An Affordable Housing Crisis Amid Wealth and Plenty in Los Angeles and Silicon Valley

Mind-boggling amounts of wealth have been created in California’s Silicon Valley since computing and electronics pioneers invented the first integrated circuit, or microchip, the first operational version of which was produced at Fairchild Semiconductors in Silicon Valley in 1960. But that’s just for starters. Home to Hollywood, businesses in Los Angeles County in recent years contributed even more to California’s economy, which would be the fifth-largest in world were the state a nation unto itself, according to analysis of the latest US Census Bureau data. 

Yet homelessness abounds amid all that wealth and plenty, as Californians continue to struggle to deal with a longstanding shortage of affordable housing. It may be difficult to comprehend how a young Silicon Valley software professional can earn US$ 75,000-100,000 a year or more yet find that he or she lives in a car, van or recreational vehicle (RV), but that’s become commonplace in the world’s high-tech hub, and the situation is equally, if not more, difficult just north in San Francisco. The median rent in the Silicon Valley city of Mountain View, home to Google’s Googleplex worldwide headquarters, almost doubled to $4,151 a month since 2010. That’s nearly triple the national average, according to data from online real estate search company Trulia. The median home value is $1.8 million, up from $750,000 ten years ago, according to another online real estate service, Zillow. 

With the number of people living in vans or recreational vehicles (RVs) soaring, Mountain View’s city leaders recently voted to ban overnight RV parking. “With house prices out of reach, where will the van dwellers go?,” asks a Bloomberg reporter. “This is the epicenter of a Silicon Valley tech boom that is minting millionaires but also fueling a homelessness crisis.” 

Finding affordable housing is just as difficult in Los Angeles (L.A.), where monthly rents average $2,685, according to Clean Energy Solutions, which recently launched a program to help address the issue. One of the fastest growing solar energy installation and energy efficiency companies in the US, CES intends to build 1,000 so-called accessory dwelling units (ADUs), also known as garage conversions, “granny flats” or “in-law apartments,” across L.A. during the program’s first year. The ADUs will be highly energy efficient, and CES offers homeowners the option of having a solar photovoltaic (PV) energy system installed. 

California turns to accessory dwelling units

California government leaders in 2016 introduced legislation permitting homeowners to convert garages into apartments, build backyard cottages or make additions to their homes for rental purposes. Cities and municipalities have been instituting ADU programs in compliance since, and the number of ADUs began soaring soon thereafter. Aiming to streamline the ADU process and spur faster growth, legislators in the state Assembly Housing and Community Development Committee in late June passed Senate Bill 13 (SB 13). 

“We are in a severe housing crisis and homeowners who build ADUs are making an important contribution to help us resolve it by providing additional housing,” said the bill’s main sponsor, Senator Wieckowski, a member of California’s Senate Housing Committee. “This bill will help more of them achieve their goal of building a small unit on their own property. We should be encouraging this behavior rather than blocking it with excessive fees, owner occupancy requirements and other restrictions.”

Today, ADUs in L.A.,which range anywhere from 400-850 square feet (37.16-78.97 square meters), are renting for anywhere from $1,200-US$1,800, according to CES, which may not seem affordable to people who don’t live in L.A., San Francisco or Silicon Valley, but they’re priced substantially lower than the average price of a monthly apartment rental, and on par with renting a bed with shared facilities in a hostel or college dormitory-like setting. “Our partnership with the City of Los Angeles allows us to help alleviate California’s housing crisis. In fact, Los Angeles will lead the state in the construction of ADUs,” said CES founder and CEO David Gomez. “With this new integration, we’re excited to help residents citywide find affordable ways to live, including cutting down utility energy to a fraction of the average cost for energy generated from the burning of fossil fuels.”

Sporting a 4,300% revenue growth over the past three earned CES a spot on the 2018 Inc. 500 list of fastest growing companies. Applying the same strategic approach that has led to its success in California’s residential solar and home energy efficiency markets, CES has reduced the time it takes to obtain building permits for ADUs in Los Angeles from three to five months to down to two to three weeks, CEO David Gomez said in an interview. 

CES has built 23 ADUs for L.A. homeowners to date, five since it streamlined the permitting process. With electricity costs among the highest in the nation, homeowners are expressing strong interest in CES’ solar-ADU offering, according to Gomez. The company offers L.A. homeowners the option of having a solar PV system installed either via outright purchase or a power purchase agreement (PPA) with longtime partner Sunrun, the largest residential solar energy systems installer in the U.S. The ADU solar PV systems come with separate electricity meters and separate sub-panels. Most are in the 3–4 kilowatt (kW) range, he explained. 

Energy-efficient ADUs are a win-win situation, benefiting California homeowners and renters, Gomez said. They yield substantial passive income on a monthly basis for homeowners and also raise the value of their homes, while renters gain access to housing substantially below current market rates, he explained. And that’s not to mention helping Californians achieve the state’s ambitious zero-carbon-energy-by-2045 goal. 

CES sees a lot of potential in Los Angeles and California’s fledgling solar ADU market. “Any single-family home built in L.A. in the past 20 years has a garage, and that [converted to an ADU] ends up being a guest house,” Gomez pointed out. CES expects many of its homeowner ADU customers to opt-in and have a solar PV installed. “They can purchase the system outright, or go with a PPA and simply pay for energy but at a lower cost. Most tend to go with the PPA and just pay for solar panel production,” he concluded.

Besides CES’ efforts in L.A., Google and Stanford University recently offered to spend billions of dollars to help alleviate the affordable housing crisis in the San Francisco Bay Area. Google said in June that it would spend $1 billion to increase the stock of affordable housing across the area. 

Also in late June, Stanford University presented a $3.4 billion plan to Palo Alto city leadersthat entails building thousands of homes for students and staff in Santa Clara County over the next two decades. Stanford graduates have gone to play key, driving roles in the development of the high-tech sector in Silicon Valley, and many have become multimillionaires doing so. Driving up rents and home prices, therein lies the roots of the affordable housing crisis in the Bay Area, however, as the influx of wealthy high-tech workers pushes out longtime residents and workers that find they can no longer afford to rent their own apartments or purchase a home of their own.