Good thoughts. You failed to mention Prop 13 which was put into place a long time ago and simply doesn't make sense anymore. It's at least part of the reason it is so affordable (in relative terms) for rich people to keep second homes here when they bought them years ago.
We live in a building of 60 units where probably at least a third of those are absentee owners. They're rich enough and the cost to maintain is so low that they don't even need or want to rent those units out. We've seen our neighbors only 2-3 times in past 2 years... but if you look at the property tax bills of folks who bought 10-20+ years ago they are minuscule and are only adjusted upon sale of the property. In our case, we're paying easily 4x what the previous owners were.
We moved from DC couple years back which is also very expensive but their tax valuations are re-assessed on a regular basis so you don't have this huge disparity in what the rich old people are paying in prop tax vs the young not quite rich people are.
If values and property taxes were reassessed every 3 years or so this would put more pressure on these absentee owners to either sell or rent their units thus increasing existing inventory as well as adding to the city's coffers.
If you care about SF housing, please just show up to Planning Commission and Board of Supervisors meetings. Talking about policy on hacker news is useless. Better yet, start or join a grassroots group of at least 10-15 people and thoughtfully present all your ideas without coming off as insensitive towards the homeless or low-income individuals. There's TONS of room for public input in SF, it's what makes our planning process unique. In many cases, this leads to a deficit in housing because planning is so sensitive to the request of those who actually show up to meetings and make their case.
> We live in a building of 60 units where probably at least a third of those are absentee owners. They're rich enough and the cost to maintain is so low that they don't even need or want to rent those units out.
Another possible cause is that being a landlord in San Francisco is incredibly difficult and time consuming. Last year friends of mine rented out their condo to someone that turned out to be a problem tenant. They had to hire a lawyer and pay the tenant off in order to get him to move. Rather than making money as landlords, they lost almost $50,000 on the deal.
The apartment now sits vacant, and they have no plans to rent it out again.
Prop 13 is a problem, no doubt. It would deserve a very long essay -- some of them exist as sub-essays within Kim-Mai Cutler's writings. I tried to focus on policy ideas that, more-or-less, San Francisco could implement themselves.
The magnitude of Prop 13's distortions contribute much more to the problem than policies that a city could implement itself.
Housing is often viewed as a San Francisco problem, but really it's an area-wide problem acutely and a state-wide problem more broadly. I.e., areas outside the policy of San Francisco, such as peninsula, south bay, etc, are not significantly cheaper. And entire other metros, like Los Angeles and San Diego, have had similar percentage cost increases (and those metros are actually more "unaffordable" since incomes are lower there).
I am sympathetic to the notion that prop 13 is a massive distortion that is driving all of these problems ...
But I have a hard time reconciling that with the relative pricing in other equally desirable coastal areas that do not have prop 13 (or anything like it).
I am simplifying greatly, but in a broad sense, SF housing is as expensive as Boston housing is as expensive as NYC housing ... and certain hot-or-not inspired pic sites[1] lead me to believe that Vancouver beats all of them.
Are you suggesting that, all else being equal, if prop13 was not extant, SF housing would be markedly lower than the aforementioned areas ?
I'm a life long Californian. I dislike Prop 13 and it's evil sister Prop 58 which allows children to inherit their parents property tax break along with the property. AKA my dad has a house with an assessed property tax value of about $75k, when he dies and my sister inherits it, she'll also inherit the $75k property tax valuation as well.
That said I don't think the current issues with housing in the bay area have much to do with Prop 13. It's why your schools suck. It's why the prices are high, because the carrying cost is 1% lower than you'd expect because property taxes are too low.
Real issue is the deranged FIRE based economy we have. FIRE Finance, Insurance, REal estate. Combined with low growth and income inequality. Means you have a lot of money pouring into 'hot markets' like SF, Boston, Vancouver etc. Same time there is collusion between the people that sit on the boards of large companies to suppress wages.
Or we could just move beyond property taxes as a means of funding municipalities. Trying to tie the market values of one's house to taxation, then trying to untie them from market fluctuation, is simply a poor heuristic for measuring a person's capability to pay taxes. A much better heuristic is progressive income taxes. So here's an idea: make real estate taxes more equal, more nominal, and more predictable long into the future. Then close tax loop-holes and use income taxes on state level to fund municipalities. Nice side effect is that funding could be based on need rather than how rich your neighborhood is, which would improve the equality and fairness in social services provided. And no more moving to the rich suburb because you want your kids to go to a good school.
Personally I think the market price for housing tends to reflect carrying costs. Which is take what a home buy can afford subtract taxes and insurance and that's the mortgage payment. The price is how big of a loan that will buy. So the yin and the yang, lower property taxes and the housing prices rise to compensate. The only difference is property taxes tend to pay for stuff that makes your home intrinsically more valuable. Where your mortgage payment doesn't. (Probably used to before we had national/international banking, but not today)
If you shift from property taxes to income taxes, then the total taxes come out the same, so the purchasing power of the home buyer stays approximately the same.
It may not be true, but I think the argument would be that in the absence of Prop 13, SF rents would indeed be comparable to Boston rather than 50% higher.
I think that on a total cost basis SF is more expensive than Boston, but I think your money goes a lot further in SF than it does in Boston. The units in Boston tend to be smaller, without amenities, ancient, in need of significant repair or all of the above.
I wouldn't be surprised if like for like, Boston is indeed more expensive than SF... I just checked Redfin for properties in core of Boston (Back Bay, Beacon Hill, Downtown, etc) built since 2000 and roughly average square foot price was $1200.
Did the same thing for SF (focusing on SoMa area) and it looks like it's more like $1000/sq ft...
Although, if housing in Boston tends to be of lower quality than SF housing, might that not put extra demand on the more recent and presumably nicer housing?
I do know I have seen a lot of commentary and postings right here on HN about the prohibitive cost of housing in Boston - perhaps it is just certain desirable areas in the center, or Cambridge ...
I grew up and currently live in the Boston area and lived in CA for several years.
Different areas just have different issues, but I think in both cases they come from the same source (issues related to supply and demand). Prop 13 creates a supply problem, new housing stock needs to be built because it's not beneficial for people to move or sell their homes due to the tax lock in. That happens in some areas, but the output is sprawl, increasing people's commute times.
Boston's issues are different, and it's based more on new stock not being built due to zoning issues and the MBTA not growing fast enough to make other areas more accessible to the city as the city has grown and attracted more business.
That said the costs in San Francisco are on another level compared to Boston. San Francisco is more comparable to NYC with regards to rent.
Not directly. But it promotes a land grab by entitling the owners of that land, and discourages redeveloping existing properties bigger because the owner would then lose the entitlement have his property taxes increased.
If you actually want to solve it, you need to think bigger than that. In fact, we need changes all the way up to the federal level. We need to overhaul the entire way that the US handles housing, across the board.
In a nutshell, our current housing paradigm was born of the soldiers returning home from WW2. Thus, the entire infrastructure is geared towards supporting single family homes designed for the nuclear family with 2 parents, a stay at home mom and 2 to 3 kids. Thus, in the decades since then, housing has kind of converged towards that standard while population has diverged away from that norm. We are having kids later, we are living long, we are having fewer kids etc etc etc. We need far more housing geared towards the demographics and lifestyles we currently have, not geared towards the demographic and lifestyle of what, for many people today, is their grandparents in their youth.
It’s not a lifestyle thing. We need to separate our house from our net worth.
As long as house prices rise faster than inflation, then that’s nice for the people who manage to buy a house, but it’s common-sense unsustainable.
A soldier returning home from WW2 could buy his first house with a few years of savings. No mortgage necessary.
A few decades later, housing prices rising faster than inflation, and a Gen X yuppie needs a 30-year mortgage to afford a house. Not ideal, but still affordable.
A few more decades, and Millenials face a world where you need to be making bank to even think about paying for the mortgage. No wonder we are having kids later, etc., etc., etc.
I don’t know how net worth and housing will be decoupled, but it has to happen. When only the bank can afford your home, that’s an ingredient for social unrest. All I know is that it’s really going to suck for the people who’ve pumped so much money into their house, when it all comes down.
I’m not sure that we fundamentally disagree, though from these samples I don’t know enough about your position to be sure.
When you say, “you need to think bigger than that. In fact, we need changes all the way up to the federal level,” I agree. The government up to the federal level has been using policies, tax benefits, and direct subsidies to promote detached single-family homes. I think that your solution of reorienting building priorities in favor of individual housing is not incompatible with my idea of removing homes as a long-term investment. Indeed, I think they are aligned: The most economical way to live by yourself is to live in an apartment with a whole lot of other people.
The suburban ideal has cost the country tremendously. Roads, sewers, air pollution, mental disturbance from the isolation, extended emergency vehicle response times, to name a few aspects that come to mind right now. Even perma-camping would destroy the environment if everybody did it. If we want to reduce our per-capita environmental impact, we are going to have to live in dense apartments, and we are going to have to make them affordable for everybody.
For cities to be affordable, we need to overrule the NIMBYs and allow the housing prices to go back down.
Where I’m least sure I agree is with the primacy of single living. A good solution will involve a diversity of housing stock, and we do need more single housing, but any society who want to survive long-term must encourage people to breed and produce a next generation. And once you’re done breeding, outcomes tend to be better if you’re involved with the next generation’s progeny, too. For the long-term health of society, we need plenty of large houses.
I am medically handicapped. I have zero plans to live in an apartment with a bunch of other people. Before life got in the way, I wanted to be an urban planner. In the US, we have largely outlawed the ability to build small houses in walkable neighborhoods because we have whored out all of our infrastructure to our personal God: The car.
That needs to change. If we could get that resolved, you and I would both be happier, even if we still disagreed.
My grandparents own a home in Livermore they've had from 1925. Livermore is now a very costly place to live in, and modern property taxes would make it impossible for them to live in a city they saw grow up around them.
I do think Prop 13's protection should be eliminated for businesses - most definitely.
If you're a landlord, perhaps it would make sense to allow up to 2 x Prop 13-protected [low-density] properties, and all those after would have unfixed property tax.
The problem here is landlords will simply pass this along to renters, so it seems 'sane' to just eliminate Prop 13 for commercial and not residential properties.
We lose billions of dollars in tax money from corporations because of Prop 13. :(
Final answer: Residential only, not commercial/business property.
Seniors aren't the only ones who need this.
I also want to add that what sucks so hard about businesses being protected by Prop 13 is that businesses can live much longer than people. Disney might keep its decades-old fixed property tax for more than a hundred years.
No one needs prop 13. Lots of people want and benefit from it, but no one needs it. You may need it to stay in your current home, but you don't need to stay in your current home. You can get another home elsewhere if the place where you live has outgrown you. Yes, it's possible for people to outgrow a place and also for a place to outgrow people.
It's not even like they are economic losers. They bought into a place and it appreciated in value and they got to upside from the increased housing value. When they sell the home, they'll be cash rich and be able to easily afford a new home in a place that was just like 1925 Livermore. If you want to live in 2016 Livermore, which is a wholly different place from 1925 Livermore, then you should pay property taxes commensurate with supporting a 2016 Livermore.
Yes, it's true, they may not be able to afford the property taxes there today under prop 13, but under some alternate universe without prop 13, the property taxes would be lower than they are today. The only reason they are as high as they are is because those that bought a home recently are paying way more in property taxes to make up for how little others pay in property taxes. Basically, if you're paying 1925 property taxes, you're freeloading while others that were born later make up the tax difference necessary for a community to function. Prop 13 is nothing more than a form of wealth transfer from the mostly young to the mostly old.
Furthermore, there are good paying jobs in and around Livermore that require people to live near Livermore. If people are subsidized so they can occupy space near those jobs at the expense of the people qualified for those jobs, you're doing economic harm to the city, county, state and country in which Livermore resides, especially when those jobs are of the variety that are valuable for economic prosperity at the national level.
I think the appreciating value in housing far outpaces inflation - and I wouldn't expect retirees on a fixed income to have planned for such increases 30 years ahead of time.
We need cheaper housing - desperately. Poor. fucking. city. planning. with mediocre transit systems is not doing enough for us. I hear talk all the time about how we should be moving out of the cities and building the needed infrastructure in more urban areas. I think the first way to make that attractive to younger generations or even retirees would be to improve on transit to get to those areas. Make "the country" easy to get to and from.
Anyway - I don't know the answer here. I don't know if it's justified whether prop 13 should exist for individuals. Ethically or logistically I don't know. I sure as hell know businesses don't need prop 13 - they don't retire.
To me "if we should have prop 13" sounds like an argument against people being able to retire.
I'd be happy to let it go entirely (business + residential) if property taxes were factored into social security. ;p
That was my argument back when they passed the thing (17 year old me argument). You can do either of two things. Either limit property tax increases on a retired persons primary residence. Or allow retired people accept a tax lien in lieu of taxes.
Personally I would rather have no income tax or property tax - just very high sales tax. IMO, sales tax has a much larger tax base than any of the others - as income tax requires you to have a job/be a citizen; and property tax requires you to... own property.
But that's not the reality we live in.
Property taxes fluctuate too much in California - you might be paying everything you can toward your mortgage to decrease the interest you owe, but still effectively pay the same with rising property taxes. A fixed property tax is really, really necessary.
Sales tax is regressive and thus should not be the main source of tax revenue, we cannot push this burden onto the shoulders of people who already have the least.
I think we currently suffer from a tax system that enables double-taxation by default - unless you're fairly good filing your taxes and know where to claim deductions. My parents raised me to be knowledgeable of what's a work expense, and things have gotten easier with Turbo Tax - but it still surprises me how many of my friends and relatives file a 1040EZ.
Personally I think it's strange that we start at 10% income tax on people making so little.
In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them.
Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house.
If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?
The main item with this problem, as is with all affordability issues is that supply is not meeting demand. Look in Detroit and Flint where there is not enough demand and the supply is worth next to nothing.
Author's points of increased units would lead to a drop in prices until it becomes affordable to all. San Francisco will never allow it because the people who live there want to keep it San Francisco and NIMBY rules.
It creates a built in incentive for NIMBYs to not block development, lest they feel the pain of increased 'rent' too. If the bay area built as many units at the rate of texas or seattle for example, none of this would of been a big deal.
Imagine old people viciously fighting for increased development lest their property tax bill goes up, unlike the opposite today at most city council meetings. The elderly drive most housing policy in many ways because they have the free time, general boredom and incentive to participate in the political process this way.
Property tax is also almost never approaching %3. The range can be %0.5 to %2.5. A high property tax rate actually helps modulate the value of houses in a market since the price of housing is based on the monthly payment. This is what contributes to texas being a cheap housing state, since the high property tax prevents housing values from going up too quickly.
Unoccupied properties also cause the supply to go down without a person or family inside it contributing to the local economy. Idle assets should be put to productive use, it's half the point of a property tax already.
This. If anyone wants to see what a real estate market looks like without property tax, come to China. Even a good property in a first tier city is 40% vacant. It acts to inflate property bubbles as housing becomes just another asset.
> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?
I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain.
The only argument for freezing tax assessments is to soak the new residents in favor of the current residents. It's a result of the absolute worst kind of democracy: voting to make other people pay more taxes.
>I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain.
Ok, now where are they supposed to live? All the other properties cost just as much, so now they're forced to not only move out of the city, but now they have to quit their job too! How is this productive? You're penalizing someone for living in a housing bubble and not taking advantage of it. Even worse, you're penalizing current residents for having their house values driven up by a bunch of out-of-state (or out-of-country) investors and speculators.
The other option is to ease pressure on home prices by laying down the NIMBYism and letting more housing be built in your community in a sustainable way!
This is the whole the point of self-corrective market forces: sure, you can choose to keep your low-density housing in a region that is attracting demand with great weather and strong industry, but prices are going to appreciate if you keep your doors closed to newcomers. Keep the door closed long enough and your self-defeating actions will force yourself out as well (see palo alto, where they now need to subsidize housing for anyone making under $250k/yr so they can have people like teachers and firefighters still live in the community).
The fact that taxes DON'T increase with demand distorts the self-corrective market forces that would otherwise stop people from closing the door to affordability.
>The other option is to ease pressure on home prices by laying down the NIMBYism and letting more housing be built in your community in a sustainable way!
That doesn't actually work in the real world. If you live in a desirable area, and you increase the housing supply in such a way that the area is still desirable, as soon as the price drops a tiny bit people move in from the outside and drive it back up again.
That can happen at the small scale - neighborhoods or suburban villages. It doesn't really happen at the city or metro area scale.
(If you have evidence of urban areas that have allowed lots of construction during periods of high population and job growth - cities like Dallas, Houston, or Atlanta - and have also seen high housing prices, please share it; I'm genuinely curious).
Part of the problem in the bay area is that there is minimal cooperation between the dozens of municipal governments to allow more housing. None of them want to be the first or only one to do it out of fear that they'll just end up with more density and high prices. It's a bit of a prisoner's dillema.
It happened in Southern California. In the area where I grew up the cities allowed developers to build hundreds of homes at a time - it's probably four times as dense as it was when I lived there.
Orange groves and strawberry fields and outdoor movie theaters and old military bases were all leveled and turned into housing tracts. But housing didn't get any cheaper - the state added 20 million people from 1970 to 2010, because there were jobs and it had the reputation of being a nice place to live.
This is the problem with for lack of a better term, millennial analysis of historical decisions on current markets.
Prop 13 was put into place because the state and municipalities were raising taxes left and right without consideration of things like fixed income individuals being able to stay in their homes.
There was good and bad in the measure. Good - to a point - raising the need to add taxes above 50%+1 vote, the bad, it applied property tax issues to both commercial and residential properties equally.
It's much easier to set up a business entity to span generations and avoid taxes than it is a private home.
The measure also masked an issue of use. A single individual who bought a house for $500k would pay more in taxes than a family who bought a house in the same neighborhood for $350k, yet if the family has children in the schools, they are paying less in taxes and getting more out. Most property taxes have multiple assessments for schools.
It does need to be fixed, but the conversation so far has fixated on residential and ignored the commercial impacts of prop 13.
Technically you would pay capital gains taxes on around 250k of the gain, and 500k if you're not married. You can deduct improvements/maintenance from the gain, but capital gains from owner-occupied real estate are taxed in the US if they're large enough.
Ah, I did not realize that. Thanks for the info! Still, $250/500k untaxed is nothing to sneeze at. And long-term capital gains are taxed at a lower rate than income for someone who's making $100k.
Right just move your kids somewhere new and cheap like Fresno because there happened to be a housing bubble where you lived. Houses provide a stable environment for raising families. Why should you be forced out by taxes?
Don't worry, families have little opportunity to own a house anymore, much less suffer the tragedy of unrealized capital gains. The most accessible housing market for urban or suburban California families is renting from the Prop. 13 aristocracy.
> Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house.
Proposition 13 was passed in 1978. The housing boom of 2001-2007 had jack shit to do with its passage.
(Yes there, is a Prop 13 in 2010 that also has to do with property taxes, but only about seismic retrofitting of existing buildings).
Firstly, California property taxes are limited by Prop 13 to being 1% of assessed value, so your $30k tax bill can only happen if your property went to $3 million. A $1 million house cannot have a tax higher than $10,000.
There are well-established solutions to your issue about people being forced out of housing with rising demand. Massachusetts allows tax deferrals up to 50% of a property value. (If you want to get technical, Massachusetts allows towns/cities to allow tax deferrals; if your city does not want to offer it, they do not have to)
So, your $250,000 -> $1 million dollar house allows up to $500,000 in tax deferrals, so you've got a lot of years you can live in that house without paying taxes. When you sell the house, you pay the taxes and also pocket a pretty sum on the appreciation in the value of the house.
> In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them.
The owner may not care, but the city as a whole should: it makes poor use of the scarce housing supply if sales are discouraged due to tax artifacts.
> why would you want the market fluctuations to be able to force an individual to leave their house?
To make room for newcomers with higher-paying jobs who, in some sense, 'deserve' to live there more than you do. Unpopular opinion, but that's how we ration every other limited resource; it goes to the highest bidder, not the first mover.
> that's how we ration every other limited resource; it goes to the highest bidder, not the first mover
This is the opposite of the truth. The core of property rights is that just because someone will offer you a "good" price for your trinket, doesn't mean you have to sell it to them. (That would be a chaotic world!) Limited resources are held by their owners, who had them first.
You can argue that housing is fundamentally different from every other kind of property, which justifies forcing people to give theirs up if somebody else wants it more -- but there is no room to argue that that's how we handle other limited resources.
> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?
Because it ties housing prices to economic viability. If a person's housing value increases 10x, they should move if they can't afford to maintain it so that another more economically productive person can live in it.
It sounds evil on the surface, but the reality is that it will keep housing prices in line with the economic growth of the area. As it stands now, fixing the assessment value only encourages people to hold onto the house even longer because taxes eventually become a minuscule amount compared to the appreciation of the house.
If taxes are a fixed $10,000/yr on a house that is growing 10% in value every year, then it makes sense to hold onto the house indefinitely. However, if the property taxes increase proportionally each year, there comes a point in time where the calculus no longer works out and it makes sense to sell the property and cash out. Since this happens to everyone simultaneously, the growth in housing prices will also decrease (thus, reducing the growth in property tax).
>If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?
A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate.
It's not the market fluctuation that's forcing people to leave the house, it's the tax and the state's enforcement of it. If taxes are pricing people out, lower the rate!
well, Prop 13 was passed way before 2001-2007, its an artifact of the late 70s. Still that's true that people can become priced out by tax increases (this was/is a problem in DC).
And you're right... as owners now we don't care and only benefit from the absentee neighbors. That's a major part of the problem. Now that we're invested, we are naturally opposed to anything that would untether our tax rates. If our neighbors (who mostly bought in the 80s/90s) were paying tax on the current valuations they would be encouraged to either sell or rent thus creating more inventory and helping bring prices toward equilibrium.
So over 20 years, your property taxes would increase by ~49%. The median sale price in 1996 for a home in SF was $275/sq. ft, today it's more like $1,250/sq ft. 450% appreciation in 20 years, or something like 7x faster than property tax increases.
Supply side market pressure. More housing, lots, and lost, and lots of housing. Also, corresponding infrastructure (including civic utilities like parks) to accommodate the additional residents.
Let's please test your intellectual honesty, shall we ?
You are indeed correct that in our very modern era, the 2% ratchet under prop13 is less than what we see California real estate appreciating at.
So would you indeed support rebates and/or clawbacks and/or negative property tax increases if California was to ever see sustained drops in valuation ?
I own property in California as well as in other states and I can tell you that the property taxes sure go upwards very easily ... not so much the other way around ...
I don't think the people railing against prop 13 have ever lived in states where property tax rates are out of control to the point the people lose their homes... it's not pretty.
I'm not sure what it used to look like in CA pre prop 13, but I get the sense that many people lose homes due to even fairly short periods of cashflow problems, leading to tax leins leading to forclosure (and possible loss of much more equity):
Seniors in those kind of conditions, would be unlikely do better selling off their homes and subject themselves to a more volatile rent for their homes.. which would likely lead to even higher societal financial supports needed so seniors don't end up on the street.
Sales reset the property taxes on properties. It was one of a few reasons I didn't buy a home in the Bay Area a few years back. Probably should have, my buddy that bought his house for 500k in the city is sitting on probably 1.2-1.4m now. Not bad for 3-4 years appreciation.
But why are people upset at others who've made a good investment 10, 20, 50 years ago. That's like telling you you have to either use your savings you haven't touched in x years or give the money to someone else to use it.
not really... it's more like a de-escalating tax bracket; The longer you've owned the home the lower the taxes you pay. However, the reality is that in return you're receiving the exact same "services" as the person buying today. How is that equitable in any way?
Their good investment allows them to sell that property at a profit, rent it for cash flow, or just sit on it. It's still their choice. Just like in the financial crisis, companies were hoarding cash due to uncertainty but because interest rates were zero-negative this encouraged spending and propped up the economy until more material improvements could be achieved. It's basic economics at the end of the day.
You should separate absentee owners from all owner occupied. Otherwise it seems you are saying:
"Housing is too expensive - so we need to increase the property tax to be much higher than it is now."
In my view, Prop 13 is a most problematic as applied to investment/commercial real estate, a lesser one applied to secondary residences - but really is a good thing for primary residences.
People are surprised that Prop. 13 applies to investment and commercial real estate. I was too until I discovered that Howard Jarvis and the backers of the proposition were all apartment owners. If it only applied to owner-occupied residences, it would never have been up for a (off-year election) vote.
I'm getting tired of defending prop 13. I'll take it as fact that their's empty potential rental units in San Francisco because it's so cheap to just keep the place.
I work in San Francisco. I have lived in San Francisco. I have had two generations of family live in that city. I don't like the city like a lot of you do. I try to avoid it on weekends.
I just haven't seen these empty potential rental units?
I now live in Marin County. I can guarantee I have never seen a empty house due to low property taxes.
My aunt used to live in Marin county. She was far from wealthy. She could only afford to stay here because her property taxes were reasonable. Actually, I would have let her stay with me for free, but she wanted her own house. A house she bought on a librarian's wage in the 50's. Yea--I know--you should let rediculious property taxes force her to move in with you to free up a home. A home she bought.
You will be her one day--I guarantee that--especially the average Programmer.
I was a kid, but before prop 13 property rates were going up every year--without a ceiling in sight. It was making Everyone scared. Beyond scared. Mad as Hell--by Howard Jarvis. I remember my father barely making those bi-yearly payments. I remember the fear on their faces. This was in the 70's, when San Francisco and Marin county were still basically middle class. Way before society decided these counties were magical?
When prop 13 passed. Their was a middle class sigh of relief.
Why can't you find a reasonable place to rent? San Francisco has always been a tight market. Yea, blame rent control. Marin has always been a tight market--no rent control, except in San Anselmo--detached mother-inlaw units are attached to federal poverty level in some way?
So--what's the problem? It's a unicorn of problems.
People are greedy. Building is very difficult. Zoning codes are ridid. Their are NIMBYs. Etc.
Again--people are greedy. Say there's a three bedroom two car garage house in Marin is paying $6000/yr in property taxes. The house has one working bathroom. There's no legal on street parking.
Do you really think that house will not be rented out. How do you think these people have the money they appear to have?
Even if your premise is right--do you really think rents would drop, if say 10 percent of housing opened up overnight? I really don't think some of you realize this is not the Bible Belt. There's not much morality here, except on Christmas, and maybe a few other holidays. People want their money. They are greedy. Get used to it.
I've seen greedy behavior forever, and there's always those that will look for something easy to blame it on. It's not prop 13! It's usually that CEO who needs to live in only the best enviornment? The beach, and mountians, and a low crime rate. Yea--that's where I want to set up shop? Let's the peons fight for housing.
Actually, the state would love it if this blame catches on.
The State of California will rob you blind.
That greedy behavior I have see in people, and even the state always sickened me.
(I wrote this off the cuff. There's bound to be errors. I really don't care to hear about petty errors. Actually, I don't come back to most posts, so fight among yourselfs. I can guarantee the state loves this blame on prop 13.)
The folly with arguments blaming San Francisco for the problem is the fact that the entire Bay area is priced at an insane level.
Take another look at this [1] BART map with corresponding home prices for each stop. Yeah, it's cheaper to live outside of the city, but it's still crazy expensive. The median sale price for a house in Pittsburg is $430,000, with a 62 min commute into SF. If you live 62 minutes outside of say, Pittsburgh PA, you can certainly expect your median home will cost ~$120,000 or less [2].
It's been my experience that while square footage cost may go down outside the city, you really end up paying around the same rent for a larger space. So if you can't afford a $3000/mo rent in the city, you probably still can't afford the $2800/mo rent you'll pay in Daly City.
I expect what would really happen if SF just went all in building new housing, is that prices would drop in the city slightly, allowing people to move back into the city, thus increasing demand and increasing prices back to where they were. The places where rent would drop are the suburbs, where people were pushed out to initially.
A way to look at it would be that SF's sphere of rent influence would end up shrinking, but the magnitude of the epicenter remains unaffected.
You make excellent points, and I don't mean to minimize the regional issues.
Sure, if I had a magic wand then I'd increase housing being built across the Bay Area. In fact, I'd like consolidate the jurisdictions in the Bay Area, but that's a whole other argument.
I don't quite know how to play out the claim that demand is infinite. One, I don't believe that. And, two, it seems like an argument that has us throw up our hands and do nothing. It's large problem that needs a large solution -- I've heard estimates in the 100-200 thousand unit range -- but I'd rather shoot for that goal than do nothing at all.
I'm not saying this is your motivation, but when it's a proposal to the housing problem is framed as "Let's Fix San Francisco" it feels like the proposer believes they must live in San Francisco, especially when the proposer isn't a native San Franciscan. It feels tribal, and this issue is extremely tribal, and anyone who appears to belong to a specific tribe chimes in with a "We need to fix San Francisco" undoubtedly people from other tribes chime in and complain about how that tribe is the problem and the conversation usually devolves into name calling at some point.
When the proposal is a bit broader, i.e. "Let's fix the Bay Area", then, at the very least, it doesn't feel like a claim is being made on San Francisco by a specific tribe.
More than anything, it's the tribal nature of this issue that really sucks and it really stalls the things for everyone.
Completely ignoring the transit issue is remarkable. New York City serves an example of a vibrant and expensive city, but one that has a multitude of options depending on how much you're prepared to commute.
People truck in on a daily basis from New Jersey and Connecticut because there's highways and reliable (enough) rail options.
BART, from all accounts, is a total disaster and is about to completely implode. The rail project through the valley is anemic, completely inadequate for any serious commuter use.
If you can provide more options, stronger links with better commute times, you can live in places farther away without as huge a penalty on your time. It should be practical to live in Oakland and work in San Francisco, the two are so damned close, but it's a nightmare in practice.
Fix that and you're half way to solving this problem.
If the Japanese could have high speed trains in 1964, why can't an area with such density have a stellar transport service in 2016? If you increase the speed by an X factor, you get an increase of surface by X^2, moving the problem away in a place where there is low density.
Yeah. In Palo Alto my crappy 1 bedroom apartment that I was living in 3 years ago was in the middle of suburban jungle (no restaurants or shops for a few miles in any direction) and was $1650. I looked last week and it was $2500. That was a crappy place.
If you want to live by downtown PA (university Ave) its right around $2800-3000 for a 1 bedroom, for places with 20 year old appliances and no upgrades.
The peninsula is just as bad because of school preferences, etc.
New engineers getting hired in MV and PA literally can't afford to live by themselves in a 1 bedroom. That is fucked.
Can you clarify where in PA you were that had no restaurants or shops for a few miles in any direction? PA is relatively small, and there aren't any apartments further west in the really nice parts. Further east there are still stores and shops and such (albeit not as nice as near downtown).
Past past California ave about 2 miles near el camino. It was a little over 2 miles to California Ave and maybe 2 miles to the san Antonio shopping center. They weren't pleasant walks the most direct way (along el camnino) and even longer if you decided to take the scenic route and everything is spread out.
Not an impossible feat to bike, but the energy is low and there are much better ways to spend rent money.
> I expect what would really happen if SF just went all in building new housing, is that prices would drop in the city slightly, allowing people to move back into the city, thus increasing demand and increasing prices back to where they were.
That seems unlikely to me, based on intuition and my admittedly elementary understanding of economics. It seems very unlikely that a significant increase in the quantity of housing units would cause no change in the price of housing units.
I really don't think so. If demand is effectively unlimited, then I highly doubt it is only unlimited at exactly the current housing prices. Some significant portion of the housing is not under rent control (most people I know don't live in rent controlled units) and some portion of the supposedly effectively unlimited demanders should be willing to pay more than the current prices.
Maybe they switch to alternatives (larger, further away) at around this price level. Other commentators have noted that you don't pay much less further away, just get much more house than you need. An increase in supply and subsequent drop in prices would be absorbed immediately given the other conditions (appears to be the claim).
Is it, really? The entire current population of the Bay Area is tiny (7 million people across 101 cities, less than a million in S.F. proper). Compare:
Tokyo metro area: 37.8 Million
Mexico City metro area: 21.2 Million
NYC metro area: 20 Million
If demand where truly unlimited, then building up S.F. to Tokyo standards or above over the next few decades should be practical, since that level of demand would provide the funds for the growth. Of course, what is really going to happen is that demand will likely stabilize around or below the 15 million threshold for the entire Bay Area.
You're right that the same arguments apply throughout the Bay Area. That fact that SF needs to build more and denser housing doesn't excuse Palo Alto, Mountain View, Berkeley, Oakland, etc. from doing the same.
But even the housing policy you describe, in which SF acts unilaterally, would still be a great good. Tens of thousands of people previously priced out of SF would now be able to live in the city. And those who still couldn't afford the city would find it much easier to live within a reasonable commute.
70 story high rise in Atherton and Belmont! That will be the day :-)
I quite liked the Peninsula. SF wasn't really my cup of tea. God forbid people like me that lived on the Cliffs of Despair (Pacifica) and were relatively happy.
BART now designates high-cost areas. You can see it in the tri-valley, the new Whole Foods in Dublin is a good indicator. Now they want to build an IKEA next to it.
Poorer, non-tech people are getting pushed out to Tracy and made-from-scratch exurbs like Mountain House.
SF is just the center, Oakland/Berkley is getting hit hard now. The Uber acquisition of that large office complex in Oak has set off a bonanza. The hipster brigade is already popping up in weird places in Oakland. Really not sure where all the poor people will go.
There is one, weird, and very not pc observation though: old home owners get pushed out, but in the East Bay you see a lot of Indian newcomers moving in - and not highly paid executives, but Indian fresh out of rural areas in India, men in sandals (no socks, ever) and women in full garb. Where is that money coming from?
Some employees at UCSF do this -- They can get on a 7-on/7-off schedule, fly in from somewhere more reasonable (often Denver or somewhere in the Midwest), stay on a couch for a week, earn a SF salary then fly back to a $1,500/month mortgage somewhere else.
I don't disagree, but they often have coworkers who work opposite shifts (7am - 7pm vs. 7pm - 7am) so they can share an apartment space without running into each other too much.
I keep saying these same arguments put forth (add more affordable housing!) but the reality is that there are very specific laws that cause the crazy prices here and it ISN'T because of a lack of housing. It's lack of liquidity.
First there is Prop 13, which is the Ponzi scheme that let's older owners pay basically the same tax rate forever. This means that landlords have little reason to repair or sell properties. Which goes hand-in-hand with all the tenant protections that make it virtually impossible to vacate a tenant. And because landlords can't raise rents beyond a tiny margin each year (1% or so), they might have tenants paying 1/4 or less the going rate for an apartment, making it even less likely that they will reinvest in improving their building.
So what happens? Anyone who has been living in the same rental for the past 5 years is pretty much locked in to their apartment now, no matter what. Every single tenant in SF who hasn't moved within the last 5 years is NOT MOVING UNLESS THEY NEED TO. Because they are paying about 50% less than the going rate. So those people will not move, which means their apartment won't be available for others, which means the supply of housing is significantly lower than it should be.
Just as new homeowners in SF are paying some of the taxes that existing homeowners should pay, new renters are paying some of the rent that should be paid by existing renters.
Hmmm, rent control has some problems, but your critique is missing a pretty big part of the picture.
We need to look at what the average rents are, not the average rents of current available units. Rent control reduces the former dramatically, but probably increases the latter. In other words, a lot of people are paying a lot lower rent than they would otherwise have to pay, but a lot of non-residents will have to pay higher rents in the future.
I used to be anti-rent control until I thought about both sides of the issue. Rent control can make sense if your goal is to "reward" long time residents, but it may discourage new residents. From a policy perspective you have to ask yourself "Does our city have a problem attracting new residents." SF does not have this problem. But there is a problem of long term residents being forced to move. Rent control alleviates the latter problem.
Rent control discourages downsizing, which has ugly effects on the housing market. If you've lived in a 2BR for 12 years while your kid grew up, you cannot rationally downsize to a 1BR. Why? Because the 1BR on the market has a higher rent than what you're paying for your 2BR.
Same story with the taxes. You can sell your current place for top dollar and buy a smaller one, but you're going to take a huge hit on the new tax basis.
A crucial component in freeing up housing is downsizing in later life, especially as we have the baby boomer generation starting to retire.
Prop 13 is a tax issue, not a housing supply problem. It affects schools more than housing prices. Also prop 13's worst offenders are corporations not individuals.
Individual property owners sell/move on average every 7 years. And the taxes are reset at that point to market rate for the new owner.
This has nothing to do with housing supply constraints, but for schools we should remove it from corporate property owners, who some like Wells Fargo have property that hasn't changed hands in over 100 years.
It might reduce turnover, but what your arguing is that taxes replace rent as a forcing function for making people on fixed incomes move. That wouldn't increase housing, just displace lower income people more.
> I keep saying these same arguments put forth (add more affordable housing!) but the reality is that there are very specific laws that cause the crazy prices here and it ISN'T because of a lack of housing. It's lack of liquidity.
i'm confused, how does liquidity affect the housing market?
if you can admit there is plenty of housing then why are you unwilling to simply say, 'all of you would be tenants move into this available housing'?
i think what you really mean by liquidity, which i'll interpret as an owner's ability to end a lease when and how they want, is that people, you?, want to live in a specific part of sf but all the housing there is already filled and the city has determined that those tenants' livelihood should be allotted some predictability by local law
this is the thing that confuses people who have lived in a neighborhood for 4, 8, or 16 years
the reason you want to move there is because of who is living there
evict all you want and it will just be those that paid for their place who remain and if those people are so flush that they can pay any amount to consume the local culture they want, then the question is, will they be willing to contribute to a local culture or will the region stagnate as some former cultural artifact
the poor will live where ever they can afford, and if that place is boring and seemingly uninhabitable then it is on them to make it fun, and they will, and then they will need to leave because you want to be where the pulse is at even if it is the exact same place you turned your nose up to 10 years earlier
fillmore in the 30s -> north beach in the 50s -> haight in the 70s -> mission in the 90s -> ???
Even if you fix the grammar problem, it doesn't address the real issue: supply. Turnover of rentals doesn't increase supply. The core of the article is about needing more inventory.
Housing in SF is an incredibly powerful illustration of the danger of letting things get so bad that the usual remedies no longer apply.
Basically:
- Traditionally, the proper fix for a shortage of housing is to build more houses. Just lift the existing regulations, and let the free market do what it does best: take care of the demand at an efficient price.
- However, after years and years of very slow building, the amount of pent up demand is such that even if builders were allowed to construct houses, the houses would almost all be built for the very well off. The amount of houses you'd have to build before you started constructing truly affordable housing is immense.
- People that are in rent regulated apartments have absolutely nothing to gain from more construction. However, even poor people that have no stable housing also have almost nothing to gain from new construction because their only realistic chance of having affordable rent is through subsidies or semi-public housing in the medium term.
- The people that have the most to gain are the moderately well off who can afford SF rents, but cannot find housing at the existing market rate.
Basically - politicians and residents let the situation with housing in SF get so absolutely bad that free-market based solutions would take a crazy amount of time to create affordable housing for poor people. At this point, I'm not sure there even are good solutions, especially if you limit yourself to what is politically feasable.
The lesson to draw from this is that you should never let the situation get so bad that people at the bottom stop caring completely about improving policy. In this case, the right policy (build A LOT more houses) would barely help poor people because the supply/demand curve is so out of wack. The very people that should benefit the most from improving the housing situation are instead opposing it - for fairly rational reasons.
...the houses would almost all be built for the very well off. The amount of houses you'd have to build before you started constructing truly affordable housing is immense.
This is a common mistake. In reality, all added supply brings down price levels across the board.
I don't think you thought this all the way though. True, each new unit reduces the delta between supply and demand. But for prices to actually drop that delta would have to be reduced dramatically. Also the housing market has interesting striations.
Reducing demand at the top prevents the demand for high-end from overflowing into mid and low end. This does little good if the majority of people moving to SF are middle class. (Which they probably are because bell curves) To make a real difference you have to also add massive quantities of mid and low end --quantities about an order of magnitude higher than SF is currently planning. (going by the 10x disparity between population growth and housing supply creation)
And here comes the hard part: it's hard to build middle end and affordable units when neighborhood associations block the building permit until the developer pays multi-million dollar bribes (sorry donations).
http://techcrunch.com/2014/04/14/sf-housing/
> Reducing demand at the top prevents the demand for high-end from overflowing into mid and low end. This does little good if the majority of people moving to SF are middle class.
It does plenty of good because there will be fewer mid and low-end units occupied by high-income individuals and thus more available to mid and low income residents. This only has an effect up to the point where high-income supply catches up with demand, but we are a long ways off from that point.
Not necessarily. If the supply & demand meet at equilibrium for a commonly agreed price then added supply will decrease price. However, we aren't at equilibrium as we continually see sales going for 500k-1mm+ above asking which implies that true price discovery hasn't been reached. With such forces still in play, it would only make sense to cater to the demand willing and able to afford such prices. There isn't any reason to be build low income housing despite the demand because the economic benefit to the builder and seller isn't there.
Actual market dynamics are complicated. There are so many effects that happen when housing is built. New housing in SF is being sold to out-of-towners who don't actually live there. Building housing into a downtrodden neighborhood can improve it significantly and actually increase values, etc.
"Market-rate housing probably has contributed to gentrification in many cities in the past. But the data shows clearly that, in San Francisco in 2015, market-rate housing development is not accommodating upper-income movers who would otherwise be somehow shut out of the city's housing market. On the contrary, the overwhelming majority of wealthy new residents do not live in new housing, and conversely, the vast majority of new market
rate construction creates housing opportunities for existing city residents. For this reason, we find no reason to believe that either a temporary moratorium, or an indefinite prohibition, of market rate housing will reduce the number of upper-income residents in the Mission, or slow the process of gentrification that the neighborhood has been experiencing."
But you completely ignore the "time and amount of houses it would take" aspect.
If you can only build 10 houses, and make 10% commission... are you going to build a shack? or are you going to build mansion?
The houses that get built, if the gates were to open wide, would all start off on the high end... while that would start a downward pressure, it would still be a very long time before those who can afford $200k for a house see anything in their range built.
You are missing the point. Houses for poor people are almost never built, instead poor people live in 50 year old places that were built for the rich or middle class.
What happens is that 10 people move into those new places and 10 people move into their old one and the vacancy works it's way down the line. Eventually some guy down the bottom gets slightly cheaper rent or a better place.
Imagine that instead 100,000 high-end apartments were built in the Bay Area. None of them will have poor people move into them but instead places like (to quote elsewhere in the thread) "downtown PA (university Ave) its right around $2800-3000 for a 1 bedroom, for places with 20 year old appliances and no upgrades." might now be $1000/month cheaper and affordable by somebody on a lot lower income.
I think you are exactly right, and in a healthy market that's what would happen. In practice, I believe we are so far from equilibrium that it would take such a long time for the trickle down effects to push housing costs in a range which is affordable for people that aren't well off.
Telling people that within 10-15 years if you keep building several hundreds of thousands of houses eventually rents will be affordable is not a winning slogan :)
Well, a mansion should be able to house more people than a shack, so it would increase supply more, and pressure prices down more.
New housing would start off being expensive because all housing in SF is expensive. Not the other way around.
Maybe the root of this fallacy is that it assumes prices are constant. If you build something today and charge $5k/month for it, that's how it will somehow remain forever. But in reality prices are set by supply and demand, for both new and old housing.
>However, after years and years of very slow building, the amount of pent up demand is such that even if builders were allowed to construct houses, the houses would almost all be built for the very well off. The amount of houses you'd have to build before you started constructing truly affordable housing is immense.
I hate the term "affordable housing". All dense housing construction helps make housing more affordable - after all, you'll be convincing people who can afford it to move out of "bad" housing into the nice stuff you're building.
Hong Kong faced this conundrum in the mid-20th century: Lots of refugee immigration, plus a major fire, causing an urgent housing crisis at the bottom end of the market. The city built massive, tenement-style public housing blocks, and never stopped building. Almost half of the population of Hong Kong today lives in public housing.
Wouldn’t work here. I’ve been to the housing meetings.
Basically, if San Francisco tried that, then the entire affordable housing budget would be taken up just buying enough land. As it is, the mayor’s office of housing and community development is going to spend hundreds of millions of dollars on maybe a few thousand units. Not very efficient, and not nearly enough to make a major impact on the housing crisis.
Streamline the process, and you get branded as a traitor to the people and undoubtedly a peon of the greedy and corrupt developers.
this problem is exacerbated by the fact that everyone that lives there (i.e. all the powerful people running the place) is getting richer and richer by letting it continue.
the only solution is to simply not live there, in my opinion.
> the houses would almost all be built for the very well off. The amount of houses you'd have to build before you started constructing truly affordable housing is immense.
Actually, if demand is so high, why would anyone bother with building a house for a single family, willing to pay say $10,000,000, when they can build a 120 floor building of small apartments for 25,000 people, each willing to pay $200,000 (on average)?
I see the point you're trying to make, but this is such a lopsided comparison as to be bizarre. A $10mm house in SF could easily be under 5000 sq ft, while a 120 story residential tower with 25,000 units would easily be one of the biggest and tallest buildings in North America, and would cost billions to develop.
A much better comparison would be a 6 bedroom mansion for $10mm, or a small building with ten 1-bedroom units. And if you look at high end real estate, the per square foot price is often multiples above the median, which is why it's more profitable to build those than lots of small units.
It sounds like you think that only the poor people problems with housing should be solved, and if someone is better off and can't find an apartment due to crazy demand, his problems don't concern you and solving his problems counts for nothing.
Another political solution is for the state government to step in. Growing regional housing and transit is a prisoner's dilemma in the sense that no individual municipality wants put up it's fair share of the cost and necessary changes in zoning. Metro areas with highly fragmented governance like the Bay Area deal with these issues very poorly.
http://www.vox.com/2016/4/6/11370258/honan-zoning-reform-bil...
I agree with the author for the most part: the ideal solution is to build lots more housing - it's the morally and ethically correct thing to do. But, SF lacks the political will to do this and we need to accept that. the 2nd best solution would be to get tech companies out of SF. I hate this solution as much as the author, but I think it's worth considering. There's no reason why tech companies must be in SF, when there's so much Software engineering talent in the rest of the US where housing is much more accessible. I can understand large companies with big budgets paying top dollar moving to SF - they can out compete other companies for talent. But, I have no sympathies for software companies that can't find labor in SF because they went to the worst possible housing location offering modest compensation.
Even putting aside the ethical and moral arguments, which carry a lot of weight for me:
(1) There are network effects in urban environments.
(2) Globally, specific industries often concentrate in specific cities. A lot of tech has concentrated in the Valley up to the San Francisco. The effects are getting stronger as that migration occurs. That's a great thing: it allows for people to move between companies easily, allows ideas to be shared, etc, etc.[1] That effects is and will continue to be hard to replicate elsewhere.
(3) Destroying that seems like a gigantic waste.
(4) We are destroying it through our current public policies -- housing and other.
(5) I believe there are political solutions, just not ones that have been well-organized.
[1] Urbanism has a lot of other benefits too, if done right: like less traffic, and a lower per capita carbon footprint.
And yet there's nothing inherent with software development that makes SF and the Bay Area any different from lots of other cities, other than inertia. It's amazing that an industry that prides itself on being non traditional is so tied to a specific geographical location, as if there's some valuable mineral that can only be mined in SOMA and downtown Palo Alto.
Actually, there is: non-compete clauses. They're unenforceable in California. Everywhere else, they are. That makes it an attractive place to be a tech worker, since tech workers tend to change jobs relatively quickly. In the Bay Area, you can easily switch jobs, even going to a competitor; this isn't the case in other states.
And then you get the chicken-and-egg problem: with all those workers there, companies want to locate there to have access to that talent pool. And then the workers want to stay there so they have access to all those jobs that they can hop between.
Here in Santa Monica, CA companies are seeing more candidates because the ridiculous rents that you pay in SF affect your bottom line.
Living in SOMA requires $120k/yr minimum to responsibly afford renting a 1 bdrm. Getting paid 20% less but, having housing costing 1/4 of what it is in SF is a win overall. And this is coming from someone who loves the tech scene in SF. So many smart people, so many great ideas, so much energy. But, to move there, I'd have to make at least $35k/yr more just to break even and that's living in a hovel in comparison to where I live now.
In theory, this could alleviate some of the issues you are seeing in SF, but in practice this is not something many tech companies founded here would do. Most new tech companies are being started by people already working in the industry, and the industry is located in Silicon Valley, with epicenter now being in SF. So it just doesn't make sense from a competitive perspective for most companies to move out of the Bay when there's no better place for "tech".
To me, the most logical conclusion is to organize and create the political will to create the housing necessary to alleviate prices. This could be on a regional level - building more housing throughout the east bay and peninsula, or organizing on the city level to re-zone and re-develop parts of the city that can most easily support denser development.
Not everyone will like it but as long as you have more people than the anti-more-housing crowd and are organized to vote, it can be done.
I've seen recent comments on HN that some people are considering it a sign of shrewdness and intelligence that some companies aren't locating themselves in SF.
For all these people complaining about San Francisco housing costs, I say: just go somewhere else. Nobody is forcing you to work or live there. By crowding in there you are just making it miserable for those already there.
Food, water and shelter are fundamental human needs that everyone should have. It's wrong for society to deny Shelter to individuals on the grounds of: traffic, population density, and countless other slight inconveniences that are not on the same level as the need for shelter. I say solve Shelter first, then deal with the other problems.
Furthermore, since government owns all the land outside of the zoned areas, they have a responsibility for making sure there's enough land allocated for people to live/house in - CA is doing a terrible job of this. Even in the furthest reaches of CA, housing prices are still almost twice the national average, especially egregious since only 5% of CA land is being used.
The government does not own all of the land outside of the zoned areas (presumably "zoned" meaning zoned for residential). Plenty of it is owned by farmers and ranchers.
I visited San Francisco last week (for the Microsoft Build conference).
Having read here on HN about the housing problems and high rents I was surprised to see quite a lot of poorly maintained buildings, if you go a bit outside the centre. From my perspective, there seems lots of room for building and improvement. They could take down blocks and build more densely while improving quality. As in all US cities, a lot of room is used by cars.
Looking at my hometown Amsterdam, there are places like Java Eiland, (https://www.amsterdam.nl/javaeiland/) an old harbor dock where they built 8500 high quality appartments housing 18.000 people, on an area of only 1.3km x 130m. I think solutions like that could work in San Francisco too.
I'm also from northern Europe, and the average housing standard here is absolutely crap compared to where I'm from. For fun, try browsing apartments here on craigslist and you'll get to see the interiors as well. And when you then look at the prices of these things, it all seems like a cruel joke.
If you just visited the conference you probably didn't see Mission Bay, but they are doing the same here as in most other coastal cities, i.e. repurposing old harbour industrial zones and building large apartment buildings, it's just way, way too little, too late.
But I agree with you that there are so many city blocks that currently house a bunch of poorly maintained two-story buildings that should just be demolished and replaced with a single modern, tall residential building. There is nothing of value to preserve there.
The problem is NIMBYs. No one wants their view ruined so The City has height restrictions. Developers want to max out profit and only build luxury high rises downtown. New developments in Daly City, South San Francisco, San Carlos, San Mateo, Pacifica et al. don't go anywhere because Peninsula, East Bay & South Bay suburbanites don't want to expand a borough like New York City. Comparisons to NYC are difficult because NYC is one city. To truly accomodate the demand for Bay Area housing, we can't just focus on San Francisco. Per Wikipedia, Manhattan has ~1.6MM people in ~22 sq mi of land. We need many, many more taller buildings. Try getting current landowners to change the 3 story restriction.
1. My goal for San Francisco is a diverse city
The City was diverse before the tech boom. The tech boom is pushing people out. Contrast the population of San Francisco with San Jose. Why is SJ more diverse? The white, suburbanites move to SF not SJ because they want NYC on the West Coast. A city of 860k vs 8mm have much more opportunity to have diversity. Again, there needs to be coordination across multiple municipalities that simply don't want to work together.
"I want to live in a beautiful, multiethnic, socioeconomically mixed community. A city where people of low, moderate, and high incomes live together, and people of different ethnicities interact." You should have moved here 20 years ago and then you would understand why long time residents hate the newcomers.
2. A little self awareness about my my role and position in San Francisco
You grew up poor but aren't now. Super.
3. The cause of our housing problem is huge demand in the face of limited supply
There were population exoduses for many years. The demand is relatively new problem. If you had been here in 2002, landlords were begging you to rent in SF. Granted, you graduated college in 2009 so you wouldn't know that but believe me, this is a recent problem caused by recent graduates.
I want to keep responding to your posts but I'm too tired. This isn't NYC and there aren't 5 boroughs that are able to be coordinated for building codes and transportation. This isn't an easy fix and, forgive me, I find your youthful perspective insulting as you have no idea how long these issues have been brewing. Chris Daly was a big proponent of affordable housing. Read up on him.
"We are on a self-imposed path leading to only one place: a city that is entirely rich and, more or less, entirely white."
Sounds like a plan.
The problem is this. SF is built out; to build something, you have to demolish something first. So the alternative is high-rise housing. High-rise low-income housing, especially high-rise low-income housing, has been a disaster in the US. Chicago had to demolish the Robert Taylor Homes, a mile long strip of high-rises. Here's a list of failed high-rise housing projects.[1] "You can't stack poor people who drink.", as one author wrote.
The boom may be cyclical. SF after the first dot-com collapse in 2001, had low traffic and lots of vacancies. After the 2008 crash, there were tens of thousands of houses in foreclosure and for-sale signs everywhere. That could happen again. Twitter and Uber aren't profitable and are going to get hit by economic reality at some point soon.
Hold on. Chicago demolished the Taylor houses, but not because they were tall; Chicago continues to build high-rise housing.
I went to high school across the street from the ABLA projects. Most of those were low-rise buildings. They got demolished, too.
Nobody is proposing to build high-rise housing projects.
I moved out of San Francisco at the end of 2001, and it was (for the time) nosebleed expensive. It's obviously gotten much worse since then, but even at the end of the first bubble it was notoriously expensive, and gentrification was a top-of-mind concern for the whole area.
SF has gone the other way, replacing 4-8 story public housing with 2 story public housing. You can see examples just south of Japantown. Crime rate went down.
It will happen again. Again and again and again, and with increasing frequency as the global economy becomes more and more interdependent and fragile.
Housing prices in SF are now fragile to, among other things, the price that Yukos gets for its oil, the banking system in China, grexit/brexit votes in the EU ... on top of all of the usual suspects like interest rates which will become greater than zero at some point in the future.
It's hard to spill too many tears for the very, very current conditions when it is all but assured that everyone will have a buying (and controlled renting) opportunity sometime soon.
Biggest issue for me is public transit. If BART was more reliable/faster, it would be easy for people to live in Berkeley, Oakland, San Leandro or anywhere along the line. I actually bought a house in Richmond because it was cheap and I could BART into the city. What was once a 30 minute ride usually takes a little over 40 now. We really need to fix transit in the bay area. More ferries would be great imo.
Ferries are even slower and less reliable in my experience.
If you didn't live where the track died, then you would still say BART is more reliable. I've noticed BART is less reliable in the edges vs the core of SF, berkeley and downtown oakland
I ride (and complain about) BART regularly to/from SF from the Berkeley/El Cerrito area. The truth is that it's still pretty reliable, though having lived where I am now since 2004 the decline in reliability and increase in crowding clearly isn't going to stop.
One alternative is AC Transit's transbay service, which I swore by for many years. Unfortunately the increase in road traffic has that option declining as well.
There has been talk in the past about a Berkeley Marina/Albany Bulb ferry, but to my knowledge there are no current plans. I haven't ridden the ferry many times from other places, but I'd like to think that having that as an option would get a decent amount of ridership as well as possibly reduce the load on the roads and tracks.
The lack of any ferry service connecting the East Bay between Jack London Square in Oakland and Vallejo is pretty surprising. Judging from the fact that a morning commute-time BART train starting in Richmond is typically standing room only by El Cerrito Plaza (third stop on the line), I'd say the demand for alternatives is definitely there, so there must be financial/political/engineering reasons that there are no ferries from other parts of the East Bay.
Boats are fundamentally slow and cannot dock at the center of a city where most jobs are, but it's edges. Docking and boarding/unboarding is a minimum 5-10 minute process too. A really fast ferry goes at 30 knots, which is around 35 miles per hour. Often ferries are there because building the equivalent bridge or train doesn't meet the cost/benefit ratio, otherwise they are an inferior transportation option.
The reason why there probably isn't any service from jack london square is because it's faster to get to a bart station by bike or similar and then take the BART.
Sorry, to clarify I was saying that the only ferry service that does exist is from Jack London Square and then north of that all the way up in Vallejo. The entire, pretty well populated chunk of the East Bay between those two points basically has BART from Richmond, AC Transit Transbay, or their cars as an option into SF and below. That was sufficient for a while, but is less so more and more.
One issue he doesn't mention is traffic congestion.
A potential remedy could be a significant tax on parking. Perhaps very significant. Parking is ugly and a blight on the city, as well as a tremendous waste of space that could be more effectively used for housing.
Traffic is a big problem -- as is parking. Public transit investments do have to correspond with building housing, but too often the lack of one is used as an excuse not to expand the other. We have to start somewhere.
As I said in the post, public transit deserves it own analysis -- I was already in the thousands of words just on housing! -- maybe that will be next.
Indeed. In the current Prop-13, anti-tax environment you simply cannot propose building infrastructure to support future needs. The need must already exist and be bad enough to get people to vote for taxes to pay for improvements.
Muni will not be extending T to Fisherman's Wharf, nor BART building a 2nd trans-bay tube and line through the Richmond/19th Ave unless the bay area can manage this housing problem and bring in more residents to pay for it.
Instead of taxing people (negative reinforcement), build better (or at least function) transit with the absurd amount of tax dollars already generated(positive reinforcement).
Taxing parking(which is already done) is something only 2 groups of people will/can support:
1) Those without a car ( can afford to live close to work,take uber, rent cars - high income people)
2) Those who can afford the tax (high income people)
You already have SF placing a maximum (not a minimum) amount on how much parking is built per new housing unit. Theoretically people are supposed to use mass transit more as a result, but the city government repeatedly cripples SFMTA, as I understand it.
I'm the author: I agree with you. I believe there are political solutions. Putting ideas out there to see if anyone agrees with me is the first step, hopefully not the last.
Props to you for organizing a discussion as a first step. And best of luck solving the problem. If I still lived in the Bay Area, I'd show up for support.
The only way to fix the housing market in San Francisco without destroying what people love about living there is to reduce the number of people living in San Francisco. And the most direct and effective way of doing that is to destroy the ridiculous bias against remote working. For all the innovative, intelligent, talented people in the Valley that we haven't yet figured out how to work together to build software without physically being in the same room is pathetic. We'll look back on this in the same way we look back on child labor and seven day work weeks.
I think you're wrong about this. Low-height buildings are not what I loved about living in San Francisco. I think San Francisco would become a dramatically more livable city if you just replaced some of the single-family homes in the Sunset with triplexes, for instance.
But you're also right that there isn't a defensible reason for forcing so many people to move here to take jobs in the tech industry. Lots of people would live elsewhere and work remotely if they had the chance.
I'm saddened, but not surprised. Like I said, there's a really weird bias that a lot of otherwise progressive and intelligent people have against remote work, and I've never heard any convincing arguments from people who've tried both that one way is categorically better than the other. Perhaps it will take something as extreme as a major environmental or economic catastrophe to warm people up to the idea because people seem to be clinging to the old ways for silly reasons.
If you live in San Francisco, you can vote on May 10 to make some of Zac Townsend's suggested fixes a reality. Here's the slate card to see how: http://www.sfyimby.org/slate/
We are on a self-imposed path leading to only one place: a city that is entirely rich and, more or less, entirely white.
I want to live in a beautiful, multiethnic, socioeconomically mixed community. A city where people of low, moderate, and high incomes live together, and people of different ethnicities interact.
Did you know that Valencia St was full of latinos? Or are you saying that as long as there is something called "Chinatown" it is ok to kick all Mexicans out?
Interesting article but I think the demand side also needs some more reexamination. It is very strange that SV mantra is "teams need to move there". Doubly silly since we're mostly talking about software companies. If you break that mentality some of the demand issues will go away.
It feels like a very dogmatic mantra "it just works better". VCs should try to reexamine and disrupt startup financing by not being clustered in one place (which is one of the top arguments for moving to SV other than talent pol being there which is kind of self fulfilling).
"Move to where your initial customers live" would be a decent counter-mantra. Make it a differentiator as a VC that you come to the startup and don't make them come to you.
If you care about SF housing, please just show up to Planning Commission and Board of Supervisors meetings. Better yet, start or join a grassroots group of at least 10-15 people and thoughtfully present all your ideas without coming off as insensitive towards the homeless or low-income individuals. There's TONS of room for public input in SF, it's what makes our planning process unique. In many cases, this leads to a deficit in housing because planning is so sensitive to the request of those who actually show up to meetings and make their case.
Not attacking, just commenting: maybe rephrase? I'm similar to you but despite background / origin we're still part of the problem. We are rich enough to live in the mission and shop at bi-rite and we displace poorer folks (who, as you observed, are often from ethnic minorities, with backgrounds different from ours). Having come from modest beginnings doesn't make us less the problem.
That said, I think it does help to make us more aware of how unfair the system is.
Is San Francisco really on a path to becoming almost entirely white? I thought a large portion of the Sunset and Richmond were Asian and it had a much larger Asian percentage than other cities?
San Francisco is around 40% Chinese. If you look at indicators like unemployment, single parent births, education level the Chinese population is as different from the Caucasian population as Caucasians are from Black Americans. Chinese make a very strong and strangely unrecognized contribution to San Francisco economically and socially.
We hardly ever see consideration of the other party in these debates. Tenants cry about high rents. What about supply and demand? There are two main causes of supply problems: (1) tough building permitting, anti-building policy seemingly; (2) shortage of willing landlords.
If I have $5 million dollars to invest, will I invest in San Francisco where (unless I buy post-1979, and 75% of units are rent controlled in SF) -- or will I invest where I can make a return on the investment?
Shortage of willing landlords. Shortage of new construction.
Almost no one talks about the shortage of willing landlords. It's as if people think "owners have their apartment buildings, they HAVE to be landlords."
- If you make it very difficult/nearly impossible for restaurants to make money, SHORTAGE OF WILLING RESTAUARANT OWNERS.
- If you make it very difficult/nearly impossible for dentists to make money, SHORTAGE OF WILLING DENTISTS
And so on.
The reason no one considers how to entice more landlords (ie. to increase the supply of units) is -- everyone probably thinks "landlords have no choice. They MUST rent their units." It's NOT TRUE.
When public policy acknowledges this point -- maybe we can all stop believing "we don't need to entice landlords -- they have units, they MUST rent them out (so we can control and limit their business).
If investors in the area are not willing to look outside, politicans and others in the San Francisco area know they have enough leverage on you that they can keep following the same failed policies.
Only when you stop the policy of redlining 99% of America and show San Francisco there is a real threat the jobs will move away will any reform be possible.
Morbidly, I think a big earthquake will be the turning point for housing in the Bay Area. After a 6.5+, just about all the brick buildings will be degraded to the point of no return. We might see plenty of new steel / wood construction with the rebuilt (or 3d-printed) facades of old buildings, with new heights and efficiencies inside (better lighting, accessability, modularity).
I've often thought it might take a natural disaster to fix things a bit.
But realistically, at this point I'd expect investors to circle the aftermath like vultures waiting to throw money at whatever they could. There might be a small downturn, but then things will get right back up there.
My hypothesis is that it would only slightly dent demand for the area. And that says nothing about all the single story wood-framed ranches in the Peninsula which would largely be fine.
Rich people with money vs rich people with property. The poor people have mostly been driven out already. There is plenty of housing for tech workers. The problem is it's not hip enough: bay view, outer mission, outer sunset, outer richmond, portola valley, etc...
Housing affordability is a nation-wide problem. Since the housing bust of 2007, little new housing stock has been added, save for oil & gas boomtowns of Texas and North Dakota.
We are all now competing for limited housing in most every major metropolitan area.
That's just a quick look of housing starts / population but we've steadily been building fewer houses and the whole thing fell of a cliff during the financial crisis. Even in the recovery, we're off the chart.
Start by voting. Read those tedious propositions and those small offices, and vote on every one of them. Supervisor Julie Christensen was pushed out by anti-housing Aaron Peskin with the approval of 12% of District 3’s residents. And don’t take the shortcut of just voting whichever way your Democrat or Republican voters guide tells you to vote.
Join, or at least follow, a political action group like SFBARF[0]. And when they mention some special committee, then don’t just go to a couple meetings and otherwise leave it alone. You’re supposed to be part of the community. Actually learn from and provide your own input to that community.
If you have some free time, then find what else the SF Planning Department has been doing[1], and attend their public hearings.
Blaming Prop 13 is silly. Look at the rest of the state, housing prices are relatively sane in places like san diego, and downright cheap in the inland empire, orange copunty, anaheim, etc etc.
Oh, all those places have to deal with Prop 13 as well.
San Francisco(and the bay area overall) has consistently chosen to restrict their supply for housing for years. Obviously this would culminate into higher prices in the future, but to many people live in denial. They would rather pretend that AirBnB is the real problem, or that Prop 13 is distorting the market(but of course, rent control is not rolleyes)
Of course Prop 13 is distorting prices. It affects all kinds of things. It limits the revenue stream of local governments, causing them to do things like encourage big box store development to get more sales tax. Prop 13 has tons of unintended consequences. Or maybe its framers knew exactly what they were doing.
I ALSO think rent control and airbnb distorts prices too. The Airbnb threat maybe overblown, who knows, but airbnb has maintained in the past they have no way of telling cities how many customers they. Databases are hard I guess.
Oh boy, yet another article claiming that if only private investors were regulated less then "all of our problems would be solved". These will never get old.
>The only way to fix it is through a radical change in our housing policy: a change that encourages (a lot of) building.
No, the only way to fix it is to actually build a lot of housing. If you have trouble imagining what that would look at, take one look at Singapore.
To make this happen requires pitchforks, eminent domain, and political will not economic tweaks to building policy.
>Incorrect claim 2: Investment capital will never build affordable housing
Not incorrect at all. Affordable housing meets the demand for a place to live by the middle class but it doesn't meet the demand of the ultra wealthy for a yield bearing asset.
The "lack of demand" for affordable housing is a facet of massive wealth inequality and the treatment of living places as yield bearing assets.
>The forces behind those aren't singular movements or collectively one movement alone.
ZIRP is pretty much behind most of it. If you want somebody to point a pitchfork at, Ben Bernanke or Janet Yellen are as good a target as any. They are largely responsible for homes being transformed into mostly investment vehicles that provide living space from vice versa.
Good thoughts. You failed to mention Prop 13 which was put into place a long time ago and simply doesn't make sense anymore. It's at least part of the reason it is so affordable (in relative terms) for rich people to keep second homes here when they bought them years ago.
We live in a building of 60 units where probably at least a third of those are absentee owners. They're rich enough and the cost to maintain is so low that they don't even need or want to rent those units out. We've seen our neighbors only 2-3 times in past 2 years... but if you look at the property tax bills of folks who bought 10-20+ years ago they are minuscule and are only adjusted upon sale of the property. In our case, we're paying easily 4x what the previous owners were.
We moved from DC couple years back which is also very expensive but their tax valuations are re-assessed on a regular basis so you don't have this huge disparity in what the rich old people are paying in prop tax vs the young not quite rich people are.
If values and property taxes were reassessed every 3 years or so this would put more pressure on these absentee owners to either sell or rent their units thus increasing existing inventory as well as adding to the city's coffers.