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  The problem is the whole bay area is averse to build up.

Mostly true. However, that somewhat diminishes the degree by which SF especially is averse to construction, and more worryingly is averse to outsiders of all kinds - not just culturally misplaced Midwestern-ers - which is quite telling. Its a special brand of NIMBYism not found elsewhere.

The following comment is also from the Economist piece and sheds light on the kind of jaundiced eyes - I don't know what else one would call it - that long time SF residents view outsiders with. This sentiment is something I highly identify with and is rarely talked about, when the issue of SF housing is hotly debated.

The author is a Kansas City native who has moved to SF to wait tables :

  2) San Francisco can be elitist and exclusionary towards outsiders. Some 
  San Francisco residents look any non-Brooklyn part of the country with dismissal
  and/or disdain, creating a distinct form of self-defeating snobbery.

  I also felt this elitism when I would look at all the row houses in the Richmond
  and Sunset and how few where being torn down to build more efficient apartment 
  buildings. The message was, and is,- we have ours and we don't care about your 
  struggles.

  I also felt this excluding elitism when I would learn about legacy apartment
  dwellers who live in great locations and pay a fraction of the market price 
  because of government controls. The government kept rental prices artificially
  low for established renters and rental prices artificially high for outsiders 
  looking to move in and rent.

  The casual snobbery, the lack of new construction, and a preference for 
  established renters made the city feel unwelcoming to outsiders. Which is ironic,
  because most people I met in San Francisco were born and raised elsewhere.

[1] The rest of his comment is eminently readable too; I've truncated it because I felt I've hijacked this thread enough.

http://www.economist.com/comment/2360736#comment-2360736

I think of it as parochialism, but there may be a better word.

I've started using the word privilege to describe it to San Franciscans. The reactions this gets are interesting.

nativism

I don't know why, but there are a great many SFers who like to think of themselves as progressives (in the modern liberal sense) and have this weird affectation where they like to let you know what nth generation SFer they are. Like it makes a difference or as if I cared.

What i can't parse is that these are the same people who say they are for more immigrant rights --whatever one thinks of immigrant rights, I can't square their desire to tell you how genuine a San Franciscan they are and the proof is in their being nth generation. So a 6th gen SFer has more status than a 5th gen SFer and so on.

SF is the only place I've seen where people feel compelled to tell you their gen as if it were status in and of itself somehow.

I spent a year there during the dot com boom, and was frankly pretty happy to move to Italy.

I'm somewhat liberal politically, but San Fran always felt like a different kind of 'progressive' than back home in relatively egalitarian, fairly moderate and generally well-run Oregon.

When I got to Padova, it felt like coming back to the real world. I'd go downtown and see young and old, wealthy and the not-so-well off. These days, thanks to immigration, it's also acquired some ethnic diversity: my daughter goes to a public school with children whose parents are quite varied.

The economy isn't great here though, and it really makes you wonder... Most of the planet would absolutely love to have the bay area's problems, as you can see by how many places try and ape it with their Silicon Alley, Prairie, Forest, Meadows, Fjord, Barren Wasteland, Cwm, Bog and so on.

> When I got to Padova, it felt like coming back to the real world. I'd go downtown and see young and old, wealthy and the not-so-well off. These days, thanks to immigration, it's also acquired some ethnic diversity: my daughter goes to a public school with children whose parents are quite varied.

I'm confused; are you saying this is in contrast with SF? The Bay Area generally is one of the most diverse places I've ever been; Oakland is often cited as the most diverse city in America.

The area of Manhattan is 90km^2. The population is 1.62 million, double that of SF. The area of SF is 600km^2. So yes, while there is some theoretical limit to the population that could be fit into SF, we are not even remotely close to it.

We could triple the population of SF if we simply increased the density to that of Pune, a city with a small town feel that fits 2.5M people into 700km^2. (I.e., it's not remotely like Manhattan.) Pune has also experienced a tech boom and huge population growth, yet has not suffered from real estate issues the way SF does.

The secret? Our underpopulated areas look like this: https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large

How is transportation and other city services there?

I have been listening to Econtalk episodes on urban growth[1][2] and apparently cities in the developing world experiencing quick expansion get completely clogged with traffic. The transaction costs are too high for developments to come to some agreement on providing city-wide transport. Some places don't have a proper sewage system, or rely on diesel power because they could not build an efficient power plant.

[1] http://www.econtalk.org/archives/2015/01/alex_tabarrok_o.htm...

[2] http://www.econtalk.org/archives/2015/03/paul_romer_on_u.htm...

I've heard New York is the only city in the US with excellent public transport. But yes, a proper underground metro requires a fair bit of planning and coordination, and if SF can't manage that then it will eventually end up like LA.

I don't necessarily mean public transportation. Any transportation. Employer-provided buses, cabs, rickshaws, or even just roads where you can drive your own vehicle. Whatever is appropriate.

But the only thing that really works is underground carriage transport, because:

-It being underground means it's not in the way of everything and, more importantly, vice versa - it can go as fast as you want.

-It being carriage based means there's no coordination with other drivers. No queue dynamics, crossings or whatever. Transport happens in constant time, independent of the amount of passengers (within reasonable bounds).

I think rush hour travel on NYC's subway might put your "transport happens in constant time for grade separated trains" notion to the test. New York City's subway system is quite impressive, given that it's pushing 100 years old in many places and runs (nearly) 24/7/365, but the more crowded the subway gets -> the longer the doors take to close -> train headways become unevenly spaced -> queueing dynamics come into play. The latest "subway etiquette" ad campaigns from the operators specifically instruct riders to stand aside before boarding the train. [1] NYC rush hour is probably right on the edge of the "reasonable bounds" you are describing.

[1] http://web.mta.info/nyct/service/CourtesyCounts.htm#STEPASID...

Most of the underground systems I have been on go pretty slow, and stop frequently. Pedal bike is the fastest way for me as long as you don't are willing to bend the rules (which in my opinion often make cycling more dangerous).

NYC's is on the order of Paris of London by way of comparison.

Washington D.C. (within the city) is a bit like a second tier European city, still quite good within the city, but D.C. has a huge metro area and it's spotty in the outer bits. There's lots of different jurisdictions that don't always integrate their bus systems well and building out the metro system has been slow going.

Portland has an excellent integrated system.

Chicago, Seattle, Boston, have decent, but limited systems.

However, even in places with almost no effective rail system, like Orlando, there's usually a comprehensive public bus system. They just run slowly, but they're relatively cheap, transfers are usually free and will get you close to where you want to go. Most public transport in L.A., for example, consists of the bus system.

Pune has more traffic than it used to, but getting around is pretty easy. It's highly walkable, auto rickshaws are easy to find in most areas, and there is plenty of public transit (govt buses, privately owned 6 seaters). Many jobs also offer transport, jobs with western hours (read: call centers) in particular. Roads and flyovers are being built at a good clip - unlike the US, construction is pretty cheap and isn't paralyzed by red tape.

You don't actually need to provide city-wide transport. All you really need is demand for it - entrepreneurial types are pretty good at figuring out where it's needed. You do, however, need to avoid passing (or at least enforcing) laws against it.

(Here is a little bit on private sector mass transit in the US: http://projects.newyorker.com/story/nyc-dollar-vans/ Jersey City also had these, and they were vastly superior to public buses.)

Manhattan's population density is 27,502/km^2, SF's is 6898/km^2 by way of comparison.

Unfortunately, your area for San Francisco is 80% water. The more relevant data of land area is more like 60 km^2 for Manhattan and 120 km^2 for San Francisco.

Edit: as a result, your comparison to Pune is significantly inaccurate. Indeed, Pune is only some 25% more dense than San Francisco, not three times as you suggest. This is easiest to check by looking at the "population density" figure on Wikipedia, but it's consistent with doing the relevant calculations yourself. (I checked.)

You seem to be correct - the area number you get by googling does include water. My mistake. I guess the ultimate limit of SF might indeed be only 2x or 3x Manhattan (Manhattan could be considerably more dense than it is).

Nevertheless, I do stand by the claim that Pune has handled population and economic growth well by building more housing, and is likely to continue doing so.

It's worth pointing out that the on-paper density of Manhattan is highly misleading. The daytime population of Manhattan on a weekday, including commuters and tourists, is 3.5-4 million people (versus about 1 million for San Francisco). The city is built to handle that amount of population, not the smaller resident-only population.

I was in Manhattan right after Sandy, when the trains were still not running, and it looked like a ghost town with just the 1.6 million residents there.

Comparison with Manhattan is unhelpful. I think better comparisons are Singapore and Tokyo. Bay area residents bristle st the idea of tall towers --specially given the geological faults running beneath. Given that, Tokyo's approach of midrises interspersed with highrises would probably be the best hope. We could at least double or triple the population in SF proper. It would help tremendously if surrounding cities also went on a construction binge to relieve pent up demand.

It helps Manhattan a lot that it has one of the world's best-engineered public transportation systems to connect it to the other boroughs and to Jersey.

The problem with construction booms in East and South Bay is that the transportation infrastructure in SFBA is barely keeping up with the population as-is, and however asymptotically it approaches "adequate" today, it is also one of the country's most poorly managed systems: it's underinvested, hemmed in by a dysfunctional political system, freighted with union, tenure, and retirement problems, and poorly maintained.

You really don't sound much different than those who seek to prevent people from moving in, let alone building to accommodate them. Meaning, come up with a neutral sounding reason to block undesirables from coming into the neighborhood.

Density would be too high, we must preserve cultural heritage, green space laws, restrictions on building heights, builds designated as heritage sites, and on and on and on.

If you build up or down you can accommodate a larger number of people. The key word here is "build". This activity is prevented by an amazing number of rules, regulations, and laws, all of which have nice sounding names but the end result is the same.

Zoning boards and those involved in creating political districts all need to be managed by as neutral groups as possible. All work needs to be as public as possible as well. Preventing someone from building more housing is not really different than the government condemning the land and taking it.

I would disagree with that. I'm for building and renewal. Too many SFers want to keep SF preserved as if it was the turn of the past century. They want a small town bucolic feel. But reality is that the sleepy town is in the midst of a metropolis but many residents resist the notion, even those affected by the policies restricting growth.

Renters and owners alike bristle at the possibility of their neighborhood changing its look and feel. They use words like gentrification, manhattanizatioon,; they also support restrictions on building as ridiculous as the ones which state that the shadow from new buildings shall not block the sun on a public park between specific hours. So its couched as nature friendly, in the meantime it is strictly anti building. People want to eat their cakes and have them too.

> While building in SF proper would decrease rents there

I'm not sure that's a given. Building lots of luxury housing in SF might actually decrease rent in Oakland and other parts of the Bay Area but not have an appreciable effect on rent in SF proper, at least in the short term. In fact, you could even argue that because of network effects and gentrification, building more luxury housing in SF would actually increase rents locally, even as it decreased rents regionally.

And that actually could explain why it's rational for some low-income residents of SF to oppose (or impose conditions on) new construction in SF itself. Increasing the geographic segregation between rich and poor can impact tax revenue, crime, education, transit, and regional politics in ways that particularly hurt the poor.

The point they make in the article is that the rich are going to move to SF anyway, but without available luxury housing they will have to buy up cheaper housing and have it remodeled. So you still get gentrification and network effects, but even higher prices for non-luxury housing than if you'd have just built more luxury housing in the first place.

> The point they make in the article is that the rich are going to move to SF anyway

That's what I'm actually unsure about. The article states it as a given without data or addressing regional effects. There are at least some well-to-do individuals who would purchase non-luxury housing in the North Bay, Berkeley, and the Peninsula rather than SF proper. You can obviously point to activity in places like the Mission and Bernal Heights, but at least some of the demand for unbuilt SF waterfront condos is going to go to the Oakland waterfront rather than something more inland. You can re-model your home, but you can't re-model your neighborhood.

Even if gentrification is a given though, the timing isn't. SF interest groups are pretty good at slowing things down (whether that's new development or a purchase and re-model). Presumably there's some difference in utility to the rich of buying luxury housing and buying non-luxury housing and remodeling it (otherwise there wouldn't be much demand for luxury housing). That's leverage the poor have in extracting some kind of negotiated benefit, like better public transit, education rights, re-distributive taxes, and so forth.

> That's leverage the poor have in extracting some kind of negotiated benefit, like better public transit, education rights, re-distributive taxes, and so forth.

Blocking luxury housing from being built is bad for poor and rich alike. So I suppose the poor could use it as leverage, in the same way a bank robber could use a suicide vest as leverage, but is this really a good idea? :)

My point is that the poor lose either way, so yeah, it could be a good idea. Obviously a matter of degree though.

> you could even argue that [...] building more luxury housing in SF would actually increase rents locally

You can argue a lot of things.

But the relationship between supply, demand and prices is very thoroughly studied. Facts are known!

I have never heard of such an effect happening in the real world, but then again I'm no expert. If anyone can provide a reference to an example, I am willing to be enlightened.

Increasing supply lowers the mean price for the market as a whole. The laws of supply and demand do not rule out local changes that run contrary to the overall market depending on the nature of the new supply.

To pick one particular example, Facebook's construction of 394 apartments next to its campus is actually driving up home prices in that part of Menlo Park because the apartments are nowhere near sufficient to meet the demands of Facebook employees but are accompanied by new commercial developments that make the surrounding property more attractive to other Facebook employees.

because the apartments are nowhere near sufficient to meet the demands of Facebook employees

That's all you needed to say. Supply and demand works.

Thanks for providing a real world example!

But I think the data can be interpreted in several ways.

If home prices are rising while apartments are being constructed, that doesn't have mean the price increase is caused by the construction.

For one thing, these units won't exist until 2016¹, so supply hasn't actually increased. It could also be that the area needs 1000 units to offset the increased demand. Or, as you imply, that the higher level of services make the area more attractive, rather than the added units themselves.

I would like to see actual studies by real economists to change my thoughts on this.

¹ http://www.mercurynews.com/business/ci_27717752/facebook-flo...

Facts are only facts if they're actually factual.

There are numerous known exceptions to simplistic supply/demand arguments, including Giffen goods, Veblen status, lack of insight on either side, information arbitrage, and so on.

It's not impossible some of them apply to city housing markets.

What annoys me about arguments about housing is that housing is clearly a systems problem, not a one-or-two-variable optimisation problem.

Availability and rental prices depend on a complex network of interacting drivers, not all of which are purely economic, and some of which aren't even local.

Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.

> It's not impossible some of them apply to city housing markets.

Yeah, that's why I asked for real world examples.

But I still haven't seen any. If this actually happens, there should be real world examples that people would bring up in these arguments, right?

> Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.

I don't want to be rude, but isn't this just this standard anti science handwaving? "The world is far more complex than western civilization can grasp, therefore my gut feel must be the real truth!"

I mean, it's fine to say a model isn't perfect, but unless you have a better one to replace it with, or at least a clear example of something wrong, you're not really helping.

To me the SF housing market conforms perfectly with the supply and demand model: With a huge rise in demand, and supply being kept almost constant, it predicts the kind of strong price rises we've seen last few years.

> There are numerous known exceptions to simplistic supply/demand arguments, including Giffen goods, Veblen status, lack of insight on either side, information arbitrage, and so on.

> It's not impossible some of them apply to city housing markets.

If you think there is such effects you should make the case, rather than hint that they might exist.

> Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.

I think 95% of economists would take issue with that statement

The usual life cycle of high-rise luxury housing is that buildings move somewhat downmarket as they age. The bulk of your housing stock downtown is going to be 30-40 year old buildings that can't carry the premium rents of new luxury buildings. But you won't get to that point if you don't start building now.

This is a good point and one worth making. Unfortunately neither politicians nor renting residents look that far afield to the detriment of the area and future residents.

That's a concern but peripheral. Yes foreign RE investment could dampen the effect somewhat, but so long as there is a place for the wealthy to buy, they will ease up pressure I. The east bay, south bay and peninsula. The issue right now is that while SF is quite unaffordable bur for the lucky ir wealthy, the south bay east ba hug and peninsula aren't much better.

If we had good transit and we had a regional govt capable of planning and building to accommodate a growing population, that the affordable housing would be in the east bay south bag or peninsula does not matter much to families. Only very few people care to have the 'cachet' of saying "oooooh, no, I live in SF, not dreadful san jose". Most people in the bay area just want an affordable place to live with good transit. Typically only rich folk care about the SF cachet --also nth generation natives, but I dont care much for them.

So the problem is that yes SF is stubborn about housing buy other cities in the bay area are no try far behind in this attitude and they all contribute to this issue.