15 ms·

San Francisco also applies rent control only to older buildings. The effect is that developers only build top-of-market “luxury” housing (often cheaply construc

by freyir 6y ago

San Francisco also applies rent control only to older buildings. The effect is that developers only build top-of-market “luxury” housing (often cheaply constructed it rented at luxury rates). This helps them recover their development costs, which they couldn’t recoup on affordable housing.

austhrow743 6y ago
I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?
- refurb 6y ago
  If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.
  - shuckles 6y ago
    I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.
    - TylerE 6y ago
      Aren't doormen pretty much only an NYC thing, anyway?
      - illirik 6y ago
        Chicago as well, at least buildings on Lake Shore Drive.
      - shuckles 6y ago
        NYC is one of the few places in the United States building truly luxurious condos. The per unit construction cost of new construction in San Francisco is probably within 20% of 100% affordable non-profit developer built subsidized housing (which runs at around $850k/unit).
    - refurb 6y ago
      Think more along the lines of amenities like pools, exercise rooms rather than more spartan buildings that are literally just basic apartments.
      - shuckles 6y ago
        Few San Francisco new constructions have pools, and I don’t see how putting some exercise equipment in what would otherwise be a storage closet makes a building luxury. That can’t be more than a few basis points of total project cost.
        refurb 6y ago
        Pools are a bad example for SF, but here is an example of a luxury condo built in the last few years. I don't disagree that they don't add much to the cost, but they are high-margin offerings - people pay more rent for places that offer these. http://38doloressf.com/amenities/ http://38doloressf.com/amenities/ Amenities: LEED Gold certified, butterfly garden, outdoor living room with fire pit
        nemothekid 6y ago
        I'm not sure those are the amenities that would signify a high end apartment; which probably tracks with the dilution of the brand. Those amenities are pretty standard for most corporate housing, (ex. Avalon's 55 9th[1] has those amenities, but doesn't market itself has luxury). Compare that building with the 181 Fremont[2] in SOMA which has a several private lounges, a doorman, a building concierge, and valet parking. Several other building in that area, such as the Avery[3] do have pools. I'd consider that 181 Fremont would still be a luxury offering in a city like Chicago where the housing market isn't insane. However, despite the range the building offerings, most units still rent out for $55-75/sqft. [1] https://www.avaloncommunities.com/california/san-francisco-apartments/ava-55-ninth https://www.avaloncommunities.com/california/san-francisco-a... [2] https://181fremont.com/amenities/ https://181fremont.com/amenities/ [3] https://www.theaverysf.com/lifestyle https://www.theaverysf.com/lifestyle
    - jboog 6y ago
      "luxury" is one of the most meaningless and oft misused terms in housing/real estate. It's not legally defined as anything so any developer can build a shoebox with a bathroom and a murphy bed throw in a nice countertop and call it "luxury". It's also become a pejorative for ANY market-rate housing in cities by NIMBY anti-development types.
    - Talanes 6y ago
      Is there a functional difference between places that have a front-desk person and actual doormen, besides opening doors? Not that the former is super-common in San Francisco either, but it's at least existent.
      - m0llusk 6y ago
        Yes, receiving packages and deliveries has become an extremely valuable amenity.
        Talanes 6y ago
        My main dealings with them were, in my most-cash strapped days, delivering Postmates orders to their buildings. They also serve the valuable service of not having to explain to the delivery guy how to get into the building. Much longer notes from the people whose buildings were not manned.
    - 8note 6y ago
      The difference between affordable and luxury housing is just the rent. It's the rent
  - kelnos 6y ago
    > If you only have 15 years of free pricing What do you mean by that? Rent control in SF only applies to buildings built before mid-1979. New buildings built today, whether low-end or high-end, will not be subject to rent control now, or in 15 years. There was a 2020 ballot initiative to change that so buildings older than 15 years old could be subject to rent control on a rolling basis, but IIRC that failed. (And even if it had passed, that wouldn't explain the last 10+ years of predominately "luxury" building.)
    - shuckles 6y ago
      Not quite true. California passed statewide rent control at inflation + 5% in 2019. Now some have moved the goalposts and called that rent stabilization instead of control because it allow rents to increase. New construction is exempt, though.
      - nostrademons 6y ago
        I thought that was the difference between rent control and rent stabilization. https://www.apartmentguide.com/blog/rent-control-vs-rent-stabilization/ https://www.apartmentguide.com/blog/rent-control-vs-rent-sta... https://rentguidelinesboard.cityofnewyork.us/resources/faqs/rent-control/ https://rentguidelinesboard.cityofnewyork.us/resources/faqs/... Yep, those are the definitions. It looks like rent stabilization policies are frequently mis-termed "rent control", though.
        deleted 6y ago
        [deleted]
        shuckles 6y ago
        My point is that the layperson doesn’t appreciate the difference.
CydeWeys 6y ago
How are you defining "luxury" here? The land in SF is inherently expensive; any newly constructed apartment building is likely to have rents meeting your definition of "luxury". The land is expensive and so too is building buildings on top of it! The granite countertops and stainless steel appliances are a tiny fraction of the overall cost.
- diebeforei485 6y ago
  If we're using rents to define luxury, then most of the westside is luxury.
  - Nasrudith 6y ago
    I thought luxury was being used by marketers as their favorite new mouth-noise that sounds good but doesn't mean anythingm Like "premium". If you pay $150 for a $1.5 bottle of wine it actually means overpriced but it is used to make it sound posh. Snark aside it could be "quality enough that it sells above commodity prices" but it is still about what others are willing to pay. Luxury has many uses as a euphemism "No Karen, just because it is an apartment doesn't mean it will cause a flood of criminals!" NIMBY defense, "Sounds good so you will pay more." and the hillariously low bar to pass "Literally anything above neccessities to sell the place."
  - CydeWeys 6y ago
    NIMBYs define "luxury" very broadly as a semantic tool in their warchest. There isn't a good definition of it at all, but it's commonly used to mean "high rents", or simply, market rate rents.
jboog 6y ago
SF also has some of the most ridiculously onerous zoning laws in the country. A HUGE portion of the city is just giant single family homes or 2-3 story buildings and you are absolutely forbidden from redeveloping them into dense, affordable housing. Change the zoning laws and developers will gladly build affordable market-rate housing.
- jpetso 6y ago
  Yep. Vienna is all mid-rises, basically everywhere throughout the entire city. I imagine that changes the calculus considerably.
- thamer 6y ago
  Yes, the zoning laws in SF are a disaster. This map[1] shows the extent of the problem. And it's not like people can easily find housing outside of SF and commute in, about 80% of the Bay Area is zoned for single-family housing as well. There was a damning report[2] from UC Berkeley on this just a few months ago. [1] https://sfzoning.deapthoughts.com/ https://sfzoning.deapthoughts.com/ [2] https://belonging.berkeley.edu/single-family-zoning-san-francisco-bay-area https://belonging.berkeley.edu/single-family-zoning-san-fran...
kelnos 6y ago
I don't think that's the cause. The reason developers only build luxury housing is because: 1. Land zoned for more than a single-family home or just a few units is relatively scarce and thus expensive. 2. The planning process is ridiculously long, which means: 2a) They need to pay property taxes on the unimproved land for much longer without any income, and 2b) Investors expect a certain % return per year, so a longer amount of time between the investment and sale means you need higher prices. 3. Nearly every development project faces lawsuits from NIMBYs, and lawyers are expensive. Remove rent control and we'd still have the same situation with new development.

by freyir 6y ago

austhrow743 6y ago

I don’t understand how those things impacts each other. Are you saying that if old buildings didn’t have rent control then developers would build less profit maximising buildings?

refurb 6y ago
If you only have 15 years of free pricing, then build the housing with the highest short term margins possible. If you have free pricing in perpetuity, then you can build housing that might have a lower margin near term but an overall high NPV over its lifetime.
- shuckles 6y ago
  I doubt this calculation changes whether a developer chooses $500 or $1000 countertops. New units in San Francisco are not luxury units. Few have luxury amenities like doormen.
  - TylerE 6y ago
    Aren't doormen pretty much only an NYC thing, anyway?
    - illirik 6y ago
      Chicago as well, at least buildings on Lake Shore Drive.
    - shuckles 6y ago
      NYC is one of the few places in the United States building truly luxurious condos. The per unit construction cost of new construction in San Francisco is probably within 20% of 100% affordable non-profit developer built subsidized housing (which runs at around $850k/unit).
  - refurb 6y ago
    Think more along the lines of amenities like pools, exercise rooms rather than more spartan buildings that are literally just basic apartments.
    - shuckles 6y ago
      Few San Francisco new constructions have pools, and I don’t see how putting some exercise equipment in what would otherwise be a storage closet makes a building luxury. That can’t be more than a few basis points of total project cost.
      - refurb 6y ago
        Pools are a bad example for SF, but here is an example of a luxury condo built in the last few years. I don't disagree that they don't add much to the cost, but they are high-margin offerings - people pay more rent for places that offer these. http://38doloressf.com/amenities/ http://38doloressf.com/amenities/ Amenities: LEED Gold certified, butterfly garden, outdoor living room with fire pit
        nemothekid 6y ago
        I'm not sure those are the amenities that would signify a high end apartment; which probably tracks with the dilution of the brand. Those amenities are pretty standard for most corporate housing, (ex. Avalon's 55 9th[1] has those amenities, but doesn't market itself has luxury). Compare that building with the 181 Fremont[2] in SOMA which has a several private lounges, a doorman, a building concierge, and valet parking. Several other building in that area, such as the Avery[3] do have pools. I'd consider that 181 Fremont would still be a luxury offering in a city like Chicago where the housing market isn't insane. However, despite the range the building offerings, most units still rent out for $55-75/sqft. [1] https://www.avaloncommunities.com/california/san-francisco-apartments/ava-55-ninth https://www.avaloncommunities.com/california/san-francisco-a... [2] https://181fremont.com/amenities/ https://181fremont.com/amenities/ [3] https://www.theaverysf.com/lifestyle https://www.theaverysf.com/lifestyle
  - jboog 6y ago
    "luxury" is one of the most meaningless and oft misused terms in housing/real estate. It's not legally defined as anything so any developer can build a shoebox with a bathroom and a murphy bed throw in a nice countertop and call it "luxury". It's also become a pejorative for ANY market-rate housing in cities by NIMBY anti-development types.
  - Talanes 6y ago
    Is there a functional difference between places that have a front-desk person and actual doormen, besides opening doors? Not that the former is super-common in San Francisco either, but it's at least existent.
    - m0llusk 6y ago
      Yes, receiving packages and deliveries has become an extremely valuable amenity.
      - Talanes 6y ago
        My main dealings with them were, in my most-cash strapped days, delivering Postmates orders to their buildings. They also serve the valuable service of not having to explain to the delivery guy how to get into the building. Much longer notes from the people whose buildings were not manned.
  - 8note 6y ago
    The difference between affordable and luxury housing is just the rent. It's the rent
- kelnos 6y ago
  > If you only have 15 years of free pricing What do you mean by that? Rent control in SF only applies to buildings built before mid-1979. New buildings built today, whether low-end or high-end, will not be subject to rent control now, or in 15 years. There was a 2020 ballot initiative to change that so buildings older than 15 years old could be subject to rent control on a rolling basis, but IIRC that failed. (And even if it had passed, that wouldn't explain the last 10+ years of predominately "luxury" building.)
  - shuckles 6y ago
    Not quite true. California passed statewide rent control at inflation + 5% in 2019. Now some have moved the goalposts and called that rent stabilization instead of control because it allow rents to increase. New construction is exempt, though.
    - nostrademons 6y ago
      I thought that was the difference between rent control and rent stabilization. https://www.apartmentguide.com/blog/rent-control-vs-rent-stabilization/ https://www.apartmentguide.com/blog/rent-control-vs-rent-sta... https://rentguidelinesboard.cityofnewyork.us/resources/faqs/rent-control/ https://rentguidelinesboard.cityofnewyork.us/resources/faqs/... Yep, those are the definitions. It looks like rent stabilization policies are frequently mis-termed "rent control", though.
      - deleted 6y ago
        [deleted]
      - shuckles 6y ago
        My point is that the layperson doesn’t appreciate the difference.

CydeWeys 6y ago

How are you defining "luxury" here? The land in SF is inherently expensive; any newly constructed apartment building is likely to have rents meeting your definition of "luxury". The land is expensive and so too is building buildings on top of it! The granite countertops and stainless steel appliances are a tiny fraction of the overall cost.

diebeforei485 6y ago
If we're using rents to define luxury, then most of the westside is luxury.
- Nasrudith 6y ago
  I thought luxury was being used by marketers as their favorite new mouth-noise that sounds good but doesn't mean anythingm Like "premium". If you pay $150 for a $1.5 bottle of wine it actually means overpriced but it is used to make it sound posh. Snark aside it could be "quality enough that it sells above commodity prices" but it is still about what others are willing to pay. Luxury has many uses as a euphemism "No Karen, just because it is an apartment doesn't mean it will cause a flood of criminals!" NIMBY defense, "Sounds good so you will pay more." and the hillariously low bar to pass "Literally anything above neccessities to sell the place."
- CydeWeys 6y ago
  NIMBYs define "luxury" very broadly as a semantic tool in their warchest. There isn't a good definition of it at all, but it's commonly used to mean "high rents", or simply, market rate rents.

jboog 6y ago

SF also has some of the most ridiculously onerous zoning laws in the country. A HUGE portion of the city is just giant single family homes or 2-3 story buildings and you are absolutely forbidden from redeveloping them into dense, affordable housing. Change the zoning laws and developers will gladly build affordable market-rate housing.

jpetso 6y ago
Yep. Vienna is all mid-rises, basically everywhere throughout the entire city. I imagine that changes the calculus considerably.
thamer 6y ago
Yes, the zoning laws in SF are a disaster. This map[1] shows the extent of the problem. And it's not like people can easily find housing outside of SF and commute in, about 80% of the Bay Area is zoned for single-family housing as well. There was a damning report[2] from UC Berkeley on this just a few months ago. [1] https://sfzoning.deapthoughts.com/ https://sfzoning.deapthoughts.com/ [2] https://belonging.berkeley.edu/single-family-zoning-san-francisco-bay-area https://belonging.berkeley.edu/single-family-zoning-san-fran...

kelnos 6y ago

I don't think that's the cause. The reason developers only build luxury housing is because: 1. Land zoned for more than a single-family home or just a few units is relatively scarce and thus expensive. 2. The planning process is ridiculously long, which means: 2a) They need to pay property taxes on the unimproved land for much longer without any income, and 2b) Investors expect a certain % return per year, so a longer amount of time between the investment and sale means you need higher prices. 3. Nearly every development project faces lawsuits from NIMBYs, and lawyers are expensive. Remove rent control and we'd still have the same situation with new development.