Property developer Danny Haber of oWOW has seen it all. Based in the greater Bay Area, in Oakland, his company approaches the California housing crisis in a unique fashion. With excess demand characterizing the Golden State’s property market, oWOW focuses on the under-catered segments, notably the middle-income earners. In 2019, the US property market continued a robust recovery as median home prices spiked to $316,000.
In California, those numbers are markedly higher at $605,280 (California Association of Realtors). In San Francisco, the median house price is around $1.6 million, while the median price in the Bay Area for 2019 was $928,000. Naturally, California like New York is an outlier in the US housing market and warrants extra special scrutiny. Haber attributes several factors which have given rise to excessively high property prices in California, including the following:
- Silicon Valley success has led to a veritable influx of highly skilled tech aficionados who command extraordinarily high salaries. Major technology companies like Facebook, Google, Twitter, Microsoft, and scores of start-ups are located in Silicon Valley, California. Their employees earn a small fortune, and this places huge demand on the limited housing supply which is continually in arrears. Rather than building more affordable housing, projects are stuck in limbo, awaiting regulatory approval vis-a-vis zoning rights, licensing, and budget allocations. Until demand and supply meet, excess pressures will be brought to bear in the 9 county Bay Area.
- Proposition 13 is a California state legislature-approved measure which limits property tax increases to a small percentage every year. This means that existing homes are not subject to the same taxation as newly built homes. This serves as a disincentive for homeowners to move to different homes or different counties, and to keep their properties in the family. Were it not for the excessive appreciation of home prices in California, Proposition 13 may not have been such a big deal.
- Local government provides tax incentives to big business, and this has facilitated a massive shortfall in available housing.
How Bad Is the Problem in the Bay Area?
To be fair, property prices started leveling out between 2018 and the present day. As the above graphic represents, the median house price in 2018 was $950,000, and it dropped to $928,000 in 2019. This represents a stabilizing of the market, which is in stark contrast to the meteoric growth between 2009 and 2018. So severe is the problem, that the 94027 ZIP Code retained its 3-year leadwith the most expensive median sale price, currently at $7,050,000. The problem in the Bay Area has become so chronic that 46% + of millennials intend to leave within the next couple of years. Other property markets like Austin Texas; Seattle, Washington, and Portland, Oregon are highly desirable and available at a fraction of the cost.
However, all is not lost as prices are slowly consolidating around a lower median price point. oWOW is particularly active in this arena by providing luxury-style living apartments below market price. There are notable examples of completed projects by the company, such as 674 23rd Street, where 24 completed units were fully leased within a month. This particular community is a live/work housing development where tenants from across the spectrum coexist. These include teachers, entrepreneurs, artists, managers, et cetera. The diversity helps to build community, and this is precisely what the vertically integrated management team at oWOW is looking to do.
How can Private Developers make a Difference in the Bay Area housing market?
The Danny Haber interview on CEO World highlighted the challenges currently facing the property market in the greater Bay Area. Many developers tend to focus their energy on keeping prices at inflated levels by building for the high-end tiers of the market. By allocating resources to the construction and development of beautiful homes at cut-rate prices, Haber has made a name for himself and won praise from leading personalities. These include Elaine Brown, formerly of the Black Panther Party, Annie Campbell Washington, Oakland’s vice mayor, and Lowney Architect. This B2B and B2C company builds net new housing units for tenants and modular units for developers, and thanks to a system of magic walls and pre-fabricated designs, it is possible to pass cost savings directly onto consumers in the form of lower prices.
By reinventing construction, oWOW can roll out repeatable designs at a rapid pace. These pre-made units can easily convert single bathroom/bedroom apartments into multi-bedroom/multi bathroom apartments, all within the same square footage. These types of adaptable spaces are geared towards people on a budget and a specific price point. Haber’s company scopes out empty buildings or damaged buildings, and completely remodels them up to code, using the latest rehabbing and renovation systems and technologies. By focusing on premium housing at an affordable price, this innovative developer can stay ahead of the competition and provide valuable housing in the process.