11 ms·

Housing markets: The spectre haunting San Francisco

155 points by mblakele 12y ago

unclesaamm 12y ago
> "If local regulations did not do much to discourage creation of new housing supply [...] Costs would rise [...] And the value to the marginal resident would fall for two reasons. First, the marginal resident will definitionally be someone who is relatively indifferent between living in San Francisco and living somewhere else. Everyone more eager to live there would already have moved in." That seems wrong. How much someone is willing to pay to live in San Fransisco isn't a measure of their "eagerness", but also a function of wealth. Marginal people in San Fransisco are also poor people who love the city, and are barely able to live there because they spend such a high proportion of their income on costs of living. Relative to their household income, they spend _more_ than someone not marginal to live in the city, but that wouldn't be reflected by their migration patterns. They're not less eager, just less rich.
- mblakele 12y ago
  Are you reading "marginal" in the sense of http://en.wikipedia.org/wiki/Marginal_concepts http://en.wikipedia.org/wiki/Marginal_concepts or in the popular sense of someone on the verge of poverty?
  - joe_the_user 12y ago
    In this case, those on the verge of poverty would also be marginal in the technical sense because a given price rise would cause them to choose to leave whereas those with more money might choose to stay because it's an easier choice. The GP make simple and correct point - those with more money can wind-up choosing to buy something they "don't want that much" while those with less money overall money forgone things they very much want since they also need to eat.
  - lazaroclapp 12y ago
    In this particular case, the word play (intentional or not) might actually be useful in explaining the problem. The idea is that, yes, for people who make the same amount of money, a completely free market distributes housing according to their desire to live in San Francisco versus some other place. But for people who don't make the same money, desire might not even factor in the equation. For a lot of people, being displaced from their homes because they can't afford it doesn't look like a cost-benefit analysis, it looks like well... being displaced. More crudely: as being thrown into the street and told to emigrate from a place where they have lived their entire life. While some software developer who could, theoretically, work from anywhere in the world, moves to the same apartment after deciding that "well, it's pricey, but nothing I can't afford, and the weather is nice". Economically, it might be efficient, in terms of say philosophical utilitarianism, it is inefficient (more overall misery than happiness is created, the developer didn't care about living in S.F. quite as much as the previous tenant cared about not being kicked out). Not saying current rent control policies and development policies in S.F. are optimal (in the colloquial sense, economic sense or utilitarian sense), or that more housing in general should not be encouraged somehow. But the option of having zero rent control and letting the invisible hand of the market shove tens of thousands of people into the streets seems like a pretty bad solution, in addition to being a particularly callous one.
- nattaggart 12y ago
  I understand your point. I think in this case, the author is talking about a scenario where the price of rent in San Francisco drops dramatically to where it is no more expensive than anywhere else relative to the opportunities. At which point, even people who would find themselves priced out of SF in today's market would already have moved to the city if they wanted to.
avn2109 12y ago
>> "Maybe we simply come up with better ways to build and design cities..." Reading that, I can't help but think that the canonically best methods for how to "build and design cities" have been pretty well understood for decades [0], if not much longer [1]. We in America have just been doing it wrong on purpose for quite a while (perhaps in order to goose suburban construction and automobile sales?) So the problem isn't lack of knowledge-how, but rather one of political organization to wrest control of the built environment from the groups and organizations that presently control it. [0] http://en.wikipedia.org/wiki/The_Death_and_Life_of_Great_American_Cities http://en.wikipedia.org/wiki/The_Death_and_Life_of_Great_Ame... [1] https://news.ycombinator.com/item?id=8090190 https://news.ycombinator.com/item?id=8090190
- rsync 12y ago
  We're talking about a city that just built a brand new, terabuck priced stadium (which will be around for 20-30 years) 43 miles out of the city in a car-centric suburb.
  - sparkman55 12y ago
    I couldn't believe that the new 49ers stadium (in Santa Clara) cost a trillion dollars, so I looked it up. It cost $1.2 billion [1] - a "gigabuck" rather than a "terabuck." To put that in perspective, a single office building in nearby Palo Alto just sold for $300 million. [2] Judging from the people driving up and down 101 with flags flying, the people wearing 49ers jerseys year-round in San Jose, the big BBQs hanging off the big trucks in the parking lot of games, and the truck commercials that litter televised football, the new car-centric location suits the football team nicely. I'd be much more upset if the SF Giants decided to move out of the city! [1] http://www.mercurynews.com/ci_23414780/49ers-new-stadium-cost-goes-up-again-1 http://www.mercurynews.com/ci_23414780/49ers-new-stadium-cos... [2] http://www.bizjournals.com/sanjose/news/2015/03/11/tibco-sells-stanford-research-park-campus-for-330.html http://www.bizjournals.com/sanjose/news/2015/03/11/tibco-sel...
    - avn2109 12y ago
      In other news, applying SI prefixes to atypical units is really fun. It reminds me of how civil engineers use kilo-pounds aka "kips."
wozniacki 12y ago
The top-voted comment for the same piece in the Economist explores the rent-seeking behavior of SF landlords, the origins and the conditions that gave rise to Prop 13 in the first place and proposes a set of (albeit, I admit, a bit far-fetched) solutions: I am one of these SF oligarchs, and I benefit from high rents of both types. Nevertheless, I have long called for an end to the rent-seeking. To me, the problem started when the boomers of old voted themselves two enormous market distortions over 30 years ago. Proposition 13 was sold as a means of keeping granny in her home, but it does not particularly benefit the elderly, the sick, or the needy. It benefits land owning incumbents (like me) at the expense of everyone else. Kill it. Start with the grotesque subsidy for commercial property, and then phase out the residential subsidy. Not to be outdone, SF renters voted themselves a rent control ordinance. This also does not particularly benefit the elderly, the sick, or the needy. Like Prop 13, it benefits one thing only - incumbency. I know fairly wealthy 50-somethings who have rented apartments for decades, and now pay a third or a quarter of market rates thanks to rent control. They keep these now as pied-a-terres, while they own comfortable homes in Marin or the wine country. For each one of these old renters, there are ten smart ambitious young people desperate to contribute new creativity and energy into the community if they could just find a room. Only the wealthiest of these can compete for the few remaining market rate units, and they must pay plenty of both kinds of rent, to people like me. This may be seem like daydreaming, but I hope Governor Brown and SF can someday create a grand bargain. Kill Prop 13 AND rent control with the stroke of a pen. As for overall supply and demand, I would support a state law that creates 1 - an estimate of statewide population growth 2 - a requirement that every municipality periodically rezone to accommodate a portion of that growth proportional to its current size; or 3 - pay another municipality to take its share This would create something like a reverse cap and trade system to manage the supposed externalities of growth. This way, NIMBY cities would have to pay growth-friendly cities, and NIMBY voters would have to pay for their selfish rent-seeking behavior. Who knows? There might even be less of it. [1] [1] http://www.economist.com/comment/2358176#comment-2358176 http://www.economist.com/comment/2358176#comment-2358176
- ianbicking 12y ago
  Something I'm coming to learn: for any bureaucratic system, those who are most capable of taking advantage of the system are the privileged. Every time we try to arrange a benefit for the poor, infirmed, disadvantaged, disabled, we create a tool for the more privileged to advance themselves. The poor hit a rough spot and they can't hold onto their homes – only the well off can hold their property for decades. Even rent control: who is most able to ward off an eviction? Who can access the legal system? Who can mount their own defense? Who can see the machinations of their own landlord and work in advance to counter? At every turn, when we make a rule, we give a tool to those who can work with rules; if those people were at one time not privileged, they are privileged now, and have been for some time.
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mc32 12y ago
By San Francisco, I suspect they mean the San Francisco Bay area. While building in SF proper would decrease rents there, we can't have everyone who wants to move to the Bay Area live in San Francisco proper. Keeping this in mind, SF proper has a natural and inherent economic rent. So there is only so much pressure more building could relieve in SF proper. That said, I don't think many people would have much issue with being able to afford a place in San Mateo, Mountain View or San Jose, even Fremont. The problem is the whole bay area is averse to build up. So the only current option for those not able to afford the housing, is to commute two hours each way --South from Gilroy, East from Livermore/Tracy, northeast Coco county, etc. or doubling, tripling up and sharing rent. But that's not an option for many families. It'd be physically difficult to have more than 6 million people living in San Francisco, no matter what density we built. So there would be some limit, just not the current approximate 800 odd thousand. The solution is to have an integrated Bay Area plan to accommodate as many people as the area can support. We must also keep in mind the ecological impact of sustaining more people in a semi arid region so perhaps desalination plants to offset water demand. Most of all, a regional government capable of making hard decisions rather than one which gives in to boisterous interest groups (rent control, height & shade restrictions, prop 13, and the adversity to pubic transit.
- wozniacki 12y ago
  The problem is the whole bay area is averse to build up. Mostly true. However, that somewhat diminishes the degree by which SF especially is averse to construction, and more worryingly is averse to outsiders of all kinds - not just culturally misplaced Midwestern-ers - which is quite telling. Its a special brand of NIMBYism not found elsewhere. The following comment is also from the Economist piece and sheds light on the kind of jaundiced eyes - I don't know what else one would call it - that long time SF residents view outsiders with. This sentiment is something I highly identify with and is rarely talked about, when the issue of SF housing is hotly debated. The author is a Kansas City native who has moved to SF to wait tables : 2) San Francisco can be elitist and exclusionary towards outsiders. Some San Francisco residents look any non-Brooklyn part of the country with dismissal and/or disdain, creating a distinct form of self-defeating snobbery. I also felt this elitism when I would look at all the row houses in the Richmond and Sunset and how few where being torn down to build more efficient apartment buildings. The message was, and is,- we have ours and we don't care about your struggles. I also felt this excluding elitism when I would learn about legacy apartment dwellers who live in great locations and pay a fraction of the market price because of government controls. The government kept rental prices artificially low for established renters and rental prices artificially high for outsiders looking to move in and rent. The casual snobbery, the lack of new construction, and a preference for established renters made the city feel unwelcoming to outsiders. Which is ironic, because most people I met in San Francisco were born and raised elsewhere. [1] The rest of his comment is eminently readable too; I've truncated it because I felt I've hijacked this thread enough. http://www.economist.com/comment/2360736#comment-2360736 http://www.economist.com/comment/2360736#comment-2360736
epicureanideal 12y ago
Why doesn't someone raise a VC fund to build another Silicon Valley somewhere else? I personally don't think it involves that much magic. Just build a brand new giant university in a relatively cheap place where you've bought up a ridiculous amount of land. Hire a bunch of Ivy League professors to teach there and establish departments. Market heavily. Around the university, build tons of housing for students. Further out, mixed office parks and all the goodies that people like about SF... lots of selection of food, drink, culture, etc. and pay up front so that a reasonable percentage of this is there before anybody shows up. Throw in some partnerships with big name companies and some VC firms to locate some startups there. Expensive, yes. Profitable, I would think so. Sign me up to live there when it's built. I'd love to work for a similar salary and save a good 30% of it per year (while still leaving healthy profit margins for the investors). Note to downvoters: You do realize that the US government essentially provided this sort of start to Silicon Valley right, and that after that there were a couple now-billionaire real estate investors who provided a lot of the office space?
- Kalium 12y ago
  If by "expensive" you mean "billions"... with profitability not nearly so assured. You cannot simply build some of those things. Culture and good schools take decades to build.
  - epicureanideal 12y ago
    Many people would probably agree with you but my personal unsubstantiated opinion is that both can be bought. Want good schools? Hire good teachers (and bring in a class of workers who care about their kids' educations and help their children succeed). Want culture? Hire musicians, artists, etc. Other natural culture will come by building the right kind of environment (see The Timeless Way of Building) and bringing in a bunch of talented people with cash to spend to generate the kind of environment they want by paying for bands to play, artists to make art, baristas, bartenders, etc. Re: Olin College, I don't often hear it as often as Stanford probably because of the relative size of the marketing budget, but the software engineers who come out of Olin College are probably not paid so significantly less that a 30-40% reduction in rent wouldn't compensate. Re: $Billions... Or a couple thousand software engineers organized to invest together. Re: "You simply cannot build some of those things." Challenge accepted! Er, well, but I'm short about a billion dollars in order to attempt it. Know anybody who can help with that?
caseyf7 12y ago
SF has felt unbearably constrained before. Then 2001 happened and there were tumbleweeds on 101. The people that were left had dozens of friends that left. Tech is fundamentally stronger this time around, but not by that much. Everyone is talking about the supply and demand of housing, but we also need to consider the supply and demand of six figure jobs.
- nullc 12y ago
  Presumably part of the reason for the ghost town effect wasn't just the demand shifted but because the landlords (or banks) wouldn't blink. There presumably always a price which would have mitigated the churn, but the market failed to find it fast enough to avoid the undershoot.
  - pjdemers1 12y ago
    During the 2001-2003 bust, rents fell quite a bit along 101 and the south bay. For an average apartment, from ~4,000 to ~2,500. High end apartments fell from ~8,000 to ~3,500
grundprinzip 12y ago
Something that is (typically) left out in these articles about how expensive rent in SF is, is that even for tech folks with rather high income the city becomes too expensive as soon as you have family. It might be ok to pay 2.5k per bedroom when you're single, but when you pay an additional 1.5k per child in daycare perspective changes. In my opinion, if the trans-bay (e.g. Oakland to San Mateo) and around-the-bay (Berkeley - SJ) public transport would be reasonable in terms of time, things could normalize easier. It could take some pressure of the rent market as more opportunities could be found in other places.
- aantix 12y ago
  Childcare expenses and lack of affordable housing options for a family of four are two of the primary reasons my wife and I moved away. I really didn't feel like being on the hook for a $6,000/mo mortgage for the next 30 years. It'd still be a mediocre home at best and I'd never see my kids because I'd be out hustling trying to pay for it. No thanks.
ubasu 12y ago
Previous discussion: https://news.ycombinator.com/item?id=7602740 https://news.ycombinator.com/item?id=7602740 Article is from 2014
remarkEon 12y ago
That chart from Thomas Piketty's "Capital" has an odd scale at the bottom. The breaks are 40-40-30-30-10-10-20-20-20-20 years, with no adjustment in the scaling.
jmckib 12y ago
This is one of the most interesting parts of the article to me, but it's not mentioned until the very end. On the other hand, if San Francisco zoning mostly deflects away non-techies who add to San Francisco congestion without adding much to its tech-centre synergies, then San Francisco's regulations may be reinforcing its status as technological leader. That leaves technology as the saving grace. Maybe we invent really good holodecks, which make it much less critical to actually be in San Francisco. Maybe we invent teleportation, laws of physics be damned. Maybe we simply come up with better ways to build and design cities, which minimise the real or perceived downsides to residents of new building.
gdubs 12y ago
A lot of focus on zoning and new construction limits when the housing crises comes up -- but what about foreign investment? I'd be curious to hear an argument over residency requirements. It's very appealing for a foreign investor to park their cash in real estate. The more that gets bought up and remains unoccupied, the tighter the market, and the more that prices continue to rise...
- gamblor956 12y ago
  In DTLA alone, we have foreign investment (mostly Chinese and Taiwanese) to thank for the construction of nearly 2,000 new apartment units over the past 3 years (including units still under construction), with an additional 2,000 apartments and 1,000 condos planned over the next 5 years.
  - adaml_623 12y ago
    You realise that you didn't answer the OP question. There is no point having new apartments if no one actually lives in them. http://www.theguardian.com/business/2014/dec/04/property-investors-islington-london-homes-empty-jail http://www.theguardian.com/business/2014/dec/04/property-inv...
    - gamblor956 12y ago
      DTLA has a less than 3% vacancy rate for apartments, and for 11 months out of last year there were fewer than 5 condos for sale downtown, so occupancy is not a problem. My point was that foreign investment can help solve the problem, which supplements the post that I was replying to. Also, I'm not sure what the point of your link was. London's housing market has little in common with SF's; housing-wise London's market is most like Manhattan. Wealthy foreigners frequently acquire London flats without the intention to live in them beyond a few weeks or days each year and primarily use the real estate as a way to store their wealth. London allows, and even encourages, uber-expensive housing developments that displace impoverished communities precisely to attract this type of foreign wealth. In DTLA, foreign investment under the EB-5 Visa program has been used to increase the supply of housing and non-industrial commercial usage in a space that historically had limited amounts of both.
iolothebard 12y ago
If they'd get rid of the ridiculous rent control, that would help a lot on both sides. When I moved out there I considered buying a 3 story home out by Ocean Beach. Then to afford it renting out 2 of the 3 floors. After doing some risk analysis (researching the legal aspects) there was no way I could do that and expect to not get burned in a multitude of ways. So it creates this really shady market for illegal rentals (you have to drive around to find them) and an adversarial way of living in this supposed liberal utopia. Not my cup of tea, but I have many friends that love living in the city.
matt_morgan 12y ago
"You see this in London, for instance, where /literally/ [my emphasis] every house in the city is now being rehabilitated, including those that were rehabilitated last year." Et tu, The Economist?
- wmeredith 12y ago
  Yeah, this stuck out like a sore thumb to me. Gross.
ThrustVectoring 12y ago
Land-value taxes would be a good part of the solution. Part of the unaffordability of the area is because the network effect of having lots of tech people in one area is extracted twice: once by income taxes on the extra productivity, and again by landlords on the money spent chasing the right to live in a high-productivity area.
Tunecrew 12y ago
To me the huge problem in the Bay Area was (is?) public transportation more than housing prices. This may have changed as I have not lived there in a while, but I just remember the Caltraink, BART, Muny, etc. being horribly disconnected - to live in the city and work in the Valley or vice versa was impossible if you had to rely on public transport, unless you just happened to live or work near the Caltrain on the southeast side of the city. The East Bay, etc. of course was worse to impossible. I could never understand this, given the otherwise progressive nature of the whole area.
aaronchall 12y ago
Really well written. How do you tell the NIMBY's that they're the problem? How do we get more construction and improve the lot of everyone, not just the monopolist incumbents?

155 points by mblakele 12y ago

> "If local regulations did not do much to discourage creation of new housing supply [...] Costs would rise [...] And the value to the marginal resident would fall for two reasons. First, the marginal resident will definitionally be someone who is relatively indifferent between living in San Francisco and living somewhere else. Everyone more eager to live there would already have moved in." That seems wrong. How much someone is willing to pay to live in San Fransisco isn't a measure of their "eagerness", but also a function of wealth. Marginal people in San Fransisco are also poor people who love the city, and are barely able to live there because they spend such a high proportion of their income on costs of living. Relative to their household income, they spend _more_ than someone not marginal to live in the city, but that wouldn't be reflected by their migration patterns. They're not less eager, just less rich.

mblakele 12y ago
Are you reading "marginal" in the sense of http://en.wikipedia.org/wiki/Marginal_concepts http://en.wikipedia.org/wiki/Marginal_concepts or in the popular sense of someone on the verge of poverty?
- joe_the_user 12y ago
  In this case, those on the verge of poverty would also be marginal in the technical sense because a given price rise would cause them to choose to leave whereas those with more money might choose to stay because it's an easier choice. The GP make simple and correct point - those with more money can wind-up choosing to buy something they "don't want that much" while those with less money overall money forgone things they very much want since they also need to eat.
- lazaroclapp 12y ago
  In this particular case, the word play (intentional or not) might actually be useful in explaining the problem. The idea is that, yes, for people who make the same amount of money, a completely free market distributes housing according to their desire to live in San Francisco versus some other place. But for people who don't make the same money, desire might not even factor in the equation. For a lot of people, being displaced from their homes because they can't afford it doesn't look like a cost-benefit analysis, it looks like well... being displaced. More crudely: as being thrown into the street and told to emigrate from a place where they have lived their entire life. While some software developer who could, theoretically, work from anywhere in the world, moves to the same apartment after deciding that "well, it's pricey, but nothing I can't afford, and the weather is nice". Economically, it might be efficient, in terms of say philosophical utilitarianism, it is inefficient (more overall misery than happiness is created, the developer didn't care about living in S.F. quite as much as the previous tenant cared about not being kicked out). Not saying current rent control policies and development policies in S.F. are optimal (in the colloquial sense, economic sense or utilitarian sense), or that more housing in general should not be encouraged somehow. But the option of having zero rent control and letting the invisible hand of the market shove tens of thousands of people into the streets seems like a pretty bad solution, in addition to being a particularly callous one.
nattaggart 12y ago
I understand your point. I think in this case, the author is talking about a scenario where the price of rent in San Francisco drops dramatically to where it is no more expensive than anywhere else relative to the opportunities. At which point, even people who would find themselves priced out of SF in today's market would already have moved to the city if they wanted to.

avn2109 12y ago

>> "Maybe we simply come up with better ways to build and design cities..." Reading that, I can't help but think that the canonically best methods for how to "build and design cities" have been pretty well understood for decades [0], if not much longer [1]. We in America have just been doing it wrong on purpose for quite a while (perhaps in order to goose suburban construction and automobile sales?) So the problem isn't lack of knowledge-how, but rather one of political organization to wrest control of the built environment from the groups and organizations that presently control it. [0] http://en.wikipedia.org/wiki/The_Death_and_Life_of_Great_American_Cities http://en.wikipedia.org/wiki/The_Death_and_Life_of_Great_Ame... [1] https://news.ycombinator.com/item?id=8090190 https://news.ycombinator.com/item?id=8090190

rsync 12y ago
We're talking about a city that just built a brand new, terabuck priced stadium (which will be around for 20-30 years) 43 miles out of the city in a car-centric suburb.
- sparkman55 12y ago
  I couldn't believe that the new 49ers stadium (in Santa Clara) cost a trillion dollars, so I looked it up. It cost $1.2 billion [1] - a "gigabuck" rather than a "terabuck." To put that in perspective, a single office building in nearby Palo Alto just sold for $300 million. [2] Judging from the people driving up and down 101 with flags flying, the people wearing 49ers jerseys year-round in San Jose, the big BBQs hanging off the big trucks in the parking lot of games, and the truck commercials that litter televised football, the new car-centric location suits the football team nicely. I'd be much more upset if the SF Giants decided to move out of the city! [1] http://www.mercurynews.com/ci_23414780/49ers-new-stadium-cost-goes-up-again-1 http://www.mercurynews.com/ci_23414780/49ers-new-stadium-cos... [2] http://www.bizjournals.com/sanjose/news/2015/03/11/tibco-sells-stanford-research-park-campus-for-330.html http://www.bizjournals.com/sanjose/news/2015/03/11/tibco-sel...
  - avn2109 12y ago
    In other news, applying SI prefixes to atypical units is really fun. It reminds me of how civil engineers use kilo-pounds aka "kips."

wozniacki 12y ago

The top-voted comment for the same piece in the Economist explores the rent-seeking behavior of SF landlords, the origins and the conditions that gave rise to Prop 13 in the first place and proposes a set of (albeit, I admit, a bit far-fetched) solutions: I am one of these SF oligarchs, and I benefit from high rents of both types. Nevertheless, I have long called for an end to the rent-seeking. To me, the problem started when the boomers of old voted themselves two enormous market distortions over 30 years ago. Proposition 13 was sold as a means of keeping granny in her home, but it does not particularly benefit the elderly, the sick, or the needy. It benefits land owning incumbents (like me) at the expense of everyone else. Kill it. Start with the grotesque subsidy for commercial property, and then phase out the residential subsidy. Not to be outdone, SF renters voted themselves a rent control ordinance. This also does not particularly benefit the elderly, the sick, or the needy. Like Prop 13, it benefits one thing only - incumbency. I know fairly wealthy 50-somethings who have rented apartments for decades, and now pay a third or a quarter of market rates thanks to rent control. They keep these now as pied-a-terres, while they own comfortable homes in Marin or the wine country. For each one of these old renters, there are ten smart ambitious young people desperate to contribute new creativity and energy into the community if they could just find a room. Only the wealthiest of these can compete for the few remaining market rate units, and they must pay plenty of both kinds of rent, to people like me. This may be seem like daydreaming, but I hope Governor Brown and SF can someday create a grand bargain. Kill Prop 13 AND rent control with the stroke of a pen. As for overall supply and demand, I would support a state law that creates 1 - an estimate of statewide population growth 2 - a requirement that every municipality periodically rezone to accommodate a portion of that growth proportional to its current size; or 3 - pay another municipality to take its share This would create something like a reverse cap and trade system to manage the supposed externalities of growth. This way, NIMBY cities would have to pay growth-friendly cities, and NIMBY voters would have to pay for their selfish rent-seeking behavior. Who knows? There might even be less of it. [1] [1] http://www.economist.com/comment/2358176#comment-2358176 http://www.economist.com/comment/2358176#comment-2358176

ianbicking 12y ago
Something I'm coming to learn: for any bureaucratic system, those who are most capable of taking advantage of the system are the privileged. Every time we try to arrange a benefit for the poor, infirmed, disadvantaged, disabled, we create a tool for the more privileged to advance themselves. The poor hit a rough spot and they can't hold onto their homes – only the well off can hold their property for decades. Even rent control: who is most able to ward off an eviction? Who can access the legal system? Who can mount their own defense? Who can see the machinations of their own landlord and work in advance to counter? At every turn, when we make a rule, we give a tool to those who can work with rules; if those people were at one time not privileged, they are privileged now, and have been for some time.

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mc32 12y ago

By San Francisco, I suspect they mean the San Francisco Bay area. While building in SF proper would decrease rents there, we can't have everyone who wants to move to the Bay Area live in San Francisco proper. Keeping this in mind, SF proper has a natural and inherent economic rent. So there is only so much pressure more building could relieve in SF proper. That said, I don't think many people would have much issue with being able to afford a place in San Mateo, Mountain View or San Jose, even Fremont. The problem is the whole bay area is averse to build up. So the only current option for those not able to afford the housing, is to commute two hours each way --South from Gilroy, East from Livermore/Tracy, northeast Coco county, etc. or doubling, tripling up and sharing rent. But that's not an option for many families. It'd be physically difficult to have more than 6 million people living in San Francisco, no matter what density we built. So there would be some limit, just not the current approximate 800 odd thousand. The solution is to have an integrated Bay Area plan to accommodate as many people as the area can support. We must also keep in mind the ecological impact of sustaining more people in a semi arid region so perhaps desalination plants to offset water demand. Most of all, a regional government capable of making hard decisions rather than one which gives in to boisterous interest groups (rent control, height & shade restrictions, prop 13, and the adversity to pubic transit.

wozniacki 12y ago
The problem is the whole bay area is averse to build up. Mostly true. However, that somewhat diminishes the degree by which SF especially is averse to construction, and more worryingly is averse to outsiders of all kinds - not just culturally misplaced Midwestern-ers - which is quite telling. Its a special brand of NIMBYism not found elsewhere. The following comment is also from the Economist piece and sheds light on the kind of jaundiced eyes - I don't know what else one would call it - that long time SF residents view outsiders with. This sentiment is something I highly identify with and is rarely talked about, when the issue of SF housing is hotly debated. The author is a Kansas City native who has moved to SF to wait tables : 2) San Francisco can be elitist and exclusionary towards outsiders. Some San Francisco residents look any non-Brooklyn part of the country with dismissal and/or disdain, creating a distinct form of self-defeating snobbery. I also felt this elitism when I would look at all the row houses in the Richmond and Sunset and how few where being torn down to build more efficient apartment buildings. The message was, and is,- we have ours and we don't care about your struggles. I also felt this excluding elitism when I would learn about legacy apartment dwellers who live in great locations and pay a fraction of the market price because of government controls. The government kept rental prices artificially low for established renters and rental prices artificially high for outsiders looking to move in and rent. The casual snobbery, the lack of new construction, and a preference for established renters made the city feel unwelcoming to outsiders. Which is ironic, because most people I met in San Francisco were born and raised elsewhere. [1] The rest of his comment is eminently readable too; I've truncated it because I felt I've hijacked this thread enough. http://www.economist.com/comment/2360736#comment-2360736 http://www.economist.com/comment/2360736#comment-2360736

epicureanideal 12y ago

Why doesn't someone raise a VC fund to build another Silicon Valley somewhere else? I personally don't think it involves that much magic. Just build a brand new giant university in a relatively cheap place where you've bought up a ridiculous amount of land. Hire a bunch of Ivy League professors to teach there and establish departments. Market heavily. Around the university, build tons of housing for students. Further out, mixed office parks and all the goodies that people like about SF... lots of selection of food, drink, culture, etc. and pay up front so that a reasonable percentage of this is there before anybody shows up. Throw in some partnerships with big name companies and some VC firms to locate some startups there. Expensive, yes. Profitable, I would think so. Sign me up to live there when it's built. I'd love to work for a similar salary and save a good 30% of it per year (while still leaving healthy profit margins for the investors). Note to downvoters: You do realize that the US government essentially provided this sort of start to Silicon Valley right, and that after that there were a couple now-billionaire real estate investors who provided a lot of the office space?

Kalium 12y ago
If by "expensive" you mean "billions"... with profitability not nearly so assured. You cannot simply build some of those things. Culture and good schools take decades to build.
- epicureanideal 12y ago
  Many people would probably agree with you but my personal unsubstantiated opinion is that both can be bought. Want good schools? Hire good teachers (and bring in a class of workers who care about their kids' educations and help their children succeed). Want culture? Hire musicians, artists, etc. Other natural culture will come by building the right kind of environment (see The Timeless Way of Building) and bringing in a bunch of talented people with cash to spend to generate the kind of environment they want by paying for bands to play, artists to make art, baristas, bartenders, etc. Re: Olin College, I don't often hear it as often as Stanford probably because of the relative size of the marketing budget, but the software engineers who come out of Olin College are probably not paid so significantly less that a 30-40% reduction in rent wouldn't compensate. Re: $Billions... Or a couple thousand software engineers organized to invest together. Re: "You simply cannot build some of those things." Challenge accepted! Er, well, but I'm short about a billion dollars in order to attempt it. Know anybody who can help with that?

caseyf7 12y ago

SF has felt unbearably constrained before. Then 2001 happened and there were tumbleweeds on 101. The people that were left had dozens of friends that left. Tech is fundamentally stronger this time around, but not by that much. Everyone is talking about the supply and demand of housing, but we also need to consider the supply and demand of six figure jobs.

nullc 12y ago
Presumably part of the reason for the ghost town effect wasn't just the demand shifted but because the landlords (or banks) wouldn't blink. There presumably always a price which would have mitigated the churn, but the market failed to find it fast enough to avoid the undershoot.
- pjdemers1 12y ago
  During the 2001-2003 bust, rents fell quite a bit along 101 and the south bay. For an average apartment, from ~4,000 to ~2,500. High end apartments fell from ~8,000 to ~3,500

grundprinzip 12y ago

Something that is (typically) left out in these articles about how expensive rent in SF is, is that even for tech folks with rather high income the city becomes too expensive as soon as you have family. It might be ok to pay 2.5k per bedroom when you're single, but when you pay an additional 1.5k per child in daycare perspective changes. In my opinion, if the trans-bay (e.g. Oakland to San Mateo) and around-the-bay (Berkeley - SJ) public transport would be reasonable in terms of time, things could normalize easier. It could take some pressure of the rent market as more opportunities could be found in other places.

aantix 12y ago
Childcare expenses and lack of affordable housing options for a family of four are two of the primary reasons my wife and I moved away. I really didn't feel like being on the hook for a $6,000/mo mortgage for the next 30 years. It'd still be a mediocre home at best and I'd never see my kids because I'd be out hustling trying to pay for it. No thanks.

ubasu 12y ago

Previous discussion: https://news.ycombinator.com/item?id=7602740 https://news.ycombinator.com/item?id=7602740 Article is from 2014

remarkEon 12y ago

That chart from Thomas Piketty's "Capital" has an odd scale at the bottom. The breaks are 40-40-30-30-10-10-20-20-20-20 years, with no adjustment in the scaling.

jmckib 12y ago

This is one of the most interesting parts of the article to me, but it's not mentioned until the very end. On the other hand, if San Francisco zoning mostly deflects away non-techies who add to San Francisco congestion without adding much to its tech-centre synergies, then San Francisco's regulations may be reinforcing its status as technological leader. That leaves technology as the saving grace. Maybe we invent really good holodecks, which make it much less critical to actually be in San Francisco. Maybe we invent teleportation, laws of physics be damned. Maybe we simply come up with better ways to build and design cities, which minimise the real or perceived downsides to residents of new building.

gdubs 12y ago

A lot of focus on zoning and new construction limits when the housing crises comes up -- but what about foreign investment? I'd be curious to hear an argument over residency requirements. It's very appealing for a foreign investor to park their cash in real estate. The more that gets bought up and remains unoccupied, the tighter the market, and the more that prices continue to rise...

gamblor956 12y ago
In DTLA alone, we have foreign investment (mostly Chinese and Taiwanese) to thank for the construction of nearly 2,000 new apartment units over the past 3 years (including units still under construction), with an additional 2,000 apartments and 1,000 condos planned over the next 5 years.
- adaml_623 12y ago
  You realise that you didn't answer the OP question. There is no point having new apartments if no one actually lives in them. http://www.theguardian.com/business/2014/dec/04/property-investors-islington-london-homes-empty-jail http://www.theguardian.com/business/2014/dec/04/property-inv...
  - gamblor956 12y ago
    DTLA has a less than 3% vacancy rate for apartments, and for 11 months out of last year there were fewer than 5 condos for sale downtown, so occupancy is not a problem. My point was that foreign investment can help solve the problem, which supplements the post that I was replying to. Also, I'm not sure what the point of your link was. London's housing market has little in common with SF's; housing-wise London's market is most like Manhattan. Wealthy foreigners frequently acquire London flats without the intention to live in them beyond a few weeks or days each year and primarily use the real estate as a way to store their wealth. London allows, and even encourages, uber-expensive housing developments that displace impoverished communities precisely to attract this type of foreign wealth. In DTLA, foreign investment under the EB-5 Visa program has been used to increase the supply of housing and non-industrial commercial usage in a space that historically had limited amounts of both.

iolothebard 12y ago

If they'd get rid of the ridiculous rent control, that would help a lot on both sides. When I moved out there I considered buying a 3 story home out by Ocean Beach. Then to afford it renting out 2 of the 3 floors. After doing some risk analysis (researching the legal aspects) there was no way I could do that and expect to not get burned in a multitude of ways. So it creates this really shady market for illegal rentals (you have to drive around to find them) and an adversarial way of living in this supposed liberal utopia. Not my cup of tea, but I have many friends that love living in the city.

matt_morgan 12y ago

"You see this in London, for instance, where /literally/ [my emphasis] every house in the city is now being rehabilitated, including those that were rehabilitated last year." Et tu, The Economist?

wmeredith 12y ago
Yeah, this stuck out like a sore thumb to me. Gross.

ThrustVectoring 12y ago

Land-value taxes would be a good part of the solution. Part of the unaffordability of the area is because the network effect of having lots of tech people in one area is extracted twice: once by income taxes on the extra productivity, and again by landlords on the money spent chasing the right to live in a high-productivity area.

Tunecrew 12y ago

To me the huge problem in the Bay Area was (is?) public transportation more than housing prices. This may have changed as I have not lived there in a while, but I just remember the Caltraink, BART, Muny, etc. being horribly disconnected - to live in the city and work in the Valley or vice versa was impossible if you had to rely on public transport, unless you just happened to live or work near the Caltrain on the southeast side of the city. The East Bay, etc. of course was worse to impossible. I could never understand this, given the otherwise progressive nature of the whole area.

aaronchall 12y ago

Really well written. How do you tell the NIMBY's that they're the problem? How do we get more construction and improve the lot of everyone, not just the monopolist incumbents?