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Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable hous

by pj_mukh 11y ago

Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable housing. I don't see a builder voluntarily building low-cost housing in the Mission district, just more luxury condos. A municipal ordinance that removes restrictions while imposing a requirement to build affordable housing along with more luxury condos might be the right solution.

rosser 11y ago
You'd think so, but we actually already have such a thing, and it's not doing anything to mitigate the issue it was designed to address. A city ordnance was passed in the late 70s, IIRC, which says that for every SRO (Single-Room Occupancy, basically, long-term flop house) in the Tenderloin that a developer wants to tear down and replace with a high-rise hotel or whatever, that developer must also put up another building with an equivalent number of SRO units to the one being torn down, somewhere else within the 7x7. So, you have to build two buildings for the price of ... well, at least two. Now, given the current rental market in SF, I can't imagine we're actually very far from (or even already over) the inflection point where that becomes economically viable, but it's demonstrably not affecting the new construction rate in any way I've noticed...
tptacek 11y ago
Affordable housing requirements make sense to me, I don't think they're silly, and I'm glad to see them. But they make only a marginal difference. The default trajectory for SF is towards pricing out the working class. Rich people can afford to live in SF even with its nosebleed prices, and they will hold a systemic and intractable advantage against the working class over the long term, because, again, real estate is a good, not a moral principle. When things get more expensive, rich people get more of those things. I'm sure there are cases where this isn't true, but as a general rule, any opposition to new housing in SF concedes ground to wealthy owners at the expense of working-class renters. If there's a place/time this scenario has played out differently elsewhere in the US, someone, please let me know.
- timr 11y ago
  "I'm sure there are cases where this isn't true, but as a general rule, any opposition to new housing in SF concedes ground to wealthy owners at the expense of working-class renters." You're missing a few critically important pieces of context: 1) The city of SF gives developers two options for the low-income housing set-aside -- they can make a percentage of their units low income, or they can contribute a percentage of the project cost to a city-wide fund. 2) Developers hate both of these options, but they far prefer the latter one (donate to a fund), since it's a fixed cost. 3) Because the city is in competition with these same private developers for land, the low-income housing fund is at a significant disadvantage when it comes to actually building low-income housing. IIRC, the city has only built a few projects in the last decade. 4) As a result of 1-3, most of the community resistance to new construction ends up being about forcing developers to choose the first option (i.e. actually building low-income units). They use the only political leverage they have to compel this choice: the planning process. 5) Many/most skirmishes about permitting get characterized as "NIMBY opposition", when in reality, they're about low-income housing set-asides. It's just easy to point to the zero-influence yahoos who show up to any public meeting, and mischaracterize them as the source of the problem, so developers do this. Basically what I'm saying is: unless compelled, there's no situation in SF where developers build anything other than luxury units. There's no ROI otherwise; land is too expensive. And they won't build new luxury units into a down market, either, for the same reasons. Low-income housing requirements are the only way this stuff happens. So I'll turn your question around on you: name one US market that has successfully lowered real estate prices via construction. Even in places canonically held up as examples (e.g. Houston), affordability is maintained by sprawl...which is not an option for San Francisco. For the exact economic reasons you've cited, nobody buys or builds real estate that they know will lose value. That's the fundamental problem with the "build out of it" argument.
  - tptacek 11y ago
    If building continues at the clip it has for the past 10 years, what do you think is going to happen to the SF real estate market? What I think will happen is that it will be owned almost entirely by wealthy people.
foota 11y ago
I think you just need to build more of everything. They're building luxury condos because there is demand for them. So let them have their fun building luxury condos (which are likely higher profit) but at the same time let them also build affordable housing, which they can also make a profit off of.
- bufordsharkley 11y ago
  Building becomes more expensive across the board (when things like Impact Fees are used to disincentive new construction). Is it surprising that only large projects that benefit the well-to-do are feasible to pull through this tangle of regulation and fees? If we streamline construction and incentivize new projects, we will get not only new luxury housing, but more affordable housing for everyone.
fweespee_ch 11y ago
> I don't see a builder voluntarily building low-cost housing in the Mission district, just more luxury condos. A municipal ordinance that removes restrictions while imposing a requirement to build affordable housing along with more luxury condos might be the right solution. Yeah, that is pretty much the only solution. The other real option is going the NYC route of subsidized housing. However, I'm not sure SF really has the revenues for this to be viable tho. http://www1.nyc.gov/site/nycha/eligibility/eligibility.page http://www1.nyc.gov/site/nycha/eligibility/eligibility.page
twblalock 11y ago
> Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable housing. They are incorrect. Building luxury housing will take some of the demand pressure off of non-luxury housing (which constitutes the vast majority of the housing in San Francisco), thereby lowering its price. The only way this wouldn't work is if nobody could afford to live in the new luxury housing. But we know for sure that there are plenty of people who want to, can afford to, and are moving into the newer luxury developments as soon as they are available. The lower-quality housing those people move out of is now available for people who can't afford the new luxury housing.
- toomuchtodo 11y ago
  > They are incorrect. Building luxury housing will take some of the demand pressure off of non-luxury housing (which constitutes the vast majority of the housing in San Francisco), thereby lowering its price. Nothing stops capital from rushing into non-luxury housing, acquiring it, and then renting it at new "market rates". You will need to swamp SFBA with housing (tens of thousands of new units a year) in order to drive down market prices.
  - twblalock 11y ago
    Non-luxury housing is already being rented at market rates, except for the rent-controlled units, but those are effectively not part of the liquid housing market anyway because the tenants won't leave. Hence the recent increase in landlords trying to force the tenants out, so the housing can be rented at the market rate, like all other housing already is. Everything I wrote presupposes that all housing is rented at the market rate, including the non-luxury housing. I suppose you put quotes around "market rates" as a form of sarcasm, but aside from rent-controlled units, all housing rents at the equilibrium market rate determined by supply and demand. If someone jacks up the price of older apartments and is still able to find tenants, all that proves is that those apartments had been rented out at a price below the market rate before now. The market rate is quite simply the amount people are willing to pay.
akgerber 11y ago
Inclusionary zoning is both a perfectly reasonable idea and, by empirical evidence, dramatically insufficient to spur affordable housing production: http://cityobservatory.org/inclusionary-zoning-has-a-scale-problem/ http://cityobservatory.org/inclusionary-zoning-has-a-scale-p... Much of the problem stems from undersupply driving formerly affordable housing to gentrify— that's why I, as a well-paid programmer, live in a formerly-abandoned tenement.
losteric 11y ago
That's why the city needs to support building across price ranges, without enforcing prices at a neighborhood level. It's OK to have wealthier areas. The problem we want to avoid is forcing slightly less wealthy people to rent from areas that are significantly less wealthy... because that's what drives people away.
ThrustVectoring 11y ago
All construction drives down housing prices in the region, by providing alternatives to bidding up any particular piece of housing. IMHO, "affordable housing" is a misnomer: all expansion of residential stock makes housing more affordable.
- Tempest1981 11y ago
  When people say "affordable housing", I think they mean affordable by non-tech workers, like teachers or police officers. Not just 10% cheaper, more like 50+% cheaper.
maerF0x0 11y ago
If everyone builds luxury condos then there is too much competition and the price declines, builders will seek to build more profitable units. So long as "affordable housing" is above cost, then eventually it will be the most attractive new good to provide the market. It will take a long time for the process to work though, because it takes years to build things, plus a year for Leases to cycle. In the meantime I imagine NIMBYs will say "see? nothing improved".
Kalium 11y ago
> Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable housing. That's because you're talking to the wrong people. Talk to urban planners instead. As a rule of thumb, activists lacking specialized technical education are useful for pointing to problems and useless for pointing to solutions.
nedwin 11y ago
It depends on the timeline you're looking at. If you think of the next 5 to 10 years then building luxury condos doesn't help. However if you look at a 30 to 40 year timeline and we allow all the market rate houses to be built that developers want then those same "luxury" houses will become more affordable over time. Instead we're sand bagging any development in favour of 25% affordable housing to be built by private developers.

by pj_mukh 11y ago

rosser 11y ago

You'd think so, but we actually already have such a thing, and it's not doing anything to mitigate the issue it was designed to address. A city ordnance was passed in the late 70s, IIRC, which says that for every SRO (Single-Room Occupancy, basically, long-term flop house) in the Tenderloin that a developer wants to tear down and replace with a high-rise hotel or whatever, that developer must also put up another building with an equivalent number of SRO units to the one being torn down, somewhere else within the 7x7. So, you have to build two buildings for the price of ... well, at least two. Now, given the current rental market in SF, I can't imagine we're actually very far from (or even already over) the inflection point where that becomes economically viable, but it's demonstrably not affecting the new construction rate in any way I've noticed...

tptacek 11y ago

Affordable housing requirements make sense to me, I don't think they're silly, and I'm glad to see them. But they make only a marginal difference. The default trajectory for SF is towards pricing out the working class. Rich people can afford to live in SF even with its nosebleed prices, and they will hold a systemic and intractable advantage against the working class over the long term, because, again, real estate is a good, not a moral principle. When things get more expensive, rich people get more of those things. I'm sure there are cases where this isn't true, but as a general rule, any opposition to new housing in SF concedes ground to wealthy owners at the expense of working-class renters. If there's a place/time this scenario has played out differently elsewhere in the US, someone, please let me know.

timr 11y ago
"I'm sure there are cases where this isn't true, but as a general rule, any opposition to new housing in SF concedes ground to wealthy owners at the expense of working-class renters." You're missing a few critically important pieces of context: 1) The city of SF gives developers two options for the low-income housing set-aside -- they can make a percentage of their units low income, or they can contribute a percentage of the project cost to a city-wide fund. 2) Developers hate both of these options, but they far prefer the latter one (donate to a fund), since it's a fixed cost. 3) Because the city is in competition with these same private developers for land, the low-income housing fund is at a significant disadvantage when it comes to actually building low-income housing. IIRC, the city has only built a few projects in the last decade. 4) As a result of 1-3, most of the community resistance to new construction ends up being about forcing developers to choose the first option (i.e. actually building low-income units). They use the only political leverage they have to compel this choice: the planning process. 5) Many/most skirmishes about permitting get characterized as "NIMBY opposition", when in reality, they're about low-income housing set-asides. It's just easy to point to the zero-influence yahoos who show up to any public meeting, and mischaracterize them as the source of the problem, so developers do this. Basically what I'm saying is: unless compelled, there's no situation in SF where developers build anything other than luxury units. There's no ROI otherwise; land is too expensive. And they won't build new luxury units into a down market, either, for the same reasons. Low-income housing requirements are the only way this stuff happens. So I'll turn your question around on you: name one US market that has successfully lowered real estate prices via construction. Even in places canonically held up as examples (e.g. Houston), affordability is maintained by sprawl...which is not an option for San Francisco. For the exact economic reasons you've cited, nobody buys or builds real estate that they know will lose value. That's the fundamental problem with the "build out of it" argument.
- tptacek 11y ago
  If building continues at the clip it has for the past 10 years, what do you think is going to happen to the SF real estate market? What I think will happen is that it will be owned almost entirely by wealthy people.

foota 11y ago

I think you just need to build more of everything. They're building luxury condos because there is demand for them. So let them have their fun building luxury condos (which are likely higher profit) but at the same time let them also build affordable housing, which they can also make a profit off of.

bufordsharkley 11y ago
Building becomes more expensive across the board (when things like Impact Fees are used to disincentive new construction). Is it surprising that only large projects that benefit the well-to-do are feasible to pull through this tangle of regulation and fees? If we streamline construction and incentivize new projects, we will get not only new luxury housing, but more affordable housing for everyone.

fweespee_ch 11y ago

> I don't see a builder voluntarily building low-cost housing in the Mission district, just more luxury condos. A municipal ordinance that removes restrictions while imposing a requirement to build affordable housing along with more luxury condos might be the right solution. Yeah, that is pretty much the only solution. The other real option is going the NYC route of subsidized housing. However, I'm not sure SF really has the revenues for this to be viable tho. http://www1.nyc.gov/site/nycha/eligibility/eligibility.page http://www1.nyc.gov/site/nycha/eligibility/eligibility.page

twblalock 11y ago

> Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable housing. They are incorrect. Building luxury housing will take some of the demand pressure off of non-luxury housing (which constitutes the vast majority of the housing in San Francisco), thereby lowering its price. The only way this wouldn't work is if nobody could afford to live in the new luxury housing. But we know for sure that there are plenty of people who want to, can afford to, and are moving into the newer luxury developments as soon as they are available. The lower-quality housing those people move out of is now available for people who can't afford the new luxury housing.

toomuchtodo 11y ago
> They are incorrect. Building luxury housing will take some of the demand pressure off of non-luxury housing (which constitutes the vast majority of the housing in San Francisco), thereby lowering its price. Nothing stops capital from rushing into non-luxury housing, acquiring it, and then renting it at new "market rates". You will need to swamp SFBA with housing (tens of thousands of new units a year) in order to drive down market prices.
- twblalock 11y ago
  Non-luxury housing is already being rented at market rates, except for the rent-controlled units, but those are effectively not part of the liquid housing market anyway because the tenants won't leave. Hence the recent increase in landlords trying to force the tenants out, so the housing can be rented at the market rate, like all other housing already is. Everything I wrote presupposes that all housing is rented at the market rate, including the non-luxury housing. I suppose you put quotes around "market rates" as a form of sarcasm, but aside from rent-controlled units, all housing rents at the equilibrium market rate determined by supply and demand. If someone jacks up the price of older apartments and is still able to find tenants, all that proves is that those apartments had been rented out at a price below the market rate before now. The market rate is quite simply the amount people are willing to pay.

akgerber 11y ago

Inclusionary zoning is both a perfectly reasonable idea and, by empirical evidence, dramatically insufficient to spur affordable housing production: http://cityobservatory.org/inclusionary-zoning-has-a-scale-problem/ http://cityobservatory.org/inclusionary-zoning-has-a-scale-p... Much of the problem stems from undersupply driving formerly affordable housing to gentrify— that's why I, as a well-paid programmer, live in a formerly-abandoned tenement.

losteric 11y ago

That's why the city needs to support building across price ranges, without enforcing prices at a neighborhood level. It's OK to have wealthier areas. The problem we want to avoid is forcing slightly less wealthy people to rent from areas that are significantly less wealthy... because that's what drives people away.

ThrustVectoring 11y ago

All construction drives down housing prices in the region, by providing alternatives to bidding up any particular piece of housing. IMHO, "affordable housing" is a misnomer: all expansion of residential stock makes housing more affordable.

Tempest1981 11y ago
When people say "affordable housing", I think they mean affordable by non-tech workers, like teachers or police officers. Not just 10% cheaper, more like 50+% cheaper.

maerF0x0 11y ago

If everyone builds luxury condos then there is too much competition and the price declines, builders will seek to build more profitable units. So long as "affordable housing" is above cost, then eventually it will be the most attractive new good to provide the market. It will take a long time for the process to work though, because it takes years to build things, plus a year for Leases to cycle. In the meantime I imagine NIMBYs will say "see? nothing improved".

Kalium 11y ago

> Talking to a few activists about this solution and most of them say that "building your way" out of it only makes sense if you are also building affordable housing. That's because you're talking to the wrong people. Talk to urban planners instead. As a rule of thumb, activists lacking specialized technical education are useful for pointing to problems and useless for pointing to solutions.

nedwin 11y ago

It depends on the timeline you're looking at. If you think of the next 5 to 10 years then building luxury condos doesn't help. However if you look at a 30 to 40 year timeline and we allow all the market rate houses to be built that developers want then those same "luxury" houses will become more affordable over time. Instead we're sand bagging any development in favour of 25% affordable housing to be built by private developers.