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Oakland Doesn't Have Nearly Enough Housing for All Those New Uber Employees

But that could change, fast.

SLIDESHOW

View down Broadway, future address of Uber's latest office.

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Courtesy of Ralph McLaughlin/Trulia.

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When news of Uber’s acquisition of the Sears building in uptown Oakland broke Tuesday night, one observer quoted in the Business Times marveled: “Oakland just changed. Wow.” In the flurry of retweets, you could almost feel an entire city hyperventilating. Oakland mayor Libby Schaaf called the ride-hailing company’s commitment to bring between 2,000 and 3,000 employees to the East Bay city “a game changer.” And that may have been an understatement. Come 2017, when Uber moves in, the company will become not only Oakland’s largest tech employer, but its largest employer that isn’t a government entity or hospital, accounting for 3.1 percent of the city’s jobs. 

No tech company can make a move in the Bay Area without setting off new round of concerns about gentrification and displacement. But this one has stirred the hornets' nest more than most. Just last week, a report from real estate site Trulia ranked Oakland as the ninth least affordable city in the nation. So what happens to overall affordability when a major employer comes to town? If Oakland's dynamic starts to mimic San Francisco's, are we headed for an even bigger crisis? The short-term answer: Hella yes.

Uber estimates that in about two years, roughly 25 percent of its Oakland employees will live in the East Bay (and it has said that about one-fifth of its workers already do). Assuming the biggest-impact scenario, if 3,000 employees go to work in the Sears building, that means 750 would live in the East Bay. Subtracting the one-fifth who already live there, that leaves us with 600 brand-new East Bay residents. 

Where will they all live? Oakland has been producing new housing at a rate of about 615 new units per year, starting in 2012 and including projections for construction that will wrap up in 2015 and 2016. Right now, the city has 1,250 units under construction, all of which are slated to be complete by the end of 2016, according to Rachel Flynn, director of Oakland’s Planning and Building Department. Discounting the 18.9 percent of those units that are affordable—and thus less likely to be rented by tech employees—that leaves 1014 market-rate units.

That actually sounds pretty good, but Trulia housing economist Ralph McLaughlin points out that those units are already absorbing the demand that existed before Uber’s announcement. Because of the housing shortage, he says, “Anything that does get built is basically already accounted for. To meet this extra demand that may come from an Uber expansion, additional units would need to be added on top of what is already approved.” The biggest problem is that Oakland, like San Francisco, has been underproducing housing for a long time. Between 2007 and 2014, the city built a measly 28 percent of the units it needed to keep pace with projected population growth, according to the Association of Bay Area Governments’ Regional Housing Need Allocation.

Of course, new Uberites—or is it Uberers?—wouldn’t only look to Oakland for housing. Their new office is poised right above the 19th Street BART station, and could even get an entrance straight from the subway. To see how much housing neighboring towns are likely to produce, McLaughlin compiled all the building permits approved in the past two years for the potential apartment-hunting grounds of Alameda, Albany, Berkeley, Emeryville, Piedmont, and Oakland. Unsurprisingly, Oakland and Berkeley account for the bulk of the permits (Alameda and Piedmont are the slackers of the bunch). All six cities approved 2,500 units in about two and a half years, from the beginning of 2013 to mid-2015. Using data from the Department of Housing and Urban Development, McLaughlin graphed the permit counts for us, and found that about 1,000 pemits got through in all six cities from 2014 to 2015 (see the second image in the slideshow above). If you assume—with some very back-of-the-envelope math—that 600 new Uber employees will support 100 other workers in the area, that’s 700 households that need housing on top of the 2,500 permitted in the last two and a half years. “These cities collectively would have to increase housing production by about 28 percent,” says McLaughlin, to house new tech employees without turning them into a drain on everyone else’s housing need. 

But don’t start packing your bags for Richmond yet, Oakland dwellers. The good news is that Uber’s arrival could unstick some of Oakland’s stalled pipeline. Flynn, Oakland’s planning director, name-checks several big projects that have permits in hand but haven’t started building because of market conditions, such as the 435 units planned for the Bay City Chevrolet site on Broadway. Oakland’s comparatively lower rents have made it a less attractive place to build than San Francisco, which commands between $6 and $7 per square foot in monthly rent, compared with Oakland’s $4 per square foot. As a result, even entitled projects can sit for years, waiting for investors who will pull the trigger.

In other words, Uber’s bet on Oakland could spur investors to bet on Oakland, too. “I think more of these projects will get built than would have because of financing,” says Flynn. “Markets will say, you have this new demand coming in and they have higher incomes. Therefore they can pay the higher rents we’ll need to justify to get buildings constructed.”

Flynn sees it as a good sign that a greater proportion of the units under construction now are market rate (a contention that Oakland housing activists would probably scoff at). Of the 765 units built last year in Oakland, a full 75 percent were affordable units funded with subsidies. By contrast, 18.9 percent of the 1,250 units now under construction are affordable—and that decrease is actually a sign of a more stable market. "During the downturn, really only government-subsidized projects got funded," says Flynn. "Now we're starting to see the results of a stronger market."

That's a healthier situation, she says, because "if you don't build market rate, people will start to look at existing housing stock and buy that up and renovate it, rather than build new." Adds Flynn, "We'd rather people get to build new. The more people build new, the less displacement there is."

 

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