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Comment by davidw | Hacker News Reader

What would make it a less interesting investment is if there were a credible threat to add enough supply to devalue it.

That's generally how markets keep prices regulated: if they go up enough, more people jump in to producing the good.

That mechanism is severely broken in the Bay Area, among other popular places in the US.

Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly.

Given that the supply of land cannot be increased (the huge omission in GP's argument), repealing Prop 13 is indeed a large part of the solution.

Thanks to technology, the supply of land is not really the constraint on housing supply in most of San Francisco, and especially not in most of the Bay Area.

What technology are you referring to?

At the extreme, these things can hold a lot of people without too much land:

https://en.wikipedia.org/wiki/Skyscraper

But you don't really need those in most places. Simply building 'in' more and up 2/3/4 stories would add a ton of housing in much of the bay area.

Those are very expensive to build, approaching $1000/sqft. Also require utilities, transit, and other city services (schools, police, fire, etc).

Prices are high enough in San Francisco to pay for them.

2/3/4/5/6 stories are significantly cheaper to build.

There isn't a cheap way out of SF's situation.

> Also require utilities, transit, and other city services (schools, police, fire, etc).

High rises don't require those things. People require those things.

For some of them, the requirements (for the same number of people and the same overall outcomes) increase with density, so, in a sense, high-rises (or other arrangements which increase density) do require them.

I didn't state my point well enough; people are the driving factor here. The density is caused by people wanting to move to SF. High rises are a way to deal with the reality, not providing housing isn't going to solve the problem in any way people are going to be happy with.

> The density is caused by people wanting to move to SF. High rises are a way to deal with the reality, not providing housing isn't going to solve the problem in any way people are going to be happy with.

Quite likely, just as many (if not more, in both absolute and proportional terms) people in SF will be unhappy with adoption of high-rises as the solution; the lack of availability under the current regime constrains some of the problems because it limits the ability of people to move in regardless of their desire to do so; relieving that constraint -- especially if the problems besides finding places to store the bodies aren't addressed -- just makes all the other problems of density worse.

It's about as expensive to live here as it is in many skyscrapers in Manhattan. NYC seems to have those other problems pretty well figured out. I've never heard a very convincing reason that SF can't be more like Manhattan in terms of density, except that the existing residents who've "got theirs" don't like the idea.

> At the extreme, these things can hold a lot of people without too much land:

They can hold a lot of people without too much land, but they don't reduce the land requirements for transporting goods and supplies to and waste products away from those people.

Sure, you can hold a lot more people in San Francisco if you fill the city with high-rises, but that's not going to, e.g., suddenly give the city a greater supply of water to support that population, or a greater ability to handle the solid waste produced by that population.

Cities are greener than suburbs by and large, so actually putting more people in cities that otherwise would have lived in a burb is a win for the environment.

Is that true when you factor in utilities? IE - Where does all the water come from? At least in the burbs, you can set up your own well.

Yes, it is, especially when you consider utilities. Average house in the burbs has some lawn or shrubs or something that uses water, and it's not like well water is ultimately 'free' - it comes from somewhere. Also, it means less land developed, less extensive electrical and water distribution systems, and so on.

What makes cost of living so much more expensive in cities vs. suburban or rural areas if they're really so much more efficient?

Demand.

Yes. Cities, dense cities, are efficiency machines.

Look up Geoffrey West, of the Santa Fe Institute, who does all kinds of research on scale and scale effects. Including of cities.

They also do best in areas where there is a large amount of bedrock close to the surface. NYC is geologically blessed in this regard. The Bay Area has far less geologically stable ground to build on, and a lot of what there is makes up our gorgeous parks and nature preserves.

Chicago seems to do ok. I don't know what the ground is like in SF, but Chicago is basically a swamp.

There is ample room to build in San Francisco - not much construction even needs to be skyscrapers. More 4/5/6 story construction would help a lot. The problem is entirely political.

Presumably building high-rise apartments.

> Given that the supply of land cannot be increased

Supply of land can be increased, but its expensive (and, for geological and hydrological reasons, particularly so in the SFBA.)

Taxing vacant real estate is another tool used in some countries and cities. One way of doing it is via an imputed rental income: if a property is not owner-occupied, then the owners are deemed to be earning a rental income (either market rate, or if rent-controlled, then whatever the set rate is), regardless of whether they actually bother to rent it out or not. That increases the cost of sitting on empty housing.

(Though the real motivation for an imputed-rental-income law is usually to combat tax fraud: people who're renting out apartments under the table and not reporting the income. It just has the secondary effect of making it more expensive to sit on vacant real estate.)

Yeah, something like that might work too, although it can be kind of invasive in the sense that now you need to check if people are living in a place. In Italy, that meant that the police send someone around for a look inside the house where you say you recently moved to. In theory, at least - they don't always.

I guess it's easier in countries with some kind of address register. Denmark doesn't police it with physical police, just through the address register: you have an official principle residence, and can only list one. So by definition any other property you own is not owner-occupied. (At least in the cities, I think second homes outside the cities are handled differently.)

You can get away with some cheating there, e.g. a couple who live together can claim to be living separately and rent the second one out under the table, or someone who lives with their parents can be dabbling in under-the-table real estate with an investment property they don't really live in. But it at least keeps it to that kind of small-scale thing; the couple can pretend to owner-occupy two properties when they really live in one, but they can't do it with five.

Higher taxes is not enough. Taxing property means you confiscate it piece by piece, the owner will have to pay or lose it, but given enough time the owner will pay more than the value of the property. Why go that slow and not go for it, confiscate all properties and be happy with it? You can always follow examples from the likes of North Korea. Just in case you don't get it: you can ask for taxes when you provide services, not when you vote to raise taxes. Not sure what are more expensive services the empty Chinese-owned houses require to tax for it. And blaming Chinese investment is just a straw man: if all the houses would be occupied by pure-breed white Caucasian Americans (that's a joke) who would you blame, Martians?

Just wanted to compliment you on one of the most impressive substance-free arm-flailing retorts I have seen in recent memory. It takes skill to weave residents of both North Korea and the planet Mars into a discussion of Bay Area quality of life.

> Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly.

More significantly, they would mean that the increased demand for property driving prices would also result in increased public resources to deal with the issues produced.

That depends on a lot of factors. Manhattan is an example of a building boom not necessarily increasing supply or lowering prices: a lot of the building boom involved demolition of older, cheaper apartment buildings that were subdivided into small units, to be replaced with newer, higher-end apartment units subdivided into larger units. Net square footage increased, but square footage isn't identical to number of housing units. Which is why over the past 100 years Manhattan has gone from having cheap housing and 2.3 million people, to having expensive housing and 1.6 million people.

Article about Manhattan rental prices dropping: http://ny.curbed.com/2016/4/7/11381852/manhattan-market-repo...

Or we could tax foreign investment properties at a higher rate. "Remove barriers and let the market work" isn't the only solution to any given problem.

I'm definitely not a "markets fix all the world's problems" kind of guy. Far from it. But in this case I think it's a big part of the answer, and I'm not alone in that thinking either. This book was particularly good, although a bit high level: http://amzn.to/1rOgoq3 - and it's also noteworthy because the author, like myself, is somewhat left of center in terms of US politics.

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