To solve affordability crisis, Bay Area housing stock must grow 50% in 20 years
sfexaminer.com
sfexaminer.com
Skylynr, the 'Uber of nanoassembled highrises', last night replaced 44 San Francisco Victorians with apartment buildings.
Reached for comment, SF's Planning Department said the overnight construction violates a city moratorium, to study displacement issues, now in its 14th year.
The Board of Supervisors plans to address the issue in an emergency session next Tuesday. A Skylynr spokesperson says over 4,000 new residents, in the nearly 2,000 new apartments, will be registered as voters on the San Francisco Department of Elections blockchain before that meeting.
By November, over half the city's voters may be residents of the on-demand skyscrapers popping up across the city, most built by Skylynr or its competitors Instatower and Zipartments.
And half of those got confused and voted to increase the "affordable housing" requirement to 50% of new housing stock, making non-Skylynr housing prohibitively expensive to build, and requiring citizen approval (by referendum) of all new developments in the Historic Market Street Corridor, including all areas east of Golden Gate Park.
But in some parts of the world, the same fait accompli can be achieved the old fashioned way. Just make sure the official enforcing the moratorium has a wife or nephew or someone with a large stake in Skylynr. With such tricks, we will soon house all the world's urban poor. Pity that California is not yet so "advanced".
[1] https://en.wikipedia.org/wiki/Idoru [2] http://www.technovelgy.com/ct/content.asp?Bnum=83
― Ernest Cline, Ready Player One
> Intellectual honesty requires taking numbers seriously. Either we prioritize making the Bay Area affordable for all of us or we don’t. The less housing we build, the more wealth will be trapped in high housing prices. Unless we decide to grow our housing stock to accommodate our economy, we are continuing to choose the interests of those who are rich or who already own their homes over the interests of the struggling middle and working classes.
It seems like we’re always stuck in an indecisive state of choosing between the interests of the wealthy and the interests of the struggling, and we can never get out unless we make the “right” choice (which is always implied to be the interests of the struggling)
Maybe the choice has already been made, and people just don’t like the outcome. What then? Barring a massive catastrophe or economic downturn I don’t see the Bay Area housing problem getting better in my lifetime.
Where these sorts of articles comes from is observers who would like to change that narrative.
If the roles were reversed I doubt these observers would be calling for a change in narrative.
That isn't actually what happens -- and the misunderstanding is what causes so much of the conflict.
If you rezone for high density, the price per square foot goes down, but the price per acre goes way up -- because suddenly developers will pay you a mint for your land so they can knock down your house and build a high rise there.
The people who theoretically lose out are the people who own property way out in the suburbs, because most people won't want to live there and spend two hours in traffic every day once they can afford to live in the city. But even they don't really lose out because now they can afford to live in the city and the value of not having to sit in traffic every day is worth more than what they're losing on their house.
The whole thing is just a huge misunderstanding. A cynic might suggest the narrative was devised by the banks to drive up mortgage loan principal amounts. Or the car companies to keep people from living in places with viable mass transit.
Either they let the pressure out gradually or the thing is going to pop.
Probably not.
> Companies will move away from areas where their employees can't get hosting.
And if that happens in even a small degree, housing prices will drop, relieving the problem. It's only a problem if their is a sharply threshold where below which no one moves out, but just above which lots of companies do. That's not entirely implausible, but it's not all that probable.
> Not many have to move before the rest start to follow
That right there is the highly speculative part; if it's true, you have an out of control positive feedback loop, but otherwise it's a self-controlling negative feedback loop.
The USA has never had housing priced at such a high number of hours of work before.
Not me, and not lots of other homeowners, judging by the polls. NIMBYism is common, but most Californians do want more housing constructed.
Ha. History seems to side with the wealthy on that one.
The future of the Bay Area will be outsourcing lower waged jobs that also includes software engineers, QA staff, administrative, etc. to other areas of the state or country where cost of living is less expensive. It's already happening, just ask around.
Again, because the value turned around by SWE peeps etc. for tech companies has an actual cap. You can't pay a QA/SW engineer $500k/year just so they can afford live in the Bay Area. They'd have to be one hell of a QA/SW engineer if that was the case. I just don't think it's worth it for tech companies at some point.
After all that happens, the jobs left here will be primarily managerial; c-level execs, product managers, business analysts etc.
Those too, if the housing situation doesn't improve, will be outsourced to lower cost of living areas as well.
Again, it's inevitable given the numbers.
Much of the wealth being generated in this area is being sunk back into real estate. The high wages in tech in the Bay Area are high because they're subsidizing a corrupt housing market.
Eventually the only people left in the Bay Area will be executives and really high-paid lawyers.
Yesterday's headline: "Alphabet median pay close to $200k" https://www.investopedia.com/news/googles-alphabet-median-pa...
Those are not all executives and high-paid lawyers.
One of the biggest reasons why a 1300 sq.ft. house in Sunnyvale now sells for $2M is because a lot of engineers are perfectly capable of paying for it.
In my tract, 5 houses out of 35 have changed owners in the past years (it's a neighborhood with lots of first owners who are now in their eighties). I've talked to all the newcomers.
Without exception, they are dual income engineering families who work for Google, Facebook, Apple and some other tech giants.
That's $400k income per year and plenty to cover a $1.725M 30 year 4.1% mortgage payment of $8500 per month.
I'm pretty happy with the salary that I make as a SF-dwelling/working software developer, but I recognize that it's absolutely insane when compared to same-industry salaries in locations with less ridiculous housing markets.
At some point, companies are going to throw in the towel and decide it just doesn't make financial sense to pay their employees that much just for the privilege of being located in the bay area. Then the jobs move away and you end up with a local recession. This will be hard to do initially for companies sized like Google or Facebook, but a ton of smaller companies can open offices elsewhere and slowly transition staff away. They're already doing it, even.
Facebook looks roughly the same.
The leverage of a software engineer to produce money is really quite astounding when you get them in large herds.
I'm pretty sure the Bay Area is going to be just fine.
I don't think that's sustainable. This is called working your way so far up the supply chain that you pop off the top and fall out.
Eventually the entire supply chain below you collectively asks the question: "Why are we paying these people? What do they do anyway?" Then the supply chain starts looking for ways to wiggle out from under you.
Yes, that is selfish, but I'm not going to apologize for not wanting an apartment complex next door. That said, I'm not going to vote against a state level politician who wants to relax zoning laws to improve affordable housing.
It has nothing to do with the inhabitants.
It's about the ugliness of these kind of buildings and everything that goes with increased density (traffic, street parking etc.)
No, it frequently does have to do with the inhabitants. That's why you saw Forest Hill homeowners kill an affordable housing development because "the new development would house 'severely mentally ill' and 'severely drug addicted' people" [1].
[1]: http://www.sfexaminer.com/city-pulls-funding-150-unit-forest...
You don't like the 'look' of 'ugly' building? I guess you better save up for the neighboring lots.
That's reasonable.
But what is not reasonable is if you try to enforce that preference on next door. Your house is your house. Your neighbours house isn't.
Speak for yourself. Not all homeowners want less density. I wouldn't have become a homeowner if the only houses available had yards with picket fences.
You can think of it as an interesting experiment in collective land ownership.
I'm using "own" meaning "control" here.
But I can have the desire for the conditions to stay the same.
See Zuckerberg's purchases in Palo Alto for example.
That's definitely an original kind of argument.
At least that's what I'd be referring to if I were to make the parent's argument.
The first may benefit current land owners a lot, but the second is absolutely essential for lower incomes to succeed at all.
This is not a zero-sum move, and is fact hugely beneficial to everyone. When there's fixed housing supply, that's when things are closer to a zero-sum economic game.
http://marketurbanism.com/2018/02/05/density-working-poor-ou...
The reality is that the apartment building goes up and you house is worth nothing unless the government allows an eminent domain for your property or a developer with the bucks to buy out the neighborhood shows up.
Until that happens, your house lost a third of its value because there's an apartment next door. If you're unlucky, rates go up and you're stuck.
Is it really controversial to say that a regular single family house in a single family house neighborhood will go down in value when somebody decides to plant an apartment complex right next to do?
Making a real estate purchase is a risk. Making a huge one is a huge risk. Right now, the Bay Area is prioritizing rewarding the obscenely wealthy and rewarding massive risk-taking by the moderately wealthy.
If those risks don’t pan out, but people can afford to live here, I’m not that upset.
People who are disrupted by this can build character by living in a van or move to any of the hundreds of metro areas that are more affordable -- it's not my problem. If you work for some tech company, you should appreciate that controlling a resource like a technology or real property has benefits.
FWIW, I chose the latter option and live in a mid sized urban core. I make about half of what I'd make in the Bay Area, but my costs are probably about 80% less, even factoring in private school. So if you make a choice to live in a van as a rational actor, that's your choice. Own it.
But see, now you have introduced an "us vs them" mentality to this discussion with homeowners on one side and non-homeowners on the other. If I, a homeowner with 800K mortgage, is going to face people like you who want to act in a way that will reduce the price of my home below 800K thus wiping out my equity in my home and saddling me with an underwater mortgage, then I am going to fight tooth and nail against any new housing.
Figuring out how to add new housing without affecting the value of existing homes would go a long way towards getting buy-in from existing homeowners.
Sure, once this happens enough times, and supply starts to meet demand, you're absolutely right in that a single-family home's value will drop when it's adjacent to an apartment complex.
(Then again, it could also be quite valuable to someone who wants a single-family home when the norm becomes larger complexes.)
Also note that the current value of your home is driven almost entirely by artificial scarcity. There's nothing intrinsic about it that makes it worth so much.
The problem from my perspective is that the "crisis" of housing is really a boomtown phenomenon. The problem exists because companies can afford to pay people enough, which won't last forever.
You're saying that if you have the only single family house in a high density area that house will actually be worth less?
I think it's very unlikely either of those things would be true.
a) Correct.
b) Beneficial to most participants in the market, well off (mainly due to luck in timing) NIMBY's being the exception.
If people really want to address the housing issues, they need to start actually listening to people who object to more housing instead of just calling them names. There are legitimate downsides to more housing and higher population that will need to be addressed.
Those governments, by design, serve the interests of their local citizens. That is, the population they serve is inherently skewed toward existing property owners. You can't fix this by complaining about money in politics or whatever, that's not why it's happening.
The solution has to be at the broader government level (i.e. in Sacramento in this case), wrenching back some of the control that has traditionally been local in the interests of the broader population and not just, say, Palo Alto residents.
It is unfortunate that the most disenfranchised demographics are the ones least likely to vote/organize.
Of course this assumes renters actually vote. As noted before, most do not. Thus the tyranny of the minority situation.
Lots of people want to live in Cambridge, MA. Cambridge is lovely, walkable, and bursting with jobs. But not everyone who wants to can live in Cambridge, because Cambridge has large areas of inappropriately low density that homeowners fight to preserve.
Many people who work in Cambridge live in Everett. Everett is kinda shitty. It doesn't even have good transit to and from Cambridge.
People who live in Everett and want to live in Cambridge can't vote on Cambridge housing policy. They can only vote in Everett.
Local control of zoning sounds so democratic, but it's a tool of rent-seeking, exclusion, and discrimination.
If even a quarter of those people are immigrants, that tips the scales quite a bit.
It should also include at least a selective repeal of proposition 13 for non-occupant residences and a re-assessment of all such residences to tax those who are using our real estate as a financial instrument rather than a place to live.
I'd also be in favor of an extra tax on out-of-state residences held by non-occupants and on out-of-state non-occupant purchases.
Non-residents cannot hold governments accountable (by voting) for how they use the money which allows the towns to side step one of the core principals of democracy (not to mention that non residents don't have as good information on which to evaluate the performance of local government since many local issues will not affect non-residents). I would have no problem taxing people who enable this by having income or vacation properties in towns they don't live and taxing local property owners who vote for the people who do it.
This accomplishes the original goal of the initiative — to keep fixed-income seniors in their homes — without starving localities of property tax money and disincentivizing them from allowing new housing to be built.
Politically, passing these changes would still be hellishly difficult, particularly the second one, which is not so easy to understand. One way of putting the problem is that Prop. 13 represents a massive transfer of wealth from future California residents to present ones. Of course, the future ones can't vote against it since they don't live here yet.
You'd get a lot less resistance there. You're not messing with cost of living for owner occupied homes, just second properties, investment properties, and of course all those foreign cash buyers using our real estate as a money laundering vehicle.
Of course, about 80 to 90% of the existing homeowners (in many neighborhoods most people bought they're homes more than 20 years ago, you can verify this for yourself on zillow) won't like that, as they're currently paying about 0.1 to 0.05%! So, it's a pretty hard sell.
I'm much more in favor of incentivizing people to support positive change than just bringing out the big sticks. How about giving everyone in the neighboorhood a property tax credit if they vote to upzone? Or giving companies big tax breaks if they allow 50% of their workforce to work remotely (tackling both housing and transportation issues)?
There is an idea of excluding commercial properties from Prop 13 too (I think they shouldn't have to be covered to begin with, the whole idea of prop 13 was to "keep that old lady in her house when she has retired and cannot keep up with raising expenses").
Also props 58 and 193 allow to inherit Prop 13 tax assessment by children and grandchildren (again against original idea of prop 13 to just help elderly with living in their places when retired) so Prop 13 expanded that way to became multi-generational.
We can consider excluding non-primary residences from it too.
this would mean proposing that the law that's supposedly meant to help old people would actually be limited to those old people
I pay more than 4x what my parents will ever pay in property taxes on their home that is worth more than 4x what mine is.
Prop 13 was, pardon my french, such a dumb fucking proposition.
The Law: https://therealdeal.com/la/2017/10/05/will-new-california-la...
The Effect: https://www.mercurynews.com/2018/04/02/community-reacts-to-d...
The current hole was dug by local governments being very involved in telling property owners what they could and couldn't do over many decades.
Why will recursion fix the problem?
The bay area is rich enough and enough of that is tied up in property that if it perceives it needs to buy influence in government in order to keep it's wealth it will probably be able to do so then the problem will be even more entrenched because it will be entrenched at the state level.
More like, California and Federal level policymakers have been too lenient and let town and city level politicians make too much selfish policy that hurts the state and country level economy and progress.
The economic powerhouse areas don't belong only to their current residents. Everyone in the country has a right to strive for wealth and a better life by moving to economically active regions. We shouldn't create a society where your economic class is determined by where you happened to be born.
Its wretched, but that is the society we live in today! Why haven't you picked yourself up by your bootstraps yet? /s
People just aren't interested in any perceived threat to their property values so they're strangling growth based on an entitlement mindset. No, sirs and ma'ams, your home's price appreciation isn't a right.
No, but they do have a right to vote for policies and politicians that defend their interests.
However, any system that allows people to rent seek by creating building restrictions that protect their property values is not an optimal solution. So sure, they can vote but they should not be able to vote on zoning.
What about nuisances or factories or what have you? Well, that's easy enough to take care of through noise ordinances. Land use zoning is mostly a well intentioned but terrible in practice policy idea.
1. Less room to spread out in the Bay Area. Detroit does not have many high-rises, and as far as I can tell, it has had a large number of single-family dwellings condemned/abandoned etc. during the recession. Also, Detroit is in a seismically stable zone.
2. Large number of incoming people who do not have a say in local politics in the Bay Area. To my knowledge, many of the incoming workers are here on visas, and they are largely apolitical, unable, or uninterested to cast a vote. Most of the busy workers do not have the time or the inclination to participate in local politics. I imagine this must not have been the case in Detroit, where unions were strong.
The other problem is that many Bay Area residents who bought their properties when interest rates were quite high (I had an older colleague who bought his house at 24% or so interest rate --- unimaginable nowadays), and the Federal Government had not embarked on a protracted QE, QE2 ... phase of pumping money into the economy, so to a certain extent, buying a house in the Bay Area has always been hard (not impossible, though, which it is now, for most people); as a result these existing homeowners (who ploughed a significant portion of their incomes into their homes) feel entitled to keep their insane property values that way.
2. This is much closer to the heart of it. Local politics allows homeowners to veto good housing policy in the interest of protecting their investments. However, Detroits expansion had nothing to do with the unions lobbying for housing policy, there just wasn't much in the way of zoning laws and people built where there was demand.
In any case, the only thing that's going to fix the housing crisis over there is zoning reform. Believe me I feel your pain, I live in Manhattan. At least we're doing some building, though not nearly as much as we should. If it were up to me all (most) of the three story sixpacks in Bushwick would be bulldozed for six story tenements.
But New Yorkers beware. The Subway is at risk of being destroyed by idiot Cuomo. It's already leagues behind London (which does it cheaper and better), not to mention Tokyo and others.
I'd put this more on the Bay Area's low population than on the geography.
Also, Santa Clara county is chock-full of EPA superfund sites. Lots of soil and groundwater contamination.
The other is that most of the built land is zoned extremely low density.
Doesn't increased density help property values? If I can build a high rise on your 1 acre plot of land, its value should go up.
However, if you are in a neighborhood of single family homes and a huge multi family building is constructed on your block, your home price will go down because there will be enough supply to meet demand, taking pressure off the single family homes.
If you are in an already dense city and regulations are relaxed so that more high rises can be built in more neighborhoods, the price of your condo all else being equal will be lower because there will be more supply. The land price may well go up but your individual apartment would likely be worth less.
which is why NIMBYs should at least be in favor of gentle density - duplexes and triplexes, small walk-ups, etc. But they fight those like the end-of-days too.
Look, I don't want to destroy the value of the largest "asset"[0] most people will own. But... what's the alternative here? The incumbents just get to grow fat off riches that they absolutely lucked into and played minimal part in creating, while lower-income residents get forced out of their homes? We just give up on the bay area as a worthwhile economy, have all the tech companies pull out, and then home prices crash?
[0] People really really love to believe their primary residence is an asset/investment, because it cost them so much money to acquire it, that it just has to be. If they'd consider it just a cost of living, a liability even, we'd have such fewer financial issues in housing markets.
The problem is (1) we haven't built that much since 2008 anywhere, so any change seems like its a flood (2) most growth pre 2008 was greenfield SFH development, most growth happening now is in established communities
Edit: here is the link (4.25 - 4.75$/sq foot to build in San jose!): https://www.mercurynews.com/2018/04/27/construction-costs-co...
By all means, let's work to fix the problem. But, for anyone who wants to get cost effective housing in the next 30 years: I'm sorry to say it, its time to bail out. We need to start lobbying software companies to get the heck out of the bay area and CA in general.
Let's get Elon musk to build one of those hyperTubes to some city like Austin, Denver, Albuquerkee, or madison, WI. maybe some of us could commute in for 4 days a week or something.
The reason why we get too many high-rises and too few low-rises is because of regulatory burden. In particular, the long, drawn-out, and capricious manner in which the laws are administered and challenged. In that kind of environment high-rises become more common simply because of the economy of scale--a high-rise developer has resources and the wherewithal to see the project through where developers of smaller developments do not.
The most important thing for commerce and especially real estate development is consistency and predictability. Proposition 13 and the cost of labor can be dealt because they're known quantities. Zoning boards and CEQA[1] are the real killers as the unpredictability compounds, many fold, the nominal regulatory burden.
[1] Compare NEQA to CEQA. The Federal NEQA law isn't much of an impediment to development anymore because an efficient ecosystem has developed--specialized assessment agencies that do the work quickly and cheaply, and relatively efficient administration of the regulatory regime. The cost of a NEQA impact statement is a known quantity and is easily budgeted. By contrast, under CEQA it's much easier for NIMBYs to challenge impact statements, which means the time and budget required for getting over the CEQA hurdle can be indefinite.
And also tends to be drastically worse build quality and sound isolation. Given a mid-rise or a high-rise built in the same year, you definitely want to live in the high-rise, all else being equal.
Higher quality multi-family buildings that middle-class people could see themselves living in would go a long way towards changing public opinion. Unfortunately, our multifamily housing stock is bifurcated between shoddily built crap for the poor, and ultra-luxury high-rises for oligarchical investors. If people don't want to live in a building themselves, it's harder to accept its externalities for the benefit of others. Most people do live in apartments as students and young adults, and they'd never go back.
>I'm sorry to say it, its time to bail out. We need to start lobbying software companies to get the heck out of the bay area
Agreed. SF is just a bad location to build a large city.
http://images.slideplayer.com/22/6340453/slides/slide_27.jpg
If being surrounded by water is an insurmountable problem, how do you explain the tall buildings and subways in Manhattan?
I'm not saying the water inhibits construction. It just limits the area where you can expand. Look at New York on Google maps and zoom out a bit. The metropolitan area expands in all directions except the very south. Now look at Tokyo. It also expands in all directions except the south-east. Now look at San Fransisco. The north, west, and east are blocked by the Pacific Ocean. There are single long bridges to the north and Oakland, but they serve as choke points limiting movement. Much of the area to the north is also a national park.
Strong statement, if slightly ungrammatical. I think this is a challenge to visionary thinkers and leaders to change the game. Engineering is one part, as is regulatory capture and regressive real estate laws and norms, weak state government in the state, and highly atrophied political participation. What could change that? I can think of one thing, and one thing only, that would "shake up" the status quo.
On the one hand, lots of people lose their investments and are forced to sell their land or take out loans to rebuild. You might be able to buy land or a damaged property for a good deal. Contractors would all be completely overbooked and the price to rebuild would likely be quite high for some time. Some who have never experienced earthquakes might get scared out of the region altogether.
On the other hand the houses that survive are now part of a much smaller pool of available, livable houses and there's still a lot of money in the region so I could see prices for these houses shoot through the roof.
Everyone talks about housing affordability and NIMBYs and we get into class warfare and home-appreciation snobbery, but the simple thing I can't understand is how will the area's transportation infrastructure scale up? There's no credible solution.
You can't wave the problem away with "eh, transplants".
Apple Austin, e.g., is only GPUs and Apple Store.
Using a long time period will give you large headline numbers.
Absent from the vast majority of these threads is the critical component in this "crisis":
Property can be purchased and held onto for purely speculative purposes, thereby draining the inventory pool, and raising the cost of housing for residents of the city.
This has been happening in the bay area for a very long time. Wealthy Chinese investors who do not LIVE in the bay area, have purchased an incredible amount of inventory over the last decade and it has remained vacant / unused.
Of course we need more building, that's obvious. But what we also need is to immediately disallow the purchase of land by foreign entities that is not used for habitation. I have yet to hear a constructive argument for why that shouldn't be banned at a constitutional level. Housing may not be a "right" per se, but it's certainly in the communities best interest to use available housing for that communities interest, not the interest of wealthy foreign investors.
Why limit that to just foreign entities? Also that's trivially bypassable, just get someone to live in the house; it's used for habitation now.
But frankly ending CEQA and capricious zoning boards (and all the other legal authorities/mechanisms that NIMBYs use to delay/obstruct housing) is a far more robust method of killing off this sort of speculative purchasing, since the only reason all this speculative purchasing happens is because there's a gross undersupply of housing and thus prices are guaranteed to increase at staggering rates.
"Rent a moving truck from Las Vegas to San Jose and you'll pay about $100. In the opposite direction, the same truck will cost you 16 times that, or nearly $2,000."
https://www.sfgate.com/expensive-san-francisco/article/U-Hau...
Short of a bubble popping, it usually doesnt work like a cusp, but rather, things remain on the edge of extremity (i.e.: dual income couple plowing 70% of income into insane mortgage.)
Wouldn't it have been done by now if that were the case? Yet SF is still the Mecca for the tech and startup scenes.
It's easy to see every major tech company having a base in SFBA for the foreseeable future, but it's also easy to see being a working programmer living in one of those smaller markets and actually being a homeowner being a much bigger thing going forward.
And while those other cities do have some tech scene, it's still nowhere near that of SV, and that's still the first choice of most developers.
This is what boggles my mind: despite such a minimal land requirement, nobody in the entire fucking region will budge. Put it somewhere else, they say. It has become a game of musical chairs where nobody gets up for the next round.
State intervention is the only thing that will solve this problem.
[0] Don't fool yourself into thinking that only people without the income or capital to live well in the Bay Area would leave it. There are intangibles (culture, traffic, distance to skiing, etc.) that, for some people, are non-optimal. For others, it's perfect. That's okay, humans are a varied lot (and it's a good thing).
[1] Nothing major, it will remain expensive due to geography and talent/creativity/capital density.
https://www.npr.org/sections/money/2018/04/26/606151956/cali...
[1]https://www.bisnow.com/san-francisco/news/construction-devel...
"Affordability" just means a balance between jobs (which produce people needing housing) and the supply of houses. There are TWO ways of fixing supply and demand problems like that. It is insane that the city of Cupertino has allowed the construction of offices for 26K jobs but only has housing for 58K people. It is insane that Mountain View has allowed the construction of offices for 30K jobs but only provided places for 77K people to live. Those two cities and others collect all the sweet revenue and burden the rest of the Bay Area with costs of housing and commuting.
Rather than insisting that cities must build housing, we should insist they balance jobs and homes. I'm angry that my home town, Fremont, had a plan to reserve space for both homes and jobs, but is forced by the state to accept home construction and we have no money to build the schools needed to accommodate the new population.
- Global amount of wealthy people goes up
- Demand for a spot in a city goes up
So if you extrapolate this 100 years, you will end up in a situation where even the worst cities of 2018 will be unaffordable for the regular person.
- 1950: 2.5 billion
- 2000: 6 billion
- 2018: 7.6 billion
I think when viewing exponential trends we need to consider the maximum 'carrying capacity' - typically when something is growing exponentially there is some latent 'available energy' that is being consumed to fuel the growth. Once consumption reaches parity with that energy production - growth may continue for a bit longer as 'excess reserves' are drained, but a trend reversal becomes inevitable.
> even the worst cities of 2018 will be unaffordable for the regular person.
In your city example, I'd argue that once a city is too expensive for any 'regular' person it will create a negative feedback loop: if unable to source enough labor to satisfy the service demands of the wealthy residents, those residents will begin leaving, reducing housing prices until the problem is at least somewhat mitigated.
The great irony is that there are plenty of people in the SF bay area who think Tokyo is more expensive than SF just like it was decades ago, even though it's not true anymore.
If anything, magacities like Tokyo and London show us that you can build like crazy, and still end up a very expensive place to live.
rent in particular is drastically less expensive
The number you want there is the the one that says Tokyo is 10% cheaper than NYC. That’s the adjusted number.
Say what you will about rent, but “10% cheaper than New York” is nobody’s definition of cheap.
according to it, salaries in SF are ~66% higher than Tokyo and rents are ~300% higher.
Unfortunately, there's no easy workaround for the situation. Perhaps an "Uber for commuters" would work, together with some sort of coordinated purchase/rent of affordable housing in areas ~1 hour commute from those chokepoints? (i.e. get 100 people to move to a small village together, then fill 2 busses every day with commuters to SF).
In most Bay Area cities, they are the wishes of the residents who do not want more development.
My neighborhood in Sunnyvale was recently rezoned to be single story only and that process is entirely driven by the residents, not the politicians. It was the 25th neighborhood in Sunnyvale to do so, and it cost around $200 per resident to file an application. No a single resident was against it.
The new zoning rules in our neighborhood limit height to 17 ft.
And greed wasn't the driving factor either.
People are much more concerned about the new neighbor tearing down the single story house next door and building an ugly two story McMansion from which you can look straight down in their garden/pool.
Legacy industry is no excuse to keep cramming more people onto a tiny peninsula in California. It sucks for people in the middle and lower involved right now but honestly I encourage them to move at all costs.
The writing is on the wall.
Presumably a big quake will do that
I used to laugh my ass off at ignorant Californians that would say that. It's still fucking Texas.
But, also, a 50% increase in housing supply means higher density of population, with higher buildings instead of single family homes and therefore more comercial space in large populated areas, meaning more jobs will be at walking/biking/short-bus-ride distance.
There are limitations on current build rates though; we'll have to massively increase the construction work force to do anything like this, as it's already not quite able to meet demand here.
Also, given that cars are inherently dangerous, cause environmental harm, and take up a lot of space, it seems like it's in the public interest to discourage car ownership/use.
You must not know a big cross section of people then. Maybe in the downtown core, but a trip across the city will show very little available street parking and most houses with garages filled with cars.
It's a small minority of the city that don't have cars.
http://sf.streetsblog.org/2014/08/15/car-free-households-are...
"Census: 95% of New SF Commuters Since 2006 Don’t Drive Solo"
http://sf.streetsblog.org/2015/09/25/census-95-of-new-sf-com...
My point is that in many cases, there exists a reasonable city design and style of living where car ownership feels unnecessary and is better seen as a luxury than a right. Certainly there are many situations where car ownership makes sense, but I worry that people are sometimes too attached to the idea of car ownership and either incorrectly view it as a necessity or assume that everyone else needs a car as well.
[1] https://sf.streetsblog.org/2014/08/15/car-free-households-ar...
This is a solved problem.
https://www.mercurynews.com/wp-content/uploads/2017/12/ebt-l... - and that's only the most urgently needed stuff. There are many more rail rights of way and tunnel sites that are easy to build on, like the Permanente Quarry branch line.
Run BART the short way between SF and SJ, build many clusters of high density along heavy transit routes. Let the current freeway dependent population continue to use them, but build housing so that people can get to jobs without using single-occupancy passenger cars.
Also, compared to most other places, traffic laws out here are ridiculously inefficient. For example, light cycles that include a “yield on left turn” step and then skip the left arrow if the lane has cleared are incredibly rare. Also, instead of “left lane fast, right lane slow”, the law is “use whatever lane you’re comfortable in”.
Simply ripping out the “improvements” made in the last decade and bringing traffic laws in line with the rest of the US would increase road capacity by double digit percentages.
(The lack of progress on public transit is also embarrassing, especially given the tax and income levels around here)
Right now local regulations require large amounts of parking, which means large amounts of the most valuable space devoted just to cars, and forcing people to pay for the car. If you're forced to pay an additional 10% in rent to cover the space used for parking, then you're probably going to get a car.
If people were allowed to make the decision to not have cars and reap the financial benefits, we'd see a bigger shift.
As it is, car use is regulated into the way that we build things.
That sounds miserable. Caltrain has much more reasonable rolling stock (i.e. with seats) for that trip.
I don't think we can stop that assumption until we have much better public transit. Cause if the trains aren't running where I need to go, when I need to get there, I have to drive.
I'd say relatively few people commute on the limited number of public transit lines you say everyone has to live near.
It can only be funded by higher sales taxes that workers pay, that end up rising the value of land and thus rent. It falls doubly on workers and renters.
It doesn't help that a lot of the people moving there, are doing so because of high tech job salaries, meaning they're more able to absorb the high rent costs.
If the Bay Area doesn't step up to do that, it's likely that the State of California will have to start implementing policies, and that's not going to be as good as a regional government and planning.
> The bigger government is the first one messing up housing.
Do you mean that State policies are the ones messing up housing? I think that Prop 13 and CEQA get named sometimes for stopping housing development, but a far bigger hurdle are the local zoning policies, and the veto power of local communities.
Are you suggesting something like a state-wide policy of by-right development for plans that meet local code and zoning regulations? That would definitely help reduce building costs, but it won't be enough to allow the amount of housing that is suggested in the original article.
To give an example of how bad this is, the city of Atherton has sued Caltrain 7 times over the electrification project, the latest one related to (wait for it..) the use of 5 45 foot poles instead of 10 35 foot ones. https://www.almanacnews.com/news/2018/03/01/caltrain-and-ath...
And this despite the fact it comprises less than a mile of the track and doesn't even stop at the Atherton station during weekdays.
How can anyone expect this problem to get any better without major changes to zoning control and major revisions to the property tax/rent subsidies? I'm not holding my breath, and neither are all the other people that are starting to think about leaving.
The core problem to me is taxation: California should have a Land value tax, but instead of that, it rewards owners with things like prop 13, and punishes workers by using sales taxes and income taxes.
Just changing that taxation would change everything: owners would not block development anymore because their land has negative worth unless it houses multiple people. Right now a big building that houses 1000 people pays more property taxes than a few houses that house 10. A Land value tax would shift the burden and make the few houses super expensive, while rent remains the same, and workes see increases in income and also in cheaper goods.
Of this there is no economic doubt in my mind. But politically, neither rent control nor prop 13 are revokable,so my assessment is that SF will hit a ceiling of growth. Maybe the last property owners will be left holding the bag as their expectations of growth will never come about. And then another city will pick up the slack, one without this issue.
This report from 2015:
http://lao.ca.gov/reports/2015/finance/housing-costs/housing...
has a section titled "Why DO Coastal Areas Not Build Enough Housing?"
* Community Resistance to New Housing.
* Environmental Reviews Can Be Used to Stop or Limit Housing Development.
* Local Finance Structure Favors Nonresidential Development.
* Limited Vacant Developable Land.
And Prop 13 feeds into the third in a huge way, and a bit into the first.
Why not just build out and do greenfield development but put some mandatory density requirements in place for new building?
San francisco will not change without a back-breaking situation: tech companies moving away, homelessness getting to untenable levels, median workers leaving the city, etc. Its already happening, but not hard enough to curb the expected profits of the last generation of landowners.
Is Tyler Cowen right, then? “Basically SF is ed?” No. San Francisco could be just fine. The thing about San Francisco is that while greenfields have been exhausted in the city, the San Francisco Bay Area is largely undeveloped. We are always arguing over San Francisco, or Palo Alto (ick). Outside of the 47 square miles of San Francisco proper are almost 3200 square miles in San Mateo, Santa Clara, Alameda, and Contra Costa counties. (I’ll leave out the hoity-toity North Bay counties — Marin, Sonoma, Napa — but if it’s Latin-America-style land reform you want, the vines there are ripe for revolution!) Nobody wants new suburban sprawl, thank goodness. But dense development is not sprawl, even when it is greenfield development.
The federal government forcing the sale of land for high-density development would probably be enough to spook landowners into seeing reason.
I know plenty of people that make $30k-$40k/y in NYC and can afford to live in Bushwick with a few roommates and live nice lives. Single train commute into Manhattan, plenty of things to do that don't cost a lot of money, no need to worry about a car, etc.
Edit: a lot of people are replying that having roommates isn't tenable for $x or long-term. I agree, and I don't think we disagree.
Solving a housing affordability problem for people making $15/h starting their careers is part of the overall picture - housing available for people at every income level. An experienced worker with a family won't be looking to live in a 3br apartment with two roommates, but that same 3br apartment that was affordable can also house a family of 4 with two wage-earning parents.
NYC is _filled_ with people in all sorts of jobs who, because there is housing stock available in many levels, can afford to live alone, with a family in an apartment in Queens, or in a house in NJ.
It's not panacea - transit is not as reliable as I wish it was, goods are expensive, but it works for a lot of people
Those two together don't compute for most people. I'd say only a minority of people are fine with living permanently in a dorm-like environment. Historically, having to share a house/flat with strangers has always been a sign of poverty.
Being an adult who needs to have "a few roommates" to afford rent is not compatible with my idea of a nice life.
This sounds fun for a bit and then you grow up. If the Bay Area wants experienced workers filling non-tech/finance/medical jobs, they’ll need to better than this.
Why is this? It ultimately comes back to the Law of Rent. The amount that landlords are able to charge directly corresponds to the produce obtainable at that location over their next best alternative... and that alternative is likewise set that way up until you reach the "margin" which is the best available rent-free location.
Since all land has been homesteaded, there's not much of a ceiling on rents... they tend towards the entire nominal productivity of the site. And the more desirable that site is, the more astronomical the rent.
We want locations to be desirable, so in effect we actually do want rent to be high. It's just important that everyone share in that rising wealth. In other words, we need to create a high demand for labor, by shifting taxes from labor onto idle landlords. Land speculators are like patent trolls atop the surface of the planet.
I do believe that the thing that would change the housing stock situation for SF is to remove sales taxes and add land value taxes. Just that change alone will make workers and renters richer overnight, and would change the anti-development mindset of owners quite a bit, considering that low-dense units will pay the highest amount.
"A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground."
- Adam Smith, Wealth of Nations
"It is in vain in a Country whose great Fund is Land, to hope to lay the publick charge of the Government on any thing else; there at last it will terminate. The Merchant (do what you can) will not bear it, the Labourer cannot, and therefore the Landholder must: And whether he were best do it, by laying it directly, where it will at last settle, or by letting it come to him by the sinking of his Rents, which when they are once fallen every one knows are not easily raised again, let him consider."
- John Locke, "Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money"
It's known that land tax together with similar antimonopoly taxes can't be shifted. What's nice is that not only this type of tax doesn't slow down the market, but on the contrary makes it more effective. Essentially without rent capture (antimonopoly tax) there is an open sink in the economy, so no matter how hard people work, all this value exits out of the economy, mostly in form of parked money in real estate.
As George predicted, all technological progress will just yield higher real estate prices and everybody will be working even harder than before.
I agree a land tax would push the owners of vacant lots to develop them. But, the NIBMY owners of single family homes will still fight against the building of new apartment complexes and try to constrain housing supply (to prop up their property values). I certainly would hope that more apartments would be built though!
https://www.bloomberg.com/view/articles/2018-03-14/californi...
We know that artificially restricting the supply of housing increases prices.
https://www.bloomberg.com/view/articles/2017-10-24/faster-gr...
Knowing why is important, though, and the law of rent explains the mechanics.
I'm in agreement with the idea that more building should occur. I'm just cautioning that even if someone destroyed every housing regulation in existence, or even if lots of public housing were built, we shouldn't be surprised if rents remain super high.
In the technology space we're used to seeing costs plummet from year to year. A land title system, by contrast, will predictably see increasing prices over time, while simultaneously extracting a flow of rent.
The result has been predictable and inevitable when supply is growing slowly and demand is growing rapidly: increased prices.
The commute into Manhattan is about an hour, while not ideal its not that bad considering you're sitting on a train for that time, and its more of a self-inflicted wound given if NYC got its act together we could have much better public transportation. On top of that if you can afford it you can move closer by for a faster commute, and most people on hacker news are probably at least decently paid tech professionals.
Personally I have about a 20 minute commute and can easily afford the place I'm staying at. Generally if you're not dating/married you live with roommates, and if you are married then you have two incomes. I know other tech professionals in NYC that can afford their own place as well.
$400ish a month in maintenance seems very optimistic in my personal experience. There's always little bits of work to be done in a residence, and will be compounded when something major inevitably ends up going tits-up and needs replaced or serviced. Then on top of all of that, you have to have insurances and whatnot. Owning a house is great, but there's a fair bit more to it than just swapping the phrase "rent" for "mortgage payment" in regards to expenses.
>Given the median income in the US is 59k
For clarity, this is the median household income rather than individual.
All within 20 mins of subway within Manhattan.
https://streeteasy.com/for-rent/queens/price:-2500%7Cbeds:1
Also, if you want something a bit more trendy and family friendly, you can find plenty of apt. in Park Slope, (the equivalent of Noe Valley)
https://streeteasy.com/for-rent/park-slope/price:-2500%7Cbed...
SF just doesn't have the same amount of options.
I've tried to make the math work every which way - the Bay Are is just out of control, even compared to NYC prices. NYC compensates quite well by building upwards rather than outwards, this has a second benefit of reducing commutes (again, on a relative scale compared to the Bay Area.)