Updated 07/29/2025 This is updated as the economy and situations change.
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Local Bay Area rents recently have declined slightly depending on city and location. In Solano County, the least expensive apartment rentals were hit the hardest, averaging a 10% price decline over the past year or two for asking rents on current vacancies. Larger, nicer, single-family homes saw about a 3% price decline in asking rents over the same period for current vacancies. This is mostly due to a small drop in population, creating an easing in the housing shortage. It’s all supply and demand.
What is affecting rents today, in order of relevance:
The Bay Area population has declined about 20,000 people a year from 2020 to 2025. This population decline is likely to continue due to an exodus of large employers and retirees. Moving forward this needs to be combined with a significant decline in immigration. All this while the number of homes continues to grow slightly. The shortage of housing that existed till now is going away quickly. Until recently, rents have been at the upper limit of their affordability. Now, rents are being influenced by supply and demand. If rental vacancies increase and are unfilled for longer periods of time, rental prices will continue to decline.
The local economy plays a role. When industry moves into an area creating jobs, the economy improves, population increases to fill the jobs and there’s a strain on the existing housing market, causing both home pricing and rental pricing to go up. However now we’re facing an exodus of industry, causing the opposite effect.
Interest rates: Currently, monthly mortgage payments on a freshly purchased starter home with little down are around 1.2 times what rent on the same home would be. Example: what might cost $3,500 a month to buy would cost around $2900 a month to rent. When you add in the tax advantages of buying it’s often cheaper to buy a starter home than rent one. Any time this has happened in the past, where it’s cheaper to buy than rent, either the cost of homes needs to go up or the cost of rent needs to go down. If interest rates come down significantly, some renters will choose to buy, adding slightly to rental vacancies. Then again that will likely bolster home sale prices.
If government intervention changes, it will grossly affect the rental market. Government rental assistance programs such as section 8 housing pay rent to landlord’s on rentals that might otherwise be vacant. This lack of vacancy keeps both rental prices and rental property values higher than they otherwise would be. As long as the section 8 housing program continues to be funded it will bolster the rental market and keep rents higher than a free economy market would do.
Although the following is true, the market is changing so that an abundance or lack of rental vacancies will affect rental prices more than anything else. Government restrictions on rent increases, different forms of rent control, designed to keep rents low, often provoke landlords to raise rent as much as legally possible every chance possible, because where these government restrictions apply, a landlord can only raise rents once a year and then is limited to a small increase so if the annual opportunity to raise a rent passes, it is lost forever. Many a landlord otherwise willing to not raise rents, thinking they can always catch up tomorrow, now raise rents annually knowing they could never catch up if they pass on the opportunity. Although the intentions of government intervention in the rental market is to keep rental housing affordable for all, is likely one of the larger causes of skyrocketing rents and slum housing.
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