Fewer people are living together in the Bay Area — and it's driving up housing demand

The average Bay Area household is getting smaller. According to experts, that means more housing is required to accommodate a stagnating Bay Area population.

The shrinkage in household size can largely be attributed to young people living solo as well as older empty-nesters. The trend isn’t unique to the Bay Area — both ends of the age spectrum are increasingly opting to live with fewer people, a shift that is undoubtedly impacting the housing market.

• Real estate map: Home prices in every Bay Area city and ZIP code

The share of Bay Area households with just one person living in them has increased by 1.5 percentage points since 2019. According to Hans Johnson, a demographer and senior fellow at the Public Policy Institute of California, the Bay Area and specifically cities like San Francisco and Oakland have seen an increase in housing units even though populations are static or declining. 

“Over 90% of those [new units] are ‘required rental’ units and a vast majority of them are two bedrooms or less,” he said, referring to units that are not available for ownership.

According to Johnson, individuals who might have shared homes with multiple roommates even just four years ago are now more often able to live alone or with just one roommate, thanks to changes in housing availability.

The trend is also linked to declining birth rates in California. Johnson explained that the total birth rate has dropped significantly since the late 2000s, suggesting that younger generations are less inclined to start families in the first place.

While younger people are gravitating toward one- to two-person nonfamily households, older adults are also transitioning to smaller households as well. This trend is evident in the declining average size of family households across the Bay Area.

As life expectancy increases, older empty-nesters — or parents whose children have left the home — are remaining in their homes longer, Johnson explained. Redfin’s chief economist, Daryl Fairweather, added that older homeowners in the Bay Area tend to stay in their homes even longer due to the region's exceptionally low property tax rates under Prop 13 and high mortgage rates, which altogether discourage downsizing.

Combined, these forces have resulted in many houses with three or more bedrooms being occupied by just one or two people.

“Connect the dots now,” Johnson said. “That means there’s less housing turnover then there was in the past, and that means there’s just fewer larger houses on the market.”

Older adults staying in their homes longer prevents others, such as young families with children, from purchasing and utilizing that space, he explained.

Now, the Bay Area faces the dual challenge of building enough housing while ensuring it aligns with what people truly want. According to Johnson, there’s a significant shortage of new housing designed for families, both in terms of size and, more critically, ownership opportunities. Right now, there are plenty of rental-only units, but not enough opportunities to buy.

“The vast majority of people do want to own their own house,” he said. “But with fewer people per household, the most optimal thing [for builders] to do is build small rental units. That’s the primary ongoing challenge in California and the Bay Area.”

Reach Kota Suzuki: kota.suzuki@sfchronicle.com