Oakland is an expensive city due to a shortage of supply compared to the high demand for housing in the city. Its proximity to San Francisco, its pleasant weather, and its diverse culture have led to a large influx of new residents and businesses.
As a longtime Bay Area resident, I’ve watched with dismay as housing and living costs have soared in nearby Oakland. Oakland, in particular, has seen housing prices and rents skyrocket in recent years.
Curious to understand the forces driving Oakland’s rising expenses, I decided to research the major factors contributing to its expensive cost of living.
What I found were several major reasons why Oakland has become so expensive: surging demand to live in the city, limited housing supply, and speculation fueled by the tech boom in San Francisco.
In this blog series, I’ll explore each of these reasons in more depth, using data and insights from experts to shed light on the affordability crisis facing Oakland.
My hope is that by understanding the key drivers, we can have an informed debate on potential solutions to make Oakland accessible and livable for more of its residents. I welcome your thoughts and comments along the way.
10 Reasons Why Oakland Is so Expensive
Here are the 10 reasons that make Oakland’s cost of living so high.
1. Proximity to Silicon Valley
Oakland’s close proximity to Silicon Valley has made it one of the most expensive housing markets in the country. This has caused the cost of housing and other goods and services to rise as businesses compete for limited resources.
The spillover effect of the high-tech industry in Silicon Valley has driven up prices in Oakland as workers and their families compete for a limited number of homes and apartments.
The demand for housing has far outpaced the supply, resulting in ever-increasing prices.
2. Home to Wealthy Individuals
The presence of wealthy individuals makes Oakland so expensive because they are able to outbid other residents for housing and businesses. Their purchasing power drives up prices for everyone, not just themselves.
These individuals have a great deal of money and they are looking for places to live that are close to downtown and offer plenty of amenities. The cost of housing in Oakland has gone up significantly in recent years as a result of this demand.
Their influence on the political and economic systems means that policies and investments that could make the city more affordable for everyone are not made or prioritized. This further widens the gap between the rich and poor, exacerbating inequality and poverty.
Wealthy individuals are also contributing to the high cost of living by spending money on luxury items and services.
3. High Tax Rates
This includes both state and local taxes, which are among the highest in the country. This makes it difficult for people to afford to live in Oakland, especially when combined with the high cost of living.
This means that residents have to pay more for basic services such as police protection, firefighting, and garbage collection. It also means that businesses have to pay more for things like licenses and permits.
The minimum combined 2023 sales tax rate for Oakland, California is 10.25%. This is the total of state, county, and city sales tax rates. The California sales tax rate is currently 6%. The County sales tax rate is 0.25%.
All of these costs get passed on to consumers, who then have to pay more for goods and services.
4. Limited Supply of Land
Oakland’s high prices are due in part to the limited availability of land. As the city grows, it becomes harder and harder to find vacant land on which to build new homes or businesses. This drives up prices as demand continues to rise.
Limited land availability (due to both geographical and regulatory constraints) in cities like Oakland means that there is simply not enough space to build new homes, which drives prices even higher.
The high cost of housing can make it difficult for low- and middle-income residents to afford to live in these areas, ultimately resulting in increased segregation and inequality.
5. Popular City for High-Income Earners
The presence of high-income earners in the city drives up prices for everyone, as demand for housing and other goods and services rises.
This effect is known as “market filtering,” and it occurs when wealthier residents move into a neighborhood, causing rents and other prices to increase as landlords, businesses, and other service providers try to capitalize on the new demand.
This is because as the demand for housing goes up, landlords are able to charge more for rent and homeowners can sell their houses at a higher price.
Starting January 1, 2021, employees who perform at least two (2) hours of work in a workweek and within the geographic limits of the City of Oakland must be paid wages of not less than $14.36 per hour.
Oakland’s minimum wage requirement, pursuant to Measure FF and set forth in the Oakland Municipal Code section 5.92.
6. Presence of Larger Companies
These businesses bring in more affluent people who are willing to pay higher rents and prices for goods and services.
Additionally, these companies often require office space and other commercial real estate, which drives up the cost of housing and rent in the area.
These businesses are drawn to Oakland’s centralized location and its growing economy. The influx of people and businesses into the city has led to increased demand for housing and other goods and services, which has in turn driven up prices.
This has pushed out many lower-income residents and businesses, leading to a widening wealth gap in Oakland.
The construction of new housing and commercial developments has been largely geared towards the high-end market, further driving up prices.
7. Proximity to San Francisco
San Francisco is a major metropolitan area with a high cost of living. San Francisco’s close proximity to Oakland has made the latter city more expensive to live in. Oakland is seen as a less desirable option to San Francisco, so it commands a higher rent price.
The two cities are only about 12.6 miles apart (22 min via I-80 W), so people working in San Francisco can easily commute from Oakland. Many businesses have moved their headquarters or offices to Oakland in order to take advantage of the lower rent prices.
The demand for housing is high in the Bay Area, and with limited space available, prices are driven up. Many jobs in the Bay Area are in San Francisco, so workers are willing to pay more for housing closer to their workplaces.
8. High Demand for Housing
The increased demand for housing in Oakland has led to higher prices for properties in the area.
The relatively limited supply of housing in Oakland compared to the number of people who want to live there has resulted in an increase in prices, as landlords and property owners can charge more for a given home or apartment.
The high demand for housing in Oakland is a result of its close proximity to San Francisco and its affordable cost in comparison to other Bay Area cities.
Many people who work in San Francisco but would prefer to live in Oakland have driven up prices as they compete for limited housing stock.
The demand for housing has driven up prices, making it difficult for middle and low-income residents to find affordable housing in the city.
9. High Gas Prices
There are a number of reasons why high gas prices make Oakland so expensive. One reason is that when people have to pay more for gas, they have less money to spend on other things.
This means that businesses in Oakland have to charge more for their products and services in order to cover their costs. Another reason is that it takes a lot of gasoline to get around Oakland, especially if you live in a remote area.
The high prices cause many people to have to spend more money on transportation, which means they have less money to spend on other things.
This makes it harder for businesses in Oakland to thrive, and it also makes it hard for people who live in Oakland to afford to live there. Many people who work in Oakland but live in cheaper suburbs have to pay more for transportation, which also raises the cost of living.
10. Beautiful Warm Weather
Oakland is a desirable city in which to live. It has a Mediterranean climate, with warm, dry summers and mild winters. This weather makes the city pleasant to live in year-round and attracts people and businesses.
This weather is perfect for outdoor activities and contributes to the high demand for housing in Oakland. The resulting demand for housing and other amenities drives up prices.