom?
The answers to those questions will depend on your job, your income level, your employer and, if you’re lucky enough, your preference. They will also dictate whether the next decade of California’s housing affordability crisis looks radically different from the last.
Within a matter of months, the pandemic-necessitated rise in teleworking has inverted parts of the state’s real estate market in ways housing economists never imagined possible. The median rent in San Francisco has dropped nearly 25% since stay-at-home orders began in March. Oakland, Los Angeles and San Diego have also seen rents drop or at least taper, instantly flattening a decade-long spike.
But in Fresno, Bakersfield and Chula Vista, a San Diego suburb, post-pandemic rent increases have been some of the most significant in the country. The median price of a single family home in California set an all-time-high of over $700,000 four months ago, with some of the steepest increases in the Inland Empire and Central Valley.
The spike has been in part driven by younger professionals fleeing overcrowded and overpriced apartments in urban cores, experts say. That kind of pseudo-exodus has prompted upticks in rent and home prices in many suburbs, exurbs and mid-size cities, including in Napa County, according to Logan Songer, a real estate agent with Coldwell Banker Brokers of the Valley.
The median price of homes sold in Napa County reached $824,500 in November of this year — a 23.5% increase from November 2019, Songer said, citing data released by the California Association of Realtors (CAR). The county reached its all-time median high — $867,000 — in August.
“We have had many people from San Francisco, the South Bay or Marin (County) who were renting, come up into our area to buy and their mortgage is now less than what their rent was,” Songer said. Low interest rates on mortgages and desire for more space — to use as a home office, maybe, or as a playroom for children doing virtual school — have only more encouraged home buying in comparatively-less expensive Bay Area counties like Napa, Songer said.
With the prospect of widespread vaccination on the horizon, private employers, local governments, urban planners and state officials are reluctantly playing the role of housing crisis Nostradamus: Is what we’re seeing in 2020 an aberration or a new normal?
“The long term piece, that’s the million if not billion dollar question,” said Jeff Bellisario, executive director of the Bay Area Council Economic Institute.
Nobody really knows the answer. But here are our best guesses.
OK, so just how prevalent will remote work be in the future? Are companies really going to let people do this forever?
Probably pretty prevalent. The number of days California workers can stay home in sweatpants will likely rise even after the water cooler is no longer a potential superspreader site.
Right now, an astounding 40% of the U.S. labor force is working remotely full time. Firms, nonprofits and even some government agencies have generally discovered productivity has not dipped, and that workers for the most part prefer complaining about Slack and Zoom to complaining about their hour-long commutes. Plus, companies can save on office space and other expenses.
A national survey from the Federal Reserve Bank of Atlanta found that employers expect the number of work from home days to triple after the pandemic. That shift is likely to be more acute in California than in other parts of the country because the state’s industry mix (e.g. tech and professional services) is generally more adaptable to remote work. Facebook and Google have said they plan to offer more flexible work from home arrangements through 2021 and beyond. Twitter said it will allow staff to work from home permanently if they wish.
Rachel Mau, a Benecia-based realtor with RE/MAX Gold.Mau, worked with an employee from Google who recently moved to Napa County, she told the Register in September. Now telecommuting, the employee “can work anywhere,” Mau said. Before the move, the Google employee had been spending $5,000 a month on an apartment in San Francisco; in Napa County, she’d purchased an almost-million dollar property, according to Mau. Her monthly mortgage payment is $4,500.
“It’s kind of incredible how the market has shifted,” Mau said in September.
But while more and more California companies will compete for talent by offering work-from-home perks, it’s unlikely a huge chunk of the workforce will be completely untethered from the office. Google just bought more office space in several cities, and many firms believe some employee to employee interaction to be essential. Plus, many office tenants are locked into long-term commercial leases.
“All of these tech companies have built these campuses to try to maximize interaction, and they expect to grow their employee head counts,” said Bellisario.
Other California-based companies have seized on remote working to simply relocate their headquarters out of state entirely. In the last nine months Oracle, Hewlett Packard and perhaps most symbolically commercial real estate company CBRE have trumpeted plans to jump to Texas.
Companies that have helped fueled the jobs-housing imbalance besetting California cities could have a much smaller California footprint post-pandemic.
Won’t people just work from home more in cities once bars and restaurants and the other great things about cities open again?
Louis Mirante, legislative director for California YIMBY (Yes In My Backyard), thinks so.
While he acknowledges there may be some marginal out-migration from denser urban centers because of telecommuting, he argues Californians will still want to live in apartments in major cities because of the professional and social benefits conferred by urban life.
“If you use price as a signal as to where people want to live, it’s still in places like San Francisco or Oakland,” said Mirante. “If you look at where price is telling economists where folks want to live, it’s still dense, urban areas.”
Even after the post-pandemic price drop, at $2,377 for a two-bedroom the median rent in San Francisco is still the most expensive of any major city in the country, according to Apartment List.
But while urbanists like Mirante remain confident that demand for denser housing environments will rebound once people aren’t scared to share apartment building elevators anymore, there is evidence to suggest that the pandemic has unleashed a desire for more space that will outlast the virus.
Many of the homebuyers sending single-family-home prices across the state skyrocketing are millennials who, now in their 30s, are taking advantage of record-low interest rates to finally buy a house. While the suddenly pressing need for a backyard where a COVID puppy can happily frolic is the proximate reason, younger would-be homebuyers are also looking for the spare bedroom they can convert to a home office when telecommuting more frequently in the future.
“You’re now seeing many of the millennials getting to the age where they’re getting married and starting a family, and you see the coronavirus hit and it gives them a reason to move out to the suburbs,” said Oscar Wei, an economist with the California Association of Realtors. “You’re seeing a little more demand there for suburban homes.”
The rise of remote work could forever expand what “suburb” really means. If you only need to come to San Francisco once a week, Sacramento — a two hour plus train and bus ride away — is a feasible and much cheaper place to call home. If you only need to reach downtown Los Angeles once a month, the thought of living in Bakersfield is more palatable. It’s not surprising home prices and rentals are spiking where affordable single-family homes are within a long but ultimately doable drive of a major job center, as long as the drive is rare enough.
Pre-pandemic, Songer said, there was “a little bit” of a workforce living in Napa making the commute to San Francisco or Silicon Valley.
“There were a few people who didn’t mind the commute or were already working one or two days from home,” he said. “But certainly not to the extent that we saw (move to Napa County) this year.”
What about people who can’t work from home?
Workers in jobs that are more likely to offer telecommuting in the future skew higher income. Workers without that luxury tend to skew lower on the income ladder and are more likely to be Black or Latino.
Despite the dramatic dip in median rent in places like San Francisco and Los Angeles, experts say the rental market in lower-income communities has only softened slightly. While rents may not be rising as much as they used to, the housing crisis for these households is in many ways more dire as the pandemic-induced recession has caused widespread job losses and wage reductions: Even if your rent drops 5%, you’re in bad shape if your income drops by 50%.
“Let’s keep in mind there’s a whole segment of the housing market that won’t see a big change in rent,” said Gloria Bruce, executive director of the East Bay Housing Organizations. “I don’t really think remote work does much for people who are overcrowded, where they were already spending 50% of their income on rent.”
Ironically, Bruce says it’s possible the rise of remote work could unleash a new wave of gentrification in the far-flung suburbs lower-income households have fled to over the past two decades. Places like Vallejo in the Bay Area, or Palmdale and Landcaster in Southern California, could see an acceleration of a pre-pandemic trend: an influx of higher-income remote workers searching for more space.
“People of color and poorer people keep being the ones who have to make room for the housing market desires of those who are higher up the income scale,” said Bruce. “It’s just another version of what we’ve been seeing in various ways for decades.”
What about carbon emissions?
It sounds like anathema for urban planners: Surging demand for larger homes farther and farther away from cities, the very definition of sprawl. For the past 50 years, California has primarily built new single-family housing beyond its suburbs instead of apartments closer to its cities, resulting in horrific commutes and rising greenhouse gas emissions.
But is sprawl really sprawl if you’re working from home half the time?
“I think (remote work) is probably the single most important emission dropping factor if we got serious about it, next to (building energy) efficiency,” said Dean Florez, a member of the California Air Resources Board, the agency in charge of meeting the state’s ambitious emission goals.
Florez points to the remarkable drop in driving that occurred in the weeks following the March stay at home order. A UC Berkeley study found that in the Bay Area alone, regional carbon dioxide emissions dropped by 25%, mostly due to less road traffic. The Metropolitan Transportation Commission, the Bay Area’s regional public transit governing body, recently voted to mandate large employers keep 60% of their workers away from the office to meet greenhouse gas goals.
Incentivizing remote work via tax credits or other policy instruments may also be an easier sell to state lawmakers than forcing cities to allow more apartment buildings near transit, an approach that has generated a whirlwind of backlash in recent years.
While a drop in greenhouse gas emissions seems like a natural benefit of more telework, research suggests it’s not the silver bullet it may appear initially. When employees work from home, residential energy use goes up substantially, and large single-family homes tend to be significantly less energy efficient than modern office buildings.
Should the state change its approach to housing because more workers will be remote?
If you believe remote work will only have a marginal effect on where current and future Californians want to live, you’re in the governor’s camp.
Jason Elliott, senior counselor to Gov. Gavin Newsom on housing and homelessness, doesn’t think telework will permanently blunt demand to live in the state’s denser, urban environments.
“When life returns to whatever our new normal is, people are still going to want to be in cities for the same reason they wanted to be in cities in January 2020,” said Elliot on Gimme Shelter, the California Housing Crisis Podcast. “Fundamentally our human nature to be connected hasn’t changed.”
Elliott also argues that shifting state housing policy away from building more densely near transit and towards accommodating telework in the suburbs is fundamentally unfair to lower-income workers without the option to work from home.
But if Elliott is wrong, the rise in telework presents new winners and losers in the state’s housing crisis, depending on who you are and where you live.
For middle and higher-income earners stymied by years of high rent in costly urban centers (think San Francisco, Silicon Valley, L.A. and San Diego), the telework revolution will be a boon. If you choose to stay in your city, rents will be cheaper. If you choose to buy a home, you can expand the geographic radius of your home search to incorporate more affordable markets.
For renters and would-be homebuyers in places that used to be considered too far to commute from (think Sacramento, Bakersfield, Fresno — maybe even Napa), the news is not so good. Rents and home prices will continue to rise, barring an unlikely boom in new homebuilding.
And for those at the bottom of the income ladder — about 1.3 million Californians — the constant pressure to find a more affordable place to live will intensify in places it was already threatening. Songer, reflecting on the changes in Napa Valley’s real estate market since the late spring, said the price upticks were “obviously affecting affordability for first-time buyers.”
“If somebody’s selling you remote work as a solution to California’s housing crisis, they’re selling you snake oil,” said YIMBY’s Mirante. “And everyone should be on the same page about that.”
Register reporter Sarah Klearman contributed to this article.
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SARAH KLEARMAN’S MOST MEMORABLE NAPA VALLEY REGISTER STORIES OF 2020
Sarah Klearman's most memorable Napa Valley Register stories of 2020
On a Sunday in mid-March of this year, I stood watching as Gov. Gavin Newsom announced the coronavirus had arrived in California - and that the state would soon shut down to prevent its spread. He began listing impacted businesses and industries; the moment I heard 'wineries,' I knew I was on the clock.
It feels now like that press conference, held just before the nation plunged deep into lockdown, was a clear demarcation of 'before' and 'after.' In both my professional and personal life, I've sometimes struggled to come to terms with just how much has changed this year, and with how much has been lost: 300,000 dead from the coronavirus in the United States. So many small businesses seem to be facing extinction. It's enough to make my head spin, and that's not even touching upon the wildfires that ravaged Napa County this year.
So I've been making sense of everything that's happened to our community through my work at the Register, because my reporting this year has been all about listening. I've lent my ear to anyone who will talk to me: folks made homeless by the wildfires; communities, including the valley's agricultural workforce, disproportionately impacted by the virus; business owners and their employees who rightfully fear for their future. This list - my top five stories of this year - is all about them.
Twin economic crises - the pandemic and the wildfires - threaten the housing security of a substantial number of renters in Napa County. More than a third have asked for help.
Low wages, cramped living conditions and the fluidity of the agricultural workforce make the farm worker community particularly prone to COVID-19.
The homes at Spanish Flat Mobile Villas burned to the ground. A number of uninsured residents now have no where else to go.
Tasting room closures and restaurant cutbacks have sent a shock through the valley's workforce.
CARTOONS OF THE YEAR, 2020
Cartoons of the year, 2020
Check out the best work of 2020 from the eight editorial cartoonists distributed by the Washington Post Writers Group.
Matt Levin is a reporter for CalMatters, a nonpartisan, non-profit news organization covering the major state issues in California.