3 ms·

I think that if you dig a bit deeper, real estate really is a major driver of the cost of doing business in San Francisco. Particularly now that companies and e

by skuhn 12y ago

I think that if you dig a bit deeper, real estate really is a major driver of the cost of doing business in San Francisco. Particularly now that companies and employees are more resistant to the process of migrating elsewhere after the startup phase. A startup's office space is just one way that venture capital is getting funneled directly into a landlord's pocket. And office rents are rising like crazy, while pushing lots of other types of businesses out (particularly in SOMA). If a landlord thinks they can come out ahead by evicting a long time tenant and refurbishing a mechanic's garage into office space, then you're clearly paying a much higher rent than that space used to command. Salaries are still a larger overall expense for just about every startup, but consider how much of that employee salary goes straight to rent. 30% in pre-tax dollars is completely normal at this point, and I expect for some people it's even more. Ownership is out of the question for anyone who hasn't had a stock windfall at a previous company (or who lived here 20 years ago). When a 1 bedroom in a shitty neighborhood is over $3000/mo, there's a minimum to the salary you can accept -- even doing the normal salary-for-equity trade with a startup. Just to hit 30% of pre-tax dollars, you need to make $120,000/yr for that 1 bedroom. There's no reason for landlords to stop until they've milked the tech economy dry. In most cases they're entirely within their rights to charge whatever the market will bear, and there is currently no shortage of people willing to pay more for less. In the long term this will hurt San Francisco and the tech industry. The money won't last forever, and eventually the city will be so expensive that the benefits of locating here become irrelevant. SF landlords can't levy a tax on the innovation of the entire tech industry forever.

ilyanep 12y ago
The people who are to blame are not the landlords that are merely reacting to market conditions, but the NIMBYs who refuse to let any development occur in the city or anywhere on the peninsula.
- skuhn 12y ago
  I'm not blaming them, as I mention the majority is likely acting within their rights. I agree that part of the solution is to create more housing -- but it's also too late for that solution to work before there is a downturn in the startup economy. If there's a next time, it might help then. Even at San Francisco's current relatively frenzied building pace, there will only be another 4000 units or so this year. That will not make even a slight dent in rent for a city of 700,000+ people. The other problem with building more units is that a lot of the available space sucks. There are whole huge swaths of the city that may as well be on the moon for how accessible they are to locations with offices (SOMA, Financial District, etc.). You can build condos in Candlestick Point, but how are people going to get to work? The infrastructure of public and private transit in the city (and the larger region) is woefully inadequate for even half the number of people that currently live here, let alone if the population significantly increases. And these kinds of projects work on 10-20 year timetables. So again, it's way too late for this to be fixed in this economic cycle. Maybe next time.
  - yummyfajitas 12y ago
    You can build condos in Candlestick Point, but how are people going to get to work? So where I live (Pune, India), we are also having an huge surge in population due to people moving in for new jobs. We don't really have a housing crunch. Unlike SF, you are allowed to simply build new housing societies as needed (more or less). Here is NIBM, one of our outskirts, about the same distance from Koregaon Park as Candlestick Point is from SoMa: https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large Strangely, all these terrifying issues like people being unable to get to work simply don't happen. They take two wheelers, auto rickshaws, or 6 seaters. Housing societies sometimes provide shuttle buses.
  - keithpeter 12y ago
    "You can build condos in Candlestick Point, but how are people going to get to work?" Bus service? Public not the Google Buses. Will always help to encourage movement out of a crowded city centre and (relatively) low capital requirement. Do some deals on season tickets/passes/carnets
    - skuhn 12y ago
      Sure. The newest subway line runs down Third Street right to Candlestick Point (about 5 miles away from downtown). It would take over an hour and requires walking a mile. Or you could take the single bus line, which cuts your walk down to half a mile or so. You'll have to transfer to another bus that goes on the highway to downtown (so it will be absolutely awful during rush hour). Expected transit time is again 1 hour. Muni's on-time rate is 60%, so these are pretty optimistic numbers. Bus's don't keep to their schedule at all -- if they get to a stop early, they take off. The supposed 15 minute interval is laughable given the city's traffic patterns, it's just as likely for three buses to arrive simultaneously because they were all stuck in traffic for an hour. The city's infrastructure is simply not built for outlying neighborhoods to be viable living destinations for people who commute into the city for work. The highways are clogged and poorly designed (and don't connect through the city). The surface road stoplight system is one of the worst synchronized I have seen in the US. The bus and subway system is poorly run and starved for money on basic necessities. The subway system itself is terribly designed: all the lines run through the same underground portion, on the same rails, so the slightest hiccup blocks up every line. It's all solvable if you throw a lot of money and political will at it, but neither seems to be there. At least all of the buses are supposed to be replaced within a few years: they SORELY need it.
- Iftheshoefits 12y ago
  A lot of those NIMBYs are the landlords, though, presumably because they like the high rents and the ever-increasing property values. The cost of ownership makes those high rents incredibly inefficient and the returns on "investment" questionable, in my opinion, but there you have it. The rent I charge on my (nice, two-story, good neighborhood) property that is not located in the Bay Area is about 1% of the price I bought it at. In the part of the bay area I live, rents are about 0.3%-0.4% of the typical sale price for homes that are much smaller than my rental. I could buy 6 of my rental properties for the cost of one such home, have similar net appreciation in real estate value and be earning more rent.
deleted 12y ago
[deleted]

by skuhn 12y ago

ilyanep 12y ago

The people who are to blame are not the landlords that are merely reacting to market conditions, but the NIMBYs who refuse to let any development occur in the city or anywhere on the peninsula.

skuhn 12y ago
I'm not blaming them, as I mention the majority is likely acting within their rights. I agree that part of the solution is to create more housing -- but it's also too late for that solution to work before there is a downturn in the startup economy. If there's a next time, it might help then. Even at San Francisco's current relatively frenzied building pace, there will only be another 4000 units or so this year. That will not make even a slight dent in rent for a city of 700,000+ people. The other problem with building more units is that a lot of the available space sucks. There are whole huge swaths of the city that may as well be on the moon for how accessible they are to locations with offices (SOMA, Financial District, etc.). You can build condos in Candlestick Point, but how are people going to get to work? The infrastructure of public and private transit in the city (and the larger region) is woefully inadequate for even half the number of people that currently live here, let alone if the population significantly increases. And these kinds of projects work on 10-20 year timetables. So again, it's way too late for this to be fixed in this economic cycle. Maybe next time.
- yummyfajitas 12y ago
  You can build condos in Candlestick Point, but how are people going to get to work? So where I live (Pune, India), we are also having an huge surge in population due to people moving in for new jobs. We don't really have a housing crunch. Unlike SF, you are allowed to simply build new housing societies as needed (more or less). Here is NIBM, one of our outskirts, about the same distance from Koregaon Park as Candlestick Point is from SoMa: https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large Strangely, all these terrifying issues like people being unable to get to work simply don't happen. They take two wheelers, auto rickshaws, or 6 seaters. Housing societies sometimes provide shuttle buses.
- keithpeter 12y ago
  "You can build condos in Candlestick Point, but how are people going to get to work?" Bus service? Public not the Google Buses. Will always help to encourage movement out of a crowded city centre and (relatively) low capital requirement. Do some deals on season tickets/passes/carnets
  - skuhn 12y ago
    Sure. The newest subway line runs down Third Street right to Candlestick Point (about 5 miles away from downtown). It would take over an hour and requires walking a mile. Or you could take the single bus line, which cuts your walk down to half a mile or so. You'll have to transfer to another bus that goes on the highway to downtown (so it will be absolutely awful during rush hour). Expected transit time is again 1 hour. Muni's on-time rate is 60%, so these are pretty optimistic numbers. Bus's don't keep to their schedule at all -- if they get to a stop early, they take off. The supposed 15 minute interval is laughable given the city's traffic patterns, it's just as likely for three buses to arrive simultaneously because they were all stuck in traffic for an hour. The city's infrastructure is simply not built for outlying neighborhoods to be viable living destinations for people who commute into the city for work. The highways are clogged and poorly designed (and don't connect through the city). The surface road stoplight system is one of the worst synchronized I have seen in the US. The bus and subway system is poorly run and starved for money on basic necessities. The subway system itself is terribly designed: all the lines run through the same underground portion, on the same rails, so the slightest hiccup blocks up every line. It's all solvable if you throw a lot of money and political will at it, but neither seems to be there. At least all of the buses are supposed to be replaced within a few years: they SORELY need it.
Iftheshoefits 12y ago
A lot of those NIMBYs are the landlords, though, presumably because they like the high rents and the ever-increasing property values. The cost of ownership makes those high rents incredibly inefficient and the returns on "investment" questionable, in my opinion, but there you have it. The rent I charge on my (nice, two-story, good neighborhood) property that is not located in the Bay Area is about 1% of the price I bought it at. In the part of the bay area I live, rents are about 0.3%-0.4% of the typical sale price for homes that are much smaller than my rental. I could buy 6 of my rental properties for the cost of one such home, have similar net appreciation in real estate value and be earning more rent.

deleted 12y ago

[deleted]