6 ms·

Restaurant fable explains everything wrong with San Francisco housing right now

31 points by dbroockman 13y ago

iwasphone 13y ago
I don't think the food metaphor makes any of the issues easier to understand.
kunle 13y ago
The food metaphor definitely overcomplicates this. Translation: 1. The citizens of the Bay Area for years have limited new housing development, complaining they could change the "character" of their neighborhoods, for the worse.The limitation is baked into the democratic process at the local level. 2. There arent enough homes to accomodate the job growth and influx of people (both renting and buying) 3. Jobs are growing and workers are moving in, competing with longtime citizens and each other for a limited amount of housing (and groceries, and parking, and public transportation, and city services etc). So it gets more expensive. We protest buses, but long after the buses are paid for, homes will still be expensive. Whatever we do, we need more homes.
- yummyfajitas 13y ago
  Fundamentally, we need to recognize that in a certain sense, San Fransisco is a Malthusian nightmare. Expanding population, limited resources. No matter what you do, someone will go without - that's just simple math.
  - dragonwriter 13y ago
    > Fundamentally, we need to recognize that in a certain sense, San Fransisco is a Malthusian nightmare. Expanding population, limited resources. San Francisco's population is only a little above its 1950 population. Its not an example of uncontrolled, unsustainable growth.
    - yummyfajitas 13y ago
      Demand for housing is highly inelastic. You don't need a lot of population growth for scarcity to be painful. (Same situation with food. Demand is inelastic, so a small scarcity hurts a lot.)
    - reeses 13y ago
      Exactly. As an immediate counter example, look at San Jose over the past 40 years.
- wwweston 13y ago
  It's definitely true that more homes are needed no matter what, but as far as I can tell, just allowing more development isn't going to solve the problem for anybody who's already priced out of the market. For-profit developers who invest now will be building the current unit prices into their model (and starting with current/future building costs, which are higher than past/amortized building costs). I think this is basically why when I've looked, I can't seem to find any examples where housing supply buildouts alone have dropped prices -- seems there's always a drop in demand based on changes in regional fundamentals that has to happen first.
  - jjoonathan 13y ago
    Not quite. Without housing ordinances you could buy 10,000sqft, build a multi-story building where once there was a single-story building, and sell 50,000sqft. You can still turn a profit by selling at a lower rate than you bought since you can multiply quantity between buying and selling. Through the magic of multi-story buildings we actually can manufacture "land" out of thin air. There wouldn't be such a crunch without building restrictions.
  - riggins 13y ago
    For-profit developers who invest now will be building the current unit prices into their model I struggle to follow this. For profit developers will build if they can do so for a profit. The only thing that will matter is whether the cost of construction is less than the PV of the future cashflows of a constructed building. An apartment building that costs $50M to put up costs the same $50M whether a 1BR apartment rents for $1,000/month or $5,000/month (for the most part ... if you get a lot of development in response to price increases, you can end up with a shortage of labor and labor costs can increase the total build cost ... but that will be on the margins). Furthermore, the cost to put up a building may be coming down. Here's a story about reducing construction costs by prefabricating buildings. http://www.wired.com/design/2012/09/broad-sustainable-building-instant-skyscraper/all/ http://www.wired.com/design/2012/09/broad-sustainable-buildi... I don't know what it costs to construct and apartment building in SF, but if the rest of the world is a guide, there are plenty of projects that would have a positive NPV even at lower rent levels. So development would contain prices and could even bring prices down.
deleted 13y ago
[deleted]
timr 13y ago
They forgot to include the part where there's a neighborhood that's 10 minutes away by train with no meal restrictions, but the Junpero-ans don't want to eat there, because it isn't a popular place to eat, and it's harder to eat with their friends. They'd rather pay outrageous prices to eat in Junipero than get on a dirty train. Also, let's not forget all the tiny, artisinal birdcage companies that are buying up a non-trivial percentage of the available meal credits on the black market, so that they can feed their employees free lunches during the daytime. Maybe as many as 40% of the meals being served in some neighborhoods are being used for birdcage company cafeterias. But really, this is a stupid metaphor, because in city that's less than 50 square miles, lack of available real estate isn't a manufactured problem.
- yummyfajitas 13y ago
  Lack of available living space is a manufactured problem. All SF needs to do to solve this problem is allow construction at the population density of Hoboken, NJ (39k/mile^2). Hoboken is not exactly a dense megacity.
  - Domenic_S 13y ago
    It might be manufactured, but building high-density housing is not going to bring any prices down. I lived in downtown Sacramento for a few years. I moved into new high(er) density apartments [0] the first year they were built. I paid $1000/month for a 400 sq ft studio with parking. For price reference, later I rented a more traditional apartment that was twice as big, several blocks away for only $650. The takeaway is that until everyone who can pay ridiculous prices has housing, prices are going nowhere but up in SF. Decent middle-class apartments with a couple bedrooms in Mountain View are $3k+. Prices are expensive because the SF bay area is awesome. It has a massive number of high paying jobs, ridiculous natural beauty, a gorgeous climate, tons of culture, diversity, and history. Contrast to Stockton, a mere 90 miles away, where you can buy a 2,000 sq ft 4bd house for $276k [1]. But Stockton's got none of the appeal of the SF bay, and it certainly doesn't have the jobs that SV does. People will fight hand over fist to get into SF, nobody's sprinting to live in Stockton. (nothing personal against Stockton). [0] http://1801l.com/ http://1801l.com/ [1] http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home/19720757 http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home...
peter_l_downs 13y ago
This is the most confusing thing I've read in a while.
- vonklaus 13y ago
  This downright absurd metaphor confused the hell out of me. If you want to craft an explanation of a problem, reason from 1st principles, not an analogy. This analogy REALLY complicated understanding the situation for me, as I'm without a huge body of knowledge about the problem. Fucking birdcage makers and burgers. What the fuck did I just read.
amurmann 13y ago
To me the solution is clear: tear down the shitty Victorians and build skyscrapers instead. It made me terribly upset to see that the new buildings in Mission Bay are only 5-6 stories. Nothing that gets build in SF should be under 30 stories. We need living space and lots of it, so that prices come down.
pcurve 13y ago
I took the word "fable" too loosely, and didn't realize I was reading a made-up story until 5th paragraph.
jbpadgett 13y ago
These class warfare style pieces are tiresome. SF could be argued to be a "foodie" destination which may attract outside visitors regardless. Artificially caping supply will only serve to increase prices anyway if people really want to eat somewhere. Conflating this with a housing argument is a misdirection mishmash that is borderline linkbait by the post.
MichaelGG 13y ago
amurmann: You're apparently dead. I agree with your comment. Granted I only visit SF now and then, but it seems very strange that things don't just go vertical. That's the obvious solution, isn't it? Build huge retail+office+residential towers like those proposed over half a century (or more?) ago. At first evaluation, it seems that people who own space must be extremely opposed to this and that works its way into local politics. I can't imagine people are voluntarily height-capping these little buildings I see going up.
- calbear81 13y ago
  I too would like to see SF go the way of other world class cities like Vancouver and build up. The challenge is the city is insanely proud of it's "small" city character and anything that makes it feel more like New York would be out of character. Even when developing in downtown, you run into issues with people protesting the loss of sunlight and the shadows cast by skyscrapers.
  - MichaelGG 13y ago
    Then get innovative with engineering. Build down. Silly that for an area that's supposed to be the centre of high tech, the options are overpriced city, or essentially suburbia.
    - malandrew 13y ago
      Are there any examples of cities that have ever built down? You'd get the housing, but then there would be fighting over the scarcity of windows.
      - stefan_kendall 13y ago
        More importantly, building down has geometric levels of cost and linear levels of return.
      - MichaelGG 13y ago
        Perhaps I'm too high on sci-fi. But I'd imagine office and retail would work well enough. Put in artificial sunlight, channel some light from the roof area, run large displays to simulate outdoors. If it really works well, then residential might work, too. And fighting over real window space is a far cry better than fighting over any space. As-is, there are even parking garages taking up nice window space in buildings here. The geography looks a bit hilly in SF; it might be cheaper to dig under those hills than just going straight down from a flat area. Maybe I'm just completely naive, but anything seems better than the current solution of doing nothing.
rlwolfcastle 13y ago
With increasing population, it is incredibly simple. Choose one: 1. Live further away 2. Increase number of people per living abode 3. Increase number of living abodes per space Numbers one and two are personal choice, number three is political.

31 points by dbroockman 13y ago

I don't think the food metaphor makes any of the issues easier to understand.

kunle 13y ago

The food metaphor definitely overcomplicates this. Translation: 1. The citizens of the Bay Area for years have limited new housing development, complaining they could change the "character" of their neighborhoods, for the worse.The limitation is baked into the democratic process at the local level. 2. There arent enough homes to accomodate the job growth and influx of people (both renting and buying) 3. Jobs are growing and workers are moving in, competing with longtime citizens and each other for a limited amount of housing (and groceries, and parking, and public transportation, and city services etc). So it gets more expensive. We protest buses, but long after the buses are paid for, homes will still be expensive. Whatever we do, we need more homes.

yummyfajitas 13y ago
Fundamentally, we need to recognize that in a certain sense, San Fransisco is a Malthusian nightmare. Expanding population, limited resources. No matter what you do, someone will go without - that's just simple math.
- dragonwriter 13y ago
  > Fundamentally, we need to recognize that in a certain sense, San Fransisco is a Malthusian nightmare. Expanding population, limited resources. San Francisco's population is only a little above its 1950 population. Its not an example of uncontrolled, unsustainable growth.
  - yummyfajitas 13y ago
    Demand for housing is highly inelastic. You don't need a lot of population growth for scarcity to be painful. (Same situation with food. Demand is inelastic, so a small scarcity hurts a lot.)
  - reeses 13y ago
    Exactly. As an immediate counter example, look at San Jose over the past 40 years.
wwweston 13y ago
It's definitely true that more homes are needed no matter what, but as far as I can tell, just allowing more development isn't going to solve the problem for anybody who's already priced out of the market. For-profit developers who invest now will be building the current unit prices into their model (and starting with current/future building costs, which are higher than past/amortized building costs). I think this is basically why when I've looked, I can't seem to find any examples where housing supply buildouts alone have dropped prices -- seems there's always a drop in demand based on changes in regional fundamentals that has to happen first.
- jjoonathan 13y ago
  Not quite. Without housing ordinances you could buy 10,000sqft, build a multi-story building where once there was a single-story building, and sell 50,000sqft. You can still turn a profit by selling at a lower rate than you bought since you can multiply quantity between buying and selling. Through the magic of multi-story buildings we actually can manufacture "land" out of thin air. There wouldn't be such a crunch without building restrictions.
- riggins 13y ago
  For-profit developers who invest now will be building the current unit prices into their model I struggle to follow this. For profit developers will build if they can do so for a profit. The only thing that will matter is whether the cost of construction is less than the PV of the future cashflows of a constructed building. An apartment building that costs $50M to put up costs the same $50M whether a 1BR apartment rents for $1,000/month or $5,000/month (for the most part ... if you get a lot of development in response to price increases, you can end up with a shortage of labor and labor costs can increase the total build cost ... but that will be on the margins). Furthermore, the cost to put up a building may be coming down. Here's a story about reducing construction costs by prefabricating buildings. http://www.wired.com/design/2012/09/broad-sustainable-building-instant-skyscraper/all/ http://www.wired.com/design/2012/09/broad-sustainable-buildi... I don't know what it costs to construct and apartment building in SF, but if the rest of the world is a guide, there are plenty of projects that would have a positive NPV even at lower rent levels. So development would contain prices and could even bring prices down.

deleted 13y ago

[deleted]

timr 13y ago

They forgot to include the part where there's a neighborhood that's 10 minutes away by train with no meal restrictions, but the Junpero-ans don't want to eat there, because it isn't a popular place to eat, and it's harder to eat with their friends. They'd rather pay outrageous prices to eat in Junipero than get on a dirty train. Also, let's not forget all the tiny, artisinal birdcage companies that are buying up a non-trivial percentage of the available meal credits on the black market, so that they can feed their employees free lunches during the daytime. Maybe as many as 40% of the meals being served in some neighborhoods are being used for birdcage company cafeterias. But really, this is a stupid metaphor, because in city that's less than 50 square miles, lack of available real estate isn't a manufactured problem.

yummyfajitas 13y ago
Lack of available living space is a manufactured problem. All SF needs to do to solve this problem is allow construction at the population density of Hoboken, NJ (39k/mile^2). Hoboken is not exactly a dense megacity.
- Domenic_S 13y ago
  It might be manufactured, but building high-density housing is not going to bring any prices down. I lived in downtown Sacramento for a few years. I moved into new high(er) density apartments [0] the first year they were built. I paid $1000/month for a 400 sq ft studio with parking. For price reference, later I rented a more traditional apartment that was twice as big, several blocks away for only $650. The takeaway is that until everyone who can pay ridiculous prices has housing, prices are going nowhere but up in SF. Decent middle-class apartments with a couple bedrooms in Mountain View are $3k+. Prices are expensive because the SF bay area is awesome. It has a massive number of high paying jobs, ridiculous natural beauty, a gorgeous climate, tons of culture, diversity, and history. Contrast to Stockton, a mere 90 miles away, where you can buy a 2,000 sq ft 4bd house for $276k [1]. But Stockton's got none of the appeal of the SF bay, and it certainly doesn't have the jobs that SV does. People will fight hand over fist to get into SF, nobody's sprinting to live in Stockton. (nothing personal against Stockton). [0] http://1801l.com/ http://1801l.com/ [1] http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home/19720757 http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home...

peter_l_downs 13y ago

This is the most confusing thing I've read in a while.

vonklaus 13y ago
This downright absurd metaphor confused the hell out of me. If you want to craft an explanation of a problem, reason from 1st principles, not an analogy. This analogy REALLY complicated understanding the situation for me, as I'm without a huge body of knowledge about the problem. Fucking birdcage makers and burgers. What the fuck did I just read.

amurmann 13y ago

To me the solution is clear: tear down the shitty Victorians and build skyscrapers instead. It made me terribly upset to see that the new buildings in Mission Bay are only 5-6 stories. Nothing that gets build in SF should be under 30 stories. We need living space and lots of it, so that prices come down.

pcurve 13y ago

I took the word "fable" too loosely, and didn't realize I was reading a made-up story until 5th paragraph.

jbpadgett 13y ago

These class warfare style pieces are tiresome. SF could be argued to be a "foodie" destination which may attract outside visitors regardless. Artificially caping supply will only serve to increase prices anyway if people really want to eat somewhere. Conflating this with a housing argument is a misdirection mishmash that is borderline linkbait by the post.

MichaelGG 13y ago

amurmann: You're apparently dead. I agree with your comment. Granted I only visit SF now and then, but it seems very strange that things don't just go vertical. That's the obvious solution, isn't it? Build huge retail+office+residential towers like those proposed over half a century (or more?) ago. At first evaluation, it seems that people who own space must be extremely opposed to this and that works its way into local politics. I can't imagine people are voluntarily height-capping these little buildings I see going up.

calbear81 13y ago
I too would like to see SF go the way of other world class cities like Vancouver and build up. The challenge is the city is insanely proud of it's "small" city character and anything that makes it feel more like New York would be out of character. Even when developing in downtown, you run into issues with people protesting the loss of sunlight and the shadows cast by skyscrapers.
- MichaelGG 13y ago
  Then get innovative with engineering. Build down. Silly that for an area that's supposed to be the centre of high tech, the options are overpriced city, or essentially suburbia.
  - malandrew 13y ago
    Are there any examples of cities that have ever built down? You'd get the housing, but then there would be fighting over the scarcity of windows.
    - stefan_kendall 13y ago
      More importantly, building down has geometric levels of cost and linear levels of return.
    - MichaelGG 13y ago
      Perhaps I'm too high on sci-fi. But I'd imagine office and retail would work well enough. Put in artificial sunlight, channel some light from the roof area, run large displays to simulate outdoors. If it really works well, then residential might work, too. And fighting over real window space is a far cry better than fighting over any space. As-is, there are even parking garages taking up nice window space in buildings here. The geography looks a bit hilly in SF; it might be cheaper to dig under those hills than just going straight down from a flat area. Maybe I'm just completely naive, but anything seems better than the current solution of doing nothing.

rlwolfcastle 13y ago

With increasing population, it is incredibly simple. Choose one: 1. Live further away 2. Increase number of people per living abode 3. Increase number of living abodes per space Numbers one and two are personal choice, number three is political.