Solutions to Santa Clara’s Housing Crisis

How to fix Silicon Valley’s housing shortage

Rent and home prices in Santa Clara County are out of control. Last year, the median home price in Santa Clara County was just over $1.25 million—that’s roughly 24 years of the university’s tuition.

For investors and homeowners, price appreciation has been a tremendous source of wealth generation. The influx of tech millionaires and those seeking fortune in the Silicon Valley has steadily increased the prices of real estate over the past decades. As per Zillow, in 2010, the median home price in Santa Clara County increased from $644,000 to a staggering $1.25 million. 

Close to campus, pricing isn’t any better. Over the fiscal year of 2019, home prices in the county depreciated by 6.4 percent, but this hasn’t resulted in lower rents for students. RealSource Property Management, one of the primary suppliers for off-campus housing, reacted to the cooling real estate market by raising rent by 700 basis points for the upcoming academic year. A difference of over 13 percent begs an important question: How did things get so bad?

Population growth and restrictive government regulation have allowed housing prices to balloon, with some groups actively fighting to keep prices artificially high. 

The math is simple: expansion in population with little housing development inflates prices. Particularly through municipal governments, restrictive regulation has prevented new units from being built. 

To see how regulation can artificially inflate the housing market, let’s look to the immediate community. Students may remember when in both 2014 and 2019 when the city of Santa Clara attempted to limit the number of non-blood residents to five per home. 

In plain English, this regulation would forbid student groups more than five to live in a house. If passed, students would be displaced, and rent would increase. 

Homeowners are eager to increase the value of their assets at the expense of those most vulnerable to price increases. Students are at the mercy of the market: unlike other groups, students must live near campus. 

Unfortunately, this issue surpasses our immediate community. For example, the Mountain View Voice reports of plans to convert a local office park into high-density housing units. 

In Mountain View, developers face struggles due to a “requirement to set aside 15percent to 20 percent of the units as affordable housing.” Furthermore, fees on the municipal level were expected to exceed $100,000 per unit. Rather than proceeding to build, the project is now stalled, preventing over 9,000 housing units from being completed. These 9,000 units could have assisted in housing thousands of people, Instead, they will house none. 

By wielding the municipal government as a weapon, homeowners protect their assets and actively take steps to prevent housing growth. 

To fix the problem, change must happen at the municipal level. Easing zoning laws and lightening fees will open the door to new development in the area. Allowing more buildings in Santa Clara County will dramatically decrease the housing price in the county. 

As we have seen, building has become prohibitively expensive and difficult for developers; providing a more business-friendly environment will allow more housing units to be created, decreasing the cost to buy and rent in the area. Swig Residence Hall, built in 1966, is still the ninth-tallest building in the county. By relaxing regulation, we could see bigger and better buildings enter the community. 

At first glance, decreasing housing prices look like a punch to the gut for homeowners. If they look deeper, they will realize that controlling the market puts them at risk for a much worse fate. 

If Silicon Valley remains unnaturally expensive, the best and brightest talent will move to cheaper zip codes. Corporations will leave the bay area seeking more business-friendly environments without the allure of fame and fortune to seek. 

Should corporations leave Santa Clara County, the local economy risks long-term damage. Housing markets are especially sensitive to changes in the economy at large. If the economy weakens, the housing market around it will follow suit. Rather than a small decrease in the value of their homes, equity holders risk losing much more value. Homeowners must take a small hit today to prevent a much larger hit tomorrow. 

Santa Clara County used to be a sleepy farm town, but much has changed since its inception. Now a tech powerhouse and one of the wealthiest counties in the world, it’s prime time to transition its housing to reflect the county’s growth. Suburban Santa Clara needs to grow into an urban town, even if it temporarily hurts housing prices in the area. 

Jake Souleyrette is a junior finance major and copy editor.