Startups Tackle Soaring Rents in Silicon Valley

Having lived in Tokyo during Japan's bubble years, I know a thing or two about expensive and cramped housing. But it was nothing compared to the astronomical housing prices in San Francisco today. That the federal government now classifies a family of 4 earning up to $117,400 as “low income” is the latest sign of the sky-high living costs in the Bay Area.

A 70-square-meter apartment located in San Francisco’s Mission District, for example, can be rented for the tidy sum of $3,400. The apartment is owned by businesswoman Victoria Galea and is located on the top floor of a Victorian brownstone. “People come here in droves -- not just those from the tech sector, but also from fashion and other industries. Their salaries are really good, so they can afford it.”

The influx of wealthy tech firms and their well-paid employees have raised the prices of housing throughout the area, making it difficult for these same techies to cope. In July 2018, the average rent for a one-bedroom apartment in San Francisco was $3,340, according to housing site Rent Jungle. That tops even New York and makes it the highest in the US. But as they say, necessity is the mother of invention, and the techies are coming up with money-making solutions.

HubHaus was launched in 2016 by Shruti Merchant and Kerry Jones to make it easy for people to live with others and be part of a community. “We saw co-living as a really obvious option for cutting people's living costs, while providing benefits like making friends and being part of a community," Merchant said.

HubHaus works by renting out individual bedrooms within a large house for half the cost of a one-bedroom apartment. People can apply to rent the rooms online, and the company screens and matches prospective roommates. Merchant explains that the housing comes with perks such as house cleaning, leaving the tenants to enjoy the positive aspects of living together.

A HubHaus home in San Mateo, a suburb of San Francisco, is comprised of 8 residents -- 6 men and 2 women whose ages range from their mid-20s to their 50s. One of the tenants is 28-year-old Indian software developer Nikhilkumar Jadhav, who left his $2,400 one-bedroom apartment despite earning a 6-figure salary. He has to share a bathroom with his housemates, but "it hasn't been a problem, except when everyone needs to use the bathroom at the same time,” he says.

For those who prefer to live alone, there are other options. John Joyce, who works at a marketing firm in San Francisco, lives in a hotel in the city center. His $1,650 rent includes the cost of utilities, breakfast, and cleaning services which are provided twice a week. The room doesn't have a kitchen, and there's only a shared bathroom in the hallway. It has very little space for furniture and personal belongings. Joyce uses an ironing board as a desk. "Compared to an apartment, it's lacking in some aspects, but it's great because it's so economical," he says. He used to pay $3,900 for an apartment and says he can’t imagine going back.

Anyplace, the company that oversees Joyce’s hotel room, is another housing startup based in San Francisco. CEO and Co-Founder Satoru "Steve" Naito says Anyplace “provides flexible housing options as residents don't need to set up utilities or Wi-Fi or buy furniture." The company offers hotel rooms for rent on a monthly basis and charges a 10 percent commission. Naito, who left Japan in 2014 hoping to start the next Uber or Airbnb, also lives in a hotel and started his business based on personal experiences. Buying furniture and setting up the utilities were such a hassle that he thought solving the problem would be a good idea for a new business. Naito has plans to operate in Los Angeles and New York, and aims to eventually expand worldwide.

Successful young businesses have driven up the cost of living in San Francisco. Now they're hoping to provide solutions with their entrepreneurial flair.