Advocates and experts have gone on the record to say that inflation is exacerbating the housing affordability crisis in the Bay Area as families do not have as much disposable income to cover cost-of-living increases. An article in the SF Chronicle discussed how, “inflation means a Bay Area resident will spend $4,400 more the same stuff this year” compared to two years ago with goods and services (such as food, transportation, housing, taxes, and healthcare) comprising these increases.[i]
A key question becomes: How different are these increases than in prior years in the Bay Area and to what extent are they driven by housing costs? The indicators from the California Housing Partnership’s Housing Needs Dashboard can help us identify the ways cost-of-living has changed from 2017-2021.
Budget Shortfall Changes by County
In counties like Marin, San Francisco and San Mateo, that have higher area median incomes (AMI) we found that very low-income (VLI) families, meaning those earning less than 50% of AMI, experienced higher increases in expenses relative to their earnings from years 2019 to 2020 than VLI families living in counties with lower AMIs – Contra Costa, Solano. From 2019 to 2020, VLI families in Marin, San Francisco, and San Mateo saw a more than 150% increase in their budget shortfall – a large jump from 2017 to 2019 when VLI families had seen decreases in the gap between earnings and the cost of basic needs in most of the Bay Area’s nine counties.
The pandemic was destabilizing for lower-income families.[ii] The economic recovery does not suggest positive news for VLI families, since while the rate of change has slowed down, overall sticker prices have remained higher than before. The Housing Needs Dashboard shows that housing costs have likely exacerbated the estimated costs of living for low-income families. Our 2019 and 2020 figures show that VLI families saw a mere 4% increase in income while facing increases to their overall budget expenditures of more than 20%.
Impact of Housing Prices on Cost of Living Changes by County
Figure 1. Percent Changes in Budget Expenditures for Bay Area VLI Families from 2017-2021, By County
Figure 1 shows how Marin, San Francisco, and San Mateo counties saw sharp percent increases in certain expenditures, with housing costs rising by 20% from 2019 to 2020. While healthcare costs have remained relatively stable across the past 5 years, housing cost of fluctuated greatly over time and across counties. There were also 40% increases in taxes and 20% increases in miscellaneous costs from 2019 to 2020, such as one-time expenses for shopping and office equipment.
This year has already seen developments that signal inflation further worsening the real costs of living facing families. With families already facing 150% increases in their income shortfalls to meet their basic needs from 2019 to 2021, the situation has surely worsened this last year.
The Partnership is in the process of updating “Who Can Afford to Rent in California’s Many Regions,” which should shed more light on these trends and issues.
The information in the figures included in this blog post comes from the Partnership’s Housing Needs Dashboard Cost of Living indicator. All dollar amounts have been adjusted to 2021 value, as indicated by the Bureau of Labor Statistics’ Inflation Calculator.[iii] Please consult the Housing Needs Dashboard methodology documentation, where we discuss the lagging periods between reported incomes and reported budgets.
Sources
[i] Hwang, K. (2022, April 12). Inflation means a Bay Area resident will spend $4,400 more for the same stuff this year. San Francisco Chronicle. https://www.sfchronicle.com/bayarea/article/san-francisco-inflation-17073956.php
[ii] Fox-Dichter, S. R., Yung Chun, & Grinstein-Weiss, M. (2021, November 23). The destabilizing cost of a pandemic: What COVID-19 meant for renters already getting assistance. Brookings. https://www.brookings.edu/blog/up-front/2021/11/23/the-destabilizing-cost-of-a-pandemic-what-covid-19-meant-for-renters-already-getting-assistance/
[iii] US Bureau of Labor Statistics. (n.d.). CPI Inflation Calculator. CPI Inflation Calculator. Retrieved July 22, 2022, https://www.bls.gov/data/inflation_calculator.htm