9 ms·

The San Francisco Rent Explosion

151 points by jejune06 13y ago

ctdonath 13y ago
In January 2010, the unemployment rate in San Francisco was 10.1%. By April 2013, the rate had plummeted almost in half to 5.4%. In just the first four months of 2013, the San Francisco unemployment rate fell 22%. Considering those rent prices (location location location!), if you don't have a good-paying job you're not going to stay there long. No unemployment entitlement is going to cover three years of renting a one-bedroom apartment renting at twice the mortgage on a four-bedroom one-acre-lot house conveniently outside Atlanta. Of course the unemployment rate plummeted: surely sky-high rent drove out anyone not able to keep or get a high-salary job. Author focuses on availability of new units, and marvels at the low vacancy rate, without addressing the turnover of old units. It's a limited supply of high-desirability housing; either pay a high price or get out, there's a line of people waiting for openings and willing to pay premium prices to get in. Of course unemployment is low and prices high there.
- Shivetya 13y ago
  Tenant laws hurt availability as many people keep units off the market because the law puts such strict limits on landlords that it can become abusive. There are many horror stories in SF about tenants from hell.
  - jejune06 13y ago
    To your point, here is a recent NYT op-ed precisely on those tenant laws and how landlords are keeping units off the market: http://www.nytimes.com/2013/06/07/opinion/king-of-my-castle-yeah-right.html http://www.nytimes.com/2013/06/07/opinion/king-of-my-castle-...
  - wankerrific 13y ago
    Ugh...the "rent control" argument again. First off, rent control doesn't apply to apartment building built after 1979, so, as noted below, its less relevant - especially with the new construction in SOMA. Second, the anecdotal stories about landlords holding units off the market is just that - anecdotal stories. The owners of those buildings are Prop. 13'ed with a 30yr old assessment and are doing just fine. Opening a new unit means they can collect more rent at todays market rates. Its a silly story promoted by landlords that would like to make more money during the booms. Of course, its also those very rent control laws that protect landlords during the busts (2002, 2009, etc). Sorry to say this, but rent will come down when companies in SF start running out of their free, investor money and have to turn a profit or sell themselves. More people will lose their jobs, won't be able to afford living in the city proper and people will move away. Thats the way it has been here for at least the last 20 years and probably longer. By the way, also anecdotally since I can't find the reference, rents in the area have decreased by 5% on YoY basis.
    - malandrew 13y ago
      However new buildings much provide a certain number of units as Below Market Rate housing.
klochner 13y ago
I believe this was posted fairly recently: http://www.slate.com/articles/business/moneybox/2012/05/facebook_george_lucas_and_nimbyism_the_idiotic_rules_preventing_silicon_valley_from_building_the_houses_and_offices_we_need_to_power_american_innovation_.html http://www.slate.com/articles/business/moneybox/2012/05/face... "San Francisco—one of the most expensive cities in the United States—added just 418 new housing units in 2011, the fewest since 1993. What’s more, 149 existing units were removed, leading to a nearly nonexistent increase in housing supply."
- rayiner 13y ago
  Meanwhile, Chicago, a city that is at best barely maintaining population, is seeing the construction of thousands of units in highrises in downtown alone: http://www.domu.com/blog/apartment-projects-under-construction-update http://www.domu.com/blog/apartment-projects-under-constructi.... I think from around my old apartment in Chicago right now, you can see three or four skyscrapers under construction just by looking around from the same spot. There is clearly something massively dysfunctional in San Francisco. High prices should create the incentive for drastically increased supply. San Francisco should look like Toronto does, with dozens of high rises under construction trying to cash in on the high rents. See: http://www.canadianbusiness.com/blogs-and-comment/what-torontos-skyline-will-look-like-in-2020 http://www.canadianbusiness.com/blogs-and-comment/what-toron....
  - kqr2 13y ago
    As indicated in the article cited above: http://www.slate.com/articles/business/moneybox/2012/05/facebook_george_lucas_and_nimbyism_the_idiotic_rules_preventing_silicon_valley_from_building_the_houses_and_offices_we_need_to_power_american_innovation_.html http://www.slate.com/articles/business/moneybox/2012/05/face... superficial explanation for the outrageously high housing prices in the Bay Area is that that there’s not much developable land, especially on the peninsula between San Francisco and San Jose. In fact, the major reason is the NIMBY (“not in my backyard”) I can attest to this rampant NIMBYism. Not too long ago in my grandparents' neighborhood, a small group of neighbors had the area rezoned so it could not be developed any further. Previously, it was mixed use, but now it could only be residential with small businesses such as nail salons. Also houses were now limited to two stories because they did not want their views blocked. Not surprisingly, the existing people with 3 or more story houses have seen their property values shoot up since those large houses can no longer be built there.
qwerta 13y ago
And thats why SF is no longer relevant for startups. I work for db startup, and most of stuff is happening outside of California (Europe, Texas...).
- changdizzle 13y ago
  Really? I get that there are multiple thriving startup communities elsewhere, but SF (and the greater bay area) is still the mecca[1] of startups. [1] http://qz.com/94939/san-francisco-not-silicon-valley-is-the-hub-for-us-venture-capital/ http://qz.com/94939/san-francisco-not-silicon-valley-is-the-...
  - qwerta 13y ago
    Startups in SF (and LA) do usually web related stuff. They also want to be acquired by larger company such as Facebook or Google. In that case SF makes sense. But that is just tiny part of startup ecosystem. I started company with my own savings. In SF it would not last 2 months, here I have 1+year runway.
    - changdizzle 13y ago
      Fair enough, thanks for your insight! Where is your company located?
      - qwerta 13y ago
        West coast of Ireland, we will be moving to Greece in a few weeks.
  - ericabiz 13y ago
    Perhaps not true any more. I came across this article yesterday: http://www.entrepreneur.com/article/227436 http://www.entrepreneur.com/article/227436 "Austin ranks as the No. 1 place to launch your business, according to a new ranking by GoodApril, a San Francisco-based tax-planning startup. The ranking compares the seven hottest startup scenes in the U.S. across measures that matter most to new entrepreneurs: median tech-employee earnings, maximum personal income tax, property tax, the cost of housing and the cost of office space. Perhaps surprisingly, San Francisco, the longtime Silicon Valley startup mecca, ranks as the worst place to launch, due to high costs and taxes."
pawrvx 13y ago
More startups should move to low cost areas such as Austin Texas!
- jetblackio 13y ago
  Only if you like live music, a beautiful city, wonderful people, and an old guy who rides his bike around town in a thong, usually pink.
  - psychometry 13y ago
    Austin would be an even better place to live if it wasn't in the middle of a dysfunctional state run by right-wing wingnuts.
    - gamblor956 13y ago
      To be fair, everyone's objection to Austin is that it is located in the state of Texas.
    - wyclif 13y ago
      SF would be an even better place to live if it wasn't in the middle of a dysfunctional state run by left-wing wingnuts. See how that works?
      - psychometry 13y ago
        Yes, not as well. California's dysfunction is due to its own right-wing wingnuts.
        wyclif 13y ago
        California being in debt to the gills is the result of the right wing? Meh. Dem politicians rule CA now and have for quite some time. Jerry Brown ring a bell? California’s budget woes combined with poor economic results have long made it a poster child for poor fiscal management. The state’s credit rating has been downgraded to an A- by S&P, the lowest rating for any U.S. state, and its budget and pension shortfalls are infamous. How long has it been since CA had any GOP hegemony again? I'm no Republican, but shifting the blame won't work in a fact-rich environment.
davidtyleryork 13y ago
Posted this in the comments section there, but I would love to hear your feedback as well. I think the primary issue is constrained supply. As klochner said, barely any new housing is added and SF has a fixed land mass. But this problem is made much much worse by rent control. If you have an apartment in SF with Rent Control and prices are rising, you don't move. This means fewer apartments are on the market, which further increases the price, leading to a price inflation cycle. Of course, ironically now that I live in the city I would never want rent control taken away. Pretty much everyone else I've talked to, even those who agree with my assessment on its negative aspects, also find it very convenient once it's in their favor. So it's removal will likely never pass in a public vote situation.
- muzz 13y ago
  Fixed land mass is a canard. Infill development requires little land. One Rincon Hill has almost 600 units and is built on about the size of a plot that a single-family home would have been built on, in most parts of the country. Rent control is becoming increasingly irrelevant as anything constructed after 1978 is exempt, which is most of SOMA.
nsxwolf 13y ago
I hear Detroit has some pretty cheap rent these days. Maybe it's time for an exodus?
nirvanatikku 13y ago
Interesting. I live in Kendall Square (Cambridge, MA) and have seen the prices rise (over the past 3 years) to the median prices outlined in the article. I keep hearing about how insane SFO is, but can't help but think that Cambridge is experiencing a similar 'explosion' in it's own right. I've gathered that the exit's out west are accelerating the price increases, but with the abundance of schools here as well as the interest in establishing a presence in 'tech square', rent has skyrocketed and I don't really see it slowing down. Maybe I'm missing something, but why doesn't the acceleration in Cambridge get such attention?
- freyr 13y ago
  Rent in Kendall Square is ridiculous, but you're comparing the city of San Francisco (46.9 sq miles of land) to a small neighborhood in a much smaller city (Cambridge is 6.43 sq miles of land). Also, while Kendall Square has its fair share of technology companies, it doesn't really compare to SF/SV in terms of sheer numbers.
- eob 13y ago
  I think one reason Kendall rents aren't a topic of discussion is also because the Boston/Cambridge area has lower rent areas that are close by and accessible via public transportation. While it's nice to live right where things are happening, you could easily get a place out in Davis Sq or Porter Sq and take the T in, or in Somerville or Union Sq and have a 10 minute bike ride. From what I gather, as a fellow Cambridge resident, the problem in the Bay Area is that areas with Somerville-level rent result in an HOUR+ commute, rather than a 10-minute commute. There's a lot that's great about the bay area, but I think we certainly have the upper hand here when it comes to [reasonably priced] city live-ability and transportation.
bubbleRefuge 13y ago
Will the tech community ever get politically active and do something about the lack of new construction and rent controls creating greater scarcity?
- rwmj 13y ago
  Hopefully the "tech community" will respond by inventing better remote working tools, so this whole problem goes away.
- xradionut 13y ago
  I don't know about "The Tech Community", but better, cheaper places to live elsewhere do attract individuals that don't seen to be hung up on SF and SV. You can code anywhere and find fellow geeks that don't waste money on crazy rents.
  - bubbleRefuge 13y ago
    Been there done that. This is my second tour of duty in SF-SV. Opportunities in the tech industry are unequaled by any other region in the states. India is getting there I suppose.
ilyanep 13y ago
Yeahhh I'm living in SoMa and paying much, much below the median cost for a 1BR, but I'm thinking of moving out to the peninsula after my lease is up even if I continue working in the city. $200/mo for a Caltrain monthly pass and 1 hour commute one way (on which I can do whatever I want because I'm on a train!) is worth it for me to live closer to my friends (many of whom go to Stanford), not be clumped up with thousands of other people, and have a cheaper apartment. SF is really going to need to figure out its artificial supply scarcity problems soon.
- bodyfour 13y ago
  Of course, the peninsula isn't dirt cheap either. As prices in SF increase, that drives up rents along Caltrain, etc.
- SkyMarshal 13y ago
  Where on the Peninsula would you live that's substantially cheaper than SF? The area around Stanford is fairly pricey.
  - usaar333 13y ago
    Redwood City, East Palo Alto.. that should be about the min
  - jackowayed 13y ago
    You can easily find a bedroom in Palo Alto for $1500 (maybe not right downtown, maybe as part of a bigger house/apartment, but a bedroom to yourself). It seems like ~1k is still achievable if you're patient and any part of PA will do. And it only gets cheaper if you're willing to go to Mountain View (only a bit cheaper), Redwood City, or really any other part of the peninsula.
    - bubbleRefuge 13y ago
      In Sunnyvale-Santa Clara area rents for 1BR's are approaching 2K. So I find it hard to believe that MV PA is $1500.
ericabiz 13y ago
I had to have a chuckle at these numbers... "The population is also growing. From 2000 to 2010, 28,500 new San Franciscans arrived in the city. From 2010 to 2012, the city welcomed another 20,600 inhabitants in just three years." Oh, is that all? I live in Austin, TX, the #1 destination in the U.S. for people aged 25-34. [1] You got 28,500 people in 10 years? We get that many new people every year. In fact, perhaps even as often as every 6 months; 158 people move to Austin every day by another estimate. [2] You have to increase the supply of rental and housing units in order to accommodate population growth. Austin is struggling with it, too, but condos are springing up downtown. San Francisco has no choice; Austin is barely managing to handle the growth, and we're a growth-happy boom town teeming with young folks. (Yes, it's pretty awesome to run a startup here too--I'm having a blast!) You must build more housing. If you are an SF resident, vote people in who will support new housing. Vote out the politicians who curb growth with ridiculous laws. Otherwise, all the cool people will end up in Austin (and other cities that can better manage the growth. ;) [1]: http://www.statesman.com/news/news/local/for-people-on-the-move-austin-is-a-place-to-stop-a/nW75T/ http://www.statesman.com/news/news/local/for-people-on-the-m... [2]: http://www.realtyaustin.com/blog/how-to-keep-up-with-158-people-moving-to-austin-per-day.html http://www.realtyaustin.com/blog/how-to-keep-up-with-158-peo...
- bicknergseng 13y ago
  Austin: 3,262.86 people/sq mi SF: 17,620.2/sq mi Austin: 272 sq mi, growing SF: 46.87 sq mi, fixed on 3 sides by water and a 4th by other metropolises Not saying that SF's development managers don't need to rethink their restrictive development policies, but comparing any city that doesn't have fixed boundaries to SF is pretty apples and oranges.
  - HelloMcFly 13y ago
    I think it makes it even more relevant. Fast growth isn't easy on cities, but at least places like Austin have the luxury of being able to grow out and up. San Francisco has little opportunity to grow out, so the need to grow vertically is even more pressing.
- novum 13y ago
scelerat 13y ago
Oakland and Berkeley should be ripe for startups. The rent is drastically lower than SF, both for commercial and residential space, and they are still very close, via freeways and BART to most of the areas that make San Francisco attractive. The East Bay has its own cool/interesting aspects too. Disclaimer. Just moved to Oakland. Loving the lower cost of living and proximity to my old haunts in SF.
arbuge 13y ago
I'm beginning to be glad I'm not in the Valley. My competitors there might have access to far more VC than I do, but their cost structure is going the wrong way for them with these crazy rental prices.
BadCookie 13y ago
I wish that this article discussed other factors that are causing rents to increase absurdly in other cities as well. In Portland, for example, rents have gone up 20-30% in the last couple of years. Why? I don't know the whole answer, but some possible factors are: - People who lost their houses recently have trouble qualifying for a mortgage and must rent instead. - Investors (Wall Street and otherwise) are buying up houses to rent because it's hard to get a good return on your money in other ways. - There still exists some amount of "shadow inventory" that banks are keeping off of the market, either on purpose or because foreclosing on a house has become more expensive and time consuming. Source: http://www.portlandmonthlymag.com/real-estate/articles/rental-market-madness-march-2013 http://www.portlandmonthlymag.com/real-estate/articles/renta...
- dgallagher 13y ago
  At an abstract level, it's likely caused by low/stagnant supply, and increased demand which is inelastic (not affected much by changes in price). Imagine a real estate market with only 100 1BR apartments to rent. If 85 are occupied, 15 available, and 5 people are trying to rent those 15, the price of rent should remain about the same as 10 will remain vacant. However, if 40 people are trying to rent those 15, the price of the 15 will be bid up due to a limit in supply. Then the remaining 25 people will continue to bid up rents for any new vacancies. A scenarios like this can cause rents to skyrocket, especially if supply remains nearly constant.
- jacques_chester 13y ago
  Rental markets tend to be highly sensitive to the rate of occupancy. When markets become tight, the wealthiest renters bid up the available units. Then other landlords raise their rates because "that's the going rate".
varelse 13y ago
This could be mostly addressed overnight by abolishing the Ellis Act. This will never happen.
drpancake 13y ago
Here's my ill-informed take on the dilemma (I no longer live in SF): * More high-rises means that SF loses it's charm * The technorati are cash rich so they'll keep on coming anyway * Soaring rents are forcing out those who make SF the desirable, culturally rich place that it is * Eventually this corrects itself and Oakland becomes the desirable, culturally rich place (already happening) * Rinse and repeat
- jquery 13y ago
  > Soaring rents are forcing out those who make SF the desirable, culturally rich place that it is If by culturally rich you mean burner babies, human freak shows, and unemployed artists who've depleted their trust-fund, then yes.
fizx 13y ago
I tend to think that the housing is presently at a local maxima. There are at least four large highrise apartment complexes going in SOMA right now, along with a good size complex on Guerrero and Market St. Additionally, America's Cup is currently in progress, which is completely eating up short-term supply in the northeast corner of the city. By the end of the year, the new apartment complexes will be online, and all of the short-term rentals for America's Cup will be put back on the long-term rental market. Edit: "More than 4,220 units of housing began construction in San Francisco in 2012 — following a year in which just 269 net units were added." -- http://www.spur.org/publications/library/article/san-francisco-boom-back http://www.spur.org/publications/library/article/san-francis...
rwhitman 13y ago
Its unsurprising that SF would eventually have a rental market as bad or worse than NYC. I'm just surprised it took this long But at least in NYC developers are constantly adding bucketloads of rental inventory, especially in Brooklyn and Queens. The restrictive development policies of not just San Francisco but other Bay Area municipalities sounds like a disturbing crisis is on the horizon. Pretty glad I'm not planing on moving back there anytime soon...
ww520 13y ago
Rising rent is a leading indicator of rising house price, 6 months to 1 year. If there's that house you want to buy, buy it now. House price will move up in the area.
- jquery 13y ago
  I bought in November for this reason. My home value estimate on Trulia and Zillow has increased by nearly 50% since I purchased. I thank my lucky stars every day that my wife and I were ready to buy at that time. I dread to think what we could afford in today's market.
wwweston 13y ago
Q: Can anyone document a situation where increased housing supply didn't just take the edge off the rate of rent increases, but actually pushed prices down? I've been able to watch some dramatic housing supply buildouts in a few areas, and my observation has been that the owners almost always price new housing somewhat above market rates for existing housing -- after all, it's new, and it's often marketed as luxury housing (plus the building costs were in $LAST_YEAR dollars and are mostly unamortized rather than in $DECADES_PAST dollars and mostly amortized). I'd think this might be more true for land-constrained places like San Francisco, where the only way to increase supply is up, so it's more capital intensive and only makes financial sense at a certain price. There's a few places I've observed a decrease in price, but it hasn't been because of supply increase. It's places like Detroit where demand drops, usually because the economic activity of the region stagnates or collapses, thought it's sometimes because of health/property hazards instead. If I'm right, building more might stabilize prices in SF, but they're not going down, short of the current tech boom there turning out to be an unsustainable bubble. Or maybe a major natural disaster.
- nostrademons 13y ago
  Rents - like wages - tend to be sticky downwards. Usually what happens is that a large increase in supply doesn't immediately push prices down, but results in a large overhang of vacant housing stock. The developer eats the cost on that for a while, but then the next recession hits, people lose their jobs, banks foreclose on the properties, and that starts the tumble in prices. That's how it worked in 2009 - rents dropped significantly in the Bay Area as employment numbers tumbled and people moved in with roommates. It does depend on their being a recession before demand catches up with supply...if there isn't, prices just don't increase as fast in the meantime.
gmisra 13y ago
1. San Francisco is small enough that there is in how much housing stock is created, with the same development groups at times opposing growth and at times advocating for growth. 2. Since building codes and zoning laws are often manipulated to adjust supply, there is predictably a lag between need and updated codes. We are in the middle of a housing creation wave. There is currently a large volume of to-be-constructed units that have been approved by the planning commission and will be entering the market in the next year [1]. 3. One of the most overlooked sources of demand pressure is the recent and rapid rise of west coast properties as good investment vehicle for Asian investors [2]. 4. Re: rent control - it is intentional that the community believes it is more valuable to keep rental housing stock fluid and accessible, at the expense of investment appreciation. Or, at least the community used to believe - given the changing demographics of San Francisco, I would expect these rules to change in the next decade or two. A reasonable comp is changes in how rental stock and rent control is treated in Berkeley over the past two decades. [1] http://www.sf-planning.org/index.aspx?page=1691 http://www.sf-planning.org/index.aspx?page=1691 [2] http://www.mercurynews.com/business/ci_22313326/bay-area-real-estate-market-bolstered-by-investments http://www.mercurynews.com/business/ci_22313326/bay-area-rea...
wooster 13y ago
The numbers of units being built in the linked SF Business Times article [0] seems to contradict those from the SF Chronicle [1]. Business Times: Nearly 8,000 new apartments, mostly in mid-rise and high-rise buildings, will come on line between now and 2015 — 3,498 in 2015 alone. It’s more new rental housing than was built in the last 15 years combined, according to real estate research firm Polaris Pacific. SF Chronicle: Largely in response to the city's growing technology sector, 22,000 residential units are in various stages of approval and construction. … Since 2008, only about 1,710 units were built each year, compared with an average of 2,220 each year between 2004 and 2008, according to the department. If the average was 2,200 housing units built each year between 2004 and 2008, that's 11,000 housing units. Granted the Business Times is using apartments as units, while the planning department uses housing units. Looking at the planning department data [1], there are currently 28,010 housing units approved and 3,930 under construction. The total pipeline is 43,580 units. For the previous reports they provide, we've got: * Q1, 2007: 9,305 filed, 4,736 approved, 4,978 under construction, 30,002 total * Q3, 2007: 10,708 filed, 5,005 approved, 6,134 under construction, 31,761 total * Q4, 2007: 20,890 filed, 4,570 approved, 6,790 under construction, 40,370 total * Q1, 2008: 34,510 filed, 4,560 approved, 7,520 under construction, 53,980 total * Q2, 2008: 32,370 filed, 4,780 approved, 7,480 under construction, 51,470 total * Q2, 2009: 34,570 filed, 6,200 approved, 6,510 under construction, 54,610 total * Q4, 2009: 30,370 filed, 8,220 approved, 1,320 under construction, 46,600 total * Q2, 2010: 30,780 filed, 5,870 approved, 1,480 under construction, 43,780 total * Q3, 2010: 20,710 filed, 16,690 approved, 1,180 under construction, 44,100 total * Q1, 2011: 15,610 filed, 22,590 approved, 1,730 under construction, 45,820 total * Q2, 2011: 7,620 filed, 29,760 approved, 1,820 under construction, 45,760 total * Q3, 2011: 7,620 filed, 30,280 approved, 1,990 under construction, 46,620 total * Q1, 2012: 6,180 filed, 27,670 approved, 3,990 under construction, 42,520 total * Q2, 2012: 6,940 filed, 28,060 approved, 4,220 under construction, 43,280 total So, data-wise, it's not clear this is as big a construction boom as it's made out to be. As an SF resident, however, I've never seen so much housing under construction, so maybe it's just more visible? Does anybody else have any data? [0] http://www.bizjournals.com/sanfrancisco/print-edition/2013/05/17/san-francisco-rental-construction-soars.html?page=all http://www.bizjournals.com/sanfrancisco/print-edition/2013/0... [1] http://www.sfgate.com/bayarea/article/S-F-apartment-construction-boom-around-the-corner-3428146.php http://www.sfgate.com/bayarea/article/S-F-apartment-construc... [2] http://www.sf-planning.org/index.aspx?page=1691 http://www.sf-planning.org/index.aspx?page=1691
wf 13y ago
Did... they do that svg path overlay on the map image by hand? Or is there something that makes creating these shapes easier?
snide 13y ago
I live in Petaluma up in Sonoma county. I commuted to the city for a year on a nice direct bus-line that usually got me to/from the city in about an hour. I know that sounds long but the bus was more comfortable than bart, had wifi and I'd just code my way to/form work. Seemed better than as East Bay commute. Best move I've ever made. Surrounded by beautiful country, better weather and a very friendly, hip community with great restaurants, bars and the like. It may not be for the 20 year olds, but when you're ready or can work a couple days from home, there are definitely affordable alternatives other than SF and the Valley. My previous rent check now covers a house mortgage, yard, insurance and taxes. Plenty of places in northern or western Marin that are the same. It's more affordable than you think. Almost more importantly, my neighbors and friends out here aren't all in startups. There's some actual diversity to the residents, being a mix of farmers, blue collar workers and desk job commuters.
redwood 13y ago
"In San Francisco last year, only 269 new units came on the market."
- muzz 13y ago
  The most-loved canard on HackerNews?
  - reeses 13y ago
    No, that's DuckDuckGo.
    - Apocryphon 13y ago
      That's a mallard.
      - reeses 13y ago
        No, mallards have colored heads. Brown for the female, glossy green for the males. (Apologies for even more off-topic, but xkcd #386.)
michaelochurch 13y ago
That's horrible. Paying the high rents isn't that bad. It sucks to have to have sell off your prime saving years to landlords, but the high tech wages and career benefits of spending one's 20s in high-prestige companies almost sorta quasi-compensate for that. The problem is that it's culturally devastating when rent gets that high. When rent prices go up, losing a job is a financial catastrophe (as opposed to an annoying inconvenience) and employers know they can get away with more bullshit. Adventurism goes away and you get an almost creepy deference to authority in the workplace that's unbecoming of high-talent people. That's a big part of why the New York startup scene is, while well-funded, so unimaginative and mediocre. If Silicon Valley wants to be relevant in 25 years, it will drop some Nordic Indignation on the NIMBY assholes. New York has tons of other stuff and will be fine (as a city, if not necessarily a tech scene) when what is now called "the Series A crunch" is fully fledged and recognized as what it it is-- a post-bubble correction, the start of a bust-- but the Valley will die if it doesn't reverse course. (By the way, one might think that prices would come down and reverse the problem; that doesn't happen. Real estate prices are so sticky against downward movement that, by the time they start to seriously drop, it's too late.)
donnfelker 13y ago
This is why I wont move to SF area. Housing prices are insane. Not worth living in a cave for that amount of money, I don't care who I work for.
icesoldier 13y ago
Any time I see stories of how crazy the situation surrounding the SF housing market is, I compare it to my own city (Amarillo, TX), which has the opposite situation. A much smaller population over a larger area with plenty of land to sprawl into means that the population density (and average rent) is much lower. My 1 bedroom apartment is ~650/mo, and my impression is that that situation would be a laughable offer in any larger city. The only issue? Amarillo is pretty far away from the other larger cities. In the plains, we talk of distances between cities based on the number of hours it would take to drive that distance. Six to Dallas/Fort Worth, six to Denver, four to Oklahoma City, ten to Houston. Combined with the lower population, not much of an urban culture makes it out here. I don't mind, though, and because of the low cost of living and the Internet bringing the world to me, the low cost of living makes up for it. I'm not working with a startup nor on any products of my own at the moment, but should I start, I don't think I'd relocate unless a very compelling offer came my way.
- reeses 13y ago
  You talk about time to other cities because it's a constant. We talk about miles because otherwise, we'd have to say,"I live seven minutes from downtown SF between 10pm and 7am, an hour and a half between 7am and 10am, twenty minutes between 10am and noon, an hour between noon and 2pm, forty minutes between 2pm and 4pm, an hour between 4pm and 7pm, and half an hour between 7pm and 10pm."
  - icesoldier 13y ago
    Very true. That the roads between these cities mostly go through sparsely-populated rural areas helps. EDIT: Though, the point I wanted to make was that it was an abstraction over the longer distances between the cities. To rephrase my examples, it's 360mi to Dallas, 430mi to Denver, 260mi to OKC, and 600mi to Houston. (Now that I'm looking up distances, I can add 500mi and 7.5 hours to Austin in that list - that length isn't in my cache, so to speak.)
- akgerber 13y ago
  There are plenty of larger cities away from the Northeast and West Coast that have similarly cheap rents. You could live in Minneapolis for about the same amount of money, Milwaukee for similar or less money, Pittsburgh for similar money, and Denver for similar money. Chicago and Portland would both be not much more. All of these are relatively large cities (~1.5M+ in the metro area) with a lot of cultural institutions, and many have pretty decent economies (especially considering that high housing costs aren't driving away lower-income folks, artificially raising the average). Minneapolis, for example, has a median income for a family of very nearly $60k, versus $42k in Amarillo. There's a large middle ground in this country between small, remote Texas cities, and hugely expensive coastal megalopolises.
newman314 13y ago
How do people afford this?!?
- usaar333 13y ago
  Not sure if you are being rhetorical, but the answer is that the new entrants are generally childless and making at least $80k annually.
icedog 13y ago
I'm currently living in my startup's office closet in SOMA. I used to have an apartment a few blocks away, but my roommate moved out and the rent went up. From a month before my move-out to a week after, I scoured through craigslist trying to find an acceptable home at a reasonable price. But now, having lived in my office for 3 weeks, I have lost all will to look. Perhaps I don't get paid enough as a developer in SOMA. I'm certainly not making six figures.
drivingmenuts 13y ago
How much potentially rentable space is currently being held off the market by disgruntled landlords? I seem to recall an article about at least one owner who was tired of bad tenants. He had mentioned that he wasn't the only one and that there were many who just weren't leasing out otherwise empty space.
rogerbinns 13y ago
Can a local explain what is "wrong" with Sunset/Parkside as they are half the price? Surely there is some attraction to being able to observe the ocean, sunsets and being alongside a park?
- rdouble 13y ago
  Cold and foggy. Sunset used to be called "fog bank" and was renamed The Sunset to get people to move out there. Also very inconvenient with regards to transportation. Our dev ops guy claimed it was faster to drive into SoMa from Marin City than taking the N from ocean beach.
  - timr 13y ago
    It's actually not that foggy in the fall and winter. It's mostly the spring and summer that suck, when the bay area air conditioning system is running full bore. But then...the rest of the city is pretty foggy in the summer, too.
- timr 13y ago
  Nobody in the tech scene thinks there's life west of Divisadero. In my experience, if you grabbed ten tech people at random, you'd find at most one person who could tell you anything at all about neighborhoods outside of the Mission and SOMA. The Googlebus picks people up from their home in those neighborhoods in the morning, and drops them off again at night. There is nothing else.
  - batbomb 13y ago
    Life west of divis, southwest of Glen Park, South of Bernal and Dog Patch. Honestly, the inner/outer richmond has better restaurants than SoMa.
- akgerber 13y ago
  They are much colder and foggier, and are not particularly convenient locations to commute from, especially to jobs outside of downtown San Francisco. They also aren't "fun" neighborhoods that young people want to move to, so you don't get tons of roommates with one professional salary per bedroom.
dev_jim 13y ago
As a New Yorker I'm always amazed as to how inconvenient of a city San Fran is. The BART has one track in the city, the Muni takes forever, walking is an absolute pain with all the hills, and there's so little mixed use development that you can really feel confined in many neighborhoods. Everywhere can't be New York, but cities like Boston and Chicago and D.C. have done a much better job of urban planning.
- malandrew 13y ago
  I can totally attest to feeling confined and inconvenienced. I live in Nob Hill, right at the top, and it is very confining because all the commercial areas are at the bottom of the hill (Polk Gulch, Downtown, North Beach, Chinatown). This means that even running to the corner store involves going all the way down the hill and back up. Plus, as someone who bicycles most places, I am happy that I'm capable of biking all the way up without stopping, but it gets sooooo old and contrary to what you may think, it never gets any easier. There is nothing worse than going to the gym, getting in a good workout and then having to deal with that bullshit hill just to get to your bed.
jrockway 13y ago
Do San Franciscans have to pay a broker $5000 every time they move? If not, the city is still much cheaper than New York.

151 points by jejune06 13y ago

In January 2010, the unemployment rate in San Francisco was 10.1%. By April 2013, the rate had plummeted almost in half to 5.4%. In just the first four months of 2013, the San Francisco unemployment rate fell 22%. Considering those rent prices (location location location!), if you don't have a good-paying job you're not going to stay there long. No unemployment entitlement is going to cover three years of renting a one-bedroom apartment renting at twice the mortgage on a four-bedroom one-acre-lot house conveniently outside Atlanta. Of course the unemployment rate plummeted: surely sky-high rent drove out anyone not able to keep or get a high-salary job. Author focuses on availability of new units, and marvels at the low vacancy rate, without addressing the turnover of old units. It's a limited supply of high-desirability housing; either pay a high price or get out, there's a line of people waiting for openings and willing to pay premium prices to get in. Of course unemployment is low and prices high there.

Shivetya 13y ago
Tenant laws hurt availability as many people keep units off the market because the law puts such strict limits on landlords that it can become abusive. There are many horror stories in SF about tenants from hell.
- jejune06 13y ago
  To your point, here is a recent NYT op-ed precisely on those tenant laws and how landlords are keeping units off the market: http://www.nytimes.com/2013/06/07/opinion/king-of-my-castle-yeah-right.html http://www.nytimes.com/2013/06/07/opinion/king-of-my-castle-...
- wankerrific 13y ago
  Ugh...the "rent control" argument again. First off, rent control doesn't apply to apartment building built after 1979, so, as noted below, its less relevant - especially with the new construction in SOMA. Second, the anecdotal stories about landlords holding units off the market is just that - anecdotal stories. The owners of those buildings are Prop. 13'ed with a 30yr old assessment and are doing just fine. Opening a new unit means they can collect more rent at todays market rates. Its a silly story promoted by landlords that would like to make more money during the booms. Of course, its also those very rent control laws that protect landlords during the busts (2002, 2009, etc). Sorry to say this, but rent will come down when companies in SF start running out of their free, investor money and have to turn a profit or sell themselves. More people will lose their jobs, won't be able to afford living in the city proper and people will move away. Thats the way it has been here for at least the last 20 years and probably longer. By the way, also anecdotally since I can't find the reference, rents in the area have decreased by 5% on YoY basis.
  - malandrew 13y ago
    However new buildings much provide a certain number of units as Below Market Rate housing.

klochner 13y ago

I believe this was posted fairly recently: http://www.slate.com/articles/business/moneybox/2012/05/facebook_george_lucas_and_nimbyism_the_idiotic_rules_preventing_silicon_valley_from_building_the_houses_and_offices_we_need_to_power_american_innovation_.html http://www.slate.com/articles/business/moneybox/2012/05/face... "San Francisco—one of the most expensive cities in the United States—added just 418 new housing units in 2011, the fewest since 1993. What’s more, 149 existing units were removed, leading to a nearly nonexistent increase in housing supply."

rayiner 13y ago
Meanwhile, Chicago, a city that is at best barely maintaining population, is seeing the construction of thousands of units in highrises in downtown alone: http://www.domu.com/blog/apartment-projects-under-construction-update http://www.domu.com/blog/apartment-projects-under-constructi.... I think from around my old apartment in Chicago right now, you can see three or four skyscrapers under construction just by looking around from the same spot. There is clearly something massively dysfunctional in San Francisco. High prices should create the incentive for drastically increased supply. San Francisco should look like Toronto does, with dozens of high rises under construction trying to cash in on the high rents. See: http://www.canadianbusiness.com/blogs-and-comment/what-torontos-skyline-will-look-like-in-2020 http://www.canadianbusiness.com/blogs-and-comment/what-toron....
- kqr2 13y ago
  As indicated in the article cited above: http://www.slate.com/articles/business/moneybox/2012/05/facebook_george_lucas_and_nimbyism_the_idiotic_rules_preventing_silicon_valley_from_building_the_houses_and_offices_we_need_to_power_american_innovation_.html http://www.slate.com/articles/business/moneybox/2012/05/face... superficial explanation for the outrageously high housing prices in the Bay Area is that that there’s not much developable land, especially on the peninsula between San Francisco and San Jose. In fact, the major reason is the NIMBY (“not in my backyard”) I can attest to this rampant NIMBYism. Not too long ago in my grandparents' neighborhood, a small group of neighbors had the area rezoned so it could not be developed any further. Previously, it was mixed use, but now it could only be residential with small businesses such as nail salons. Also houses were now limited to two stories because they did not want their views blocked. Not surprisingly, the existing people with 3 or more story houses have seen their property values shoot up since those large houses can no longer be built there.

qwerta 13y ago

And thats why SF is no longer relevant for startups. I work for db startup, and most of stuff is happening outside of California (Europe, Texas...).

changdizzle 13y ago
Really? I get that there are multiple thriving startup communities elsewhere, but SF (and the greater bay area) is still the mecca[1] of startups. [1] http://qz.com/94939/san-francisco-not-silicon-valley-is-the-hub-for-us-venture-capital/ http://qz.com/94939/san-francisco-not-silicon-valley-is-the-...
- qwerta 13y ago
  Startups in SF (and LA) do usually web related stuff. They also want to be acquired by larger company such as Facebook or Google. In that case SF makes sense. But that is just tiny part of startup ecosystem. I started company with my own savings. In SF it would not last 2 months, here I have 1+year runway.
  - changdizzle 13y ago
    Fair enough, thanks for your insight! Where is your company located?
    - qwerta 13y ago
      West coast of Ireland, we will be moving to Greece in a few weeks.
- ericabiz 13y ago
  Perhaps not true any more. I came across this article yesterday: http://www.entrepreneur.com/article/227436 http://www.entrepreneur.com/article/227436 "Austin ranks as the No. 1 place to launch your business, according to a new ranking by GoodApril, a San Francisco-based tax-planning startup. The ranking compares the seven hottest startup scenes in the U.S. across measures that matter most to new entrepreneurs: median tech-employee earnings, maximum personal income tax, property tax, the cost of housing and the cost of office space. Perhaps surprisingly, San Francisco, the longtime Silicon Valley startup mecca, ranks as the worst place to launch, due to high costs and taxes."

pawrvx 13y ago

More startups should move to low cost areas such as Austin Texas!

jetblackio 13y ago
Only if you like live music, a beautiful city, wonderful people, and an old guy who rides his bike around town in a thong, usually pink.
- psychometry 13y ago
  Austin would be an even better place to live if it wasn't in the middle of a dysfunctional state run by right-wing wingnuts.
  - gamblor956 13y ago
    To be fair, everyone's objection to Austin is that it is located in the state of Texas.
  - wyclif 13y ago
    SF would be an even better place to live if it wasn't in the middle of a dysfunctional state run by left-wing wingnuts. See how that works?
    - psychometry 13y ago
      Yes, not as well. California's dysfunction is due to its own right-wing wingnuts.
      - wyclif 13y ago
        California being in debt to the gills is the result of the right wing? Meh. Dem politicians rule CA now and have for quite some time. Jerry Brown ring a bell? California’s budget woes combined with poor economic results have long made it a poster child for poor fiscal management. The state’s credit rating has been downgraded to an A- by S&P, the lowest rating for any U.S. state, and its budget and pension shortfalls are infamous. How long has it been since CA had any GOP hegemony again? I'm no Republican, but shifting the blame won't work in a fact-rich environment.

davidtyleryork 13y ago

Posted this in the comments section there, but I would love to hear your feedback as well. I think the primary issue is constrained supply. As klochner said, barely any new housing is added and SF has a fixed land mass. But this problem is made much much worse by rent control. If you have an apartment in SF with Rent Control and prices are rising, you don't move. This means fewer apartments are on the market, which further increases the price, leading to a price inflation cycle. Of course, ironically now that I live in the city I would never want rent control taken away. Pretty much everyone else I've talked to, even those who agree with my assessment on its negative aspects, also find it very convenient once it's in their favor. So it's removal will likely never pass in a public vote situation.

muzz 13y ago
Fixed land mass is a canard. Infill development requires little land. One Rincon Hill has almost 600 units and is built on about the size of a plot that a single-family home would have been built on, in most parts of the country. Rent control is becoming increasingly irrelevant as anything constructed after 1978 is exempt, which is most of SOMA.

nsxwolf 13y ago

I hear Detroit has some pretty cheap rent these days. Maybe it's time for an exodus?

nirvanatikku 13y ago

Interesting. I live in Kendall Square (Cambridge, MA) and have seen the prices rise (over the past 3 years) to the median prices outlined in the article. I keep hearing about how insane SFO is, but can't help but think that Cambridge is experiencing a similar 'explosion' in it's own right. I've gathered that the exit's out west are accelerating the price increases, but with the abundance of schools here as well as the interest in establishing a presence in 'tech square', rent has skyrocketed and I don't really see it slowing down. Maybe I'm missing something, but why doesn't the acceleration in Cambridge get such attention?

freyr 13y ago
Rent in Kendall Square is ridiculous, but you're comparing the city of San Francisco (46.9 sq miles of land) to a small neighborhood in a much smaller city (Cambridge is 6.43 sq miles of land). Also, while Kendall Square has its fair share of technology companies, it doesn't really compare to SF/SV in terms of sheer numbers.
eob 13y ago
I think one reason Kendall rents aren't a topic of discussion is also because the Boston/Cambridge area has lower rent areas that are close by and accessible via public transportation. While it's nice to live right where things are happening, you could easily get a place out in Davis Sq or Porter Sq and take the T in, or in Somerville or Union Sq and have a 10 minute bike ride. From what I gather, as a fellow Cambridge resident, the problem in the Bay Area is that areas with Somerville-level rent result in an HOUR+ commute, rather than a 10-minute commute. There's a lot that's great about the bay area, but I think we certainly have the upper hand here when it comes to [reasonably priced] city live-ability and transportation.

bubbleRefuge 13y ago

Will the tech community ever get politically active and do something about the lack of new construction and rent controls creating greater scarcity?

rwmj 13y ago
Hopefully the "tech community" will respond by inventing better remote working tools, so this whole problem goes away.
xradionut 13y ago
I don't know about "The Tech Community", but better, cheaper places to live elsewhere do attract individuals that don't seen to be hung up on SF and SV. You can code anywhere and find fellow geeks that don't waste money on crazy rents.
- bubbleRefuge 13y ago
  Been there done that. This is my second tour of duty in SF-SV. Opportunities in the tech industry are unequaled by any other region in the states. India is getting there I suppose.

ilyanep 13y ago

Yeahhh I'm living in SoMa and paying much, much below the median cost for a 1BR, but I'm thinking of moving out to the peninsula after my lease is up even if I continue working in the city. $200/mo for a Caltrain monthly pass and 1 hour commute one way (on which I can do whatever I want because I'm on a train!) is worth it for me to live closer to my friends (many of whom go to Stanford), not be clumped up with thousands of other people, and have a cheaper apartment. SF is really going to need to figure out its artificial supply scarcity problems soon.

bodyfour 13y ago
Of course, the peninsula isn't dirt cheap either. As prices in SF increase, that drives up rents along Caltrain, etc.
SkyMarshal 13y ago
Where on the Peninsula would you live that's substantially cheaper than SF? The area around Stanford is fairly pricey.
- usaar333 13y ago
  Redwood City, East Palo Alto.. that should be about the min
- jackowayed 13y ago
  You can easily find a bedroom in Palo Alto for $1500 (maybe not right downtown, maybe as part of a bigger house/apartment, but a bedroom to yourself). It seems like ~1k is still achievable if you're patient and any part of PA will do. And it only gets cheaper if you're willing to go to Mountain View (only a bit cheaper), Redwood City, or really any other part of the peninsula.
  - bubbleRefuge 13y ago
    In Sunnyvale-Santa Clara area rents for 1BR's are approaching 2K. So I find it hard to believe that MV PA is $1500.

ericabiz 13y ago

I had to have a chuckle at these numbers... "The population is also growing. From 2000 to 2010, 28,500 new San Franciscans arrived in the city. From 2010 to 2012, the city welcomed another 20,600 inhabitants in just three years." Oh, is that all? I live in Austin, TX, the #1 destination in the U.S. for people aged 25-34. [1] You got 28,500 people in 10 years? We get that many new people every year. In fact, perhaps even as often as every 6 months; 158 people move to Austin every day by another estimate. [2] You have to increase the supply of rental and housing units in order to accommodate population growth. Austin is struggling with it, too, but condos are springing up downtown. San Francisco has no choice; Austin is barely managing to handle the growth, and we're a growth-happy boom town teeming with young folks. (Yes, it's pretty awesome to run a startup here too--I'm having a blast!) You must build more housing. If you are an SF resident, vote people in who will support new housing. Vote out the politicians who curb growth with ridiculous laws. Otherwise, all the cool people will end up in Austin (and other cities that can better manage the growth. ;) [1]: http://www.statesman.com/news/news/local/for-people-on-the-move-austin-is-a-place-to-stop-a/nW75T/ http://www.statesman.com/news/news/local/for-people-on-the-m... [2]: http://www.realtyaustin.com/blog/how-to-keep-up-with-158-people-moving-to-austin-per-day.html http://www.realtyaustin.com/blog/how-to-keep-up-with-158-peo...

bicknergseng 13y ago
Austin: 3,262.86 people/sq mi SF: 17,620.2/sq mi Austin: 272 sq mi, growing SF: 46.87 sq mi, fixed on 3 sides by water and a 4th by other metropolises Not saying that SF's development managers don't need to rethink their restrictive development policies, but comparing any city that doesn't have fixed boundaries to SF is pretty apples and oranges.
- HelloMcFly 13y ago
  I think it makes it even more relevant. Fast growth isn't easy on cities, but at least places like Austin have the luxury of being able to grow out and up. San Francisco has little opportunity to grow out, so the need to grow vertically is even more pressing.
novum 13y ago

scelerat 13y ago

Oakland and Berkeley should be ripe for startups. The rent is drastically lower than SF, both for commercial and residential space, and they are still very close, via freeways and BART to most of the areas that make San Francisco attractive. The East Bay has its own cool/interesting aspects too. Disclaimer. Just moved to Oakland. Loving the lower cost of living and proximity to my old haunts in SF.

arbuge 13y ago

I'm beginning to be glad I'm not in the Valley. My competitors there might have access to far more VC than I do, but their cost structure is going the wrong way for them with these crazy rental prices.

BadCookie 13y ago

I wish that this article discussed other factors that are causing rents to increase absurdly in other cities as well. In Portland, for example, rents have gone up 20-30% in the last couple of years. Why? I don't know the whole answer, but some possible factors are: - People who lost their houses recently have trouble qualifying for a mortgage and must rent instead. - Investors (Wall Street and otherwise) are buying up houses to rent because it's hard to get a good return on your money in other ways. - There still exists some amount of "shadow inventory" that banks are keeping off of the market, either on purpose or because foreclosing on a house has become more expensive and time consuming. Source: http://www.portlandmonthlymag.com/real-estate/articles/rental-market-madness-march-2013 http://www.portlandmonthlymag.com/real-estate/articles/renta...

dgallagher 13y ago
At an abstract level, it's likely caused by low/stagnant supply, and increased demand which is inelastic (not affected much by changes in price). Imagine a real estate market with only 100 1BR apartments to rent. If 85 are occupied, 15 available, and 5 people are trying to rent those 15, the price of rent should remain about the same as 10 will remain vacant. However, if 40 people are trying to rent those 15, the price of the 15 will be bid up due to a limit in supply. Then the remaining 25 people will continue to bid up rents for any new vacancies. A scenarios like this can cause rents to skyrocket, especially if supply remains nearly constant.
jacques_chester 13y ago
Rental markets tend to be highly sensitive to the rate of occupancy. When markets become tight, the wealthiest renters bid up the available units. Then other landlords raise their rates because "that's the going rate".

varelse 13y ago

This could be mostly addressed overnight by abolishing the Ellis Act. This will never happen.

drpancake 13y ago

Here's my ill-informed take on the dilemma (I no longer live in SF): * More high-rises means that SF loses it's charm * The technorati are cash rich so they'll keep on coming anyway * Soaring rents are forcing out those who make SF the desirable, culturally rich place that it is * Eventually this corrects itself and Oakland becomes the desirable, culturally rich place (already happening) * Rinse and repeat

jquery 13y ago
> Soaring rents are forcing out those who make SF the desirable, culturally rich place that it is If by culturally rich you mean burner babies, human freak shows, and unemployed artists who've depleted their trust-fund, then yes.

fizx 13y ago

I tend to think that the housing is presently at a local maxima. There are at least four large highrise apartment complexes going in SOMA right now, along with a good size complex on Guerrero and Market St. Additionally, America's Cup is currently in progress, which is completely eating up short-term supply in the northeast corner of the city. By the end of the year, the new apartment complexes will be online, and all of the short-term rentals for America's Cup will be put back on the long-term rental market. Edit: "More than 4,220 units of housing began construction in San Francisco in 2012 — following a year in which just 269 net units were added." -- http://www.spur.org/publications/library/article/san-francisco-boom-back http://www.spur.org/publications/library/article/san-francis...

rwhitman 13y ago

Its unsurprising that SF would eventually have a rental market as bad or worse than NYC. I'm just surprised it took this long But at least in NYC developers are constantly adding bucketloads of rental inventory, especially in Brooklyn and Queens. The restrictive development policies of not just San Francisco but other Bay Area municipalities sounds like a disturbing crisis is on the horizon. Pretty glad I'm not planing on moving back there anytime soon...

ww520 13y ago

Rising rent is a leading indicator of rising house price, 6 months to 1 year. If there's that house you want to buy, buy it now. House price will move up in the area.

jquery 13y ago
I bought in November for this reason. My home value estimate on Trulia and Zillow has increased by nearly 50% since I purchased. I thank my lucky stars every day that my wife and I were ready to buy at that time. I dread to think what we could afford in today's market.

wwweston 13y ago

Q: Can anyone document a situation where increased housing supply didn't just take the edge off the rate of rent increases, but actually pushed prices down? I've been able to watch some dramatic housing supply buildouts in a few areas, and my observation has been that the owners almost always price new housing somewhat above market rates for existing housing -- after all, it's new, and it's often marketed as luxury housing (plus the building costs were in $LAST_YEAR dollars and are mostly unamortized rather than in $DECADES_PAST dollars and mostly amortized). I'd think this might be more true for land-constrained places like San Francisco, where the only way to increase supply is up, so it's more capital intensive and only makes financial sense at a certain price. There's a few places I've observed a decrease in price, but it hasn't been because of supply increase. It's places like Detroit where demand drops, usually because the economic activity of the region stagnates or collapses, thought it's sometimes because of health/property hazards instead. If I'm right, building more might stabilize prices in SF, but they're not going down, short of the current tech boom there turning out to be an unsustainable bubble. Or maybe a major natural disaster.

nostrademons 13y ago
Rents - like wages - tend to be sticky downwards. Usually what happens is that a large increase in supply doesn't immediately push prices down, but results in a large overhang of vacant housing stock. The developer eats the cost on that for a while, but then the next recession hits, people lose their jobs, banks foreclose on the properties, and that starts the tumble in prices. That's how it worked in 2009 - rents dropped significantly in the Bay Area as employment numbers tumbled and people moved in with roommates. It does depend on their being a recession before demand catches up with supply...if there isn't, prices just don't increase as fast in the meantime.

gmisra 13y ago

1. San Francisco is small enough that there is in how much housing stock is created, with the same development groups at times opposing growth and at times advocating for growth. 2. Since building codes and zoning laws are often manipulated to adjust supply, there is predictably a lag between need and updated codes. We are in the middle of a housing creation wave. There is currently a large volume of to-be-constructed units that have been approved by the planning commission and will be entering the market in the next year [1]. 3. One of the most overlooked sources of demand pressure is the recent and rapid rise of west coast properties as good investment vehicle for Asian investors [2]. 4. Re: rent control - it is intentional that the community believes it is more valuable to keep rental housing stock fluid and accessible, at the expense of investment appreciation. Or, at least the community used to believe - given the changing demographics of San Francisco, I would expect these rules to change in the next decade or two. A reasonable comp is changes in how rental stock and rent control is treated in Berkeley over the past two decades. [1] http://www.sf-planning.org/index.aspx?page=1691 http://www.sf-planning.org/index.aspx?page=1691 [2] http://www.mercurynews.com/business/ci_22313326/bay-area-real-estate-market-bolstered-by-investments http://www.mercurynews.com/business/ci_22313326/bay-area-rea...

wooster 13y ago

The numbers of units being built in the linked SF Business Times article [0] seems to contradict those from the SF Chronicle [1]. Business Times: Nearly 8,000 new apartments, mostly in mid-rise and high-rise buildings, will come on line between now and 2015 — 3,498 in 2015 alone. It’s more new rental housing than was built in the last 15 years combined, according to real estate research firm Polaris Pacific. SF Chronicle: Largely in response to the city's growing technology sector, 22,000 residential units are in various stages of approval and construction. … Since 2008, only about 1,710 units were built each year, compared with an average of 2,220 each year between 2004 and 2008, according to the department. If the average was 2,200 housing units built each year between 2004 and 2008, that's 11,000 housing units. Granted the Business Times is using apartments as units, while the planning department uses housing units. Looking at the planning department data [1], there are currently 28,010 housing units approved and 3,930 under construction. The total pipeline is 43,580 units. For the previous reports they provide, we've got: * Q1, 2007: 9,305 filed, 4,736 approved, 4,978 under construction, 30,002 total * Q3, 2007: 10,708 filed, 5,005 approved, 6,134 under construction, 31,761 total * Q4, 2007: 20,890 filed, 4,570 approved, 6,790 under construction, 40,370 total * Q1, 2008: 34,510 filed, 4,560 approved, 7,520 under construction, 53,980 total * Q2, 2008: 32,370 filed, 4,780 approved, 7,480 under construction, 51,470 total * Q2, 2009: 34,570 filed, 6,200 approved, 6,510 under construction, 54,610 total * Q4, 2009: 30,370 filed, 8,220 approved, 1,320 under construction, 46,600 total * Q2, 2010: 30,780 filed, 5,870 approved, 1,480 under construction, 43,780 total * Q3, 2010: 20,710 filed, 16,690 approved, 1,180 under construction, 44,100 total * Q1, 2011: 15,610 filed, 22,590 approved, 1,730 under construction, 45,820 total * Q2, 2011: 7,620 filed, 29,760 approved, 1,820 under construction, 45,760 total * Q3, 2011: 7,620 filed, 30,280 approved, 1,990 under construction, 46,620 total * Q1, 2012: 6,180 filed, 27,670 approved, 3,990 under construction, 42,520 total * Q2, 2012: 6,940 filed, 28,060 approved, 4,220 under construction, 43,280 total So, data-wise, it's not clear this is as big a construction boom as it's made out to be. As an SF resident, however, I've never seen so much housing under construction, so maybe it's just more visible? Does anybody else have any data? [0] http://www.bizjournals.com/sanfrancisco/print-edition/2013/05/17/san-francisco-rental-construction-soars.html?page=all http://www.bizjournals.com/sanfrancisco/print-edition/2013/0... [1] http://www.sfgate.com/bayarea/article/S-F-apartment-construction-boom-around-the-corner-3428146.php http://www.sfgate.com/bayarea/article/S-F-apartment-construc... [2] http://www.sf-planning.org/index.aspx?page=1691 http://www.sf-planning.org/index.aspx?page=1691

wf 13y ago

Did... they do that svg path overlay on the map image by hand? Or is there something that makes creating these shapes easier?

snide 13y ago

I live in Petaluma up in Sonoma county. I commuted to the city for a year on a nice direct bus-line that usually got me to/from the city in about an hour. I know that sounds long but the bus was more comfortable than bart, had wifi and I'd just code my way to/form work. Seemed better than as East Bay commute. Best move I've ever made. Surrounded by beautiful country, better weather and a very friendly, hip community with great restaurants, bars and the like. It may not be for the 20 year olds, but when you're ready or can work a couple days from home, there are definitely affordable alternatives other than SF and the Valley. My previous rent check now covers a house mortgage, yard, insurance and taxes. Plenty of places in northern or western Marin that are the same. It's more affordable than you think. Almost more importantly, my neighbors and friends out here aren't all in startups. There's some actual diversity to the residents, being a mix of farmers, blue collar workers and desk job commuters.

redwood 13y ago

"In San Francisco last year, only 269 new units came on the market."

muzz 13y ago
The most-loved canard on HackerNews?
- reeses 13y ago
  No, that's DuckDuckGo.
  - Apocryphon 13y ago
    That's a mallard.
    - reeses 13y ago
      No, mallards have colored heads. Brown for the female, glossy green for the males. (Apologies for even more off-topic, but xkcd #386.)

michaelochurch 13y ago

That's horrible. Paying the high rents isn't that bad. It sucks to have to have sell off your prime saving years to landlords, but the high tech wages and career benefits of spending one's 20s in high-prestige companies almost sorta quasi-compensate for that. The problem is that it's culturally devastating when rent gets that high. When rent prices go up, losing a job is a financial catastrophe (as opposed to an annoying inconvenience) and employers know they can get away with more bullshit. Adventurism goes away and you get an almost creepy deference to authority in the workplace that's unbecoming of high-talent people. That's a big part of why the New York startup scene is, while well-funded, so unimaginative and mediocre. If Silicon Valley wants to be relevant in 25 years, it will drop some Nordic Indignation on the NIMBY assholes. New York has tons of other stuff and will be fine (as a city, if not necessarily a tech scene) when what is now called "the Series A crunch" is fully fledged and recognized as what it it is-- a post-bubble correction, the start of a bust-- but the Valley will die if it doesn't reverse course. (By the way, one might think that prices would come down and reverse the problem; that doesn't happen. Real estate prices are so sticky against downward movement that, by the time they start to seriously drop, it's too late.)

donnfelker 13y ago

This is why I wont move to SF area. Housing prices are insane. Not worth living in a cave for that amount of money, I don't care who I work for.

icesoldier 13y ago

Any time I see stories of how crazy the situation surrounding the SF housing market is, I compare it to my own city (Amarillo, TX), which has the opposite situation. A much smaller population over a larger area with plenty of land to sprawl into means that the population density (and average rent) is much lower. My 1 bedroom apartment is ~650/mo, and my impression is that that situation would be a laughable offer in any larger city. The only issue? Amarillo is pretty far away from the other larger cities. In the plains, we talk of distances between cities based on the number of hours it would take to drive that distance. Six to Dallas/Fort Worth, six to Denver, four to Oklahoma City, ten to Houston. Combined with the lower population, not much of an urban culture makes it out here. I don't mind, though, and because of the low cost of living and the Internet bringing the world to me, the low cost of living makes up for it. I'm not working with a startup nor on any products of my own at the moment, but should I start, I don't think I'd relocate unless a very compelling offer came my way.

reeses 13y ago
You talk about time to other cities because it's a constant. We talk about miles because otherwise, we'd have to say,"I live seven minutes from downtown SF between 10pm and 7am, an hour and a half between 7am and 10am, twenty minutes between 10am and noon, an hour between noon and 2pm, forty minutes between 2pm and 4pm, an hour between 4pm and 7pm, and half an hour between 7pm and 10pm."
- icesoldier 13y ago
  Very true. That the roads between these cities mostly go through sparsely-populated rural areas helps. EDIT: Though, the point I wanted to make was that it was an abstraction over the longer distances between the cities. To rephrase my examples, it's 360mi to Dallas, 430mi to Denver, 260mi to OKC, and 600mi to Houston. (Now that I'm looking up distances, I can add 500mi and 7.5 hours to Austin in that list - that length isn't in my cache, so to speak.)
akgerber 13y ago
There are plenty of larger cities away from the Northeast and West Coast that have similarly cheap rents. You could live in Minneapolis for about the same amount of money, Milwaukee for similar or less money, Pittsburgh for similar money, and Denver for similar money. Chicago and Portland would both be not much more. All of these are relatively large cities (~1.5M+ in the metro area) with a lot of cultural institutions, and many have pretty decent economies (especially considering that high housing costs aren't driving away lower-income folks, artificially raising the average). Minneapolis, for example, has a median income for a family of very nearly $60k, versus $42k in Amarillo. There's a large middle ground in this country between small, remote Texas cities, and hugely expensive coastal megalopolises.

newman314 13y ago

How do people afford this?!?

usaar333 13y ago
Not sure if you are being rhetorical, but the answer is that the new entrants are generally childless and making at least $80k annually.

icedog 13y ago

I'm currently living in my startup's office closet in SOMA. I used to have an apartment a few blocks away, but my roommate moved out and the rent went up. From a month before my move-out to a week after, I scoured through craigslist trying to find an acceptable home at a reasonable price. But now, having lived in my office for 3 weeks, I have lost all will to look. Perhaps I don't get paid enough as a developer in SOMA. I'm certainly not making six figures.

drivingmenuts 13y ago

How much potentially rentable space is currently being held off the market by disgruntled landlords? I seem to recall an article about at least one owner who was tired of bad tenants. He had mentioned that he wasn't the only one and that there were many who just weren't leasing out otherwise empty space.

rogerbinns 13y ago

Can a local explain what is "wrong" with Sunset/Parkside as they are half the price? Surely there is some attraction to being able to observe the ocean, sunsets and being alongside a park?

rdouble 13y ago
Cold and foggy. Sunset used to be called "fog bank" and was renamed The Sunset to get people to move out there. Also very inconvenient with regards to transportation. Our dev ops guy claimed it was faster to drive into SoMa from Marin City than taking the N from ocean beach.
- timr 13y ago
  It's actually not that foggy in the fall and winter. It's mostly the spring and summer that suck, when the bay area air conditioning system is running full bore. But then...the rest of the city is pretty foggy in the summer, too.
timr 13y ago
Nobody in the tech scene thinks there's life west of Divisadero. In my experience, if you grabbed ten tech people at random, you'd find at most one person who could tell you anything at all about neighborhoods outside of the Mission and SOMA. The Googlebus picks people up from their home in those neighborhoods in the morning, and drops them off again at night. There is nothing else.
- batbomb 13y ago
  Life west of divis, southwest of Glen Park, South of Bernal and Dog Patch. Honestly, the inner/outer richmond has better restaurants than SoMa.
akgerber 13y ago
They are much colder and foggier, and are not particularly convenient locations to commute from, especially to jobs outside of downtown San Francisco. They also aren't "fun" neighborhoods that young people want to move to, so you don't get tons of roommates with one professional salary per bedroom.

dev_jim 13y ago

As a New Yorker I'm always amazed as to how inconvenient of a city San Fran is. The BART has one track in the city, the Muni takes forever, walking is an absolute pain with all the hills, and there's so little mixed use development that you can really feel confined in many neighborhoods. Everywhere can't be New York, but cities like Boston and Chicago and D.C. have done a much better job of urban planning.

malandrew 13y ago
I can totally attest to feeling confined and inconvenienced. I live in Nob Hill, right at the top, and it is very confining because all the commercial areas are at the bottom of the hill (Polk Gulch, Downtown, North Beach, Chinatown). This means that even running to the corner store involves going all the way down the hill and back up. Plus, as someone who bicycles most places, I am happy that I'm capable of biking all the way up without stopping, but it gets sooooo old and contrary to what you may think, it never gets any easier. There is nothing worse than going to the gym, getting in a good workout and then having to deal with that bullshit hill just to get to your bed.

jrockway 13y ago

Do San Franciscans have to pay a broker $5000 every time they move? If not, the city is still much cheaper than New York.