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It's a problem all over in many big cities. Toronto is experiencing the same issues. Small businesses are being pushed out. You have a Deli or a Coffee shop that has been there for decades close and some kind of Boutique shop move in since they can afford the 5-10k a month in rent.

The trend now is for small shopping plazas or outdoor malls being sold off to developers to build Condo complexes. Complete neighborhoods have no shopping anymore forcing residents to drive instead of walk to get groceries or enjoy a stroll.

It doesn't help that these cash strapped cities (Toronto) just rubber stamp any new development since the tax haul will be several times what they got for what was there. A 20 story Condo brings in a lot more revenue then a parking lot and strip mall. I won't even start about all the green space they are selling off to developers. It's out of control.

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> It doesn't help that these cash strapped cities (Toronto) just rubber stamp any new development since the tax haul will be several times what they got for what was there.

The problem is not too much building, but not enough. The only real solution to the real estate problems in expensive cities is to get enough new building that real estate values tank.

I could fix the SF real estate market in 10 seconds (although it would take maybe 10-20 years for developers to enact the change).

1. Minimum residential zoning is 15 story multi-family (subject to engineering limitations)

2. Axe rent control

3. No requirement to conform to the character of the neighborhood

This would make lots of people very unhappy. People wouldn't like it that huge buildings are going up next to their 1 story house. People wouldn't like it that their real estate values will tank my 80-90%. That's a big part of the reason why there will never be a fix.

But that level of change is what's necessary to fix the problems the city has.

That would definitely create a lot of value ("fixing the problems"), but it needs not tank real estate values at all - Manhattan NYC does not have "cheap" real estate. What helps people looking for "cheap" RE is that this gives them more options in terms of moving to surrounding communities, since these would be incented to develop and densify in turn.

> That would definitely create a lot of value ("fixing the problems"), but it needs not tank real estate values at all

The most basic, fundamental laws of economics are the relations between supply, demand and price.

If you keep demand relatively constant and dramatically increase supply, price will fall.

Indeed, because of the close substitutability of owing and renting, the only way to get rents lower is to also decrease property values.

Why do you assume that demand would remain constant despite a large increase in density? More density tends to mean more amenities and more services like mass transit, hence raising demand.

> Why do you assume that demand would remain constant despite a large increase in density?

Sure - induced demand is a thing. But induced demand is a secondary effect: people move to a place because the cost of living is now lower; it can slow the decrease in rent, but it can't stop it

More importantly, it's completely possible to just out-build induced demand. There are simply a limited number of people who want to live in SF (although admittedly, that number is quite a bit larger than the number who are currently living there).

So the more nuanced relation is: when supply dramatically outpaces demand, price will go down.

Just to make sure we're both on the same page, I'm advocating increasing the number of bedrooms in the city by a minimum of 1-2 orders of magnitude.

That may be a thing is San Francisco, but this issue exists far beyond it.

I live in Albany, NY, a tiny city that has a mix of middle-income and low income residents. It's the state capital, so the fairly narrow salary bands of government workers define the market. The city adopted a model zoning ordinance to make building easier, and now there's a mini-boom of medium-density apartment construction, all of which is upmarket. All of the development is 4-5 story stick on brick buildings. New York provides generous tax incentives for apartments with retail space, so most have that, and most of that space is vacant.

It's creating some potentially bad outcomes, as it's cutting off the oxygen for aging flats and single family homes that have been rentals. You have more vacancies as people with money move into new apartments that are cheaper due to the tax abatements. The older properties that pay taxes are going downmarket, and the bottom tier properties are increasingly vacant as they don't meet the code requirements for Section 8 subsidy, and the landlords cannot afford to cut the rent to let the market fill the units.

My point is that there are no easy fixes. SFO is a supply/demand problem and while supply is a problem, demand is too -- the outlier is that the extended gold rush is allowing tech companies to make irrational decisions with respect to employee compensation. The market has decided that it's cheaper to pay workers incredibly well than to move to Omaha.

My question is why are they giving developers tax abatements?

One thing I don't understand is the "their real estate values will tank 80-90%" part. I live in a transforming rural area and one-by-one all the farmers have been selling their land to developers to make planned neighborhoods. They control the supervisors, zoning, and planning boards, and they have to be dragged kicking and screaming to allow these developments. However, their land values have gone up a ton in the last decade: basically a whole order of magnitude from on the order of 10's of thousands per acre to 100's of thousands per acre.

I think the same applies to your single family home next to a 15 story condo building. Instead of selling to a another family, now they're selling to a big developer and can price it waaaaay higher, because the developer will be getting significantly more value out of the land than they were.

And still, they'll not want to do it. There's still farmers holding out, despite single digit million dollar offers for 10-ish acre plots. And it's great if a small number of them do hold out, because it makes it possible to have some green space down the line when the area has fully developed to a single family house level suburb.

But I think the main issue is the culture. Farmers want to maintain their way of life. Single family home people want to maintain their way of life. And so on. People don't like change.

> One thing I don't understand is the "their real estate values will tank 80-90%" part. I live in a transforming rural area and one-by-one all the farmers have been selling their land to developers to make planned neighborhoods. They control the supervisors, zoning, and planning boards, and they have to be dragged kicking and screaming to allow these developments. However, their land values have gone up a ton in the last decade: basically a whole order of magnitude from on the order of 10's of thousands per acre to 100's of thousands per acre.

> I think the same applies to your single family home next to a 15 story condo building. Instead of selling to a another family, now they're selling to a big developer and can price it waaaaay higher, because the developer will be getting significantly more value out of the land than they were.

I think the way to think about property values is this: what is the highest value economic activity that can be accomplished on the property?

In your first example, it's pretty clear that building lots of houses (in the presence of sufficient demand) is a much higher value economic activity than farming.

The home to condo example is a bit more complicated. For the very first person to sell to a developer, I think your point is sound.

However, each additional bedroom that's created in the city decreases the value of all other bedrooms by a small amount. This not only directly decreases the value of a single family home, but it also decreases the value of a condo building, which means that developers will be willing to play less money for land.

Eventually, builders will stop building - the cost of construction will be more than they can sell new condos for. At that point, I believe the remaining home owners will have suffered a dramatic decrease in the value of their property.

Where does the equilibrium land? I don't think anyone knows for sure. But new construction goes up in some pretty low value real estate markets. 80-90% is just a guess on my part, but I don't think it's too far off based on current prices.

That's a great explanation. One other thing that contributes to the equilibrium I think we haven't mentioned here is migration. You mention that as the number of accommodations increase, the price of existing residences is shifted down. This is supply. But demand is changing too. And I think that demand to live in the bay area is absolutely huge. As supply increases, I believe that either new people will move in to meet that supply. Or, under-housed current residents of the bay area will level up (ie. move out of a van / garage / attic and into a "real" dwelling).

Another thing to mention is that the remaining single family houses will have a different kind of value once they become rarer. Owning one of the final single family houses in San Francisco is the ultimate flex. You still have a backyard; you can still walk to things. So some super-rich person will come knocking and want to buy just as a status symbol or as a way to get the way of life they want but still in the city.

"The problem is not too much building, but not enough."

No - the problem is too many people.

Toronto accepts a vast array of newcomers every year - there is simply no need for it.

The number of new people is existentially problematic, it's not normative in any sense, and it's a self inflicted problem.

Malthus doesn’t make any more sense at a micro level than a macro one - you can’t keep people out.

"you can’t keep people out"

This is simply not true.

Almost all of the influx is due to migration into Canada. The government absolutely controls those numbers.

I don't know Toronto, but your description is the exact opposite of what is happening in San Francisco.

All residential development has been frozen. There are a few small areas where very modest amount of housing has been built, but even there it has been with an abundance of retail, that takes a long time to find retail tenants. And because most of the city is blocked from any development; and only small areas get what look like massive changes, it take many years to adapt.

The entire western side of SF is basically unchanged in the 20 years I've been in the area, and the age of the buildings say that it's been unchanged for decades more.

North beach, Russian hill, marina, cow hollow, telegraph hill are all basically unchanged too.

Mission bay and soma are the two places where residential is being built but it’s all expensive high rise esque units that middle income can not afford.

When you limit building, the most expensive forms of building get built first, and existing buildings go to those who can pay the most.

The only other way to deal with the mismatch of shortages is to have waiting lists or lotteries. Both of those are used for subsidized housing in SF, and the lotteries are ridiculously lopsided, to a tragically comic degree.

The only people who benefit from the shortage are landowners, and boy do they take it in.

I have never understood the mindset that new housing has to be cheap or "affordable" to middle income people. New things whether it be a car or a home is always going to be more expensive and it being in the bay increases that immensely.

I grew up in the bay and now live elsewhere because the price of living in the bay became unjustifiable to me. I don't see why so many people feel that they are entitled to live in a place that they do not own and feel its the role of the gov't to ensure that they have a place to live.

I'm glad that you escaped before the economic system got as messed up as it currently is, but there's a lot wrong with your point of view on this.

Those of us who live here do not exist as islands. We all participate in a rich economic web that requires exchanging services with lots of people. Teachers, bus drivers, delivery people, shop keepers, mechanics, plumbers, police officers... it takes a lot of people to run a society.

Typically the "not everybody has to be able to afford to live here" mindset has worked only when there is a wealthy exclusive enclave that tries to keep out poorer people and races they don't like, but when that community can still draw workers from more affordable places nearby.

The Bay Area has taken that "these people we depend upon for our lifestyle don't deserve to live here" attitude and applied it a region so large that people can no longer commute in. It leads to extremely dysfunctional societies.

Toronto's problems are very different from San Francisco's. Toronto currently has more cranes in the sky than New York City, Los Angeles, Seattle and Boston combined.

1: https://www.blogto.com/real-estate-toronto/2019/07/toronto-c...

So there's lots of construction, but prices and rents keep going up. But there are signs of it softening a little.

https://www.thestar.com/news/gta/2019/07/12/apartment-vacanc...

Maybe I’m missing something but 120 buildings doesn’t seem a lot. Also only 27 new buildings in the whole New York seems wrong by at least an order of magnitude. What am I missing with this crane index?

It may seem like a lot of cranes and a lot of construction, but like tigershark notes below, on a relative basis it’s not even close to the amount of construction needed to meet demand (and thereby induce lower prices). Today’s building boom is a pittance relative to population.

New York, Boston, most expensive urban areas are experiencing some version of this. Landlords with commercial space either want a bank or some other national chain that afford an expensive long-term lease, or they're willing to let the space sit empty because it's just a safe-deposit box for some investor's cash--the appreciation of property value is worth more than the rent.

Boston is kind of a funny case because Boston itself is decently good about letting development happen so long as said development isn't politically incorrect (relative to local politics/beliefs) or can't be construed by the pearl clutchers as being unsafe, bad for the children or bad for some protected class. Yes I know you can drive a container ship through those exceptions but it's pretty darn pro-building as far as Eastern MA goes. By contrast everywhere around Boston is zoned and run like SF. This has the side effect of creating rising real estate prices, rent, etc. in Boston proper even though Boston is mostly sort of doing things right (with regard to zoning) because land is limited and Boston may as well be an island because it's the only place development can happen.

Really? I live near Kendall Square in Cambridge and there's been a massive mount of development there. It's been a nonstop construction zone for a decade, with no end in sight.

Kendall is one of the only places outside Boston proper. Large parts of Cambridge and Somerville are basically zoned as leafy commuter suburbs with New England small-town charm.

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