How do housing prices increase, exactly?

This was written by Alfred Twu and originally posted on the SFBARF Google Groups thread. The table he made is so helpful for thinking about how exactly rents rise and what kind of people live in what kind of housing, I thought it deserved a wider audience than just our discussion group.

A lot of people seem confused about how rents rise. They think that landlords just make numbers up out of thin air, when actually rents are determined by the income and preferences (or, more specifically, the willingness to tolerate crowding) of the population doing the renting. — Sonja Trauss

I was talking about housing with various folks this past week and one topic that came up was how there’s opposition to market-rate housing with the argument of “who can afford it?” (this is especially common here in Berkeley).

However, affordability is a factor of two things: income and amount of living space needed. For various reasons, people in the Bay Area seem to be much more willing than the average American to share living space…

Below is a chart of several common household types in the Bay Area. Note how low on the affordability ladder the idealized two-parent, two-child household with solid upper-middle-class jobs falls.

Normally, if an American city became unappealing to middle class families, it would hollow out and collapse. However, the Bay Area has figured out a way to have a strong economy without having to raise its own middle class children, by attracting young people from elsewhere. While it might work economically, this understandably terrifies a large number of people in a very visceral way.

I think this is a big part of the opposition to upzoning single family zones: If some people consider a single family house with yard the only type of housing they’re willing to live in, no amount of apartments or ADUs is going to help their situation.