I don't see a builder voluntarily building low-cost housing in the Mission district, just more luxury condos. A municipal ordinance that removes restrictions while imposing a requirement to build affordable housing along with more luxury condos might be the right solution.
They are incorrect. Building luxury housing will take some of the demand pressure off of non-luxury housing (which constitutes the vast majority of the housing in San Francisco), thereby lowering its price.
The only way this wouldn't work is if nobody could afford to live in the new luxury housing. But we know for sure that there are plenty of people who want to, can afford to, and are moving into the newer luxury developments as soon as they are available. The lower-quality housing those people move out of is now available for people who can't afford the new luxury housing.
Agreed. Also, rich people can just buy an old Victorian and modernize the inside, converting a non-luxury housing unit into a luxury one. That's one less unit on the market for normal people to buy or rent.
For example: http://sf.curbed.com/2015/10/8/9913302/victorian-disembowele...
This is what happens when you don't allow development to proceed. It only makes things worse. Rich people will get their luxury housing, one way or another. The rest of us are left with fewer options.
Oh, it's worse than that: they can buy an old Victorian full of apartments and convert several non-luxury housing units into a single luxury housing unit. Which is something that tends to be generally encouraged by the zoning and planning codes, because single family houses are regulated much less strictly than any other kind of building, and also tend to be exempt from things like rent control.
Supply and demand-- you build enough, and you cannot have artificially high "market rates."
Nothing stops capital from rushing into non-luxury housing, acquiring it, and then renting it at new "market rates".
You will need to swamp SFBA with housing (tens of thousands of new units a year) in order to drive down market prices.
Everything I wrote presupposes that all housing is rented at the market rate, including the non-luxury housing.
I suppose you put quotes around "market rates" as a form of sarcasm, but aside from rent-controlled units, all housing rents at the equilibrium market rate determined by supply and demand. If someone jacks up the price of older apartments and is still able to find tenants, all that proves is that those apartments had been rented out at a price below the market rate before now. The market rate is quite simply the amount people are willing to pay.
Hence, my quotes around "market rate". The tech industry can afford to keep pouring salaries into employee pockets, therefore, tech workers will always be able to price out non-tech workers seeking affordable rents in the bay area.
You will never be able to outbuild what Facebook, Google, and the like can pay their workers. Zoning is not the issue, a slanted labor market is. And the tech labor market will continue to soak up whatever housing comes onto the market.
The high salaries of developers in the Bay Area are a reaction to that feedback loop. The companies you listed offer lower salaries to workers outside of the Bay Area, using what they call Prevailing Market Rate to determine pay bands.
I don't really understand why Apple, Facebook, Google, et al. spend so much money on hiring in the Bay Area instead of hiring aggressively outside of it in cheaper regions. Are they benefiting from the network effect anymore? I can understand startups needing to be close to VC funding sources, but how does it benefit the larger players?
Unless its more financially advantageous to train new engineers then keep paying the ones in SFBA? 7 billion people? Its not like only the brilliant ones are in SF.
So more than you think in fact.
None of those companies are going to restructure their engineering cultures just to relieve housing pressure in SF. Just like the rest of the mainstream, they probably see the problem in SF as one of artificially limited supply, not demand.
NYC 1921-1929 (prior modern zoning): "The total of 658,780 new dwellings averaged 73,198 units per year, a figure ... In the most prolific year, 1927, 94,367 dwellings were built"
https://books.google.com/books?id=AS1bGTRSggYC&pg=PA122&lpg=...
Heh. Okay, let's not even try.
"Never" is a long time. Mature companies don't continue with gangbuster growth, and eventually company management has to look around for savings. San Francisco isn't immune to what happened to the rust belt cities.
Or just wait ... what, another year or two ?
Every 5-8 years you have an opportunity to buy SFBA real estate at fire sale prices. If all of the activists and hand-wringers and bloggers[1] spent half as much time doing some simple financial planning instead of bemoaning the end of SF as they know it, they'd all be owners instead of renters and the "character" of the city (as they understand it) would be saved.
Or is it different this time ?[2]
[2] No, it isn't.
Ok, when do we start?
The default trajectory for SF is towards pricing out the working class. Rich people can afford to live in SF even with its nosebleed prices, and they will hold a systemic and intractable advantage against the working class over the long term, because, again, real estate is a good, not a moral principle. When things get more expensive, rich people get more of those things.
I'm sure there are cases where this isn't true, but as a general rule, any opposition to new housing in SF concedes ground to wealthy owners at the expense of working-class renters.
If there's a place/time this scenario has played out differently elsewhere in the US, someone, please let me know.
You're missing a few critically important pieces of context:
1) The city of SF gives developers two options for the low-income housing set-aside -- they can make a percentage of their units low income, or they can contribute a percentage of the project cost to a city-wide fund.
2) Developers hate both of these options, but they far prefer the latter one (donate to a fund), since it's a fixed cost.
3) Because the city is in competition with these same private developers for land, the low-income housing fund is at a significant disadvantage when it comes to actually building low-income housing. IIRC, the city has only built a few projects in the last decade.
4) As a result of 1-3, most of the community resistance to new construction ends up being about forcing developers to choose the first option (i.e. actually building low-income units). They use the only political leverage they have to compel this choice: the planning process.
5) Many/most skirmishes about permitting get characterized as "NIMBY opposition", when in reality, they're about low-income housing set-asides. It's just easy to point to the zero-influence yahoos who show up to any public meeting, and mischaracterize them as the source of the problem, so developers do this.
Basically what I'm saying is: unless compelled, there's no situation in SF where developers build anything other than luxury units. There's no ROI otherwise; land is too expensive. And they won't build new luxury units into a down market, either, for the same reasons. Low-income housing requirements are the only way this stuff happens.
So I'll turn your question around on you: name one US market that has successfully lowered real estate prices via construction. Even in places canonically held up as examples (e.g. Houston), affordability is maintained by sprawl...which is not an option for San Francisco. For the exact economic reasons you've cited, nobody buys or builds real estate that they know will lose value. That's the fundamental problem with the "build out of it" argument.
We do possess the technology to build higher buildings, rather than simply create sprawl. Housing is expensive enough in SF that said technology could be profitably employed.
This is especially important to consider in much of silicon valley, which has very few high buildings and not much density.
Adding more housing is probably not going to drastically drop prices, but it'll certainly help contain price increases.
As for higher buildings: I'm not going to argue that we shouldn't raise building heights in SF. I'm just saying that developers aren't going to voluntarily make any of those tall buildings cheaper than market rate. They also won't build more space than they know they can make a comfortable profit on, at current prices.
Again, name a city in the US where construction has lowered real estate prices. Developers don't have any natural incentive to do that.
Unless they're colluding, they'll keep building if it's profitable to do so. And there's a lot of margin for that in SF, especially if they get rid of some of the big obstacles.
There are various articles about 'filtering' and how it's not happening in cities like SF. Here's one - there are probably better ones:
http://www.forbes.com/sites/scottbeyer/2016/02/19/what-liber...
I know SV is a separate entity (entities, actually), but it's obviously very closely related.
People in the US are going to have to figure out density sooner or later. This stuff has knock-on effects all up and down the west coast. Lots of people move here to Bend to escape the bay area, and are driving up local prices...
if it's profitable over the long term.
Keep in mind that builders have to allocate ever-increasing percentages of units to "below-market housing".
Then, with the current bubble bursts, they're stuck with the below-market renters but will be scrambling to fill the rest of the units.
> "Filtering is the idea that, as new market-rate housing is built, higher-income people move into it, leaving behind older housing stock for lower-income people."
It does, there was an article here a few weeks ago where they had studied gentrification in SF and found that the areas that allowed more new (luxury) apartment construction had less reduction in poor people living in the area compared to the ones that didn't.
I watched Seattle build like crazy in the late 90s. It seems like every month a huge skyrise apartment building came online in Belltown. Many thousands of units were added every year. It coincided with a continuing influx of people so I don't think it lowered the absolute price of real estate, but the laws of supply and demand are pretty inviolable. Seattle is pretty affordable by present SF standards, and with much of the same cultural appeal.
(I live in SF but used to spend lots of time in Seattle)
I'll give you that Seattle is more affordable than San Francisco...but it's also at least twice the land area of SF, with fewer people and geographic constraints. And the weather is...an acquired taste.
2. Hong Kong, one of the densest cities in the world, is built on land much steeper than SF.
None of these places is really keeping up with demand. SF is simply the worst of the worst from that point of view.
I agree completely about the weather. I grew up in western Oregon and I don't know how it's possible to sustain human life further north without an IV of antidepressants!
No, housing prices do not necessarily immediately sink. Developers will only build when they believe they can turn a profit. But you can overbuild during boom times and allow housing prices to correct when demand diminishes.
Obviously, with perfect foresight, few intelligent developers would choose to begin a construction project just before a major economic retraction. But if your suggestion is that we should build now, then wait for economic armageddon to really adjust prices downward, then I guess I can't argue.
If you ask me, the best we can do now is improve regional transit to make SF look more like Manhattan, and fight to hold on to whatever low-income property remains on the SF peninsula in the meantime.
I'm making a more nuanced point: indiscriminate high-end construction doesn't help, and that's what you get in SF without the kind of planning that people in this debate like to call "NIMBYism".
I'd personally love it if someone were to build 1000 units of affordable housing. The thing is, nobody is gonna do that unless they're forced to do it -- in this town, it takes years of fighting to get a fraction of that number built (for example: NEMA phase II had 52 'affordable' units built, out of a total of 489. Those other 437 units have some of the highest rents in San Francisco.)
http://sfist.com/2013/11/18/middle_class_screwed_in_current_...
I'm comfortable with the idea that the market will figure out the right amount of housing, and the right price for housing. I'm not saying that there should be no zoning laws, but within whatever zoning laws you have, why not allow it to be a free market? The forces of supply and demand do a good job shaping what supply is provided. Zoning itself may be a big part of the problem as well:
"The artificial upward pressure that zoning places on house prices—primarily by functioning as a supply constraint—also may undermine the market forces that would otherwise determine how much housing to build, where to build, and what type to build, leading to a mismatch between the types of housing that households want, what they can afford, and what is available to buy or rent" ( Jason Furman, Chairman, Council of Economic Advisers)
Perhaps we'd all be better off leaving much more of land use to the market as well.
That's the point, to increase the supply.
Is it surprising that only large projects that benefit the well-to-do are feasible to pull through this tangle of regulation and fees? If we streamline construction and incentivize new projects, we will get not only new luxury housing, but more affordable housing for everyone.
A city ordnance was passed in the late 70s, IIRC, which says that for every SRO (Single-Room Occupancy, basically, long-term flop house) in the Tenderloin that a developer wants to tear down and replace with a high-rise hotel or whatever, that developer must also put up another building with an equivalent number of SRO units to the one being torn down, somewhere else within the 7x7. So, you have to build two buildings for the price of ... well, at least two.
Now, given the current rental market in SF, I can't imagine we're actually very far from (or even already over) the inflection point where that becomes economically viable, but it's demonstrably not affecting the new construction rate in any way I've noticed...
Yeah, that is pretty much the only solution.
The other real option is going the NYC route of subsidized housing. However, I'm not sure SF really has the revenues for this to be viable tho.
Much of the problem stems from undersupply driving formerly affordable housing to gentrify— that's why I, as a well-paid programmer, live in a formerly-abandoned tenement.
It will take a long time for the process to work though, because it takes years to build things, plus a year for Leases to cycle. In the meantime I imagine NIMBYs will say "see? nothing improved".
However if you look at a 30 to 40 year timeline and we allow all the market rate houses to be built that developers want then those same "luxury" houses will become more affordable over time.
Instead we're sand bagging any development in favour of 25% affordable housing to be built by private developers.
That's because you're talking to the wrong people. Talk to urban planners instead. As a rule of thumb, activists lacking specialized technical education are useful for pointing to problems and useless for pointing to solutions.
It's OK to have wealthier areas. The problem we want to avoid is forcing slightly less wealthy people to rent from areas that are significantly less wealthy... because that's what drives people away.