8 ms·

They literally don't see how they constrain supply and how that leads to higher prices.

by hrdwdmrbl 8y ago

tachyonbeam 8y ago
Home owners have a selfish incentive to constrain supply to keep prices going up.
- nerfhammer 8y ago
  also the local far left does not believe that scarcity and prices are related, and attempts to block new housing on that basis. E.g., greedy developers and/or rich people will never "allow" prices to fall.
  - mbrumlow 8y ago
    Which is funny. Because I think 5 well places high rise apartments would level the entire playing field. You want to place the buildings right in front of the most expensive ones today. Blocking whatever view they have. This would instantly cut the value of those places in half or more. Which for the left should be a huge win. Sticking it to rich people and providing more affordable housing for the normies and probably good set of the super poor. New buildings wils have to allocate 12% or so of their units to low income housing. Think apartments rental units mixed with ownable ones. Or just all rent.
  - standardUser 8y ago
    I wouldn't read too far into the beliefs and philosophies of the "local far left". Most local politicians are just struggling to placate and/or not piss off a large enough cross-section of those few weirdos that are actually active in local politics so that they can continue their career in politics.
  - astazangasta 8y ago
    If scarcity is causing high prices, why did San Francisco rents balloon from $2300 in 2008 to $3600 in 2016 when the population size only grew modestly at the same time? The idea that supply scarcity is responsible for what is clearly a tech-driven event is some serious head-in-sand reasoning. I watched this happen; tech boomed in SF after 2008, and prices boomed with them. The population, meanwhile, did not boom significantly. This has little to do with scarcity.
    - jchmbrln 8y ago
      Honest question: how can the population grow more than modestly without more housing? Without more information, what you just described sounds to me exactly like a supply-constrained scenario. Population can’t grow, so prices skyrocket.
      - astazangasta 8y ago
        By increasing density in existing housing stock, which is exactly what would happen if the boom were being driven by sudden population influx. This isn't what happened; instead poorer residents just began to be replaced by wealthier ones.
        erik_seaberg 8y ago
        SFist used to write about crazy offers like "rent my walk in closet" or "share a big house with 50 techies". https://sfist.com/2015/12/31/the_worst_and_saddest_of_apartment/ https://sfist.com/2015/12/31/the_worst_and_saddest_of_apartm...
    - deleted 8y ago
      [deleted]
    - erik_seaberg 8y ago
      A large number of people moved in, the vacancy rate went to zero, and an equally large number of people had to move out because they had been outbid for every unit. If not for hosting shortage we'd see a population boom.
    - todipa 8y ago
      You don't need a considerable increase in population to affect prices substantially. You only need to push out the marginal people, the ones who are at the lowest end of the rental spectrum. So to compete, these people are forced to pay a higher % of their salary towards rent, this creates a vicious uptrend in real estate prices. The only remedy to this problem is to increase housing supply. Good luck...
  - rjf72 8y ago
    There is nuance that you're not considering. Increasing supply only results in a decline in prices at the point that supply is so plentiful that sellers are obligated to drop prices to increase revenue. This very article inadvertently explains why this will not likely be the case in San Francisco for the foreseeable future, regardless of development. People waiting tables were making $70,000-$80,000. This is edging towards 300% of the US median personal income [1], for being a waiter! If there was affordable and available housing here, along with getting paid $75k to wait tables, you'd see a massive surge in migration. And you'd rapidly end up in the exact same boat again as the newly expanded supply would be insufficient and prices would continue to rise. People use Japan as an example of smart planning leading to more reasonable housing prices over time. In reality what happened to Japan is this [2]. That's the GDP of Japan. Many people do not know that Japan is now going on 30 years in recession. Their GDP was higher 25 years ago than it is today. And so prices naturally declined over time. The reason I mention this is because the same is true of San Francisco. If you want housing prices to decline you'd need to see a general recession sending all prices, including wages, down. Otherwise anytime you create affordable housing it will quickly become affordable as people race to spend somewhat sane prices on housing while earning $75k waiting tables. [1] - https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N [2] - https://tradingeconomics.com/japan/gdp https://tradingeconomics.com/japan/gdp
    - specialist 8y ago
      Comparing SF, or event metro USA, to all of Japan is quite a stretch. Further, the structure of their real estate markets are completely different. Increasing supply will put downward pressure on price. Econ 101. That other factors apply upward pressure does not negate this.
    - mbrumlow 8y ago
      But the nuance is what is meant by affordable housing. You may be right about flooding the market with more workers but you forgot to keep going. If all the sudden there are a ton of people applying for these jobs it will drive the wages down. We have to pay people those high wages because there is a lack of people willing to work for lower wages because of high housing prices.
  - specialist 8y ago
    The fight between the upzone & affordable vs NIMBY & rent control coalitions in my jurisdiction (not SF) has been illuminating, disappointing. I'm as commie pinko liberal as can be, aka pragmatic (maximum benefit most efficient way possible). From where I'm sitting, there is no "Left". Just some temporary coalitions around some topics. I've heard some of the most patronizing, condescending views and beliefs from otherwise "liberal" people. Not even "conservative" (eg traditional principled defensible positions). Just regressive beliefs. I guess what I'm trying to say is that outside of a small basket of issues, "left" and "right" is case by case, and a person's position on one issue is a poor predictor for other issues.
- mbrumlow 8y ago
  Yes they do. But are there not far fewer home owners than renters? Somewhere some one renting a apartment with a nice view voted down a building changing their view.
  - AnimalMuppet 8y ago
    For every renter, there's an owner that they rent from. That owner has the same incentives as other owners, plus the incentive of having the rent keep going up. Renters outnumber owners, and could in theory outvote them. But I don't think they will. Renters have a different mind-set from owners. Owners are in for the long(er) haul; renters can leave at the end of the lease if they choose. So owners tend to care more about politics and the future of the city, and therefore vote in higher numbers. Or so I suspect, with exactly zero evidence to back it up.
    - netheril96 8y ago
      In Silicon Valley, often several renters correspond to a single owner.
  - standardUser 8y ago
    Renters are more transient, so less willing and able to exert political pressure. And they usually have fewer resources to advocate for their own benefit in the first place. But you still make a great point. Long-term renters must at least sometimes vote on the side of the "NIMBYs". If you've lived in a unit for 10 years and have rent control, do you want low-income housing or giant view-blocking structures put up in your neighborhood? Maybe not.
    - JumpCrisscross 8y ago
      > Renters are more transient, so less willing and able to exert political pressure New York's renters are quite politically active. The bottom line is most people in the Bay Area aren't politically active. It's not cool to write to one's elected representatives, go to town halls, collect petitions for candidates and spend weekends stumping for them. Primary and local election turn-outs, critical in an effectively one-party region, are miserable. These factors lead to a large fraction of the population self selecting out of the political process.
- taysic 8y ago
  Homeowners homes become more valuable if developers know they could tear it down and build many more units on it.
astazangasta 8y ago
You apparently literally don't see how high net worth individuals and speculators can drive up prices much faster than new construction can possibly keep up - remember, the demand side of price? Also, there are other forces at work on the supply side, like a bonkers property tax system which incentivizes never selling your home. But your tidy narrative is better for real estate developers, so let's blithely parrot it as often as possible.
- pascalxus 8y ago
  Well... yes, this problem has been developing for a long long time, over the last 50 years CA has been restricting supply ever more, like those WWII frog experiments where they boiled water very slowly to see if the frogs would jump out. Some of those frogs jumped out and some died out. Now, we're facing the same dilema in SF. That doesn't mean we shouldn't try to lower the temperature. Every last apartment or house can help. We desperately need as much housing of every type we can possibly get. I don't understand how anyone with a conscience can continue to advocate for "character" with the current housing crisis. And, why are people concerned if a developer makes a profit. If people are starving, you dont say, geez we better not grow any more food lest those pesky farmers make a profit. If developers are making too large profits, then more will enter and we'll have even more housing which will lower the prices even more.
  - astazangasta 8y ago
    No, this problem appeared acutely starting in 2008. When I moved to SF, rents were not exorbitant; they were high, but ordinary people could pay them. Then they climbed dramatically in a short period. This is easy to ascertain; just look at any graph of rents. This graph has no relation to the graphs for new construction or population growth, both of which grow at a steady pace. This is an acute crisis caused by a spike in demand due to the sudden inflow of new wealth, not by a supply constraint. When one person can buy up every house in the Mission, the supply side of the equation is not as relevant as the demand size. This is blindingly obvious, and only some serious denial seems to be preventing people from acknowledging this. As for concern over whether developers are making a profit; apparently you have never read any history of redevelopment. Here is a good place for you to start, learn something about your own city: https://hoodline.com/2016/01/how-urban-renewal-destroyed-the-fillmore-in-order-to-save-it https://hoodline.com/2016/01/how-urban-renewal-destroyed-the... What will happen, over and over, is poor people will be moved out, rich people will move in, and developers will make a profit. Your econ 101 fantasy will not take place.
pascalxus 8y ago
It's the biggest failure of modern day education: an inadequate understanding of the basics of supply and demand. Such an irony that this is so prevalent in a city with one of the highest percentage of residents who have so called educational degrees.
- rajacombinator 8y ago
  You’re assuming this is an unintentional oversight of modern education.
- Mikeb85 8y ago
  Economics is tough and because of the political factors, often gets discredited. People always come up with excuses for why the economics explanation is false and why you can blame someone else. Economics explains why SF is expensive, why Trump wants to build a wall, why the Yellow Vests are protesting in Paris, but if the explanations don't confirm someone's worldview they get dismissed.

They literally don't see how they constrain supply and how that leads to higher prices.

tachyonbeam 8y ago

Home owners have a selfish incentive to constrain supply to keep prices going up.

nerfhammer 8y ago
also the local far left does not believe that scarcity and prices are related, and attempts to block new housing on that basis. E.g., greedy developers and/or rich people will never "allow" prices to fall.
- mbrumlow 8y ago
  Which is funny. Because I think 5 well places high rise apartments would level the entire playing field. You want to place the buildings right in front of the most expensive ones today. Blocking whatever view they have. This would instantly cut the value of those places in half or more. Which for the left should be a huge win. Sticking it to rich people and providing more affordable housing for the normies and probably good set of the super poor. New buildings wils have to allocate 12% or so of their units to low income housing. Think apartments rental units mixed with ownable ones. Or just all rent.
- standardUser 8y ago
  I wouldn't read too far into the beliefs and philosophies of the "local far left". Most local politicians are just struggling to placate and/or not piss off a large enough cross-section of those few weirdos that are actually active in local politics so that they can continue their career in politics.
- astazangasta 8y ago
  If scarcity is causing high prices, why did San Francisco rents balloon from $2300 in 2008 to $3600 in 2016 when the population size only grew modestly at the same time? The idea that supply scarcity is responsible for what is clearly a tech-driven event is some serious head-in-sand reasoning. I watched this happen; tech boomed in SF after 2008, and prices boomed with them. The population, meanwhile, did not boom significantly. This has little to do with scarcity.
  - jchmbrln 8y ago
    Honest question: how can the population grow more than modestly without more housing? Without more information, what you just described sounds to me exactly like a supply-constrained scenario. Population can’t grow, so prices skyrocket.
    - astazangasta 8y ago
      By increasing density in existing housing stock, which is exactly what would happen if the boom were being driven by sudden population influx. This isn't what happened; instead poorer residents just began to be replaced by wealthier ones.
      - erik_seaberg 8y ago
        SFist used to write about crazy offers like "rent my walk in closet" or "share a big house with 50 techies". https://sfist.com/2015/12/31/the_worst_and_saddest_of_apartment/ https://sfist.com/2015/12/31/the_worst_and_saddest_of_apartm...
  - deleted 8y ago
    [deleted]
  - erik_seaberg 8y ago
    A large number of people moved in, the vacancy rate went to zero, and an equally large number of people had to move out because they had been outbid for every unit. If not for hosting shortage we'd see a population boom.
  - todipa 8y ago
    You don't need a considerable increase in population to affect prices substantially. You only need to push out the marginal people, the ones who are at the lowest end of the rental spectrum. So to compete, these people are forced to pay a higher % of their salary towards rent, this creates a vicious uptrend in real estate prices. The only remedy to this problem is to increase housing supply. Good luck...
- rjf72 8y ago
  There is nuance that you're not considering. Increasing supply only results in a decline in prices at the point that supply is so plentiful that sellers are obligated to drop prices to increase revenue. This very article inadvertently explains why this will not likely be the case in San Francisco for the foreseeable future, regardless of development. People waiting tables were making $70,000-$80,000. This is edging towards 300% of the US median personal income [1], for being a waiter! If there was affordable and available housing here, along with getting paid $75k to wait tables, you'd see a massive surge in migration. And you'd rapidly end up in the exact same boat again as the newly expanded supply would be insufficient and prices would continue to rise. People use Japan as an example of smart planning leading to more reasonable housing prices over time. In reality what happened to Japan is this [2]. That's the GDP of Japan. Many people do not know that Japan is now going on 30 years in recession. Their GDP was higher 25 years ago than it is today. And so prices naturally declined over time. The reason I mention this is because the same is true of San Francisco. If you want housing prices to decline you'd need to see a general recession sending all prices, including wages, down. Otherwise anytime you create affordable housing it will quickly become affordable as people race to spend somewhat sane prices on housing while earning $75k waiting tables. [1] - https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N [2] - https://tradingeconomics.com/japan/gdp https://tradingeconomics.com/japan/gdp
  - specialist 8y ago
    Comparing SF, or event metro USA, to all of Japan is quite a stretch. Further, the structure of their real estate markets are completely different. Increasing supply will put downward pressure on price. Econ 101. That other factors apply upward pressure does not negate this.
  - mbrumlow 8y ago
    But the nuance is what is meant by affordable housing. You may be right about flooding the market with more workers but you forgot to keep going. If all the sudden there are a ton of people applying for these jobs it will drive the wages down. We have to pay people those high wages because there is a lack of people willing to work for lower wages because of high housing prices.
- specialist 8y ago
  The fight between the upzone & affordable vs NIMBY & rent control coalitions in my jurisdiction (not SF) has been illuminating, disappointing. I'm as commie pinko liberal as can be, aka pragmatic (maximum benefit most efficient way possible). From where I'm sitting, there is no "Left". Just some temporary coalitions around some topics. I've heard some of the most patronizing, condescending views and beliefs from otherwise "liberal" people. Not even "conservative" (eg traditional principled defensible positions). Just regressive beliefs. I guess what I'm trying to say is that outside of a small basket of issues, "left" and "right" is case by case, and a person's position on one issue is a poor predictor for other issues.
mbrumlow 8y ago
Yes they do. But are there not far fewer home owners than renters? Somewhere some one renting a apartment with a nice view voted down a building changing their view.
- AnimalMuppet 8y ago
  For every renter, there's an owner that they rent from. That owner has the same incentives as other owners, plus the incentive of having the rent keep going up. Renters outnumber owners, and could in theory outvote them. But I don't think they will. Renters have a different mind-set from owners. Owners are in for the long(er) haul; renters can leave at the end of the lease if they choose. So owners tend to care more about politics and the future of the city, and therefore vote in higher numbers. Or so I suspect, with exactly zero evidence to back it up.
  - netheril96 8y ago
    In Silicon Valley, often several renters correspond to a single owner.
- standardUser 8y ago
  Renters are more transient, so less willing and able to exert political pressure. And they usually have fewer resources to advocate for their own benefit in the first place. But you still make a great point. Long-term renters must at least sometimes vote on the side of the "NIMBYs". If you've lived in a unit for 10 years and have rent control, do you want low-income housing or giant view-blocking structures put up in your neighborhood? Maybe not.
  - JumpCrisscross 8y ago
    > Renters are more transient, so less willing and able to exert political pressure New York's renters are quite politically active. The bottom line is most people in the Bay Area aren't politically active. It's not cool to write to one's elected representatives, go to town halls, collect petitions for candidates and spend weekends stumping for them. Primary and local election turn-outs, critical in an effectively one-party region, are miserable. These factors lead to a large fraction of the population self selecting out of the political process.
taysic 8y ago
Homeowners homes become more valuable if developers know they could tear it down and build many more units on it.

astazangasta 8y ago

You apparently literally don't see how high net worth individuals and speculators can drive up prices much faster than new construction can possibly keep up - remember, the demand side of price? Also, there are other forces at work on the supply side, like a bonkers property tax system which incentivizes never selling your home. But your tidy narrative is better for real estate developers, so let's blithely parrot it as often as possible.

pascalxus 8y ago
Well... yes, this problem has been developing for a long long time, over the last 50 years CA has been restricting supply ever more, like those WWII frog experiments where they boiled water very slowly to see if the frogs would jump out. Some of those frogs jumped out and some died out. Now, we're facing the same dilema in SF. That doesn't mean we shouldn't try to lower the temperature. Every last apartment or house can help. We desperately need as much housing of every type we can possibly get. I don't understand how anyone with a conscience can continue to advocate for "character" with the current housing crisis. And, why are people concerned if a developer makes a profit. If people are starving, you dont say, geez we better not grow any more food lest those pesky farmers make a profit. If developers are making too large profits, then more will enter and we'll have even more housing which will lower the prices even more.
- astazangasta 8y ago
  No, this problem appeared acutely starting in 2008. When I moved to SF, rents were not exorbitant; they were high, but ordinary people could pay them. Then they climbed dramatically in a short period. This is easy to ascertain; just look at any graph of rents. This graph has no relation to the graphs for new construction or population growth, both of which grow at a steady pace. This is an acute crisis caused by a spike in demand due to the sudden inflow of new wealth, not by a supply constraint. When one person can buy up every house in the Mission, the supply side of the equation is not as relevant as the demand size. This is blindingly obvious, and only some serious denial seems to be preventing people from acknowledging this. As for concern over whether developers are making a profit; apparently you have never read any history of redevelopment. Here is a good place for you to start, learn something about your own city: https://hoodline.com/2016/01/how-urban-renewal-destroyed-the-fillmore-in-order-to-save-it https://hoodline.com/2016/01/how-urban-renewal-destroyed-the... What will happen, over and over, is poor people will be moved out, rich people will move in, and developers will make a profit. Your econ 101 fantasy will not take place.

pascalxus 8y ago

It's the biggest failure of modern day education: an inadequate understanding of the basics of supply and demand. Such an irony that this is so prevalent in a city with one of the highest percentage of residents who have so called educational degrees.

rajacombinator 8y ago
You’re assuming this is an unintentional oversight of modern education.
Mikeb85 8y ago
Economics is tough and because of the political factors, often gets discredited. People always come up with excuses for why the economics explanation is false and why you can blame someone else. Economics explains why SF is expensive, why Trump wants to build a wall, why the Yellow Vests are protesting in Paris, but if the explanations don't confirm someone's worldview they get dismissed.