Average Rent in San Francisco Has Dropped $1k This Year

A good modern analogue of southern CT from the 70s-90s would be the valley in the bay area e.g. Palo Alto, Mountain View etc.

https://en.wikipedia.org/wiki/List_of_U.S._state_and_territo...

You can’t follow the game if you don’t have a program.

And it’s even an ANSI standard...

Property values are rising at 5%-10% per year, but bulidings themselves only depreciate without dumping more money into the building. So that 5%-10% is all land value gain. As a property owner, why increase taxes by using the land more productively with new buildings, when you can continue to profit just as much without that? Also, attempting to build is hugely risky, because the permitting process is fraught, long, and likely to fail.

If we didn't have Prop 13, every single property owner would have a lot more incentive to actually try to build.

> Residents strain the city budget via things like public schools. Businesses put money into the city budget via gross receipts taxes.

Prop 13 was meant to drastically cap property taxes. It was very successful in doing so. As a result, tax revenue from property taxes has also been capped dramatically, and cities adapted by relying more heavily on taxing businesses. Hence the current situation where residents cost more in services than they bring in in property taxes, incentivizing cities to attract businesses and wiggle out of their responsibility to build more housing units.

A good illustration of this dynamic is “RHNA” process for allocating housing unit quotas to each city in California. it is a very conflictual process where city councils typically fight tooth and nail to get their quotas reduced. A recent example in Palo Alto: https://www.paloaltoonline.com/news/2020/11/18/palo-alto-ass...

It's interesting to see how little things have progressed over the last few decades. For example, check this study [1] from fourty years ago.

TL;DR: "A recent survey of local land use policies in the Bay Area identified the important role that land-use controls play in limiting developments. The suburban land squeeze is not the exclusive result of immutable natural constraints. It is the outcome of the restrictive land use and development regulations imposed by many of the region's 100 land governments. A new mood has emerged in the suburbs; land use controls now place severe limits on where, when and how the region can develop. Continued suburban land conversion is now viewed as undesirable, and efforts to limit residential development are well organized and effective."

It's certainly not an "evil cabal of landlords in a dimly lit room", but it'd be naive to ignore the systemic forces at play.

[1] https://escholarship.org/uc/item/0ds0q9q4

Next, the idea that landlords are a unified group with a common set of designs is itself a premise that requires a little bit of legwork. Here's one. What are landlord expenses versus their expenditures. Are they large or small landlords. etc. To hell with nuance, let's create an Us v Them type of discourse, and see who bites.

Let's not pretend this is Milton's economic utopia.

Except your own example demonstrates that it's not. If it was "solely supply and demand", then rents should drop far more dramatically than they have, down to levels comparable to other cities that used to be equally unpopular. Yet there's a literal pandemic and even though demand for San Francisco housing is at a ~20-year low, with newly-empty units everywhere, San Francisco still remains one of the priciest cities in the nation. Short of like, an earthquake wiping SF off the map or similar sized event, demand for SF housing will never get lower than this, and it's still not enough to bring rents remotely back into the real world.

Supply and demand have an impact on housing prices, but are definitely not the "sole" source of them. Landlord behaviour, city tax goals, investment banking demands, private equity involvement, and much more all dramatically impact the price of rent far more than "supply v demand" or any "regulation" does.

This is hard to understand for folks used to megacity pricing, where "high demand" (i.e., a small-but-consistent influx of new residents) is until recently, an automatic given thing you could just always point to as blame for any problem. For those of us out in the midwest, where demand is regularly falling in many places, where new construction always outpaces population growth every single year, and yet the housing prices still always rise, the disconnect between prices and supply/demand is quite a bit more obvious.

I am happy to discuss all variables which inform the price, so long as we agree to give supply and demand top billing. We can even discuss the variables which inform supply if you like.

An HOA might, I’m not too familiar with them, but as I understand it even they have legal limits on the restrictions they can place on people moving in, so maybe not. Someone else would have to chime in on that one.

Agreed otherwise.

When there isn't enough room for everybody, the rich get served first. So everytime somebody protests a new housing development which adds to the supply, they are advocating for the rich to stay, and to kick out the same number of people that would otherwise occupy those units.

In the 20th century, we declared housing a human right. But in San Francisco, we have declared that only the wealthy should be able to afford housing, and that the everybody else should leave.

Hopefully with Covid forcing more sane remote work policies across the board, fewer people are forced to live somewhere they don't want to.

But for a brief 40 years before the super-constriction of supply happened, it was a welcoming place to lots of people that couldn't find homes elsewhere, because there were at least some empty places to rent out.

What drives up the prices isn't that people with big salaries are there, they've always been there. What's driving up the rents is that the people with big real estate holdings have said that the people with paychecks can't build anything new. So instead of those big paychecks going to building more infrastructure and subsidized low-income housing, those big paychecks are going only to current landlords, and pushing out anybody without a big paycheck.

SF housing is a game of musical chairs, and all the people that found their chair in the 1970s and 1980s easily because there were lots of empty chairs have decided that there should be no more chairs. That provincial, close-minded, and ultimately xenophobic attitude is what makes the housing market so unfair.

Separately, developers are already required to build a certain number of affordable housing units in every development.

If you require developers to build units that are mostly or solely composed of affordable housing, those developers will not earn enough money to make it worth building the units in the first place. This leads to progressives holding up all kinds of development with endless planning meetings and environmental impact assessments. The result is no housing gets built - no affordable housing, no market-rate housing. They allow the perfect to become the enemy of the good.

We need to work with developers to build housing units of all kinds, including affordable housing, rather than demonizing the very developers who are going to end up building those affordable housing developments that I think we all want.

This is because the true position of Progressives is that any development has a chance to cause harm, and they prefer the current situation to any harm, in a messed up form of the trolley problem.

I would also urge you to capitalize the P, as the Progressive positions in SF are not really recognizable as progressive in most of the US or world. It's more of a factional battle in the culture war than about what are more generally agreed to be progressive values.

The average cost to install a kitchen is around $60,000. If we assume a rate of return of 5%, that is $3,000 per year right there that the money needs to provide to justify it being invested in a kitchen and not invested elsewhere. That covers more than half of the individual restaurant cost right there and leaves only about $4 for everything else. Does $4 even begin to cover the time it would take you to make your own Big Mac meal (I agree that it isn't fair to compare with lobster) at home once, let alone twice? While the average home has 2.5 people, not just one person, we've only just scratched the cost of having a kitchen. We still have ingredients to pay for, the opportunity cost of occupying the land, electricity/gas, taxes, repairs and maintenance, etc. You're blowing your $30 budget in pretty short order. Okay, if you are one of those TV families with 14 kids, then perhaps you can gain some economies of scale at home.

Yes, if you've already invested heavily in having your own kitchen, then you can become more price competitive with a professional kitchen. Though that is true of a lot of things. After you've invested heavily in having your own silicon fab, you're going to laugh at how much Intel is charging for their chips as well. The means of production comes with a cost, though. And while it may be a sunk cost for most, it should not be ignored on that basis.

The real world is complicated, though.

1. If you're buying a used home, as most people do, they rarely come with silicon fabs but virtually always come with a kitchen, leaving you little choice in whether or not you want to invest in one. If land is cheap, it usually doesn't make sense to divest yourself from owning a kitchen. However, if land is expensive, then the calculus changes. When land is expensive, the land occupied by a kitchen can be put to more productive use that outweighs the investment you have already made.

2. Because most people are invested in home kitchens already, restaurants aren't optimized for providing food you want to eat on a regular basis. Eating a Big Mac twice a day, every day isn't sustainable. But at the other end, non-fast food restaurants focus on providing entertainment. Your kitchen can compete with them as your kitchen doesn't have to be entertaining. To be fair with them, we would have to include the cost of having a living room, TV, Netflix account, etc.

One is that $15/hr is a dramatic underestimate of the opportunity cost for many of the people who would otherwise be eating out. Minimum wage in Mountain View & Sunnyvale is $16.05/hour. My wife & my salaries, if converted to hourly, would be several hundred / hour. We cook at home because we're salaried and so don't actually reap that opportunity cost in cash, and because the transaction costs of finding a restaurant, driving to it, and waiting for food dwarf the food preparation time (indeed, if we're already in the car near food we're far more likely to eat out). Which brings me to...

Transaction costs for meals out are really high, largely because of the automobile. Restaurants in the U.S. are spread out, with large amounts of parking that the restaurant owner needs to pay for. Because you have to hop in the car to go elsewhere, you're far more likely to wait for a table rather than find a less full restaurant. That means restaurant owners need to build in waiting space (more rent), and host staff (more labor), and carefully predict staffing needed (more labor). It means patrons waste time waiting for a table, and then ordering, and they're locked into their choice of restaurant once they show up, which means that they're more inclined to research options carefully before picking where to eat.

I visited my in-laws in Taiwan last year, and the food culture & economics are dramatically different there. Restaurant meals out are the equivalent of $US4-5. Most restaurants are what we'd call fast-casual: you walk in, the menu is posted behind the counter, you order, get your food, and sit down at a small number of tables. When you're done you wipe up your area and bus your food yourself. The whole restaurant is usually family owned & operated; there might be 3-4 employees total. If the place is full, you walk next door to the equally-good restaurant there. ("Destination" restaurants like Din Tai Fung do exist, and they charge American-ish prices of $20-50/plate.) This is all within walking distance of your apartment, so when you're hungry you take the elevator down, walk outside, and find someplace, with minimal search or transportation costs. As a result, there's a big culture of eating out, and most people have just a kitchenette and don't use it for many meals.

Is that because, based on other comments here, you're already invested in a kitchen and, as a result, are forgetting to factor in that substantial cost? But that would be like if you owned your own silicon fab. You would no doubt also wonder how anyone could afford to buy their processors from Intel for hundreds of dollars when you can make your own for pennies. But you're not actually making them for pennies when you need to lay the capital upfront.

> Subjectively, I don't think that cooking at home is a "luxury".

The luxury isn't cooking. The luxury is being able to have a large room full of machinery dedicated to preparing meals for, on average, 2.5 people. These days, average people can barely afford living spaces as-is. That room adds to the cost substantially and is not likely to be recouped against eating out, unless eating out means eating at places that are selling entertainment alongside food.

It is true that the typical home kitchen can be more cost effective than food entertainment, but that's only because your home kitchen does not have to provide the entertainment portion. I do not see these being reasonably comparable when talking about the cost of prepared food. Once you add the cost of equivalent entertainment at home, the food entertainment restaurant looks pretty cheap again.

> Generally speaking only the lowest economic strata of the working poor depend heavily on fast & packaged food

Generally speaking, the poor have to buy used houses that already have kitchens for a lot of historical reasons. They have little opportunity to not become invested in the means of production, even when it is not ideal from a purely economic point of view. There are exceptions of places without kitchens, as mentioned earlier in the thread, but they are typically only found where land values are high, where the cost of keeping an existing kitchen is higher than repurposing it.

The wealthy, who are most likely to build new houses, that will one day be sold to the poor, want the luxury of having a kitchen even when it is not economically sound, and so the cycle continues.

Please define “massively” for us. It sounds like you were eating larks tongue in aspic and are now buying year-old potatoes at the Latvian coop. Remember, some in an international audience may have done just that at some point. Is that what happened?

Wonder if a functional kitchen should be thought of as an expense-management device. No matter what the financial situation, in the US without a kitchen you can always find something to eat to keep body and soul together, but with a functional kitchen you can always eat something both tasty and healthy (if you can cook). You can choose to cook if you have the cash; you may need to do that if you don’t. The fact that you always can is a very consoling fact in rough economic times.

It’s amazing how little actually changes after two millennia. At least we know people are still people. :)

I think it’s worth investigating later, but for now I’m inclined to say it is probably a little of column A and a little of column B.

If I hadn’t personally observed apartments renovated to remove features try and pass it off as a 1 bedroom prior to the pandemic, I might have considered that angle initially, but for now it is still coloring my view of what I saw in September. I think this is becoming more of a norm, and they were the norm as far as what was available at the time, but this could also have been that units with kitchens were getting filled faster at the same time I was making my observations.

What infuriated me personally wasn’t that there were so many, but that the asking prices were about the same as the asking price for an equivalent unit with a full kitchen. It’s a seller’s market, that’s what I’ve been more or less communicating all up and down the thread, but damned if that doesn’t peeve me.

Either apartments outside of Paris are dirt cheap or minimum wage in France is really high.

A dev from Paris I met in Germany said he left due to how unaffordable housing was so something doesn't add up.

(SF rent control does not apply when you're bringing in a new tenant)

Granted, ADA and other upgrades in quality of life are nowhere near the big problem of the cost of reducing lot and block sizes retroactively. The design for cities made for cars and for pedestrians are fundamentally opposed, and cannot coexist.

The higher taxes could effectively force a land owner to sell their property.

Often part of what existing land owners are fighting for is preferential zoning which artificially keeps the "highest and best use of land" a low density detached house, which keeps land values relatively low.

I grew up here, but I personally hate winter and can't wait to get out of this entire region.

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

Further, the revenue from that tax could be used to fund public housing to further drive down housing costs.

[1] https://www.bookweb.org/news/san-francisco-approves-vacant-p...

Presumably, the building company would be the owners for all the empty apartments which would make it easy to find and tax. It would be more difficult to detect someone buying a home/apartment as an "investment".

See ‘homestead exemption’. Other states use this term, but it means different things.

WV, for instance, only allows the exemption for people above a certain age.

Any property tax, from vacant lot to strip mall to vacation home to industrial plant, can not rise above 2% per year. Meanwhile property values rise 5%-10% per year. The only way for property to get reassessed at market value is to build on it or sell it.

This subsidizes speculation. If you own a vacant lot since 1970, and pay an effective tax rate of 0.05%, and building on it raises your taxes to 1%, you're taking a huge risk by deciding to enter the market now. Similarly, that super old 6-unit apartment building from 1930 has a ridiculously low tax basis; upgrading to 20 units hugely increases taxes.

You're only gonna get that big impact one time, but it goes to show that the tax was worth doing.

Doesn't solve the problem by itself, but the tax will help.

The amount of units that suddenly appeared showed that there was a small percent of units "leaking" from every new build that never hit the market.

So, who pays for that? All the taxpayers, or the builders, or the potential new tenants?

You can only reduce quality of life so much.

You failed to address anything regarding wastewater treatment.

80 million gallons per day treated with no rain, but rain, it can be 500 gallons.

So, will climate change put additional pressures on wastewater treatment as well?

Also, has SF only recently had a handle on wastewater treatment?

Was 1998 wastewater treatment capacity inadequate?

Also, if you have historical data on wastewater metrics, I would like to take a peek.

It also oddly erroneously equates water usage with some sort of negative thing in and of itself, akin to saying that rain is wasting water. It is not the use of water that is the problem, ignoring the rather minimal cost of things like moving the water, which is overwhelmingly a fixed, not variable cost. The real and only consequential problem is the contamination and pollution of water through things like significant quantities of soaps/surfactants, as well as almost unremovable harmful chemicals like birth control and other pharmaceuticals, preservatives from vehicle tires, and carcinogenic PFOA/PFOS that are now said to essentially be in EVERY SINGLE PERSON ON THE PLANET.

I can assure you that pumping a million gallons of water out of a well and letting it seep back into the ground is not nearly as destructive and damaging as the emission of various hormones into the municipal water system by women simply going to the bathroom.

In other words, if I were to use essentially nothing but moderate levels of natural surfactants, e.g., animal/plant fat produced soaps and did not take or use products created with "chemicals"; I could use tens of thousands of gallons of water per day and it would make no difference to the water cycle or availability. However, I could also use the amount and number of different destructive, polluting, toxic products that the average self-righteous person uses and I could pollute millions upon millions of gallons of water EVERY SINGLE DAY, all, while feeling self-righteous about my low water usage, while tossing new technology and plastic products produced by pumping tons of chemicals into Asian rivers.

A lot of these things are about perspective. You would ask that you take a step back and reexamine whether you are actually rational and using the scientific method that requires the questioning and reexamination of all assumptions and facts, or if you are being militant and extreme, aka an activist.

https://news.ycombinator.com/newsguidelines.html

Rent doesn't make housing affordable at all. Ownership does.

EDIT: I know it might seem unfair if you are a landlord or in the housing speculative market. But heck, you’ve had your chance to play a fair game, and seriously screwed us over. You’ve proven your self unworthy as a player in a fair market to a point that you shouldn’t be allowed to play it.

Also rent control should not be the only measure. The county should also buy up housing and rent for cheaper to drive the market rate down, price gauging should be illegal (for everyone, not just foreign investors). etc.

Joking aside, the lifestyle is also different. Tokyo and HK where I live are known for tiny apartments, but they're also cities where residents spend far less time at home, offering cheap options for eating out, many places to hang out outside home, reliable transit, and extreme safety from crime at all times of the day. I'm far more comfortable in a tiny HK flat than I would be in the same size in SF. Thankfully I have the luxury of a decent sized space in both now.

215 vs 700 is a very different story from 400 vs 700.