John, you are essentially correct regarding the torrid rental market in the Bay Area. Job growth is outstripping housing supply here, and really has (statistically speaking) since the 1970s. This is compounded in Berkeley (where I work as a housing planner) by the state legislature's pre-emption of strong rent control (vacancy control on rental units) in 1996. Landlords are finding that if their units come vacant they can jack up the rents on vacant units 15 percent a year through 1998 in compliance with state law; after January 1, 1999, they can seek "market" rent. In terms of housing programs, this means that the Section 8 program is having great difficulties retaining landlords and finding new ones for Section 8 tenants (whose incomes are at or below 50 percent of the area median income - $22,150 for one person, $25,300 for two people, etc.). Landlords can do better in this housing market renting to college students and can afford to skip Section 8. Under strong rent control here, the situation was the reverse (because Section 8 units were exempt from rent control). This has directly led to a decline in "low rent units." Perhaps not a decline in absolute numbers of units, but in the number of units rentable at a given price, this is definitely the case. Using Rent Board data for our recent draft homeless housing and services plan, we figured out here that there were some 10,000 rental units in Berkeley in 1990 renting at or below $400; 6 years later (1996), there were 1,300 such units. The fact that the federal government has reduced to a trickle the supply of new public housing units and Section 8 certificates or vouchers means that there is very little new assistance out there for folks who could really use it to stay afloat (bad El Nino joke there). This trend was begun by Reagan, and has been continued by the Republican congress (and a lack of real passion for urban policy from the Clintonians). Berkeley has a rental removal ordinance that prohibits removal of housing units in town; but other communities in the Bay Area rezone residential housing and land in response to non-residential development pressures (read: "fiscalization of land use" in the wake of prop 13) and then demolish housing (often apartments) to make way for jobs that increase the traffic on the region's freeways because people have to live 80 to 100 miles away in order to own housing, etc. The processes you've identified compound this exurban trend in northern California (including the Sacramento region). I haven't heard that the housing market has cooled at all resulting from the "Asian flu," especially if the San Francisco Examiner is to be believed. I tend to think it would cool nearly overnight if Greenspan and the FOMC raise the prime rate anytime soon. I leave it to others to read those tea leaves. Cheers, Tim Stroshane
