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It's entirely possible that home owners are NIMBYing this due to perceived impacts on their house values. But I'm not sure you're right about developers wantin

It's entirely possible that home owners are NIMBYing this due to perceived impacts on their house values. But I'm not sure you're right about developers wanting to just develop a few luxury condos and artificially restrict the number of units they build. It seems like that would only work if there was a near monopoly on who was allowed / able to build in SF. They make money on building units; not building units is not really benefitting them. Per the article, the per-unit costs of all the planning / permitting / construction / land / special interest earmarks make the per-door cost to be the $1 million quoted. That already puts that into "luxury condo" price range. It might be that the ROI might be better for the developers if they decide to spend an extra $100k on premium tile so it really is "luxury". It might be that selling them as non-luxury really isn't profitable. After all, if as a customer you're going to need to spend at least $1.05 million on the unit (break even for developer + 5%), wouldn't you rather get a $1.25 million luxury apartment for not that much more? (1mill + 100k tile + 14% profit). For the developer in my made up scenario, they're making 3x the profit, while you're "only" spending 20% more on the more desirable luxury version. I'm sure if the permitting process were quicker / easier, the barrier to entry for developers of all sizes would be lower. The per-door cost would be lower, and you wouldn't need a massive war chest of cash to ride the 3-year permit process. This would also make the economics on non-luxury units make sense.

joe_the_user 4y ago
But I'm not sure you're right about developers wanting to just develop a few luxury condos and artificially restrict the number of units they build. I shouldn't have implied there necessarily was anything artificial or conspiratorial involved. I mean, some times there can be but it's quite possible that building a few high priced luxury units is the most profitable decision for an individual builder. Luxury condos cost a lot to build and can be sold for a high markup over costs. A many-unit building for average people is not going to have the same markup so even if you build more units, your total profit can be less. Per the article, the per-unit costs of all the planning / permitting / construction / land / special interest earmarks make the per-door cost to be the $1 million quoted. So you're saying regulations push builders to only build luxury housing - which is part of my point. I mean, lots of producers in lots of industries cry about regulations that increase their markup, an increase they pass to the consumer. They cry all the way to the bank about that.

joe_the_user 4y ago

But I'm not sure you're right about developers wanting to just develop a few luxury condos and artificially restrict the number of units they build. I shouldn't have implied there necessarily was anything artificial or conspiratorial involved. I mean, some times there can be but it's quite possible that building a few high priced luxury units is the most profitable decision for an individual builder. Luxury condos cost a lot to build and can be sold for a high markup over costs. A many-unit building for average people is not going to have the same markup so even if you build more units, your total profit can be less. Per the article, the per-unit costs of all the planning / permitting / construction / land / special interest earmarks make the per-door cost to be the $1 million quoted. So you're saying regulations push builders to only build luxury housing - which is part of my point. I mean, lots of producers in lots of industries cry about regulations that increase their markup, an increase they pass to the consumer. They cry all the way to the bank about that.