SF’s Housing Crisis Explained
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I wonder if both rent-control and prop-tax-caps could be knocked down in an equal-protection lawsuit. Why does the person who moved in yesterday, perhaps far needier than the longer-term resident/owner (and just as deserving of basic civic services) have to pay so much more? Is duration-of-residence a legitimate basis for such strong civic discrimination rooted in law?
I have been renting for last five years, and I see nothing bad in renting. Though my opinion might be irrelevent to the subject, as I do not live in SF and there is no "frozen property taxes" law in UK.
In 30-year mortgages you are realistically paying more than half your monthly payment as interest, and doing that with pre-tax money means you're conservatively looking at 15% total reduction in monthly payments compared to renting.
You are right that the US has two things to advantage owning: (1) mortgage interest tax deduction and (2) 30-year mortgage terms.
If you're lucky enough to lock in a mortgage rate of ~3%, when you add in the mortgage interest tax deduction, you're practically paying nothing for the money you are borrowing.
However, all it takes is a 10%+ drop in the market when you are selling to wipe out any advantage to owning and often you'll come out behind of someone who rents.
Anything over $250k puts you in the top 2% of U.S. households. Your definition of words like "trivial" and "wealthy" might be different from mine.
It's a write-off for someone who's making enough money to find it worthwhile to itemize but not enough to pay AMT.
Wealthy families also have access to higher-quality asset-backed loans which typically come with lower interest rates.
The rub usually comes when you are older and your earning ability deteriorates. Those who own their house get a significant drop in monthly housing costs while those who are still renting to not. Some people plan well for this, others don't.
Then there are the transaction and opportunity costs associated with buying...locking up a down payment, closing costs, broker costs. I'm sure I'll buy in the future when I'm at a different point lifewise, but for now renting works just fine.
No, because that's not true (federal property taxes would probably be problematic under the Constitution, which restricts non-apportioned federal taxes, but property taxes aren't federal.)
(which makes "wealth" taxes problematic or impractical)
(This is not a rhetorical question.)
And the "externality" in restricting that land to your private use is captured by the housing market. If you're sitting on a plot of land worth a million dollars, it means you value that land at more than a million dollars, because otherwise you would sell it. Sitting on it is costing you access to a million dollars. Living there is costing you the money you could get by renting it out.
If your argument is that the property tax rate on a million dollar home will be lowered until the absolute number of tax dollars paid is the same as that paid on a $250K home, the evidence is to the contrary. Municipalities that see an increase in tax revenues at the same rate more often see it as an excuse to expand the budget than an excuse to lower tax rates, especially in California.
Take a look at local city budgets. When housing prices doubled, the cities tax revenues didn't. They certainly went up overall (I mean, when has a gov't ever not expanded?), but my argument is that often 2house price =/= 2property taxes.
That's an effective cut in the overall property tax rate, but its not a city "adjusting" the rate down to meet the desired budget, its the nominal rate remaining fixed (because that's also capped by Prop 13), and the tax basis value on most properties whose value has increased not reflecting the value increase.
That almost never happens. OTOH, in California, if a home doubles in value in 5 years and doesn't change ownership or have new construction, the assessed value for property tax purposes at the end of that 5 year increase would only be 1.1× the starting tax basis, since Prop 13 limits assessed value to increase at most 2% per year.
Education on the other hand I expect to remain fairly constant on a per unit (child) basis once a school hits 150 children per grade.
Here in London there are whole apartment blocks owned solely by investors with no-one living in them. That's morally repugnant, a deadweight loss, whatever sophist arguments you can come up with for why really the right thing. Property taxes are a nudge in the right direction.
The charge for council tax is set at the 'band C' level, and scaled up/down for bands A-H. (A being the lowest property value.)
Additionally we have 'stamp duty', which is paid when you sell the house, as a percentage of the sale price above a threshold, and if you've lived in the property for less than three years you're also liable for capital gains tax on the sale.
This isn't an ideal system - but it does present an alternative to what's being discussed here. I imagine that a quick trip through Wikipedia would show other alternatives in use throughout Europe.
Basicallly there is no real way to not be a beholden slave to the monetary system and debt.
Yes, if you're buying a house in the US you are typically going to take on some debt.
If you rent and retire you can go wherever rent is cheaper. Problem solved
When you buy a house, you can't just move even if you need to do it. It is a lot more difficult. That's where I see the 2-3 hour daily commutes, which I feel is insane.
> You also pay money but never see any permanent return, as it doesn't matter how long you've been paying, you can never stop
Yes but at the same time, your capital isn't trapped in the place that you're living in. You also have to pay for yearly maintenance in both time and money (I personally hate this part the most). When you don't own a home, you can more easily do things like investing or using it to start something up.
It probably varies by person, but I don't see that the same. If i was paying $2400/mo in rent, then i bought a house for $2400/mo mortgage, the capital in the house is not part of the capital i would have if i had been renting. That would just be gone.
If rent was $2400/m, I can assure you that a house in the same area would be a lot more than $2400/m unless you put %50 or more as a down payment which is at least a few hundred thousand if not a million dollars. That's a lot of capital. If you choose a house in a cheaper area with a mortgage of $2400/m, then I can guarantee that there will be cheaper apartments in the area as well.
> the capital in the house is not part of the capital i would have if i had been renting. That would just be gone.
I'm not sure I understand what you're saying? Are we in agreement or are you disagreeing?
i will have to find a cheaper area to be able to buy a house(or condo more likely).
> I'm not sure I understand what you're saying? Are we in agreement or are you disagreeing?
Rent: pay $2400/mo for 30 years. Spent: $864k. Capital: $0
Buy: pay $2400/mo for 30 years. Spent: $864k. Capital: Whatever the house is worth. Hopefully around the 3-400k the loan was for, but half would still be better than the rent scenario
Together that doesn't sum it up, sure in that cheaper neighborhood maybe a rental would be $600 a month cheaper, $216k over those 30 years and more with compound interest. But rent doesn't stay the same like a mortgage does (baring intervention). An apartment that went for $1800 a decade ago (locally) goes for well over $2400 now.
1. As you've already mentioned, if you were to stay in the same area rent would be cheaper than a mortgage. Rent is always cheaper than a mortgage for equivalent real estate in the same area. So even if you moved, there would still be really strong reasons for renting since it would still be cheaper than buying a place. So your argument of $2400 rent vs $2400 mortgage is just wrong since moving to a different area will result in $1200 rent (or less).
2. Unlike a mortgage, you're not going to be spending anywhere close to $864k upfront. At most it's only going to be $7200 up front. If you were going to buy a place in the same neighborhood, it's probably going to be about $400,000 upfront, not including closing costs and other fees. Not including stuff like renovation or housing insurance either. Don't forget HOA for certain areas as well.
So if you have 500k in cash, if you rented you've about $492,800 for investing or for starting something up. If you bought a place in the same area, you have nothing for investing or starting something. So this "$0k vs Whatever the house is worth" argument is really flawed, especially when you consider that your capital is "stuck" with a huge opportunity cost unless 1) it appreciates a lot and you're willing to BOTH sell and move into a cheaper place that isn't as nice in terms of location or features (if you're not you're just stuck living in a nice expensive place which isn't a bad thing but remember opportunity cost), or 2) you're a professional house flipper (your home really is an investment and not just a place to live), and you repeat this process every 1-4 years.
If you haven't already guessed, I'm not a renter and I just figured that you want something more than normal people since you roam HN.
FHA loans start at 2.5% down, and $2400/mo puts the total loan amount somewhere around $350k. So bare minimum would be 2.5% down and 2.5% closing for $18k to get in the door. I'm shooting for more like $30k-$35k, but $18k is the minimum.
18k minus 7k leaves 11k that could have instead been invested. To me the value of keeping a portion of my rent as capital(even tied up and with risks of loss) combined with certainty about what my monthly cost will be 10 or 20 years down the line is worth a lot more than that $11k in the bank today.
1. It's very hard to get approved on less than %10 down post 2008, unless you're taking out a jumbo loan which is above $450k, and this is assuming you can meet all the new strict standards with income (based on what's reported to the IRS AFTER deductions) and credit history. How do I know this stuff? I bought my house after 2008, and so did a lot of my friends. On the off chance it gets approved, you'll be paying something called PMI which adds about %15 to your monthly payment. So $2400 turns into about $2760.
2. As I've already mentioned, if your mortgage is $2400 I can almost guarantee that there's an apartment in the same area where the rent is approximately $1200.
3. Using your example, putting a $3600 deposit for a rental is very different from $35,000 down which doesn't include any closing costs or house insurance. If you're in the Bay Area you also have to account for monthly HOA which is about $300-$500 and it can increase at anytime. So your $2400 / mo now turns into approx $3200 / month with PMI. With housing insurance, that baloons to about $3350
4. The type of home $350k buys in the Bay Area is most likely not going to appreciate beyond inflation, unless you buy something that isn't gentrified yet which incurs other types of risk.
I'm not saying its easy, but I think its possible. I'm perhaps being overly optimistic on down payments, the only person i know that bought a house recently did it in TX with 10%
If you want the services the city provides, you have to pay for them. They are paid from property taxes. As those raise, so does the rent - after all, you live in the city, so you consume those services, so why don't you have to pay for them? That's your return - getting city services. If you don't like taxes being linked to property value - enact fixed taxes, but then you'd have to rein in city budget costs, including salaries, pensions, benefits, entitlements, etc. Somebody has to pay for all that. If not people living in the city, then who? If you want to stop paying for it, then you need to either stop consuming them, or find some other way to pay - what that would be?
Property taxes without caps are just as unfair but in the opposite direction. Why should someone who lives within their means and bought an affordable house be punished just because a bunch of other people swoop in and drive up prices around them. A buyer of a house needs to be able to forecast future tax payments to make an informed decision. If you don't have a yearly increase cap on property tax rates, the buyers future costs are totally unpredictable and up the whims of the markets and bubbles.
Houses get some sort of special treatment, I guess because people emotionally bond with them. But in a free market we'd not scotch-tape all these special rules around them.
Still, people move for all sorts of selfish reasons, and take on all that burden anyway. The difference between the free market making you do it is an emotional one.
Should you be able to buy fuel for the same price it was when you bought the car?
tiny violin songs, very sad
OK then, let's talk about reality. Letting incumbents under-utilize valuable real estate is a bad policy. Anyway nobody gets thrown out of their house for owing property taxes in California because the local authorities just put liens on the property. Once the old folks kick the bucket, the local govt collects on their lien from the heirs or buyers.
There are also several other non-old-people-getting-evicted problems with Prop 13 and its siblings. There certainly is not any excuse for the ability to pass your property tax assessment on to your children or grandchildren.
If the value of the property increases, there is incentive for owners to sell. If a developer wants to "utilize valuable real estate," is it not better that they make an offer and that people have choice in what happens to their property, rather forcing out "incumbents" with no choice due to escalating tax costs?
Buying a house with potentially wild inflation of tax costs is about as attractive as buying a house with a variable APR.
Prop 13 counter-acts the incentive given by market appreciation of the value.
The value may go up according to the market, but the owner's taxes are capped.
This is an incentive to stay, as an owner would face higher taxes and thus higher costs if they simply moved to an identically-priced home.
http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1
And as you point out, if you are under 55 then none of this applies.
So, the value according the market is not accurate. The value is actually higher. The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property.
I'm not sure how a market value can be inaccurate, that implies that there is some objectively correct non-market value that you could meeasure the market value against, which is an odd idea.
What Prop 13's limit on assessment increases does is (in terms of the forces that drive market prices) is decrease supply (because it increases the value of homes to people who already own them, by decreasing the cost -- in property taxes -- paid compared to the utility derived from holding the property), which, considered on its own, increases market clearing price.
It may also increase demand (since it also decreases long-term expected costs for new buyers), but probably more weakly than it increases supply (since the decreased cost is already being realized by sellers -- and more strongly the longer they have held the whome -- wherease it will take several years for the decreased cost to be realized by a new buyer, since purchase events trigger assessment at full value.)
> The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property.
The law adds non-transferrable value (or, less simply, provides a non-transferrable abatement of cost) as long as the owner holds the property. This creates an externally-imposed difference in the value to the owner and the value to other market participants.
The one and only reason the US has 30 year fixed rate mortgages, with no prepayment penalty, available levered 5-10x, all at less than 100 bps over the risk free rate is because of massive government implicit and explicit subsidies.
Absent distortions it doesn't make sense for most people to buy a house -- it's inherently non-diversified, low liquidity, high transaction costs. But American society has for some bizarre reason decided that home ownership is the sine qua non of human civilization and so every level of government intervenes to distort the market in favor of homeownership.
Instead of recognizing this extraordinary intervention, and perhaps being grateful, homeowners tend to either: 1) refuse to recognize that such massive subsidies exist, or 2) see as entirely natural -- and bitch and moan if even the slightest modification is proposed.
It's yet another example of the American phenomenon of socialism for me but not for thee (and none dare call it welfare).
But it's more than that. The truth is, buying a home is the only form of investing on margin for most. Also, it's compulsory investment and savings -- both with the principal payment and in the form of property improvements.
Finally, of course, are the myriad tax benefits.
While it's true that we incentivize home ownership, possibly too much, I think it's unfair that you paint it as an otherwise neutral activity that we strangely endorse with public policy. Land has real value, you can live on (and off) it. It was long seen as the one enduring source of wealth (See John Adams, George Washington, etc). It's much deeper than our postwar tax policies.
I find it weird that people look at houses as "investments". For an asset to be an investment for me, it has to be productive. Buying stock in a company or starting your own is productive; buying farm land is productive (you can use it to produce food). A house in itself doesn't produce anything, it's just an asset. If you're relying on buying it cheap and selling it at a high price, that's speculation, not investment (that house still hasn't produced anything, it just happens to be more valued by other people).
You can also customize and improve a home you own. Many people have housing needs that cannot be met in the rental market. With a home you own, you can make the modifications you need, and accept the impact to your home's value.
Sure, I agree with all of that. However, none of these qualify as economic investments IMHO, unless you decide to start a business out of your home.
Keep in mind I'm focusing strictly on investment in economic terms (production of goods or services). I agree that the house provides various benefits to its owners, just that none of them are economic returns.
I think your argument is thin here.
Speculation in equities is also not an investment in my book. I was referring to buying stock long-term for the dividends, not short-term speculation.
I think your argument is thin here, too.
1) Usefulness
2) Scarcity
Something useless and abundant has little value, something very useful and scarce has high value. A house is useful (it's a place to live, with varying personal usefulness based upon geographic location; a house 3 states away from my job is personally not very useful to me, for example) and scarce for any given geographic location.
The fact that copper is useful because you can build stuff out of it, while houses are useful because having a place to live is useful is irrelevant.
[edit] And the both the usefullness and scarcity of houses can change (just like with copper). Someone comes up with a cheaper way to mine copper? Price drops. A locality loosens their zoning laws? Price drops. Someone finds a new, valuable use for copper? Price rises. Big tech boom in the bay area? Price rises.
Anyway, I'm done with this discussion. Feel free to have the last word. It's clear to me that you've made-up your own definition of 'investment' and cannot see past that. Totally your right. But for the rest of us, here's what investment means:
investment noun : the outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased
I'd need to see a lot more justification before accepting that leveraged investments are a net positive either for individuals or for society. In general, leverage increases variability while reducing expected value in the form of interest payments. In other words it is analytically opposite of insurance.
I do agree that program or automatic savings are a positive "nudge" both for individuals and for society, but there's nothing but status quo bias that says that this asset class has to be the heavily favored vehicle for that.
While it's true that we incentivize home ownership, possibly too much, I think it's unfair that you paint it as an otherwise neutral activity that we strangely endorse with public policy. Land has real value, you can live on (and off) it. It was long seen as the one enduring source of wealth (See John Adams, George Washington, etc). It's much deeper than our postwar tax policies.
Prior to the industrial revolution land was the primary means of production. Today that's no longer true, and the vast vast majority of real property (by value not acre) is not used as an input factor for goods. The best translation of those classic references to the importance of land ownership today are modern means of production (e.g. ownership shares in productive businesses), not a quarter-acre of lawn in the suburbs.
Governments ought to be encouraging investment in positive sum productive enterprises, not zero sum positional goods. And at least as a default bias for non-wealthy citizens it ought to encourage holding diversified portfolios of assets with transparent liquid markets and low transaction costs.
It would also reward those who got there early without allowing them to block all progress since there is financial benefit for all.
The thing is? Leases are... very inflexible. In many ways, it's less flexible than buying. Here is the essential problem: If I have a rational, profit-maximizing landlord, every time my lease is up for renewal, he increases my rent to what it would cost me to rent an equivalent place elsewhere plus just under what it would cost me to move. On the other side of that, if I take a longer lease, I'm in a seriously bad position if something changes in my life and I need to move.
This is especially dramatic in commercial real-estate, where the business owner is usually asked to personally co-sign the lease, and where there are fewer laws requiring the landlord to reasonably try to rent vacant units to other people. (and where the tenant is more likely to be able to keep paying rent after moving.)
Three to five years of rent is nearly always more than 6% of the purchase price of the property.
So while you're thinking of (and playing violins for) a certain sect that you know well here in the cosmopolitan city, there are also hundreds of thousands of "99 percenter" property owners throughout California that really do hurt as they scrape to make ends meet with the major (and usually only) asset they will ever own.
[1] http://articles.latimes.com/2009/jul/13/business/fi-hiltzik1...
[2] http://www.car.org/meetings/carmeetings/committee-materials-...
Who are you kidding? You get a lien on the house and then that is used to force a sale to cover the amount due. Hell even home owner associations do it all the time if you don't pay your monthly dues for several months.
I'm not enough of a lawyer to know exactly how that should be structured, but it's a great solution.
The lien we're talking about would be on the difference between the tax paid under Prop. 13 and the tax that would be due if there were no Prop. 13. If the mortgage is underwater, that difference is zero.
Please don't address other users this way on Hacker News. Civility is important here.
The comment is otherwise substantive and would be a fine one if that bit were simply deleted.
Property tax caps are perfectly fine. As a homeowner, I will always vote down ANY increase in property tax.
Your mentality values economic optimization over human optimization, and it is one that I reject.
In other words, instead of the state foregoing that person's property tax adjustments, it should defer them until the time of sale, and at that point, recover them.
In other words a lien.
Also it's not like values are an eternally increasing step function. Suppose I bought in '95, saw my paper net worth rise thru the boom, then I need to sell at a depressed price in 2001. Without this lien waiting for me, I can take comfort knowing that I'm selling at a depressed price but also buying again at a depressed price. But when you take tens of thousands off the table to pay back taxes, my down payment has eroded significantly, increasing my borrowing cost.
Of course outside of California most people are used to periodic reassessment. It's just part of life. But I think tinkering w/ Prop13 in the ways you describe are possibly worse than just eliminating it and replacing it with an expanded homestead exemption of some kind.
http://www.nolo.com/legal-encyclopedia/avoid-capital-gains-t...
And the transfer tax doesn't hold a candle to the lost property tax revenues on, say, 30 years of ownership.
Because they are now wealthier, and can convert the wealth of that house into liquid assets (through sale, remortgage, etc), or income-generating assets (by becoming landlords). That's one of the points of property taxes: to encourage people to do productive things with their asset instead of just sitting on it.
An equally anecdotal counterpoint: "Why should a real estate speculator who bought a house twenty years ago not be forced to pay increasing amounts of property tax on it as they wait for its value to go up?"
Is this really HN I'm on here?
Anyway -- you've never heard of a home equity loan? If you really want to hang on to the property, take out a loan, pay the property taxes with part of it, and use the rest to make the payments. Zero cash flow impact. Or, sell a partial interest in the property to a speculator. There are solutions.
And as 'raldi points out, Prop. 13 could have been written so the accumulated difference between tax assessed and tax paid would have been collected at the time of sale. That would have addressed the owner's cash flow problem without requiring financing, without cheating localities of taxes they need to provide services -- not least, education -- and (getting back to the point of the article) without disincentivizing residential development vs. commercial.
Indeed one of the huge stories around Prop 13 was an elderly woman with a paid-off house, about to be evicted because she couldn't pay the ridiculous uncapped property tax. She went to city hall with Howard Jarvis to ask for help and when turned away, had a heart attack and died right there in city hall.
http://www.hjta.org/propositions/proposition-13/proposition-...
Also, the anecdote comes from Howard Jarvis himself. Was he lying to further his agenda? This source casts doubt on his story: http://www.americanlibrariesmagazine.org/blog/happy-birthday... - from that source: "White notes that “even though the age of the deceased woman varied as Jarvis repeatedly told this story, the feelings it generated resonated with the public.”" Smells fishy to me...
- My land value has skyrocketed.
- Now I can't afford the property taxes and have to sell the land and retire several times over.
It's not that being priced out is a pure good; it's that it naturally comes with effects that very much soften the blow (at least for homeowners). It's not the sort of extreme personal catastrophe that social policy tries to mitigate in general.
It seems fair to me that the risk of the future variability of the cost of ownership of a property is assigned to the owner of the property.
I understand why you'd rather have someone else take on the risks, but newcomers are an unfair pick. How about an insurer or another financial counterparty? I'm sure it's possible to come up with some synthetic instrument which mimics the price movement of the property and can serve as a reliable hedge.
The reason we have higher property taxes is that school boards and the town/county government continually pass budgets that outpace inflation.
If the local government is well run, then an individual's property taxes should approximate the cost of providing local government services to them, regardless of the value of their house. If real estate values in a local jurisdiction double without changing the government's costs, property tax rates should be cut in half to compensate. I realize that there's a big "if" when it comes to the "well run" part, but if that's not being done, then you need to fight over the "well run" part, not giving people massively different tax rates based purely on when they bought their house.
I don't think this idea is all that outlandish either. My understanding is that a lot of jurisdictions work this way, either explicitly or effectively through the legislative process. A budget is set, required revenue decided upon, and property tax rates set such that the required amount is obtained. If values go up, rates fall, and vice versa.
This doesn't solve the problem of hyper-local changes, like if just one section of a county becomes extremely popular and prices are driven through the roof, while the rest is unaffected. But again, what's the difference between being driven out due to that and having, say, the local food stores double their prices to to huge demand and drive you out that way?
Every time you see a dysfunctional market, look for the policy which creates an asymptotic condition. That asymptotic condition (or the sum of several asymptotic conditions) is the likely culprit behind the dysfunction.
By asymptotic condition I mean and hard cap or limit that is unchanging based on circumstance (such as time). The reason asymptotic conditions are so toxic is because they become barriers to natural market corrections.
Almost immediately after passage, the California Supreme Court sustained Proposition 13's constitutionality in the Amador case (Amador Valley Joint Union High School District v. State Board of Equalization. September 22, 1978). After a series of legal challenges in the 1980s, the issue of acquisition-value assessments reached the U.S. Supreme Court in Nordlinger v. Hahn. In a stunning 8-1 decision, the court in 1992 upheld California's acquisition-value system.
The court ruled that an acquisition-value system does not violate the Equal Protection Clause of the U.S. Constitution because it rationally furthers a legitimate state interest. The court said, "The state legitimately can conclude that a new owner, at the point of purchasing his property, does not have the same reliance interest warranting protection against higher taxes as does an existing owner who is already saddled with his purchase and does not have the option of deciding not to buy his home if taxes become prohibitively high."
The court also opined that a state has a rational interest in neighborhood preservation, continuity and stability, and that Proposition 13's system of "locking in" lower tax assessments contributed to such preservation.
http://en.wikipedia.org/wiki/Equal_Protection_Clause
See tiered scrutiny.
It seems reasonable to me that laws or policies that favor people who have been residents of a town for a longer period of time could be used to preserve Sundown Towns. It's fairly easy to see how these policies would benefit those who seek de facto segregation.
An interesting thought experiment is imagining a policy that allows the eviction of those with rent-control in favor of those who can demonstrate more financial need. I'm trying to imagine how to form this so I can propose it to San Franciscans with rent control when they express ire about techies and the Ellis Act. I'm extremely curious how they will react/respond when they are asked to explicitly acknowledge their position of privilege relative to someone less well off.
Unrelated: Ultimately what we need is the startup equivalent of cities, where people abandon the status quo in established cities and seek out new civic models. Given the right location, I would consider being a founding citizen in a "startup city".
I don't think San Francisco can build its way out of outrageous rents alone. The other cities in the Bay Area need to step up and provide the type of urban housing close to transit that people want. No more surface parking lots next to train stations.
Also, for those that believe there is no alternative: the East Bay remains the best kept secret in San Francisco. When we moved here from the City for schools, we were braced for a let-down -- but having been here for six years, we know now that we will never return to the City, even when the kids are grown and gone...
Oh, brilliant, I'll be right over! WE ARE THE 99%! ARISE YE WORKERS FROM YOUR SLUMBER!
It's also not a behaviour unique to the SF Bay Area; when I lived in a fairly rural area (pop. < 10K spread over quite a few miles), the largest city nearby was often referred to as "the city" by everyone that lived outside the largest nearby city (which was Kansas City where I lived).
It's "I went into The City" that I will not abide.
In fact, I've never seen anyone refer to any city that way except a minority of people in and around SF.
This is why South Park characterized residents of the city as "in love with the smell of their own farts."
http://www.usingenglish.com/forum/threads/17423-Rule-for-cap...
Geographic regions should be capitalized when they refer unambiguously to only one place. A capitalized "the City" implies that "the City" only refers to San Francisco, which is pretty pompous to many other people around the Globe.
If this were a Bay Area-only forum, however, it would be justified, as "the City" is pretty unambiguously SF within the Bay Area.
I have no idea what changed.
However, a vibrant downtown Mountain View with transit-oriented development at the Caltrain stop would be a good replacement for at least some of the tech industry people who commute down from SF now. But that train station is a parking lot.
A lot of other VCs and founders are also digesting Thomas Piketty’s new book, “Capital in the 21st Century.” With more than 200 years of data, it chronicles an inexorable rise in inequality that was punctuated in the middle of the 20th century by the Great Depression and World War II followed by 30 years of evenly-spread prosperity. Ultimately, it advocates a globally-coordinated tax on wealth.
I know that it's taboo on HN to get overly political, but I think because of Piketty's work we should talk about it (particularly, because Piketty's new piece is so groundbreaking [1] and incredibly well-backed with data). What do you guys think of his "global wealth tax" -- tax on capital (including real property), in the context of the new SV riches?
[1]: The book is being received as "the most important economiscs text of the decade" by a lot of high-placed economists, etc.: http://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Cen...
Doesn't the estate tax fully cover this case?
To avoid discouraging savings, the wealth tax could be progressive. The tax on the average citizen's savings is negligible but rentiers pay a substantial portion.
I think an inheritance tax is especially important to prevent the formation of generational wealth.
Property tax is a sort of wealth tax. It goes to fund local services that the occupants of that house presumably consume, though.
This is a very strange economic theory you've got going here.
http://en.wikipedia.org/wiki/Georgism
There's a foundation of some sort in San Francisco that introduced it to me. It's a quite interesting idea. The TLDR is capitalism for what you produce, and socialism for natural resources.
I'd like to see it tried out somewhere if it hasn't been already.
To provide a counterpoint: We already exist in the society you describe. You can choose to not pay your taxes and the government won't protect your assets from being seized. Now logically, under your system the person with the greatest military might would be able to seize your assets and defend them him/herself (or pay taxes). However, as the entity with the biggest military might will always be the government, ipso facto we have exactly the same situation as we do under the current law, where the government will start seizing assets if you don't pay your taxes...
The only alternative in a might-makes-right kind of libertarian society, is that individual entities (rich people/corporations/etc) start gathering enough military might to challenge the government and hence keep their tax money to themselves.
So best case scenario, we end up with a detente where the government and the hypothetical powerful force agree not to fight. Due to economies of scale, I'd be willing to bet that the cost of maintaining such a force is waaayyyy more than any taxes levied. Given that this force also gives the owner the ability to tell the government to go away, they'll have effectively declared independence and started their own little dictatorship (whether corporate or otherwise). The only difference is that nobody gets to vote for the new corporate overlords. They just have to obey or leave (until there's nowhere to flee to). This kind of libertarianism is better called neo-feudalism.
Worst case scenario, we have regular open warfare in our own back yards. What a great society to live in, where we're all just trying to stab each other in the back. Progress and civilization indeed...
Therefore the right of the government to enforce taxation for the betterment of society as a whole is absolutely essential to having a "civilization" at all. Those who cannot remember the past are condemned to repeat it.
/rant over :p
"I've thought a lot about this, actually; it was not a casual remark. I think the fundamental question is not whether the government pays for schools or medicine, but whether you allow people to get rich.
In England in the 1970s, the top income tax rate was 98%. That's what the Beatles' song "Tax Man" is referring to when they say "one for you, nineteen for me."
Any country that makes this choice ends up losing net, because new technology tends to be developed by people trying to make their fortunes. It's too much work for anyone to do for ordinary wages. Smart people might work on sexy projects like fighter planes and space rockets for ordinary wages, but semiconductors or light bulbs or the plumbing of e-commerce probably have to be developed by entrepreneurs. Life in the Soviet Union would have been even poorer if they hadn't had American technologies to copy.
Finland is sometimes given as an example of a prosperous socialist country, but apparently the combined top tax rate is 55%, only 5% higher than in California. So if they seem that much more socialist than the US, it is probably simply because they don't spend so much on their military."
http://paulgraham.com/resay.html
(I know that in the US anything even vaguely leftist gets called "socialism", but Thomas Piketty, the author, is a genuine strong supporter of the French Socialist Party, and the focus of the book is explicitly on government action to prevent anyone from getting 'too' rich. I think it's a fair criticism.)
EDIT: To those not familiar with British history, things got really bad during the 1970s. Inflation peaked at 27%. The government went bankrupt and had to go "cap-in-hand" to the IMF for a bailout. Garbage piled up in the streets because the sanitation workers were on strike. Bodies piled up because the gravediggers were on strike... (http://en.wikipedia.org/wiki/Winter_of_Discontent). I don't want to get into an argument about Thatcher, but everyone at all familiar with the history agrees that the country was in a mess.
The golden years of British innovation where in the 50s and 60s all right but 1850s and 1860s, maybe even earlier. By the end of the WWII Britain was a shade of its former self completely eclipsed by the US. Although to be fair, tax policy probably wasn't the decisive factor.
England / the UK is a mess at the moment. They are heavily in debt. They keep on cutting benefits to the poor and allowing the rich to pay even less tax. According to your argument everything should be getting better because of this, but I assure you it is not.
Do we have rubbish piling up on the streets, dead people piling up not being buried? Do we have rolling power cuts due to strikes? Are we all on a 3 day week? Massive inflation and interest rates?
The UK is turning the corner after the disastrous spend spend spend! Socialism of the last decade.
That's a very polite way of acknowledging that the UK government ran a massive deficit-funded spending campaign throughout one of the fattest and longest boom cycle in history.
Debt is high, but the key metric of net debt as a proportion of GDP is decelerating and is forecast by the Office of National Statistics to level out over the next few years and be falling within 3-4 years. [2]
The UK has made cuts to social and welfare budgets, but these cuts are actually smaller than across the Eurozone. Social spending has risen faster since 2000 in the UK than anywhere in the OECD. [3]
There are still issues with wealth disparity (poor vs rich and South-east versus the rest of the country), tax avoidance (mainly corporate), and challenges with reforming the welfare state so that benefits are there for the those that genuinely need whilst not creating a disincentive to those that work. However, saying the UK is mess at the moment, is do dismiss the facts.
[1] http://news.sky.com/story/1238991/imf-sees-uk-growth-remaini...
[2] http://www.bbc.co.uk/news/business-25944653
[3] http://www.telegraph.co.uk/news/politics/10574376/Graphic-Br...
The main measure of an economy is GDP per capita. Apart from cyclical fluctuations, the main drivers of GDP per capita are are investment and productivity.
In the UK both of these are below that of the major developed economies.
As for the current growth of the economy-all is not well, as there is a large current account deficit, which is being funded by borrowing from overseas and is not sustainable.
The UK competes with many other places for where the rich want to live. France has had a disaster with their recent proposed 75% tax rate.
The same goes for entrepreneurs - would you register your startup in the USA if the tax rates, especially on capital gains were massively higher than elsewhere? It's also a question of VC capital - would they let you.
It's better for the USA to get it's cut of Facebook's success rather than drive Facebook into a tax haven and get nothing.
And the race top the bottom continues.
Wages going down for the majority, while a few get a lot richer is hardly what I would describe as progress.
How about the internet? The web? Nuclear energy? All of this has been payed for by taxpayers.
EDIT: I am getting a couple of down votes, so I am assuming people are asking for some sources. Most of the research, for internet at least, was actually funded by the department of defense [1]
[1] http://www.internetsociety.org/internet/what-internet/histor...
It's funny how the idea the fact that government provided some early foundations for the Internet somehow awards them full credit for it, doesn't apply to the private inventions such as electricity and the telephone without which the government couldn't have invented the Internet.
Who said this? I was merely pointing out that "new" technology, as appeared in the quote I responded to, it actually usually kickstarted by taxpayer money. I am not interested in where it went from there.
Said what exactly? The comment you were responding to is titled "How can you dismiss socialism so casually?"
> I am not interested in where it went from there.
Well, that's awfully convenient, isn't it? If we only consider technology that's developed by the government it's much easier to reach the desired conclusion.
First, you're understating the government contribution. DARPA didn't just research network theory. They built a network. TCP/IP was designed under contract. Also, that point undermines the original argument, which is that entrepreneurs are necessary for innovation. Once the technology exists, development is something that can be done with a rate-regulated monopoly. AT&T wired up every person in America under such a regime.
I'm not saying that this would be my preferred model, but its one that works just fine.
For at least a year after I started on the internet in Dec 1991, any use of the internet for "commercial activity" was disallowed (and did not happen enough for a person to notice it). Spam had not been invented yet; the entire marketing profession seemed unaware of the existence of the internet; the main form of promotion I can remember is announcements of academic and technical conferences; it was OK to make a "work wanted" post on Usenet only if you wanted to become an employee ("W-2") -- contractors ("1099") and one-man consulting shops were prohibited from using the internet to look for clients.
Although a few private-sector companies (UUNET for example although started as a non-profit in 1987 became a for-profit in 1989) were influencing the internet at this time, the influence was minor compared to the influence of governments, governmental contractors (notably BBN and Mitre) and universities.
And again, the internet was already very valuable and very able to enrich people's lives -- provided that those people were willing to use command-line interfaces.
Just because government money was involved doesn't mean the government developed the technologies, nor that profit wasn't a prime motive.
That was pretty good incentive to pipeline money to Bell Labs or the PARC: http://www.slate.com/blogs/moneybox/2012/07/24/xerox_parc_an...
And look where that got us.
Please don't buy into the propaganda. I think you are confusing invention with smart packaging and marketing what was already developed. None of the technology we see today were bootstrapped by individuals or private investors. As a counter argument I will direct you to this talk.
http://www.ted.com/talks/mariana_mazzucato_government_invest...
I find it hard to believe that there would be no facebook if Mark Zukcerberg was worth $15B instead of $30B, or no Apple if Steve Jobs had paid a few billion more in taxes. If money is the ultimate goal, then why are so many billionaires joining Bill Gates in giving their fortunes away?
During Eisenhower's time the top tax rate in the US was over 90%. We didn't become the Soviet Union, gravediggers didn't strike and innovation continued. I don't know if a 90% tax rate is necessarily socialist, but it wasn't the end of capitalism either. The idea that higher taxes stifle innovation is unproven and unproductive. If the super rich were willing to pay just 10% more, perhaps the super poor would have the opportunity to hold up their end of the deal as well. This real estate issue and the other symptoms of income inequality could become manageable problems instead of simmering conflicts.
Corporate person-hood, and corporate taxes don't really make so much sense.. I'd be in favor of limiting corporations, and pushing for disbursements to the owners... Limiting corporations from holding onto unutilized and under-utilized assets and capitol. Make it work, or give it back to the shareholders/owners.
I think that these things could really simplify legal/tax structures, and reduce a lot of government bureaucracy... Some people just wouldn't work.. more power to them. Some people will want more, and there will be competition in the workforce... I'd also be in favor of either open trade, or trade sanctions with countries that don't have similar environmental protection requirements to our own. Yes, that means that smart phones may double in price, but I think actions like that would help a lot more than simply putting up military bases all over the world.
Plus this whole issue of 'companies returning money to shareholders' is again only favoring the rich. It will be a long time before any significant portion of my income comes from dividends and capital gains. To make money in this way, you have to have a huge amount of capital invested already. Just to prove this point, if you made a very nice 10% per year before taxes on your investments, you would have to have 100,000 invested to make an extra 10,000 per year. If you are only making 50,000 per year, that would take a 20% contribution to your pre-tax retirement account for TEN years before you reached that level of invested capital. Sure, it would happen a little faster because of compounded interest and reinvested earnings, but I think my point is clear.
http://en.wikipedia.org/wiki/Negative_income_tax#Flat_tax_wi...
Edited to add: It's worth noting, though, that you can't produce every possible progressive tax rate curve with this method. It's certainly possible to prefer some curve that is unattainable this way. But a simplistic "a tax flat in dollars is regressive in utility" isn't applicable.
I'm in favor of a much simplified structure, applied evenly, as fairly as possible, and much smaller government needed to operate it. A lot of spending comes down to complicated bureaucracies, reducing those is a big step. Another benefit of a basic income, is it would allow the revocation of a lot of welfare and stimulus programs, and their own layers of corruption and bureaucracy.
I'm also in favor of cutting the overall defense and operations budgets by at least 2/3 ... There's a lot of ways the federal government could be much more effective, and reduce expenditures at the same time.
And although I don't know how much I feel it is the government's place, a baseline healthcare system could even be funded in a much better way than Obamacare. I tend to lean libertarian, but I'm a pragmatist. I just want solutions that are responsible, and have a chance at making things better, while avoiding as much chance for corruption and bureaucracy as possible. Not to mention reducing the footprint of the federal government, and reducing the impact of corporate protectionism along the way.
Corporate personhood (as far as I understand) is required by limited liability, which makes a lot of sense to me. Separating a company's debts from the owners' debts (and preventing creditors from going after the owners of a company when it goes bankrupt) is very encouraging for new and small businesses. The debts of the company become separate from the debts of its owners. It encourages people to start businesses and take loans, not having to worry that they'd lose everything if their startup goes under (at least theoretically).
OMHO one of the biggest arguments for corporate personhood is they are tax paying entities... if you reduce corporations to only allow shared ownership and limited liability, while also limiting the holding of underutilized assets and capital, it would even out. I'm not talking about liability, I'm talking about holdings, taxes and political sway.
While I agree with the idea itself, I don't think you can prevent that realistically. In the end, it's not "corporations" that donate money, but the people in charge of those corporations. If those people (the CEOs, VPs, board members and so on) want to make a donation, they can always do so privately (and most of them certainly have the money to do it).
I feel this is the heart of the issue, that people think of money and wealth as "mine" vs. "not mine." It's the whole American individualism at play, where it's you vs. everyone else, where you getting richer is a Good Thing, even if (or maybe especially if) it increases the gap between you and others.
Whereas a much healthier mindset is "mine" vs. "ours." You have money that belongs to you and you have money that belongs to your community. This community can be a neighborhood, a city, a state or even a country. Once you flip this mental switch, you realize that the taxes you pay are not really taken away from you, but rather shared with everyone in your community (of which you are a part).
I understand that taxation is necessary. I also understand that people like to keep what they earn. I draw this line at half... and I would draw that same line for the wealthiest (who bend current tax law to pay far less than half) to the poorest, who would recieve a basic income (along with everyone else) to subset the half that they earn and get to keep.
For instance, consider Mark Zuckerberg. By and large, Mr. Zuckerberg will owe his taxes when he decides to cash out. But why should he cash out? An entrepreneur can build a multi-billion-dollar company up from nothing, earn a comfortable salary doing it, and as long as he is reinvesting all of the business's profits and not cashing out, not pay significant taxes!
Steve Blank's "Secret History of Silicon Valley" [1] reveals just how heavily the Silicon and other semiconductors in Silicon Valley depended on DoD funding, and SV likely wouldn't be where it is without that funding. Parenthetically, 'Secret History' is also just plain fun and fascinating to watch.
The plumbing of the internet exists because of DoD's ARPA (now DARPA) project to connect and share expensive computing resources.
Entrepreneurs may be part of the equation, but ignoring the significant government role in the technology we have seems likely to lead to wrong conclusions.
[1] http://steveblank.com/secret-history/ [2] "Where Wizards Stay Up Late: The Origins Of The Internet ", Katie Hafner
It is true that the NIH conducts basic research that often identifies biologic targets, but there is a huge difference between discovering a lead compound and actually bringing it to market. That difference is about $1B. That money has to come from somewhere and the free market is a great place to get it.
Even though the USA pays the most in the world for it's military, I was surprised how little of the GDP it actually was.
It's poor example considering that Finland is not a socialist country, they have the same capitalistic economy and democratic government that US and most of Europe have.
Two similar apartments on opposite sides of the same street can have significantly different market rents just because they are in different boroughs, and those boroughs have vastly different council taxes. The classic example in London used to be Wandsworth vs. Lambeth.
Council tax, although based on properties, is meant to be a tax on residents, to put towards local services like police and rubbish collection. It was created after a previous tax (dubbed the 'poll tax'), which taxed each individual, regardless of the size of their abode, caused protests.
Not any more it isn't.
We are all drastically more wealthy than our parents and grandparents. We have it far better. But for socialists, this is not enough. They despise "inequality" and wealth.
Some people want to think that a village idiot doesn't deserve to live a miserable life because he is a village idiot.
You're certainly pulling a lot of strawmen here. Come to think of it, almost reminds me of Fox News. They have a habit of demonizing the other group, just to make themselves feel better.
Thank you for being the better person and not joining in.
The idea that he would think that a village idiot deserves to live a miserable life is entirely in your head, and quite at odds with the second paragraph of his comment.
I was trying to say that the inequality and "hatred" towards inequality and wealth(both claims unsubstantiated, with emotionally charged language)he is attributing to "socialists"(used as almost a slur in his text, also, wrong, social democracies are the wealthiest systems around) is in his head. You are the one misrepresenting my argument.
And just because we have it "better", doesn't mean everyone has at least a reasonable standard of living. Einstein should be earning a lot more, but a village idiot also deserves to not live in dire poverty.
people pretend that wealth does not increase the cost of living for the poor, but it does. And the poor should not be penalized for this.
Even the village idiot should have a place to sleep, though the very valuable Einstein bought all the houses.
But on inflation adjusted income, job opportunities, and retirement age and social security benefits the baby boomer generation was likely the peak. Trust me, the likelihood that we are just going downhill from now is quite high.
>They despise "inequality" and wealth. Maybe. I despise Kim Il Song. He is wealthy and his country has inequality.
Only if by 'we' to mean the top 20% of American society.
The median worker's wages have been essentially stagnant since 1970: http://www.nytimes.com/imagepages/2013/01/13/opinion/13green...
Moreover, inflation has been uneven: food (including in restaurants) and electronics have plummeted, but the costs of education and healthcare have skyrocketed, and housing has skyrocketed in areas with good job opportunities. It's easy to cut back on new electronics and restaurants, but a lot harder to cut back on housing and healthcare. Cutting back in education gets your stuck in a poverty trap.
So things don't necessarily look so bright for the median worker, especially after 6 years of persistently high unemployment.
I can't dig up a source for that part right now, but it's out there in the CPI statistics.
This kind of language is exactly why you think only 20% of Americans are wealthier than our parents and grandparents. Money ≠ wealth. Compare the number of people today who have access to washers, dryers, irons, microwaves, a kitchen, cars, cell phones, and so on to previous generations. Even if wages have remained stagnant the average standard of living is almost always increasing. You can even live in an apartment, own many or all of those items I listed, and still be classified as living in conditions of poverty.
I'm not saying poverty doesn't exist. But I am saying the definition of poverty is constantly being adjusted because humans are so great at creating more wealth. Instead of an absolute metric for poverty or a standard of living, we use a subjective one that changes as humans acquire more wealth.
If you haven't already, I'd highly recommend Paul Graham's essay "How to Make Wealth"[1]. He covers this subject very well.
For tl;dr of that book, by the same author, is here: http://www.vanityfair.com/society/features/2011/05/top-one-p...
Fundamentally, wealth can only be created against the backdrop of social order. If you gave Zuck $10 million, far more capital then he started Facebook with, and sent him to Somalia, he would not be a billionaire today. He would've been killed and his money taken. Any business he built would've been taken from him. Because he's not skilled in war, and without social order that's the only skill that matters.
Each person equally contributes to the social order, and therefore each person has equal say in the structure of that society. That's the basis for liberal democracy. If people feel that inequality undermines the social order, they are entitled to do something about it.
Sure. But if they're proposing cures worse than the disease, we should try to talk them out of it, not just play on their feelings of "unfairness" to win political battles.
- What other solutions to the problem of wealth being used for political influence have been proposed?
- Would lobbying/fundraising reform be a better focus, rather than attempting to make everyone, regardless of their contribution to the economy, have equal amounts of wealth?
- When was the last time nationwide wealth equality was proposed? What were the results? What about previously? What about before that?
Also see the zero-sum fallacy (http://lesswrong.com/lw/2gd/fight_zerosum_bias/). "Some people being richer necessarily means I am poorer."
https://groups.google.com/forum/#!topic/rec.birds/vPvrRW_fVX...
> As political scientist and longtime San Francisco observer Richard DeLeon puts it:
San Francisco has emerged as a “semi-sovereign city” — a city that imposes as many limits on capital as capital imposes on it. Mislabeled by some detractors as socialist or radical in the Marxist tradition, San Francisco’s progressivism is concerned with consumption more than production, residence more than workplace, meaning more than materialism, community empowerment more than class struggle. Its first priority is not revolution but protection — protection of the city’s environment, architectural heritage, neighborhoods, diversity, and overall quality of life from the radical transformations of turbulent American capitalism.
...and ironically creating some of America's highest market rents in the process.
But I think the sentiment is broadly popular because it gets the heart of why people fall in love with San Francisco. It's not just the community (whatever community), it's the housing stock, the 'perfect' density, the hills, the views, the shops and restaurants, the smell of the air. That's what makes San Francisco San Francisco. One hundred years ago, Los Angeles looked a lot like SF. But they replaced 90% of the victorians, they flattened the hills, they built freeways everywhere. San Francisco was spared that, largely because the people fought back, and now the people want to fight to preserve what was saved.
I'm of mixed-feelings about it. The Bay Guardian always warns of "Manhattanization", but the alternative endpoint is turning into a huge version of Carmel By The Sea.
I understand that other people don't feel that way, but at the same time I think if people were told the choices, which is basically Manhattanization and $1500/mo rent or stay the course and pay $3k/mo, people on the whole would pick the former.
But because it's framed in terms of 'preserving our heritage', it's easy for people to wishfully think that they can keep things the same for free.
I upvoted kijin's comment. If you want to build another Manhattan full of gigantic buildings with computer cubicles and tiny apartments, do it in LA or somewhere, because it's probably never going to happen in SF.
And new construction becomes old within a few years. There are plenty of perfectly serviceable condo towers of unfashionable age in downtown Chicago with very reasonably priced apartments.
Just look at BART. Very popular in the polls, approved in a landslide, dismal ridership. Why? Because everybody thought that other people riding BART was a great idea- they had no intention of riding themselves.
NIMBY-ism about BART was manifested by the peninsula towns, which refused to allow BART in the first place (due to misguided fears of easy access to their towns by transients, potential criminals, etc.)
As opposed to those whose homes and businesses were Eminent Domain'd to make way for the construction, their nearby neighbors who now have loud above-ground train noise beginning at 5am, etc.
Also, I doubt much eminent domain was exercised/abused during the construction. Have you noticed the way the tracks weave, go underground here, run in the middle of a freeway there? Terminals in the outskirts of town? They certainly exercised that power, but it's not like BART runs right through the middle of town.
(Left the Bay ten years ago)
Ok, I live in Europe, but I was under the impression that SF had a bit of a smog problem.
Of course, they have a fog problem, but that's a different matter!
Perhaps you are thinking of Los Angeles?
It does however have a fog problem, because those nice clean prevailing winds are quite cold and moisture condenses rise when encountering the hills along the coast. This is in fact the major source of water for the coastal giant sequoias.
"Coast redwoods (Sequoia sempervirens) are distributed along a narrow band of California's northern coast. During the summer these red giants take advantage of the fog to capture water out of the air—and summer is the critical growing season for the trees, despite being California's dry season."
http://www.scientificamerican.com/article/fog-that-nourishes...
Giant Redwoods = Giant Sequioa = sequoiadendron gigantium
Seems like there is some imprecise naming going on which is why I wasn't sure.
Los Angeles is the California city that is known for its smog problem. The US is big, so its easy to get the various cities confused.
It doesn't help that California is huge. San Francisco to Los Angeles is a 381 Mile (613.16 km) journey... which is 20% longer than the distance between Paris, France and Amsterdam, Netherlands.
best described as "an open sewer"
Someone thought that all that protection was free?
Its merely a means for the very rich to protect themselves. They simply limit who can live near them by dressing it up in fancy sound good, do good, terms. Protecting the environment, protecting history, and all, is just nice speak for keeping people we don't want away.
As to one highly rated post about the benefits of socialism, it never has or will work. Socialism and capitalism are little different in the end, the first merely concentrates wealth and power in the hands of politicians directly, the later just adds another class that benefits.
I think this is a pretty groundless claim. San Francisco has been one of the most tolerant cities of alternative lifestyles and even homeless people compared to any other American city.
It's easy to claim that the rich just want their gated communities, but if you can't even address the claim that they want to preserve the existing quality of the city without claiming a hidden ulterior class motive then how are we supposed to have an honest dialogue? You can't just unilaterally declare a whole group of people to be lying about their motivations and expect anything productive come out of it.
If those laws had been on the books in 1850, or if the Paris of that time had subscribed to modern-day SF's change-nothing philosophy, the city you love would not exist in anything like its current form.
Further reading: http://en.wikipedia.org/w/index.php?title=Eiffel_Tower&mobil...
http://en.wikipedia.org/wiki/Haussmann's_renovation_of_Paris
The over-regulation of home building by cities is an issue not really on the public's radar, unfortunately.
>It doesn’t have to be this way. But everyone who lives in the Bay Area today needs to accept responsibility for making changes where they live so that everyone who wants to be here, can.
I don't know if drastically changing the housing landscape of SF will destroy the culture that made everyone want into the city in the first place, but asserting that it won't is just as tenuous as asserting it will.
All I ever see is rationalization that it won't, because the tech community takes it as axiomatic that they must pile into the city. By debating the conclusion we are tricked into accepting the form.
For example: "But everyone who lives in the Bay Area today needs to accept responsibility for making changes"
That's a lot of people. Including ones hostile to your goals. You would need to get a smaller and friendlier set of people on board to make a slightly-more geographically disperse tech scene work in the Bay Area. The self-fulfilling business "common sense" about SF is much more momentum than sense.
I still don't get protests over evictions or for rent control. They are literally forcing the landlord to subsidize their cost of living. But why make only landlords pay for the subsidy? Why not tax everyone? I'm ok with income redistribution, but not when it is done so inefficiently and at the expense of a specific group.
I personally know a lot of mom-and-pop landlords with vacant rental units who cant be bothered to rent them, because dealing with bad tenants in SF is such a pain. These are middle-class people who bought multiple-unit buildings 20 or 30 years ago when it was affordable and dont need the rental income, and dont want the hassle. I would guess that there are thousands of units like this across the city.
If I had a dollar for every time I've heard this one. I refuse to believe that professional landlords are keeping units off the market when the current rental market may well represent the top of what they can get for the next 5 years. Most of the long term landlords who bought 20-30 years ago have gone through at least 3 down markets from the late 80s to now. The current employment gold rush in SF is just that, and I suspect long term owners recognize that and want to strike while the iron is hot.
I am willing to change my opinion if anyone could provide any tangible data, but I only see this argument bandied about with no actual proof.
So in my rebuttal, I would say that I guess that there are less than 100 units like that across the city. I have no proof, but I feel thats the case, therefore rent control not bad. See how that works?
I agree I'd like to see a real study about this, but yeah anecdotal evidence is all I've got.
I know of at least 4 landlords like this, and the set of people who I know is an extremely limited sample size. How many you encounter probably correlates to how many homeowners over the age of 60 you know. These are people who have already paid off their buildings, which is usually also their home, and have decided that the potential income stream is just not worth the hassle of renting out their extra units and potentially getting bad tenants. Especially if they have been vacant a long time and would need some sprucing up to put on the market. They are retired and comfortable as it is and just dont want to deal with it. Better to just use that unit as storage or an occasional guest house for family or whatever.
Sorry to be blunt, but that's how "supply and demand" is really supposed to work. If Seattle supplies the same quality of housing for half the cost of San Francisco, buyers/renters should flock to Seattle, thereby reducing demand in SF and eventually causing SF housing prices to come down until the market finds an equilibrium. Trying to lobby for "below-market-price" housing is always going to be a losing game; the only long-term solution is to make the market price lower.
Unfortunately, competition among cities to attract residents is not like competition in other industries. A lot of people are stuck in a relatively small geographical area their whole lives due to employment, their children's education, various kinds of emotional attachment, and the sheer difficulty of uprooting themselves from a familiar neighborhood. This creates a captive market, severely limiting the effectiveness of inter-city competition. And of course, whenever there's a captive market, there's somebody who profits from it. In the case of SF's housing market, entrenched neighborhood groups and "below-market-price" renters enjoy benefits at the expense of newcomers to the city. Perhaps they actually deserve those benefits. Still, it's unfair to everyone else.
But there's one group of people who can afford not to be bound by the usual excuses that keep people stuck in a captive market. That's us, the techies. We don't need to be in any particular city in order to write code. Most of us are young and don't have kids. Few of us have any "root" in the Bay Area, so we couldn't care less about being uprooted [1]. There is no reason for us to be a part of San Fran's captive housing market. We can pack up and leave, all 8% of us if possible. That would be "supply and demand" doing its work.
Of course, there are a few problems with this proposal, including the fact that there really is such a thing as social networking of the offline kind. The Bay Area undoubtedly has one of the best tech "scenes" in the world. But I see it as a problem that needs to be fixed, not merely an advantage that we're free to exploit. HN, for example, requires everyone to move to the Bay Area, perhaps for a good reason. But in doing so, they directly contribute to, and exacerbate, the hideous distortion of the Bay Area's housing market. It's like mandating that everyone meet at a particular Starbucks. It makes sense when everyone you want to meet is already a regular of that Starbucks, but when the manager of Starbucks begins to take advantage of its captive clientele, you should seriously start considering an alternative.
Remember, the only vote that the market respects is a vote with your feet, i.e. a realistic threat to do business with a competitor.
[1] Disclaimer: I've lived in at least seven different cities in three continents, and harbor no particular emotional attachment to any of them. Apparently I'm incapable of developing an emotional attachment to geographical coordinates. But I must confess that I kinda like it that way.
There is high demand for what the city offers.
There's also high demand for face-to-face meetings with people to assess and establish trust. There is no replacement for that, and why experience tends to cluster together, whether tech here, or entertainment in the South.
Where I disagree is that I think of those things as having two faces. On the one hand, a vibrant culture and a large group of trustworthy colleagues increase people's quality of life. On the other hand, they reduce mobility, distort markets, and therefore reduce people's quality of life.
And the hacker in me wonders whether it might be possible to reduce the negative side while keeping most of the positive side.
I suppose if you're in your 20s and without children, it makes a bigger difference, but I find I don't often have the time to do anything until the weekend anyway, and so there would be little use paying high rents when 60% of the time, I'm just crashing there and spending all my time elsewhere.
Most of us in the tech sector are young and single and least likely to go house hunting, so the expensive housing is painful for us, but probably affects us the least.
The biggest thing preventing tech workers from moving is that some interactions simply must be done in-person. Often this requirement is due to culture, not technological limitations. Still, there are significant advantages to in-person interactions. People are much more likely to pay attention to each other. There can be interesting and beneficial chance encounters. And of course, the likelihood of anything getting recorded or leaked is lower.
I think that as remote work becomes more feasible (both technologically and culturally), more tech workers will move out of the bay area. There are simply too many incentives to leave.
1. The worst being Guam, which couldn't keep electricity running for more than 12 hours a day. Great beaches, though.
2. Oh, and who had the bright idea to put cloth seats on BART? That person has probably caused the spread of more disease than Typhoid Mary.
After all, teleconferencing all the time is not the only alternative to everyone living in the same city. People could actually travel for important meetings from time to time.
A best-of-the-class high-speed train (300mph+, not the pathetic 200mph version they're talking about) should be able to get you from Portland to SF, or from LA to SF, in two hours flat. Even better, you'll be able to work during those two hours.
And then they could uproot their workforces (and if you took the combined employees of Yahoo, MS, Google, Apple, AOL, Facebook, etc, you would have moved the employee base) and move there, it would probably be the most futuristic city on the planet.
I mean, they wouldn't - or they already would have - because it isn't economically feasible. But that always comes off as a buzz kill since we just end up trying to grow new businesses like cancer into the ancient ruins of lost revolutions we call "historical preservation".
Who knows, maybe the ex-Californians will vote yes on Prop 1 so we can keep our buses.
That does help explain why you see locations as essentially fungible. :)
> Apparently I'm incapable of developing an emotional attachment to geographical coordinates.
There's coordinates, and there's community. Places become keys for personal/shared experiences and history, people build up neighbors and networks that provide society, help mitigate risk, and introduce opportunity (and the fewer resources you have, the more important that is).
> We don't need to be in any particular city in order to write code.
Certainly not to write code. To raise money, on the other hand, it seems to be pretty advantageous. Whether that's about dev convenience or VC convenience, though, is probably a key question worth exploring.
The larger point about making other choices than the Bay Area is one I'm very on board with. There are times I wish I lived there and opportunities that have tempted me, but it's also clear to me that SF and the Bay at large have some structural problems and don't have good policy for protecting/fostering the stuff that's important about communities. For the most part, I've chosen to move in other orbits and it's been rewarding.
The problem is not the new people moving in and the solution is not to stop them, the solution is to address the pressure those new residents create that is driving the old residents out. Entire families shouldn't be uprooted and have their lives thrown into disorder just because some twenty-something wants to live in SF for a year or two while they're working at a startup, and that twenty-something shouldn't have to practically evict some low-income family to find an apartment.
If those families wanted to be able to stay there permanently at a fixed rate of housing expenses, they should have purchased the property. Can't afford to buy? Then deal with the risks of renting.
Their desire for low rent that keeps them comfy and entails no inconveniences has no validity. That's just a wish. That's immature. This is not grade school and not everyone gets a trophy for simply showing up.
There's a LOT of upper-end housing supply due to come in soon - tens of thousands of units. Amazon is taking a lot of heat about it, since they chose to build in the city and their workers usually do as well.
Please encourage others to read this.
Also, prop 13 is the worst thing ever. Reading that section was really depressing.
Great for mentioning the prop13-rentcontrol duality, a lot of people conveniently forget one side or the other.
Great for delving into the politics of it all, including the neighborhood associations.
Not-so-great: it was touched on but not really elaborated: why the peninsula (Palo Alto, Mountain View, Cupertino, the heart of SV) are not densifying to provide housing for the corporations they have. Some of the downtowns are very desireable, but still full of single-family homes. Some of the commercial space could be built up with housing over the businesses, and then these towns would develop even more character. I think the tech industry got a free-ride (heh) in building huge campuses in towns that have little residential growth (and even the towns' resistance to growth is mentioned). Google, Apple, etc, should be pushing on Mountain View to build 10,000 residential unites in the area. It's happening a tiny bit, but not nearly as fast as the companies are expanding.
Most people don't choose 1-hour 40-mile commutes if they can avoid them. But the corporate buses make that commute feasible. I actually wonder if bus transport is reported by the employees as income for taxation purposes, and if not why?
Finally, this issue really seems to stem from regional politics. SF has to compete with suburbs on tax breaks to companies, yet the suburbs can offload all the residential problems to the city. Seems like there should be state-wide rules that make this fairer.
I for one am going to speak to some local political figures. If you live in any city in the SF bay area, you may as well do the same. Write a letter. Express your interest in the creation of apartments in the city. Because if you build housing in the area, people will live there.
Just search for the city and "affordable housing".
Lower rents and increased availability benefit almost everybody.
https://plus.google.com/112482032780181267192/posts/FLUkbf4k...
This details a great many seemingly illogical (but actually financially sensible) consequences of California's 1978 property "tax reform" measure, Proposition 13.
Schou (recently hired by Google) is among the brightest lights on G+ in my experience. Much as I try to avoid the site, he draws me back at least to look.
The key thing is the margin for "even more expensive". Fundamentally, yes, development makes cities more valuable / expensive, in aggregate (after all, that's why cities exist in the first place). The key thing is how many units that value is spread out over. If you tear down a slum and replace it with $1M condos in a supply-constrained market, rents will rise.
But, there are a limited number of people who can afford to buy 7-figure condos, and it is possible to build enough housing to saturate that demand all the way down the curve. If you're actually able to tear down a single-family unit and replace it with 4-unit low-rise apartments, and rent / sell them at a decent price since people want to move into the city, and all your competitor landlords can do the same, you'll see more units, more total dollars going to landlords, and lower prices per unit.
The key thing is to make it cheap to build. Excessive regulation of the kind the article talks about often does the exact opposite - they make it so you can build, eventually, but it's only worthwhile if you can be sure of extracting large rents. Even worse, the high value of land & rent in a supply-constrained environment puts a lot of vested interests in keeping supply low, in a vicious circle.
A sure sign you're trapped in that vicious circle is if developers have "community engagement" and "affordable housing" dollars to throw around.
Of course, but if the total possible supply of 7-figure condos in SF is smaller than the total number of people who want to buy 7-figure condos in SF, then it would indeed be possible to fill the city with nothing but 7-figure condos and have thusly dramatically increased the price of housing!
Techies are just the new middle-class. Asking for affordable housing here is like asking for it at Vail, Jackson Hole or Geneva.
Y'all missed the bus.
Purchasing power with the past middle class though is a different story. My parents are firmly middle class - but looking at the cost of housing and other factors, to afford a similar lifestyle to what they gave me growing up, living in similar places, now requires an income level far in excess of what they made.
It's in fact much closer to what I make now.
So the more accurate (and less insane sounding) claim is that to afford the middle class lifestyle of the past now requires a higher-than-middle-class income. This gap varies depending on where you are.
As a tech worker here, I and others engineers I know are becoming disenfranchised with the housing prices around here to the point that I'm casually exploring where I might want to move next in 4 years or so if this situation doesn't reverse itself.
With the number of engineers all feeling the same, it's possible to find enough people to willing to be a co-founder and move to a much cheaper part of the world during the formative months/years when your company is pre-profit. Take Silicon Valley investing connections, a mobile workforce, rising housing prices and you basically have a confluence of forces that will accelerate a diaspora of engineers to more places in the world without necessarily giving up on the tech community that makes SF so desirable. Once decent sizeable tech communities show up in more places, the greater the likelihood that engineers in the Bay Area look around and tell themselves "This just isn't worth it. I'm paying a premium to be around colleagues, but now my colleagues are everywhere and it's just not worth it anymore."
At the end of the day every engineer without rent control is going to face a financial decision once a year when rents are raised that could make moving elsewhere more attractive. What's the point of improving at your job and earning raises when most of your raise ends up going into your landlord's pocket. Do that 2-3 times and you are either going to look into someway of getting into rent control unit or you're going to start considering other options elsewhere.
All you really need to stay in the area for is to create a solid enough professional network that you'll gain access to the smart capital in the region. Once you have that, you can go anywhere since investors will know you, what you're capable of and that investing in you and your business is a good idea. If this happens often enough, you're going to start to see more VCs comfortable with this approach that they'll be able to tell offer job candidates coming through the VC hiring offices positions in portfolio companies located in places that might be more desirable to a tech worker than SF.
I stay in SF because some of the most interesting tech jobs are here. Once that is no longer a valid assumption and my professional network is sufficiently geographically distributed, I no longer have anything tying me solely to San Francisco.
I can't count the number of conversations I've had with other engineers about thinking about moving to Berlin or Portland or even trying to set up shop in some cheap remote paradise where we would have the financial liberty to invite friends to come out and hang out in a guest room for weeks to months at a time so long as they pay the airfare and living arrangements. Top places on my list when I entertain ideas like this are small beach towns along the Northeast of Brazil. I'm often amazed at how many of my engineer friends are onboard with this ideas, more than willing to exchange San Francisco so long as they know they will have engineering peers and interesting engineering problems to solve in some other locale.
Even the cultural attractions that made San Francisco awesome have been co-opted by the hipster culture and gone mainstream enough that SF no longer has the strong lead on novel cultural innovations that it once had.
"It's an odd thing, but anyone who disappears is said to be
seen in San Francisco. It must be a delightful city and
possess all the attractions of the next world"
-- Oscar Wilde
You are just going to push good people in Portland out of their homes as they do not have the same rent controlled protections some have in San Francisco.
I assume you make plenty of money, so maybe you would be doing the world around you a better service in staying in San Francisco as that one is already ruined and you can afford it anyway.
There are some very interesting concepts around what you are talking about:
What are the most desirable places to live?
Are there cities that are somewhat broken that could fixed?
Are there cities that are totally broken that could flourish?
Should we take cities that will survive massive climate change more seriously than those that will vanish beneath the ocean?
How critical is the cities' level of individual freedom?
Then there are questions regarding software and technology's impact on the very nature of the city -
Will better remote work diminish the networking advantages of a place like NYC or SF?
Will self-driving cars spread cities out?
Will people if want to live in a densely populated area after all of these changes?
* walking and biking are valued over cars
* vehicles within city limits are only used for delivery of goods.
* instead of a network of roads, we have a network of greenspaces[0]
* more plazas and parks (Medellin has done a pretty good job here)
* one massive park in the center of the city (e.g. NYC and Munchen)
* located where precipitation is not a problem
* cars are only for inter-city travel and stay outside the city (Freiburg)
* Lots of sports in the city (Rio de Janeiro and Sydney, Australia)
* People that need to move bulky things often live/work at the city periphery.
Maybe. Here in Toronto, we've had a rough average of 35,000 new homes each year. I'm used to seeing new buildings and cranes all over town. It's not a boom town, but I've yet to hear of a shortage either...
And Toronto's population is roughly 3.1x that of San Francisco, but it's held steady for roughly the last decade at least. 35/6 is 5.8x less, and given the population growth in SF, the number of new builds should be at least double; 12k perhaps.
Equally funny, Toronto also had a freeway revolt and succeeded. So we have a relatively livable downtown, plus growth. Go figure. Some corridors in Toronto are nothing but skyscrapers. Height restrictions do exist, but are raised on a case-by-case basis (e.g. public art, parks can help negotiate). Even areas that fought expressways, while mostly single-dwelling, have allowed high rises along nearby major streets.
That said, we're still trying to make plans to destroy the Gardiner Expressway, our Embarcadero it seems.
Do you know what kinds of stories you never hear in California: "the OMB, against the City's wishes, approved development of a condominium/townhouse complex near a low-density residential area immediately west of North York Centre."
The papers she's citing here exclude apartments from the analysis. They're talking about single-family homes:
http://www.nber.org/papers/w8835.pdf
"The housing price data used in this paper to create the relationship between home prices and construction cost comes from the American Housing Survey (AHS). We focus on observations of single unit residences that are owner occupied, and exclude condominiums and cooperative units in buildings with multiple units even if they are owned"
Probably not incredibly relevant to a discussion of rental prices.
>The true culprit behind our housing problems: let us deflect blame to Mountain View’s burrowing owl!
http://en.wikipedia.org/wiki/Shoreline_Park,_Mountain_View
>City of Mountain View evicted a pair of burrowing owls so that it could sell a parcel of land to Google to build a hotel at Shoreline Boulevard and Charleston Road.
...wtf?
Also is the problem with executives in companies like Google. I believe a lot of them bought properties and they have no incentive to change the market dynamics. They working against company best interest.
So a startup can hire remote tech workers, but it still needs to be somewhere with capital in order to pays those remote workers. And most VCs are in SV, in particular VCs willing to invest tens of millions in a startup.
Enjoy it while it lasts; sometimes the smaller owner-operated apartments can be nice specifically because they don't raise rents as rapidly as the professionally-managed ones.
Page length issues seem to bother a lot of people.
I wrote a long one-page web article myself recently, and everybody said it was too long and needed to be split up and organized.
So I split the article at the section headings into separate web pages.
Everybody who had complained earlier said that my "reedit" was now much better. But really I didn't make any change other than splitting it into separate web pages.
Now, I do understand the value of paragraphs, spacing, and section headings. It's much easier visually. But I never understood the distaste for long web pages. (Obviously, it should be related material, like a story.)
It seems that some readers prefer 5 separate web pages (that must be read contiguously) rather than a single page with five section headings. Maybe I'm in the minority, but I prefer the single page.
I can see how one can become dependent on more episodic consumption, designed to give clear break points and bring one comfortably back into the context at a later point when ready to continue. Those crutches would be comforting even if one ends up "binging" on the entire piece anyway.
Perhaps there's something psychologically satisfying about being able to finish five smaller reading tasks than one larger reading task?
I have found that if the text doesn't fit on one screen, it's more enjoyable for me to read the content as an ePub than as a long scrolling web page.
This doesn't mean I enjoy reading "news" sites which split the content into 25 pages of one paragraph each, just so they can squeeze a dozen more adverts into the page.
I don't think the article is unnecessarily verbose, in fact I think it successfully covers many inter-connected issues by only illustrating the relevant depth without burdening the reader with the superfluous.
It's actually a really quite incredible piece of work, and arguably the best thing ever published on TechCrunch.
Sadly everything seems to be going the way of buzzfeed and infographics. You think you are getting information, but its the equivalent of a newspaper headline, compared to getting all the details.
Exact same move the Maya pulled. At their tech level, that plus climate change ended their civilization.
http://www.nytimes.com/2014/04/15/business/more-renters-find...
los angeles leads the nation in out-of-whack median rent/median income ratios. what does that suggest to me? that it's one of the last of the major US cities with poor and lower-middle class people living in it.
“Increasing the supply is not going to increase the number of affordable units; that is a complete and utter fallacy,” said Jaimie Ross, the president of the Florida Housing Coalition.
As the article explains, the reason is that builders are going to prefer to build "luxury" units to "affordable" ones. So having a whole bunch of construction is not necessarily going to lead to anything affordable. A construction boom may bring the high end rents down a little bit, but they'll still be out of reach of most people.
The "invisible hand" just doesn't care about marginal actors. Who cares if there's people being displaced? Free markets!@#*(_!@)#
jesus I need a drink
SF renters need to back up the U-Haul truck and find new places to live where they can afford it. They are not "entitled" to live in SF simply because they want to.
People who have roots are getting uprooted because they declined or couldn't get in on the sweet tech boom dollars. A lot of the locals are pissed.
I live in Brooklyn, and I live in a part of Brooklyn that really, if they figured out I worked in Tech, I wouldn't be shocked if they showed up with torches and pitchforks as a warning to others.
It's not just renting. It's income as well. There are lots of folks whining about how others make more money and how that "isn't fair". It's a broad theme of people complaining and having a sense of entitlement.
This isn't about moving, this is about completely changing lives. How to get to work, who's in the neighborhood, what's the neighborhood flavor like... it's more than just "living in a specific area" it's about living life.
Income inequality is another issue all together. No, it's not fair that a fast food joint has the guys who flip burgers and run the cash register do all the work and get literally the least amount of money the business can legally give them. And yes, they could just go look for other jobs... if there were any. In a lot of places, there just isn't other work. For others, their particular field may have been decimated. A friend of mine was a bar certified lawyer in corporate finance. ... when he graduated in 2008.
Yeah. life isn't fair, and maybe part of it is roughing it. But another part of it is also recognizing that the system has been inadvertently rigged towards the relatively wealthy and hyper wealthy.
There's reasons why there are protests in the streets of the Bay Area, and tone deaf responses like this are one of them.
Wow, those left wing progressives must really be crazy. It's not like tech CEO's would ever say there is a shortage of good technicians. They obviously believe in supply and demand, and that if demand, salary, working conditions and long-term career viability were good enough, the supply would arise.
From my perspective SF does not have a housing crisis. They quite obviously have a culture crisis. Two opposed socioeconomic groups are at war, each trying to push the other out of the city. Housing remains plentiful, though obviously not affordable. You want to make housing really affordable? Introduce a large drug trade and a couple dozen gangs to bring up the mortality and crime rates, and you'll see those housing prices rocket downwards.
If you would rather live in a city with plentiful, affordable housing - 16% of which is abandoned or unliveable - come on over to my side of the country. You might want to bring a car and some pepper spray, though.
Sorry, I didn't read it because you're a lazy writer who can't be bothered to consolidate the piece into a cohesive, easy-to-digest narrative. Oddly enough, I should be fish in a barrel, -- a mid 20s moving to SF for career; yet you couldn't take the time to work on maintaining my attention for more than a couple bullet points. The hilarious part is that you self-righteously reject that which you ultimately give in to, ("sorry [...] that I didn’t break it into 20 pieces") presumably under the continuing theme of "look at me for being better at not being better than people."
So yeah, sorry I didn't read. Let me know how your blog post does.
According to google maps, this was about 10 minutes away from the heart of San Francisco (when there was no traffic). I'm guessing google doesn't paint the whole picture, and it really is as far as you say it is.
Personally, if I had gotten a job in downtown SF with 6 figures, and no family, I'd have no problem living there and saving up. It doesn't look THAT bad does it? It's even got an outside area. Just my opinion though.
http://www.huffingtonpost.com/2013/05/29/san-francisco-media...
I moved to the city 3 years ago and you could find a nice 1 bedroom in Noe/Mission/Glen Park (southern part of the city, but still pretty desirable) for $2000-$2300 no problem.
Rents have gone up from there, but I've seen a number of units listed recently, in the same area, for $2400-2700.
If you want to spend $5000 for a one bedroom, you can do it, but it's not quite as bad as some of the articles make it out to be. In fact, a friend just rented a 3-bedroom house last year for $4500/month in a very desirable neighborhood.
(Somewhat un-PC thing that a real estate agent told me when I first moved to the Bay: "Go where the lesbians are. They tend to sniff out the best value in real estate, and when they move in, the neighborhood usually becomes more community-oriented, safer, and cleaner." I've heard a couple times that the Excelsior has recently developed a large lesbian population.)
Really, the lowest hanging fruit is just building reasonable transport through the whole city. At the moment it seems like only 30-40% of SF is actually being used. Demolishing freeways & replacing them with housing would not be a bad area either. Smaller houses, like the ones in European cities, would help a lot as well.
I knew this was going to happen: people have heard a trite sound-bite about "counter-intuitive" statistical logic so many times that they ignore that correlation is usually a pretty damned good signal for a causal relationship.
To wit: of course there's a correlation between price and new housing units -- because it is causally related. When prices go up, developers have greater incentives to build. More importantly, in a city with as high a density as San Francisco (and yes, folks, it is dense -- the second-densest city in the US, in fact), with as many architectural challenges (seismic, geographic, etc.) the limiting factor for new construction is land and materials, not red tape.
Nobody wants to hear this, but it's true. The fixed costs of building here are so high that developers won't do it unless rents go up. That's why new construction costs upwards of $4k for a 1-bedroom unit, and why new construction in SF doesn't place any real downward pressure on rents -- except (perhaps) in the very long term. At best, you're treading water. Developers don't build into a falling market.
But really, the best response for the people who keep asserting that "building up" is the magical solution is to point to Manhattan: it's the densest city in America, yet it's just as expensive as San Francisco, if not more so.
There are no magic bullets. San Francisco is expensive because there's a lot of money chasing a tiny little bit of land. You don't need a dissertation to explain it.
While developers may not build into falling markets it it disingenuous of you to say that additional housing stock at market price doesn't help, where do you think the people occupying those shiny new market-price rentals would go if they were not there, I'm guessing not Oakland...
I think you are mistaking rising rents for lack of downward pressure. It's possible to have both at the same time as long as the influx of people exceeds the growth in supply.
I read the whole article. The source she cites for that factoid is an article that excludes apartments from its analysis. It deals only with single-family housing. Oops:
http://www.nber.org/papers/w8835.pdf?new_window=1
I've also read a whole bunch of other stuff on it, and it doesn't agree with the assertion. An example of what architects and developers have to say about it:
http://markasaurus.com/2013/10/22/why-can%E2%80%99t-develope...
The biggest consistent complaint that I read from developers is subsidy for low-income housing, which is onerous, but still only 12%. This guy suggests that average bureaucratic costs are ~30%.
"where do you think the people occupying those shiny new market-price rentals would go if they were not there, I'm guessing not Oakland..."
The article has a table that points out that SF has built something like 200% of the anticipated demand for high-end construction. If that's to be believed, the answer is: they'd be just as empty as they are today.
I strongly disagree. Land and materials aren't creating 3 story height restrictions close to mass transit.
> the best response for the people who keep asserting that "building up" is the magical solution is to point to Manhattan: it's the densest city in America, yet it's just as expensive as San Francisco, if not more so.
If Manhattan had tried to stop new construction at all costs or limit the height of new building for the past 30 or 40 years, do you think prices there now would be lower, higher or about the same as they are now?
Manhattan is also the counter example that always comes to mind for me. If you have a lot of relatively well off people chasing the same thing the prices are going to be high no matter what.
Urban rents generally only come down if the economy crashes or an area becomes undesirable (i.e. a lack of people people willing to pay the prices).
I would love to see examples of an urban area (i.e. not a suburb) where rents went down MAINLY because of building new units, even while demand and the economy remained strong.
Are you kidding me? There are plenty of other cities in seismically active regions where they've built upwards with great success. All of you people who blame earthquakes for SF's inability to build upwards should put your money where your mouth is and get rid of all the red tape - then we'll see what really happens.
> But really, the best response for the people who keep asserting that "building up" is the magical solution is to point to Manhattan: it's the densest city in America, yet it's just as expensive as San Francisco, if not more so.
Wow, how is it that so many people forget basic economics whenever the topic of Bay Area housing comes up? Prices demand both on supply and demand. You are making the (false) assumption that demand is the same in SF and Manhattan.
For example, Tokyo.
> with as many architectural challenges (seismic, geographic, etc.) the limiting factor for new construction is land and materials, not red tape
Excellent question!
Because "supply and demand" is a lot like "correlation does not equal causation" in the lexicon of internet debate: most people are parroting something they heard once but don't quite understand.
The econ-101 supply/demand curve requires a perfectly competitive market for a homogenous product -- neither of these applies to the SF housing market. The products are not homogenous, and the current landowners have dramatically more influence on the prices than the consumers.
So yeah, how is it that so many people forget basic economics? And what does it have to do with housing prices here, anyway?
While I admire your attempt to recycle the "refute a commonly used argument on the basis of its commonality" strategy, that simply doesn't cut it when you're making fallacious claims.
While you can try making dubious arguments regarding economics, you can't hand-wave away the fact that buildings in SF can be much taller than they currently are while adhering to safety codes for a seismically active region.
> The econ-101 supply/demand curve requires a perfectly competitive market for a homogenous product -- neither of these applies to the SF housing market.
Which "econ-101 supply/demand curve" are you referring to, exactly? I hope you're not referring to the perfect competition supply/demand curve, because that's irrelevant here. Price is influenced by supply even if competition isn't perfect.
No kidding. That's exactly what I said: homes aren't commodities, the market isn't anywhere near "perfectly competitive", the demand is inelastic, and the supply is primarily constrained by the availability of land. Thus "building skyscrapers" is not an axiomatic solution to any of this: it costs more to build upward, which exacerbates the non-commodity nature of the good; landowners have even more competitive power in the market; availability is still constrained by an extremely limited natural resource (land).
What happens is that prices go up, landowners build upward until prices stagnate, then landowners stop building. When prices go up again, landowners build upward again. All building happens in response to rising prices, so it's never a force for downward pressure on prices unless demand declines unexpectedly.
There you go again, making fallacious claims. Demand for housing is definitely not inelastic.
> What happens is that prices go up, landowners build upward until prices stagnate, then landowners stop building.
Wrong again, landowners will build upwards until the cost of building upwards outweighs the gains in terms of expected rent. There is no reason the rent couldn't decrease and still result in a net increase in profit for the landowner. After all, you would be renting out more units on the same land.
You mean the "red tape" meant to ensure that buildings don't collapse on you while you work, or in your sleep as the ground the building is built on turns into quicksand?
Or maybe the "red tape" that exists to ensure that there is adequate transportation and services to support increased density.
I think what would happen is a lot of shitty housing would be built that would kill a lot of people and bring the city to a halt during the next sizable earthquake.
No, I mean the red tape that allows anyone to block the construction of a new building just because they don't like how it will look. Work on your reading comprehension, I have no problem with building codes to ensure safety.
It's the 2nd-densest large city in the US, but that's because the dense core city is its own incorporated area, as opposed to most other American cities, which annexed many suburban areas throughout the 20th century. And most American cities are some of the least dense in the world— San Francisco doesn't even rate on a list of world cities: San Francisco doesn't even rate on a list of world
And it's still only half as dense as Brooklyn.