Restaurant fable explains everything wrong with San Francisco housing right now
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1. The citizens of the Bay Area for years have limited new housing development, complaining they could change the "character" of their neighborhoods, for the worse.The limitation is baked into the democratic process at the local level.
2. There arent enough homes to accomodate the job growth and influx of people (both renting and buying)
3. Jobs are growing and workers are moving in, competing with longtime citizens and each other for a limited amount of housing (and groceries, and parking, and public transportation, and city services etc).
So it gets more expensive. We protest buses, but long after the buses are paid for, homes will still be expensive.
Whatever we do, we need more homes.
San Francisco's population is only a little above its 1950 population. Its not an example of uncontrolled, unsustainable growth.
(Same situation with food. Demand is inelastic, so a small scarcity hurts a lot.)
I think this is basically why when I've looked, I can't seem to find any examples where housing supply buildouts alone have dropped prices -- seems there's always a drop in demand based on changes in regional fundamentals that has to happen first.
Through the magic of multi-story buildings we actually can manufacture "land" out of thin air. There wouldn't be such a crunch without building restrictions.
I struggle to follow this. For profit developers will build if they can do so for a profit. The only thing that will matter is whether the cost of construction is less than the PV of the future cashflows of a constructed building.
An apartment building that costs $50M to put up costs the same $50M whether a 1BR apartment rents for $1,000/month or $5,000/month (for the most part ... if you get a lot of development in response to price increases, you can end up with a shortage of labor and labor costs can increase the total build cost ... but that will be on the margins).
Furthermore, the cost to put up a building may be coming down. Here's a story about reducing construction costs by prefabricating buildings.
http://www.wired.com/design/2012/09/broad-sustainable-buildi...
I don't know what it costs to construct and apartment building in SF, but if the rest of the world is a guide, there are plenty of projects that would have a positive NPV even at lower rent levels. So development would contain prices and could even bring prices down.
I agree with your comment. Granted I only visit SF now and then, but it seems very strange that things don't just go vertical. That's the obvious solution, isn't it? Build huge retail+office+residential towers like those proposed over half a century (or more?) ago.
At first evaluation, it seems that people who own space must be extremely opposed to this and that works its way into local politics. I can't imagine people are voluntarily height-capping these little buildings I see going up.
And fighting over real window space is a far cry better than fighting over any space. As-is, there are even parking garages taking up nice window space in buildings here.
The geography looks a bit hilly in SF; it might be cheaper to dig under those hills than just going straight down from a flat area.
Maybe I'm just completely naive, but anything seems better than the current solution of doing nothing.
Choose one:
1. Live further away
2. Increase number of people per living abode
3. Increase number of living abodes per space
Also, let's not forget all the tiny, artisinal birdcage companies that are buying up a non-trivial percentage of the available meal credits on the black market, so that they can feed their employees free lunches during the daytime. Maybe as many as 40% of the meals being served in some neighborhoods are being used for birdcage company cafeterias.
But really, this is a stupid metaphor, because in city that's less than 50 square miles, lack of available real estate isn't a manufactured problem.
I lived in downtown Sacramento for a few years. I moved into new high(er) density apartments [0] the first year they were built. I paid $1000/month for a 400 sq ft studio with parking. For price reference, later I rented a more traditional apartment that was twice as big, several blocks away for only $650.
The takeaway is that until everyone who can pay ridiculous prices has housing, prices are going nowhere but up in SF. Decent middle-class apartments with a couple bedrooms in Mountain View are $3k+.
Prices are expensive because the SF bay area is awesome. It has a massive number of high paying jobs, ridiculous natural beauty, a gorgeous climate, tons of culture, diversity, and history.
Contrast to Stockton, a mere 90 miles away, where you can buy a 2,000 sq ft 4bd house for $276k [1]. But Stockton's got none of the appeal of the SF bay, and it certainly doesn't have the jobs that SV does.
People will fight hand over fist to get into SF, nobody's sprinting to live in Stockton.
(nothing personal against Stockton).
[1] http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home...
Where's the part of your post that backs up this statement?
Examples: Nob Hill and Telegraph Hill in SF, Wilshire Corridor in LA, and downtown SD. All examples of expensive areas where housing densities are high. Manhattan is quite dense and nobody asserts that it is affordable.
Affordability is a separate issue from density.
> The takeaway is that until everyone who can pay ridiculous prices has housing, prices are going nowhere but up in SF. Decent middle-class apartments with a couple bedrooms in Mountain View are $3k+.
So you're saying that adding more housing will make prices stop going up. So why do you simultaneously claim that building more housing won't bring prices down?