Oakland relaxed a lot of zoning, and permitting regulations about 5 years ago, and so now you're starting to really see production sky rocket. This article [0] mentions 2019 was had 15x more units completed than 2018. And 3x the total units from 2013-2018 combined. Anecdotally, I have several friends who've all moved to Oakland in the last year or so. It will be interesting to see how this plays out, and maybe, hopefully, SF will take the hint.
CT went this way as well, eventually the businesses look to follow residents - particularly younger residents who can't afford the inflated rent or down payments.
CT has a different problem, they kicked the labor expenses 30 to 50 years into the future via underfunded defined benefit pension benefit, retiree healthcare, and other deferred compensation.
They don’t have a tier 1 city which people are willing to pay a premium to live in, and the taxpayers today are balking at paying for labor performed decades ago.
I’d be wary of starting a business subject to a relatively deeply indebted government if I had other options.
Did CT follow Oakland, where SF is NYC? Or if CT is SF, where is the corresponding Oakland?
I live in NYC, and my view of CT is that its modern identity is dominated by being a suburb to NYC, with a handful of big and old businesses in the big cities to keep domestic economy afloat.
The places in my mind that don't fit this model are all east of New Haven, at which point CT starts to be "Coastal New England", a region that, excepting Boston, continues up to Bar Harbor, ME.
But my view is obviously biased by my limited experience, I'm curious to hear more of your perspective.
During the suburban expansion of the last century many southern CT towns allowed in businesses but declined to expand housing and transit availability. This combined with strong NIMBYism drove up housing prices in southern CT.
A good modern analogue of southern CT from the 70s-90s would be the valley in the bay area e.g. Palo Alto, Mountain View etc.
Not disagreeing with you but some additional points:
I don't think CT's housing issues are anywhere remotely as bad as the Bay area. Stamford is the tier 1 city in CT IMHO, which seemed kind of lame. i.e. we would have friends in places further east (almost as far as New Haven) who would come to Stamford for the "scene". I use quotes because the scene in Stamford was pretty muted. We (who lived in Stamford) would drive to Manhattan for our weekends and special weeknights. I thought it worked really well for us. For 2400 a month, we were living in Luxury apartments and life was car friendly. Housing didn't seem too overpriced (starter homes were 600K IIRC). IMO, Stamford was pretty neat a few years back .. not sure if it has changed.
Bay area housing just went stupid until the pandemic hit. I moved out and so did many people I know. It was just not "affordable" on a 200K salary if you have multiple kids and a stay at home spouse. The housing you could get for $2400 was terrible in most parts that were reasonable commuting distance. I also would take metro north over caltrain any day.
Taxes are bad in both places. Stamford seemed more affordable and a lot better culture to me. I love the Bay area but can't make the math work :(
I grew up in southeastern CT and visit there occasionally. It's hard to describe how dead it is for commercial software development, even compared to Boston.
Even if one was inclined to open a good software shop in CT, you'd have neither low property prices nor an existing pool of highly skilled labor.
Anecdotally, I definitely came across more startups being located in the East Bay during my last job search. The founders already lived there, so they located the company there too.
Prop 13 gives huge tax benefits to using land less than productively. Both selling land, and building on it will massively increase taxes.
Property values are rising at 5%-10% per year, but bulidings themselves only depreciate without dumping more money into the building. So that 5%-10% is all land value gain. As a property owner, why increase taxes by using the land more productively with new buildings, when you can continue to profit just as much without that? Also, attempting to build is hugely risky, because the permitting process is fraught, long, and likely to fail.
If we didn't have Prop 13, every single property owner would have a lot more incentive to actually try to build.
> As a property owner, why increase taxes by using the land more productively with new buildings, when you can continue to profit just as much without that?
Is it really a bubble if the overvaluation is created by law? The only way to pop the bubble would be to change the laws. And with Prop 13 being untouchable politically, and homeowners have an iron grip over city councils to keep cities underzoned, there's little chance of the systematic problem being eliminated any time soon.
> Residents strain the city budget via things like public schools. Businesses put money into the city budget via gross receipts taxes.
Prop 13 was meant to drastically cap property taxes. It was very successful in doing so. As a result, tax revenue from property taxes has also been capped dramatically, and cities adapted by relying more heavily on taxing businesses. Hence the current situation where residents cost more in services than they bring in in property taxes, incentivizing cities to attract businesses and wiggle out of their responsibility to build more housing units.
A good illustration of this dynamic is “RHNA”
process for allocating housing unit quotas to each city in California. it is a very conflictual process where city councils typically fight tooth and nail to get their quotas reduced. A recent example in Palo Alto: https://www.paloaltoonline.com/news/2020/11/18/palo-alto-ass...
I don't think every California home owner is some evil beast trying to keep others out. I support building more homes, and would love it if every single family detached home were automatically rezoned for two units on the parcel. But if it weren't for Prop 13, my home and my business would have been forced out by people moving in and paying too much money for homes next door to me.
And "raising property values" only raises my property tax, while giving me no real benefit.
Prop 13 causers real estate values to rise much faster than they would have otherwise , by restricting the productive use of the land. It incentivizes land owners to not build and to not transfer land to someone who could make better use of it.
When it's a broad, general effect that covers an entire stateC that causes prices to rise much faster than they would have risen without Prop 13.
Prop 13 is one of the major causes of people "paying too much money," whatever that means. No purchaser wants to pay too much. The seller is the one setting the price when it is high, and Prop 13's incentives for speculation are what gives sellers so much market power to extort purchasers.
1) sell, reaping a huge windfall.
2) use a HELOC or reverse mortgage to pay for the higher property taxes.
But of course you'd prefer both to keep the windfall and not move, a privilege afforded to you by prop 13. That is only natural.
Meanwhile, homelessness in the state continues to rise as high land values make housing production and anti-growth activists on planning committees exacerbate our housing shortage.
I find it acceptable that people want to stay at home where their social networks and memories are. You all act like it is OK to push people out from their homes, just because you have money and want that place.
I agree it would not be OK for people to be forced to leave their home because they cannot afford to pay their property tax.
But there are simple solutions to this problem which do not create even worse problems, unlike prop 13. For example, Texas allows taxpayers 65 years of age or older to defer their property tax payments. In other words, the tax is still due, but not until the property is sold.
Why did California voters not implement this much simpler approach to preventing displacement? Because the goal was never to prevent displacement - it was to lock in massive tax subsidies for established homeowners, at the expense of everyone else.
> But if it weren't for Prop 13, my home and my business would have been forced out by people moving in and paying too much money for homes next door to me.
Prop 13 does not solve this problem. It merely shields historical homeowners from it, while amplifying it for everyone else. Many people and businesses were forced out by speculation because of prop 13, but you and a small group of people were exempted so you don’t care.
People are forced out of their home all the time, without the gigantic windfall of money that a property sale entails.
Evictions happen all the time, and these poor folks do not get the windfall of a $1M investment paying out. They get the trouble of trying to find a place to rent with an eviction on their record, which means they will be paying higher rents with less ability to pay.
Nobody should be forced from their home, homeowner or renter. But in California we only privilege the already privileged with that sympathy.
Prop 13 has forced far more people out of their home than property taxes have forced people in NY State out of their home. And NY has high property taxes and lots of people. So does NJ.
The idea that Prop 13 protects people from being taxed out of their hugely inflating financial asset is somewhat preposterous on its face. It mostly protects large landholders, and gives a tiny tiny benefit to the people that we are concerned about.
Focusing on the ineffective application of protection to a tiny number of millionaire homeowners, while ignoring the wealth inequality that funnels money to the people with tens and hundreds of millions of property, is extremely short sighted. It's time to stop pretending that Prop 13 is about the minor side effect of protecting a homestead, and pay attention to its primary effects, which is to encourage financial speculation with land and to give away tons of tax subsidies to those with the most land wealth that are hoarding it the most from better uses.
> The idea that Prop 13 protects people from being taxed out of their hugely inflating financial asset is somewhat preposterous on its face. It mostly protects large landholders, and gives a tiny tiny benefit to the people that we are concerned about.
When you say "large landholders", are you talking about REITs and commercial property holders? If so, wouldn't Prop 15 have addressed these issues?
Anybody who owns more than a home, including "small" landlords.
If you look at land distribution in cities, you'll find lots of super wealthy families, hidden behind LLCs, and a few REITs, the smaller scale landlords, and then finally individual homeowners.
Those wealthy land hoarding families are often worse than REITs for cities, in that maintaining their own political power is more important than profits, and that can be worse for people on the lower end not the economic scale than even REITs' horrifying landlord behaviors.
Thanks. I had briefly thought "what if we just tax second homes at market rate?" But quickly realized the loophole of creating a company/trust per property.
Have you come across any good articles showing the breakdown of land ownership in SF?
"You should be thankful for having to move despite really not wanting to, because some other people have been completely screwed" is an abusive logic tho.
I think the point being made is that if you support Prop 13, you either a) are wildly misinformed about its effects, or b) don't care about its effects because you are in the privileged group that benefits from it at the expense of others.
(Whether or not the assumptions behind this assumption are true is of course up for debate, though I personally tend to believe Prop 13 is a bad deal, even for those who think they benefit from it.)
Perhaps you simply were not aware of the fact that prop 13 contributes to the displacement of people and businesses you claim to care about. I that case, it is now up to you to act on this newly acquired information and revisit your support of prop 13. The choice is yours.
Actually no, land is the one thing you can't make more of, which is why economists say a land value tax is one of the most efficient taxes (since supply is fixed, taxes can't reduce supply).
It's true you can make more housing by building up, but only if city zoning allows, which NIMBYs don't want.
Wealth taxes in general are challenging to execute. Property taxes are much easier, as well as deal with the extra issues brought on by land ownership that cash-equivalent wealth does not.
You're absolutely right - a property tax is a type of wealth tax. I completely agree, which is why I attempted to differentiate between a general-purpose tax on all wealth in any form and a tax on real property. Please accept my humble apologies for my failures to be less clear than I could have been - my communication skills are a work in progress.
With that said, I have been under the impression that countries that have attempted to levy general-purposes taxes on all forms of wealth have in many cases run into practical difficulties. This requires things like finding a fair way to value and re-value an art collection or shares in a company not traded or liquid. In several cases - like France - these difficulties and others have led to dropping general-purpose wealth taxes.
Have I been laboring under a misapprehension? Can you help me understand what I've missed?
I don't think you're wrong. There's easy parts (ie. publicly traded equities) and hard parts (eg. art collections).
I've been skeptical of skepticism (lol) of the wealth tax mostly because the easy parts dominate the hard parts. Most wealth is in the easily identifiable areas (ie. equities and property) not the hard areas. Even with private companies like some startup, surely the shares have some known valuation right?
My point is though that we've already built a bureaucratic apparatus to evaluate wealth in our property assessment system so surely it's possible to extend this.
A possible implementation would be to mostly ignore the "hard" sectors of wealth (eg. car collections/art collections) or do random audits of the tricky parts just to keep people honest.
My -- perhaps overly cynical -- expectation is that a "focus on the easy stuff" wealth tax would just cause wealthy people to move their assets into the "hard stuff" as much as possible.
I think the hope would be that there'd be would be some limit to the willingness for someone to shift money into relatively illiquid assets (ie. cars) that aren't really that good of investments instead of keeping their money in equities and simply pay the tax. There's a balance to find there in the policy.
Do you think it's perhaps worth looking at places that have tried wealth taxes? I think it possible that there might be some lessons to be learned from the well-intentioned and sincerely tried efforts of others. Perhaps our basic assumption that what works for real property will surely work for everything might not be trivially true, for example.
Yeah sure, but we should also be aware that the wealthy do not want these taxes, and will use every means to ensure they are not enacted. This includes spreading FUD about their implementation and results.
I, personally, hesitate to characterize the lived experiences with policy choices of other polities as FUD. I understand that this is a deeply personal choice, and as such some might differ.
I'm speaking mostly to the media (owned by whom?), politicians and the surrogates of wealth that appear as a talking head to speak about the wealth tax.
The "Taxes were repealed in Europe so case closed" message that wealth is all too happy to push is a deflection from a thorough examination of the policy. Why were these policies "failures" in Europe? Some of the flaws of the European taxes have been already directly addressed by more recent Bernie and Warren proposals. For another example the issue some European countries had of their wealthy fleeing the country to avoid the tax isn't even possible US's tax system which will tax you regardless of where you live.
I'm not sure it's so rosy in Oakland. For commercial real-estate in oakland, we were hit with the reverse -- rent kept going up as folks like Uber were eyeing it. Community housing groups were rightfully concerned for the relatively poor community as well. It reached the point that we moved to a spot in SF (union square) because prices reached a similar level. We went fully-remote right before covid as we had a remote culture, so not sure how it is now.
If true, good to hear Oakland is fixing the path it was on..
SF gets a lot of flak for housing - quite deservedly so - but we give a free pass to cities like Mountain View and Palo Alto. They have much much more restrictive zoning. Palo Alto outright bans a second storey. That’s where people go to work as well. They want to keep the offices there but not let the people live. What would be good is a tax system that’s distributed based on where people live nullifying the advantage of the lopsided advantage for favoring businesses over residents.
I agree with Palo Alto, but how is Mountain View restrictive by Bay Area standards? It's added a higher percent of people than Oakland on the past decade.
Prefab won't be a solution for housing shortages in California because of trade union opposition. The fact that there is more than enough work to go around doesn't stop them from opposing efficiency improvements and extracting rents in the form of union labour requirements in housing bills.
Everyone I know who has asked for a discount has got the discount.
After several months of the pandemic, and noticing the adjacent apartment being relisted by my landlord at a discount I emailed my landlord and asked if I could have my rent adjusted by the same discount. They said yes, if I committed to another years lease.
Saving 5% of rent, at the cost of a one year commitment didn't seem like a win, so I politely declined explaining my reasoning, and suggested we leave things as they are.
A week or so later, out of the blue by my rent got adjusted by 10%+ instead of 5% with no need to commit to stay.
Sufficed to say, if their intention was for me to stay put, it worked!
Another data point. Tried to get a discount in our Inner Sunset 1BR that we paid $3250 for. Other units in the same building listed for the past few months for $2700 with 2 months free (effectively $2250).
Denied a decrease (citing CA Fair Housing and not giving anyone a decrease) so we paid 1 months rent to break the lease. Now living in a 2BR by the beach for the same price as before with 50% more space, W/D, garage.
Old apartment went from ~10 vacant 1BR to ~25 vacant 1BR listings during the past couple of months during our negotiation and move.
I had a corporate landlord in Foster City and asked, they wouldn’t budge and invited me to reapply for a different apartment at a lower rate as the lease was up. I live in LA now.
If you have 6-8 months left in your lease, and they do not have demand, they got you locked in so their incentive is less. They do not have demand so obviously the unit you vacate will also sit for a few weeks at least so you need to pay. That's the contract.
If you have 2 months left, they know you are high risk to move out so they will throw discounts to avoid yet another vacancy.
As a data point: I asked for 25% off my 1 bedroom rent (which seemed like roughly market rate). They said something along the lines of "we're not lowering any rents because we're struggling due to the economy".
So, I left and they got nothing. I doubt they're going to rent it out again for a while.
This behavior is very common and just baffling to me. In many markets right now, there is just no way they are going to rent that out.
The only explanation I have heard is that lenders allow a certain amount of vacancy increases in the terms without triggering a reevaluation of the property value. Whereas lowering the rent will more quickly trigger that new valuation.
And the way many commercial loans are setup, they may require immediate payment of the difference of the value of the property if it drops.
But this just seems short sided on the part of the banks. And why do seemingly so many of them have this policy? If I am assessing property value and vacancy sky-rockets, I'm going to be a lot more concerned than if rent has to drop a bit.
SFHs are assessed by looking at comparable properties because there isn’t a liquid market continually providing feedback of the current value of the asset. With rental property you get a pretty good signal on an ongoing basis - the rent! So investment real estate is based quite strongly on the Net Operating Income, and the value is the net operating income divided by the sale price which gives you what is called a capitalization rate (how much money you get coming in for how much you had to come up with to buy the place.) cap rate is impacted a bit by market and a bit by segment (upscale property vs housing for lower income folks) but it is mostly impacted by current interest rates. Cap rates can be like 4%, or where the sales price is like 25x NOI. So, at a 4% cap rate, differences in rent have a 25x impact on the value of the property (big expenses like property management costs tend to be proportional to rent, etc.)
So now that you know about how NOI is the thing that drives property value, some other practices make sense — “concessions” (free months of rent) are only sometimes valued as part of the rent roll, but usually ignored unless the property has a pattern of excessive turnover. This is why landlords are more likely to give you free months rent instead of lowering your rent!
Anyway, it’s all a game that serves to transfer wealth from workers to capital holders and our tax system incentivizes this in many ways. Used to be that people spent way less a portion of their income on housing, but the move to create an “ownership society” actually made it way more expensive relative to wages, to the benefit of land owners. This also explains a large part of the wealth gap between white people and Black people with redlining and refusal to loan for black neighborhoods, etc.
They’re able to slip this into agreements because conventional wisdom (even post 2009) still thinks real estate never drops in value. Momentum is the strongest inefficiency in most financial markets because humans have short memories.
If I’m a dumb real estate investor in SF pre-2020, I don’t care if the bank puts that kind of requirement on me, because rents in SF always go up!
There was a great comment on Reddit who is familiar with the commercial real estate industry. These loans are combined and split up among thousands of investors. Its basically the same thing that happened back in the last recession with residential loans.
In Seattle, I asked for them to fix the internet and run an ethernet cable to my unit instead of relying on their spotty wifi. They said they wouldn't and they're raising rent a few percent. I declined to renew my lease as well. Some landlords are ridiculous. Hope they enjoy their massive spiking vacancy rates.
It's still a better deal for them, sometimes. Decreasing the rent can decrease the implied value of the property, which can be problematic with financing of multi-family or commercial properties. Letting it sit, collecting no rent, won't hurt the property's value. Which is a strange loophole in the system.
I am in bay area, but my apartment complex refused to readjust rent to reflect the drop in rent (2500$ to 1800$!). I decided to break the lease and move to a better area.
Great on you! To complete the math, what was the "break" penalty and how much did your new rent save you? These economics are fascinating, SF is crazy.
Unless the lease had other terms written in, California generally allows landlords to continue to charge rent until the unit is rented again (or the end of the lease term).
The last time I moved, I had 2 months OR rent responsible till end of lease (or until they lease it again). It depends. I picked "rent responsible" per their friendly advise and paid 5 days of extra rent since they could clean and re-rent that fast (this was 2018).
Not necessarily. I’ve lived in three rentals in LA over the past five years and each one had a clause that allowed me to break my lease in exchange for two months rent. Not saying the OP had that clause, but I’ve never had to ask for it and it’s been baked into the lease.
I know my current landlord is going to be excited about me leaving in a month, as rent had gone up about $1,300 a month in this area over the last two years, but my increase are capped.
I see. I am in NYC and read my lease break to see if I could brake it. Im from europe and this clause looks like illegal in my country but I guess USA is on a whole other level... If I move I could end up paying 1200$+ double rent for months...
"In the event the lease is broken during the middle of the term, and the applicant did
not pay a year up front due at lease signing, the lease break fee is $1,200.00 made
payable to the Shareholder. The penalty fee is charged by the coop board to the
Shareholder due to the lease break. Lessees are immediately relieved of his or her
contractual obligations to the Shareholder & coop upon successful take over by the
next Lessee(s) identified by the broker, and is board approved for move in."
Sublet for a smaller amount till the lease runs out, at least you will lower your loss or even come even (considering that you'll be paying way less in the new place you move to)
Assuming that's allowed: many lease agreements in major cities in the US explicitly disallow sublets, or require landlord approval. Landlord wouldn't have any (financial) incentive to approve since they get money either way, and taking on a temporary subtenant is usually higher-risk than a regular renter.
Then again, if the current tenant has a lead on someone to potentially take over the lease and become a long-term tenant, then everybody wins.
The move did not save me money considering the security deposit and moving costs despite the lower rent, infact it cost me 200$. But i got a bigger home in a nicer area. Well worth the 200$ it cost me overall.
Our landlord proactively offered! We pushed back a little and got an overall savings of around $6000 for committing to another year in an apartment we love. Well worth it.
Added bonus: The apartment is rent controlled so it will take 2 to 3 years before rent climbs back up to our old level, if we stay.
I'm not sure rent control works that way. I think it only depends on the base rent, which is the rent in the year you moved in. I don't think later reductions reduce the base rent.
Which implies if you want to lock in lower rent with respect to rent control, you have to start a new lease in a different location.
> Everyone I know who has asked for a discount has got the discount.
Just one data point, but a couple I know who lived in a 1BR in a largeish apartment building was denied a rent adjustment, despite other identical, vacant units in the building being put on the market at a somewhat lower rate. They ended up moving into a 2BR in a nearby duplex at the same rent (plus a couple free months), but nearly twice as much space.
A month after they moved, my friend told me that their old building had something like a 35% vacancy rate due to similar departures. My theory is that they're banking on the rental market going back up by mid-2021, and, being a rent-controlled building, don't want to allow people to lock in much lower rates.
Commercial real estate rents work differently, at least in America, because of how they’re financed. Unlike residential housing, commercial buildings are continuously refinanced. When the owner of a commercial building gets a new mortgage on their building, the potential for rent is weighed more by the banks than the current rent. The way the math works out, it’s much better for a commercial land lord to leave a unit empty for a surprising amount of time rather than reduce rent, because the impact on financing costs is typically larger than lost rent.
Really interesting. There's an empty spot in my building that's a coffee shop storefront. When we moved in, I saw that it was vacant (beginning of 2020) and asked about rent. It was $9k/mo. I offered them $5k and they declined. Still vacant. That's a lot of lost income, but perhaps it makes sense in the sense of commercial real estate.
if they can offset the cost of the lost income from the (lack of) rent with some other source of gains, they pay less taxes!
Also, if they accept a rent of $5k/m, it sets a new (lower) price ceiling, where as a $9k/m original price was the original ceiling which supports the current valuation. Thus the commercial real estate would have a harder time to capitalize on the equity. S
Therefore, the losses are more than just the $4k/m difference - it's lost capitalization/equity to which one may leverage against, and lost tax offset potential as well.
Here's a good comment covering it[0]. I got my summary slightly wrong; buildings aren't re-financed, but rather the owner has the ability to delay payment on any unleased units. Leasing a unit at a lower rate suddenly modifies the value of the building, which means signing a lower lease can put the loan underwater. The same basic motivation structure applies though, it is far better for the owner to leave a unit empty and pray that someone can rent it at market rates later than it is to lower rates and get a tenant now.
That does seem strange, it’s hard to imagine the financial and legal structure that would incentive the beneficial owners to let a desirable chunk of real estate sit idle for 11 years.
Because the Fed is continuously lowering interest rates and pushing up asset prices??
Commercial space in a city like Boston rarely rents for anything close to 1% per year. R/E has been appreciating at over 6% per year.
You're going to make almost 10x as much money doing nothing as you would renting the building - even if the rent was 100% profit (it's not). In this case, the landlord would need to do a ton of repairs and probably wouldn't even cash-flow for 2 years.
For 10% more profit? That sounds like unnecessary / excessive risk to me.
There is overhead cost to having tenants as well that may not make the drop in rent worth it. As someone mentioned, if you drop rent by a significant amount, banks have to adjust you potential profitability, and that's a big downside. Its also harder to get rent prices back to where they were once you drop them.
> the weighted average asking rent for an apartment in the city, which currently measures around 2.3 bedrooms when counting a studio as having one, has dropped to $3,100 a month.
Still too high. Was checking into apartment prices earlier in the year and it is amazing the number of landlords that will try and sell you on a “kitchen” that is a mini-fridge, tiny sink, microwave and a hot plate whilst still charging you full rent.
San Francisco’s rental market is a good lesson in how supply and demand informs pricing that the residents and the Board of Supervisors alike continuously and willfully ignore.
Those landlords don't try to sell that small kitchen, they DO sell that small kitchen. When I was shopping for an apartment in SF 2 years ago there was no spot that did not have at least 2 other parties looking at it. There was no room for negotiation or to even take a day to think it over, if you walked away from it, there were 2 people right behind you to take it.
> There was no room for negotiation or to even take a day to think it over, if you walked away from it, there were 2 people right behind you to take it.
Naive question maybe, but if demand is that high, why don't prices rise even higher to balance it out a bit? Presumably most landlords would prefer another hundred or two a month at the cost of a few extra days on the market?
They do. At some point the landlord makes the decision that this is good enough and accepts an offer using whatever factors are in play, maybe some personal circumstances like needing the money sooner rather than later or just liking one of the applicants more, but the next landlord is now informed by what his neighbors charged a month or two ago for a similar space and uses that as the floor for what they should ask for. On and on it goes and suddenly prices trend up and a space that went for $X two years ago now goes for $X+$500 today, or as we see in the original article, $X-$1K versus a year ago.
It is better to rent to an interested party today than wait a month for someone who might pay $200 more per month. When the rent is $3500 a month, it will take 1.5 years to make up that difference.
Yes this: in real estate investing this is called the vacancy rate and it eats into profits, sometimes significantly. Too much vacancy and you can’t cover the mortgage.
Then they don't sell the kitchen per se, they're selling a very in-demand housing unit. People take it in spite of its kitchen, not because of its kitchen.
Do they ignore it, or are they using it for their own gain? For people who actually own property in San Fransisco, consider how enriched they have become by the obscenely rising rent/real estate prices. This comes along with them getting to keep their neighborhoods static instead of having to have a gigantic shadow erected across the street. Sure there are downsides, but you can always just sell and get our with a pretty sweet paycheck before those come to bite you.
Both. I spent the last decade having these conversations with people who also grew up here and can’t afford to remain here without staying with their parents, with some of the stranger conversations devolving into my counter parties brainstorming ways to kick tech people out of the City and stop new people from moving in altogether, as if freedom of movement in the United States wasn’t really a thing.
It’s not “supply and demand”, it’s “selfish rich techies and landlords”. I mean you can read that as supply and demand restated, until you get to next steps like solving the supply problem, and apparently building one more apartment building will irrevocably ruin the character of the City.
It's a side effect of de-taxing land. The more land becomes an asset and the less it becomes a liability (e.g. by capping property taxes) , the greater incentive there is to hoard it and jealously guard its value with NIMBYism which leads to even less development, greater shortages and even higher prices on an upward spiral.
Saying "it's about supply and demand" is not technically wrong but it glosses over the toxic systemic changes which brought us here and exculpates the people who deliberately fought for them to create this mess.
If land were closer to being in a liability in SF then the NIMBYism would be a pale imitation of what it is now and the land would be used much more efficiently and property wouldn't be as astronomically expensive.
However, land owners need an economic incentive to develop that requires them to lose money if they use land unproductively.
That means taxing the value of the land - preferably directly (via LVT) but failing that by raising property taxes.
Even if land were historically taxed at say NYC rates in SF the supply and demand problem would still rear its head. The problem is artificial supply constraints created first and foremost by zoning and secondly by a myriad of other regulation that infringed upon property rights and adds friction (time, money, risk, all of the above) that prevents people from exercising their property rights. Prop 13 (a monetary incentive to not sell) falls into this latter category. LVT would just be the revers of Prop 13. It's not going to solve a fundamental supply and demand problem that's created at a lower level. You'd have everything built out as much as the zoning allows for but the net result would still be inadequate because the zoning is too restrictive and the regulatory friction is going to still works its magic at the margin.
NIMBYism is a result of people who really want to protect the value of their land. Some of these people will be quite desperate to do this because they're highly leveraged. Negative equity is a good incentive to turn up to your local planning meetings and inhibit development.
I think NIMBYism only looks financially attractive because everyone who bought a square of land in a "city" since the 1970s or so and held for at least a decade has won big regardless of where. That doesn't mean that SF/SV isn't forgoing a lot of money in order to keep its NIMBY policy. Think about how much just the squares of land those single family homes and low rise buildings in SV are on would be worth if the SF was developed to NYC, Chicago or Boston levels.
I think the fundamental problem here is that the people of SV people do not believe in property rights (e.g. the right to develop property you own as you see fit) to such an extent that they are willing to put their money where their mouth is and codify it in the form of (restrictive zoning and other shenanigans that hinder development) even though this inhibits growth and limits their upside.
* People who have watched their property appreciate in value by 4-10x for basically doing... nothing.
* People who have taken out an eye watering loan for well over a million dollars and are kept up at night by the idea that theyll owe a million dollar loan on a $750,000 home.
Of course they're going to be conservative! Of course they're going to try to avoid anybody rocking the boat! Of course they'll be NIMBYs!
Why on earth would you think that the one thing that keeps them ludicrously wealthy - property rights - is the thing that they'd stop believing in??
I think you and your parent are not using "property rights" in the same way. You're talking about the right to own property in a sort of static sense, while the parent is talking about the right not only to own property, but build and develop on it as the owner sees fit.
SF homeowners of course believe in the kind of property rights you're talking about, but mostly do not believe in the latter. Most homeowners here want (and unfortunately mostly have) absolute veto right over any kind of construction or development that their neighbors want to engage in, whether it's as simple as reasonable cosmetic changes by a resident homeowner, or as complex as a denser rebuild by a housing developer.
(But I mostly agree with you in your characterization of the two types of SF homeowners. There also are some who are nominally in your second category but wouldn't be catastrophically financially impacted if their mortgages went under water, but they're definitely in the minority.)
I guess they "care about property rights" in the same sense that everyone right of die hard communists cares about property rights but that's kind of like saying it's a warm day out because it's 200-something degrees above absolute zero.
If they care so much about property rights then why is it so hard for people there to do build on their own property that increase the value of that property?
Saying SF cares about property rights is like when the person who creates drama says they don't like drama.
Yes and no, and this is a big part of the problem: young adults in the US are taught that their primary residence is/will be their biggest investment. So you get this weird set of fears that encompasses the worst of both.
The house-as-residence aspect makes them fearful that you won't make your mortgage payments, or your mortgage will end up under water, and the bank will foreclose on you and you'll be homeless. The house-as-investment aspect makes them fearful that they'll take a loss or even break even come sale time, and then their retirement nest egg will be weak.
So I agree that fundamentally yes, people are buying a house to live in, but it's a lot more loaded than that.
If housing costs were more reasonable, perhaps we could turn the tide against this "primary-home-as-investment" attitude, which I believe to be counterproductive.
I live in one of those sorts of cities. Detroit is their own doing because of local tax code. There's a decent amount of "there was a falling down commercial building here so we bulldozed it and then just let it sit" type of lots kicking around in other cities but the lots have still increased in value (i.e. inflation has happened) enough that mostly nobody is underwater and anyone looking to get out can do so without losing money.
> a myriad of other regulation that infringed upon property rights and adds friction (time, money, risk, all of the above) that prevents people from exercising their property rights. Prop 13 (a monetary incentive to not sell) falls into this latter category.
I think Prop 13's incentive not to redevelop is actually more significant here than its incentive not to sell.
Right. At least when you're old enough to be in retirement there are a bunch of ways (expanded this year) to sell and keep your old tax assessment on your new place. AFAIK redevelopment will always trigger a reassessment no matter what.
> Saying "it's about supply and demand" is not technically wrong but it glosses over the toxic systemic changes which brought us here and exculpates the people who deliberately fought for them to create this mess.
I am happy to discuss all variables which inform the price, so long as we agree to give supply and demand top billing. We can even discuss the variables which inform supply if you like.
No but when figuring out what informs a price you want to look at supply and demand first. There’s room for other variables, but you normally start there.
EDIT: While I’m inside the edit window, let me throw in another big variable as an example. Costs are another factor that inform a price, and a big one. You could make a case that it deserves higher billing than supply and demand, but if your costs are $X but you can only sell your widget for $X-1, and not $X+>=0, then $X-1 is your price ceiling. Your business is unprofitable and losing money.
I’m trying to be careful with my words but I still seem to be leaving some people with the impression that I think supply and demand is the only variable that informs a price. It’s not, but it’s still incredibly important and often dismissed as a non-factor when discussing San Francisco rental and real estate prices with San Franciscans.
But property supply itself is a constrained effect of politics and the relative power of various social groups, not a unique and independent primary cause.
If landlords can make a killing by constraining supply politically, they will. So the primary cause is the incentive system and the political environment which makes it possible for them to do that.
It's all about how the reward functions are designed. So of course if you reward scarcity and profiteering that's what you get - as a secondary outcome, not a primary cause.
It depends on your definition of "landlord". If by landlord you mean the typical NIMBY homeowner then sure it's true. But in practice landlords can make more money off of building more units vs squeezing out more profit from a smaller amount of units. So if you were a politician and followed the advice of the greediest landlord you would not end up with scarcity. The political environment doesn't listen to the greediest landlord though. It primarily listens to the homeowner type of landlord.
That's not typical of California landlords because of Prop 13. The tax benefits entirely shifts the market towards the benefit of properties that have been in the same hands for a very long time. So building new units will be far less profitable than old buildings, long-held, without any significant renovation. It's very rare to find an existing property on the market that is profitable to rent out at current market prices, because there's a lot of anticipated value gains built in to current prices.
In cities with zoning constraints, developers are the only natural predators of landlords. They are entirely different skillsets, building new units requires managing an extremely difficult political process for permits, raising capital, working with contractors and labor, etc. Being a landlord requires very different analysis and skills.
There may be a few landlords with the capacity to cross over to development too, but it isn't many of them.
Political factors can also inform supply, it doesn’t change the fundamental calculus of supply and demand, merely shapes the supply.
If you have a bunch of left wing groups who are anti-development fighting to keep supply constrained even while complaining the rent is too damn high and the character of the City is changing and yadda yadda yadda, who are you[1], as a landlord, to take the wind out of their sails when you are profiting from their protests?
This is just wildly incorrect. Landlords are very strongly opposed to left wing groups in SF, based on political funding. Landlords are the number one target of progressive legislation. The most left wing supervisor is literally a tenants rights attorney who ran on protecting rent control and wrote the law banning evictions.
Land is a rivalrous good but housing isn't. Sprawl is just the most conflict free way of giving everyone what they want but it's not the only way. You can always build more housing on the same piece of land.
Supply and demand is pretty obvious because of the basic physics behind it. If you have a world with 10 houses and 20 people then 10 people will be without a house. It's not very difficult to see the problem and how to respond to it. We first have to establish that we want every human in our country to have shelter. That means what we don't want to happen is the allocation of housing to a subset of the population, be it via the free market, a lottery or an application process where you are vetted by an interviewer according to some criteria. We don't want any of that. So the obvious solution is to just build more housing, regardless of the economics.
Now lets just add a thin layer of economics.
It turns out that the free market has this interesting property that in the case of demand exceeding the supply the cost of housing increases until it becomes profitable to build more housing. It's a self balancing system if you make sure that it's not getting stuck somewhere.
Turns out if you make it really difficult to build more housing then people decide to pack up and leave because that's the only option left. For the sake of the argument 20 people can't live in 10 houses so 10 people will have to go build housing somewhere else.
Now here is the perverse thing. The same people who made it difficult to build more housing also made it so that they get to stay where they are by removing the pressure to leave the location. What we get is 10 people living in housing and 10 people living in misery. You don't need an economic resource allocation mechanism like the free market to cause misery. The misery already exists in the real world and the economics merely summarizes that misery as a price signal.
So why care about supply and demand? Because it's the closest thing to physical reality but what people fail to grasp is that you have to change physical reality to change the economics. No, messing around with prices via rent control or prop 13 does not solve the underlying problem.
Veblen goods are a special case that prove the concept. With a Veblen good the price paid is part of the demand: you want that Rolls Royce or Lamborghini or diamond ring because its expense signifies your social status. The demand curve then slopes upward: at higher price points consumers demand them more. You can still analyze them by supply & demand, but you just have to take into account the upward-sloping demand curve (which is not unlimited, BTW: Veblen goods still reach an equilibrium price point where supply reaches buyer's ability to pay, it's just higher).
But they are using land productively as they are making $3100 a month off of a small studio.
Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters.
When people talk about "using land productively", they aren't talking about a single person's profit. It's more of a "collective productivity".
You can only pass on so many costs before demand drops because the price you're asking just isn't feasible.
Non-resident landlords in SF, to my knowledge, aren't really anti-development. They recognize that 2x the number of units on the same parcel of land won't cut the per-unit rent in half, so higher density is still a better deal.
The problem, from the individual landlord's perspective, is that they can't redevelop their own land without triggering a tax reassessment, which can easily turn any profit into a loss, even after adjusting rent for the newly-developed property. The landlords who are making out like bandits right now are the ones who have owned their properties for decades. I wouldn't buy a duplex or a quad-plex in SF right now with the intention to rent it out; the cost of the property, plus 2020-assessed property taxes, would mean I'd barely break even at market rates (pre-pandemic market rates; current market rates might be a solid operating loss).
Large developers that are coming in and wanting to build apartment or condo complexes essentially have to build so-called "luxury units", because the economics won't work out otherwise, when you take into account high initial property taxes and the high, drawn-out cost of just building in SF.
which is why i think property taxes are a stupid form of taxation. The property's income should be what's taxed - not the "value" of the property. And that income should be taxed at the marginal tax rate of the owner.
Land owners are not in the business of giving money away. That's precisely why increased taxes will not result in increased rents. After all, if they could increase rents and the market would clear it when there's a tax, why wouldn't they when there's no tax?
They're not selling at cost-plus, they're trying to maximize profit.
Because renting in SF trades off in part against buying in SF at the margins (and against renting nearby to SF and against moving out of SF entirely). If buying in SF becomes more expensive due to an LVT, then renting becomes more competitive on the margin.
I find it to be strangely magical thinking that land-value-taxes will precisely and surgically extract 100% of their value from landlords with no players in the game altering their behavior in any way that would result in the effects being shared across many participants in the real estate markets in a city.
The idea behind the LVT is not about making rent cheaper. It's to reward landlords for using land more efficiently. If the land costs a fixed amount you want to build as many units as possible and make each unit as attractive as possible.
Compare that to a conventional property tax where you have to pay more tax for each unit of housing you build. You also have to pay property taxes for home improvement meaning old properties won't be renovated ahead of time and therefore won't be rented them out. Instead the house will only be available for sale with the hope that the buyer will renovate the property.
Have LVT proponents ever considered augmenting it with tax credits on the LVT for property improvements? To really hammer home incentives towards development in especially supply-strained markets such as S.F.
Usually, the LVT on its own will be sufficient to provide an incentive to develop in an economically efficient manner. The real problem isn't that. The real problem is that people do not desire their neighbours to operate in an economically efficient manner. It is just risk aversion in a different sense except the asset is being paid for by someone else.
Imagine that the US government would buy you a bicycle, any bicycle, at any price, reallocating from things that you don't care about, so long as you tell it how important a bicycle is to you. You are likely to describe it as being a matter of life and death.
The amount any human would pay for a view is different from the amount they require someone else to pay to obscure the view. Economic efficiency is not a goal in any sense. And any incentives such as the ones you provide would be struck down in the court of popular opinion because it is the outcome that is not desired, not the process.
LVT is a tax only on the unimproved value of the land. Property improvements are not covered: the land owner gets to keep (or pass onto the renter) 100% of the value of such improvements. No tax credit is necessary; it's a natural consequence of how the tax is structured.
Right, I understand that property improvements aren’t considered in LVT, and are naturally incentivized through the application of the tax. I’m just speculating if specific development-adverse markets could use both LVT, and credits against LVT to really get the pro-development ball rolling.
Based on the one prior attempt at LVT in the U.S., landowners don’t seem to understand its intent:
There's a pretty big risk of market distortions then. I could easily see landowners adding whatever "improvements" the tax credit incentivizes, regardless of whether it benefits the tenant or increases the potential rent charged, and then passing the cost along to the tenant. Also see a booming cottage industry of contractors & paper-pushers to get the tax credit.
I do agree that an LVT has psychological issues when proposed to voters. It's a massive change to how we currently do things (that's the point!), and it preferences groups who don't currently have political power (future developers, tenants, future residents) over those who do (land speculators, retirees, existing homeowners). I think the most likely scenario for its adoption is in the aftermath of a cataclysmic war that destroys all the existing infrastructure and redraws political boundaries. Likely one successor polity might try it out (since everything's dead & destroyed anyway), and then their pro-development advantages would draw lots of displaced immigrants to them, and eventually they'd amass more power than their neighbors through that economic dynamism. Much like how the U.S. became the pre-eminent global power through an innovative politico-economic system + immigration friendly policies + near complete genocide of the native population.
> Much like how the U.S. became the pre-eminent global power through an innovative politico-economic system + immigration friendly policies + near complete genocide of the native population
It's also invaded a crap-load of countries and defacto taken their natural resources And slavery.
No, that's a facile understanding. The loot-and-plunder style colonialism has given way to a unique variant that the US practises. It's not quite "take their resources" like the British Empire and friends did.
See Japan, a de facto US vassal state after WW2 and what they've grown into. Similarly, Korea and Israel. Also, Germany and France. They are just smaller participants in an alliance.
United Fruit style things still happen but the dominant style of US hegemony is different from VOC or EIC style imperialism.
It sounds like GP understands that point and is positing a "what if the value of certain new improvements were taxed at a negative rate?" (rather than a zero rate)
The point of LVTs is precisely to alter participants' behavior in the market.
The value of LVTs is in aligning incentives so that landlords have an incentive to build more housing and use it more efficiently. It makes vacancy & speculation a money-losing endeavor (the same way that inflation makes holding cash a money-losing endeavor), and creates political pressure to repeal zoning laws and create smart public improvements, ones that will increase the value of the land more than their cost. Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government.
> The point of LVTs is precisely to alter participants' behavior in the market.
Maybe this is the point to its proponents. However:
> Its value as a revenue source is secondary, and many proponents (of the geolibertarian sort) actually support lower tax receipts and smaller government.
Statements like this muddy tax discussions.
The primary reason for any tax at all, regardless of type or preference is to raise revenue for government. That fact shouldn’t be lost when discussing which kinds of taxes and what percent to raise them at is discussed, even when optimizing for political outcomes.
If the government were raising more tax than it needs for example, tax revenue is too high. If the government is spending more than it is collecting, then tax revenue is too low. Effects on market behavior are always secondary considerations.
That depends whether you're a politician or an economist. ;-) Through a politician's lens the goal of a tax is to raise revenue for government and tax policy exists to do that efficiently. Through an economist's lens efficient trade and alignment of incentives are fundamental and governments exist only incidentally to ensure those. There are various schools of economics that suggest limiting government's role only to the enforcement of private property rights and kneecapping its ability to do anything else.
It's much like how to a physicist, vectors are real objects that live in the abstract concept of a vector space, while to a mathematician vector spaces are fundamental axioms and the existence of vectors is just a consequence that falls out of these axioms.
You missed out an important perspective that is neither purely politician nor purely economist: taxpayer.
Taxes are paid on money earned, whether through labors, investments or rents. They are a taking, a legal one, of something that rightfully belongs to someone else, so if you are going to take it, then it had better go back to government services.
Economists have found ways to reinterpret taxes and exploit their second Order effects, but this does not change what a tax is or how it should properly be used, nor excuse the misuse of surplus revenues.
Now the reason I bring this up is because if a tax were enacted for the express purpose of shaping public behavior and the resulting revenue was greater than what the government needed, what ought to be done with the surplus revenue? Should the tax be lowered to match expected expenses? What if lowering it to that level negates the benefit of shaping public behavior? These are the conflicts I would expect to see come up.
This is one of the reasons why the discussions around taxes tend to fall along the lines of what is taxed, how much, and where the burden should proportionally fall. Leading with second order effects muddies the waters and hinders productive discussion.
> [taxes] are a taking, a legal one, of something that rightfully belongs to someone else
IMO a LVT holds up (relatively) well under this sort of moral reasoning. I'm sure many arguments can be made around what's fair, but it's intuitive that income from labor, investments, etc should naturally go to who performs the labor, who makes the investments etc.
The (unimproved) land itself is a bit different. It can't go to who created the land, since no one did. In the US, the closest thing is maybe who first took it from the Native Americans. The moral argument for strong property rights (on the land without improvements) to begin with seems weaker than the other cases, since there's no contribution to society tied to making the land (of course switching from one tax regime to another is another matter, since people certainly buy land that is valuable under our current system with their hard-earned money).
That also leads to its (relatively) small effects on incentives for a tax. Taxes on labor and investment income of course discourage labor and investment, but the amount of land does not decrease no matter how much it is taxed. Even a huge tax probably does not affect the monthly payments to use land very much (since the supply and demand still remain similar), it would probably just lead to lower land values and more of the monthly payment going to taxes instead of interest.
> Now the reason I bring this up is because if a tax were enacted for the express purpose of shaping public behavior and the resulting revenue was greater than what the government needed, what ought to be done with the surplus revenue?
I think this is an interesting question especially with things like carbon taxes being considered seriously. It seems like two natural things to do would be to either reduce other harmful taxes that exist only to raise revenue, or to distribute the funds to everyone equally. I could see an argument for the latter if the incentive-shaping tax was something that would raise living expenses for most people (for example, a carbon tax that increases electricity costs), since otherwise it would negatively affect people living off savings or others with low incomes.
I'm aware of the taxpayer perspective and it's a big problem with getting adoption for an LVT. It's the type of policy that makes most people better off but you can never really convince people to adopt, because it sounds worse than alternatives.
There's actually an economic theorem (the "Henry George Theorem", discovered by Joseph Stiglitz in 1977 [1]) that states that under conditions of democracy & perfect information an LVT will exactly "right size" the government, spurring investment in only those public goods that pay for themselves in increased citizen welfare. That's because the tax revenues from public good expenditures come back in the form of increased rents: a playground nearby, a subway stop, better schools, low crime, stable currency, a strong military, etc. all increase the amount of rent that a landlord can charge for a property within their jurisdiction. That rent then comes back to benefit the exact same people who are paying the tax, which removes the principal-agent problem inherent in most taxes (where you pay the taxes but it benefits your neighbor). Landlords have an incentive to raise taxes on themselves right up to the point where the public improvement fails to raise rents by more than its cost. Tenants have the same incentive - as long as the cost is less than the public benefit, they get to enjoy the benefit, their rent will raise by the cost (as landlords pass along the tax), and they end up better off. When costs rise more than benefits (as they seemingly have in SF), people leave the expensive jurisdiction and move to areas that have more smartly allocated their tax dollars.
The main problem in practice is that you can always direct people's attention to small problems that don't raise their welfare in aggregate much - saving the burrowing owls, for example, or banning abortion. The economist's answer is that this will eventually even out across many people and many municipalities, but I think we have pretty ample evidence that people are not necessarily rational beings, and an LVT isn't all that robust to irrationality.
> The primary reason for any tax at all, regardless of type or preference is to raise revenue for government. That fact shouldn’t be lost when discussing which kinds of taxes and what percent to raise them at is discussed, even when optimizing for political outcomes.
That's a political statement speculating at intentions. For instance, the number one purpose of a carbon tax is to disincentivize carbon emissions. This is exemplified by the fact that carbon tax proponents generally support returning the money to all taxpayers as a 'green dividend', i.e. it's a net-zero redistributive policy.
Raising government revenue isn't that important compared to the prime purpose of the carbon tax.
If the market will only bear $3100/mo for an apartment today, that's in part because some less desirable apartment is renting for $3000/mo and that might be the case because that landlord can break even on cashflow and bank on the appreciation.
Institute an LVT and those competing landlords may become cashflow negative, forcing some of those units off the rental market entirely (typically to sales to owner-occupants, sometimes to landlords with better financing or lower overheads, sometimes to short-term rentals or other higher cashflow uses).
An extra $100/mo of LVT may not result in an extra $100/mo of market-clearing rent, but it's far from obvious that it results in $0/mo change.
Thought experiment: if the LVT for that unit were $3500/mo, what do you think the offered rent would be? If that's the case for $3500/mo, what part of that doesn't hold for $3000/mo, $1000/mo, $350/mo, or $35/mo?
I don't think you could have a $3500 a month LVT for an apartment that rents for $3100/mo, because the land value is not fixed.
Put another way, I think the main thing that is going to take hit as the LVT % increases is not renters or landlords, but the land value itself.
A piece of land that rents for $3100/mo may have landlords willing to pay $2000/mo for the land so they can break even after construction, overhead, etc. Absent any taxes, maybe they could pay the whole $2000/mo in interest on a loan to buy the property. As the amount of land taxes increases, the budget to make the loan payments decreases, which should reduce the property value (since the same logic should apply to all the potential purchasers).
It gets more complex once you add land speculation but I think the core logic remains the same - instead of being willing to pay $2000/mo for the property the developer might be willing to pay $2200 anticipating a speculative land return (without LVT, so higher property values), but that shouldn't change in general the market rental rate or if construction is viable, so I think the main difference with or without LVT would still be the land values.
>Institute an LVT and those competing landlords may become cashflow negative, forcing some of those units off the rental market entirely (typically to sales to owner-occupants, sometimes to landlords with better financing or lower overheads, sometimes to short-term rentals or other higher cashflow uses).
Well, LVT is always meant to be a replacement for conventional property taxes so depending on how it is implemented it can be roughly the same as the previous property tax or it could be significantly lower because only the land is taxed and not the whole property.
Wouldn’t the rent be too prohibitively expensive at some point, and the landlord will be forced to shift their strategy for recouping the money lost from LVT from lowering rent, to redeveloping it to be a more effective money maker? Such as by building more units and increasing urban densification.
Now what if redevelopment is not possible? Maybe regulation stops it? Actually, if net value of land is negative what will happen to it? That is taxes are more than value and there is no legal way to extract more value...
The government could just guarantee housing for a fixed price. That fixed price becomes the upper bound and all private market participants would have to bid lower than this upper bound.
This doesn't happen because those who have a political say don't actually want more housing. My proposed idea would force the government to actually solve the problem after all. If there is not enough housing the government would be forced to build it as a last resort and if the government can't do so because of the laws it has enacted then it can change those laws but that's exactly what must be avoided at all costs if you were to ask existing homeowners.
This is a lot like Singapore's HBD, which builds lots of public housing. And you're right, it's the absolute nightmare of people in SF who say they want non-market housing, precisely because it means new housing and new buildings.
However, it's a generally popular idea, that if put to a majority vote could pass. It's individual small groups that would stop it, because city politics are highly undemocratic and controlled by small factions.
However, there's hope at the state level to make this possible. I'm hopeful that in the coming legislative session there will be some serious attempts at state-level public housing to alleviate our desperate shortage.
The $3100 is the result of rent-seeking, not of productive economic activity. SF landlords are leaches on the economic engine and wealth of the city, one of the rare things that both Adam Smith and Karl Marx would agree on.
> Also I doubt if raising taxes will result in anything more than them passing that cost on to the renters.
Only new buildings in SF pay substantial taxes, and only new buildings have rents that are close to their carrying costs. The landlords that are getting huge property tax subsidies due to Prop 13 are enjoying market rents that are far far above their carrying costs. This is why SF landlords are economic leaches, their profits come from a supply shortage not from productive activity.
If they coludn't afford to pay the tax, would rents have dropped? No, they would sell if they couldn't cover their costs with rent.
According to pretty much any economic model, the LVT can't be passed on to tenants. Having a hard time finding a concise, and to the point explanation of that, but maybe check out the answer here:
It's all but illegal to build new or higher density housing in SF. We need to start electing people who will actually embrace or at least allow construction.
This is what it's like:
"San Francisco Man Has Spent 4 Years and $1 Million Trying to Get Approval to Turn His Own Laundromat Into an Apartment Building"
Exactly -- there's a pervasive belief in the bay area that high rents are solely due to the evil cabal of landlords who meet every week in a dimly lit room and agree to charge sky-high rents while cackling maniacally and twirling their perfectly-waxed moustaches.
The sudden COVID-related rent price drop indicates that this theory is nonsense, and that the high rents are solely a function of supply and demand, but I'm sure that won't stop anyone from believing in it.
I think most people doubt supply and demand to some degree. How often have you seen someone argue we should secure the supply of food to disaster zones by repealing price gouging laws? Rent control is popular because many people believe, wrongly but wholeheartedly, that landlords are just price gougers and everyone could get cheap adequate housing if they weren’t manipulating it.
My opinion is that rent control is much less about actually controlling rent, and more about controlling who is allowed to be in the city and where. Most rent control systems I’ve seen strongly favor those who have been in their current apartment for a long time, as moving often resets the rents back to market rate. And while that does help avoid evicting long time (and old) tenants, it also has the effect of forcing everyone on rent control to stay where they are.
I mentally couple the way that rent control works with the pretty common opinion that the city was great until “they” came, and would be excellent again if they’d just leave. While the “they” changes from place to place and time to time, the attitude seems to be pretty common. You even see this attitude here on HN, with occasional assertions that those who moved there for tech jobs should move and let rents fall for those who have always been there.
That concern, though, is something I've grown much more sympathetic to. There's a fundamental unfairness in putting in work to make your local community great, making it so good that rich people want to live there, and then being told that the community no longer has room for you because the rent is too high. If the city won't allow enough housing to keep your area affordable, you have a right to feel aggrieved, and it's understandable that you might misdirect the grievance if you have no lived experience of a city successfully expanding the housing supply.
People overestimate their impact on the community. The elephant here is that those people contributed very little to making the place desirable.
You can usually tell. They'll say that the culture has changed because the desirable people left. That's right. But the groupies are still there. They just don't know where the desirable people went.
> If the city won't allow enough housing to keep your area affordable, you have a right to feel aggrieved
The city is not the one preventing more development. It's overwhelmingly these xenophobic residents that are responsible for that. I don't have much sympathy for people aggrieved by shooting themselves in the foot.
>There's a fundamental unfairness in putting in work to make your local community great, making it so good that rich people want to live there,
Actually that is a the result of an incredibly skewed tax policy. Prop 13 means that the government cannot derive any significant tax income from residential property. It is forced to allow commercial property because it brings in tax money. This means you will always have more commercial property than residential property. Land owners want this because it raises their property values. The government wants this because it's the only way to fund itself.
When you look at the reality of what you are doing you are actually incredibly selfish. You are creating jobs and moving them away from rural places but at the same time you are not building enough housing so that people can live near those jobs. You do this because you want the value of your property to go up. Then once those people are coming because you moved all the jobs to your city you start complaining because they want to work there.
There is this misconception that it's "rich people" who want to live there when the reality is that those people only became rich after they arrived in your city. It's you who created them.
>, and then being told that the community no longer has room for you because the rent is too high.
Well, that's exactly what you wanted. You wanted more jobs meaning more people but you did not want more housing which means someone has to go. If you call this unfair then you have no one to blame other yourself.
Now that you can get a high-paying job with the same company without moving from a different region of the US (because of COVID), I expect the SF housing market to collapse. Why move to a shoebox apartment and pay SF cost of living rates when you can have a nice, big property elsewhere?
What's interesting and something I've witnessed first hand in NYC, that the tenants of rent controlled apartments will setup a black market for their rent controlled apartment in collusion with their landlord. So if they do move they will attempt to sell for the privilege of renting the unit, at the time this could range as high as $50k, the landlord and previous tenant would split this 'fee'. What's incredible is that for the right apartment in the right part of NYC amortized over a few years, this was a great deal for the new tenant.
Rent control is popular with renters because the rent is too damn high. You can figure that one out without assigning motives to people you've never met.
I don’t know why you’re assuming bad faith here. I’ve met rent control advocates, talked to them, and read their detailed explanations of why they think there should be rent control. They often believe exactly what I said, and always have some principled explanation for why it’s not fair that the rent is high; despite that one guy in New York, I’ve never actually met anyone who argues for rent control on the grounds of pure self-interest.
The supply and demand based solution to price gouging is to make the government guarantee access to the good at the desired price.
Price gouging laws themselves don't solve the problem.
If anything, the government can pretend that the problem has been solved and block any potential resolution. They can make the problem far worse.
I'll say it over and over again. If you want to fix the economics then you must fix physical reality.
Why does the government guarantee work? Because it will be the government's responsibility to fix the problem. If the government created laws that caused the problem then it will be forced to change those laws.
The classic price gouging example is the mask shortage where people will constantly say that manufacturers can't expand their supply fast enough so price gouging is inevitable and the duct tape fix is the only way to solve the problem. If you introduce a government price guarantee the government will be forced to buy existing masks off the private market and sell them for a lower price. Effectively subsidizing the manufacturers of the mask. The manufacturer can charge an increasing amount of money for the masks until it becomes profitable to expand production capacity immediately. What if greedy manufacturers gouge the government? The obligation to provide masks doesn't disappear because of a little greed. In fact, the government can just buy the manufacturers and build its own factories and completely remove the need for uncompetitive mask manufacturers. If anything, there is now immense pressure for private industry to stay relevant by offering prices lower than what the government is guaranteeing.
There are two problems with this line of reasoning of the type of muddied thinking you're replying to. The first is that it can both be true that supply and demand as a phenomenon can be used to meaningfully explain the world and applies to housing, AND that an individual can denounce landlords morally with the phrase "greedy". However, the OP cannot reconcile the two concepts, they said.
Next, the idea that landlords are a unified group with a common set of designs is itself a premise that requires a little bit of legwork. Here's one. What are landlord expenses versus their expenditures. Are they large or small landlords. etc. To hell with nuance, let's create an Us v Them type of discourse, and see who bites.
Technically it is supply and demand, but there are systemic factors at play that can't be ignored. This is not a typical supply and demand marketplace. The supply here is artificially constrained by existing regulations, and there's a vicious relationship between land owners, elected officials, and demand pressure from folks with high paying jobs.
It's interesting to see how little things have progressed over the last few decades. For example, check this study [1] from fourty years ago.
TL;DR: "A recent survey of local land use policies in the Bay Area identified the important role that land-use controls play in limiting developments. The suburban land squeeze is not the exclusive result of immutable natural constraints. It is the outcome of the restrictive land use and development regulations imposed by many of the region's 100 land governments. A new mood has emerged in the suburbs; land use controls now place severe limits on where, when and how the region can develop. Continued suburban land conversion is now viewed as undesirable, and efforts to limit residential development are well organized and effective."
It's certainly not an "evil cabal of landlords in a dimly lit room", but it'd be naive to ignore the systemic forces at play.
> The sudden COVID-related rent price drop indicates that this theory is nonsense, and that the high rents are solely a function of supply and demand,
Except your own example demonstrates that it's not. If it was "solely supply and demand", then rents should drop far more dramatically than they have, down to levels comparable to other cities that used to be equally unpopular. Yet there's a literal pandemic and even though demand for San Francisco housing is at a ~20-year low, with newly-empty units everywhere, San Francisco still remains one of the priciest cities in the nation. Short of like, an earthquake wiping SF off the map or similar sized event, demand for SF housing will never get lower than this, and it's still not enough to bring rents remotely back into the real world.
Supply and demand have an impact on housing prices, but are definitely not the "sole" source of them. Landlord behaviour, city tax goals, investment banking demands, private equity involvement, and much more all dramatically impact the price of rent far more than "supply v demand" or any "regulation" does.
This is hard to understand for folks used to megacity pricing, where "high demand" (i.e., a small-but-consistent influx of new residents) is until recently, an automatic given thing you could just always point to as blame for any problem. For those of us out in the midwest, where demand is regularly falling in many places, where new construction always outpaces population growth every single year, and yet the housing prices still always rise, the disconnect between prices and supply/demand is quite a bit more obvious.
> where demand is regularly falling in many places, where new construction always outpaces population growth every single year, and yet the housing prices still always rise
that just sounds wrong, and may be i can't see the whole picture from just your comments, but the price _can't_ be rising if demand is falling. Otherwise, these new construction will not sell at all. SO there _must_ be some sort of demand.
even for hyperbole this is hogwash. No one thinks people become landlords because they want to treat their tenets like shit. Obviously they just want to make ends meet like everyone else, they just happen to do so in a way that hurts communities, not on purpose, mind you, but because that's how you get ahead in this society.
You’re mischaracterizing the left-wing / long term renter position here. This is a very common tactic among local SF “YIMBYs” for some reason.
Progressives are not objecting solely on the basis of “character of the city” and in fact regularly poll in favor of development. What they fight for is affordable housing development.
Underlying this problem is a massive income disparity between techies and working class folks. Essentially the YIMBY position is if you build market rate housing for techies it will trickle down to the working class because “supply and demand didn’tyoutakeeconomics???” But Econ 101 has within it the concept of inelasticity that explains why increasing supply does not always move the price much under certain conditions. Like those of say a massive boom economy where tons of high income earners and speculators from around the world are waiting to snatch up new inventory. SF has had many experiences with such boom/bust cycles.
It’s a real estate developer’s dream and it helps us rich-ish techies (hence heavy YIMBY presence on HN) but it doesn’t necessarily translate into lowering rents for the working class. Thus, progressive supervisors are focused on public investment in affordable housing and taxing the rich to fund it, not just serving the needs of the wealthy.
YIMBYs absolutely hate this characterization because they like to claim they are on the side of the poor. But they are 100% aligned with and politically funded by the real estate industry, and that’s why they prefer to mischaracterize progressives who are actually prioritizing the needs of the most vulnerable.
This is a mischaracterization of the YIMBY position. Most YIMBYs are not opposed to raising taxes so that the city can pay for the construction of affordable housing units. (Note that the city doesn't build housing even if they pay for it - developers still do!) YIMBYs also believe, however, that we need housing of all kinds, including market rate housing. That is where YIMBYs and progressives disagree.
Separately, developers are already required to build a certain number of affordable housing units in every development.
If you require developers to build units that are mostly or solely composed of affordable housing, those developers will not earn enough money to make it worth building the units in the first place. This leads to progressives holding up all kinds of development with endless planning meetings and environmental impact assessments. The result is no housing gets built - no affordable housing, no market-rate housing. They allow the perfect to become the enemy of the good.
We need to work with developers to build housing units of all kinds, including affordable housing, rather than demonizing the very developers who are going to end up building those affordable housing developments that I think we all want.
> This is a mischaracterization of the YIMBY position. Most YIMBYs are not opposed to raising taxes so that the city can pay for the construction of affordable housing units.
This is false. YIMBYs opposed the recent prop I to tax >$10M real estate sales to fund “emergency rent relief and permanently affordable housing.”[1]
You stated that "progressive supervisors are focused on public investment in affordable housing and taxing the rich to fund it." This is not what Prop I does.
Instead, the >$10M real estate tax would mostly be paid by developers, not homeowners, because most property sales in San Francisco that are >$10M are apartment buildings rather than houses owned by rich people. Not only that, but it would be a tax paid twice by developers, because they have to buy the land and then sell the finished development.
The reason YIMBYs opposed that proposition is for exactly this reason. It wouldn't be a tax on rich people, but yet another obstacle to the construction of housing, both affordable and market-rate.
Literally is a tax specifically constructed to target sellers (not buyers) of >$10M properties, otherwise known as rich people. With an exemption for sales to affordable housing nonprofits. This issue, passed by a wide margin, demonstrated that SF YIMBY is little more than a real estate lobby front at this point.
Again, developers != rich people. Developers are just businesses like everything else, not some evil cabal. Developers build the housing units that we both claim to want, and if you make it harder for them to build anything then no housing of any kind gets built.
This is a heavy mischaracterization of Progressives. When it's 100% unit that are below market rate, it gets blocked. When it's 50% BMR, it gets blocked. When it's 20%, it gets blocked.
This is because the true position of Progressives is that any development has a chance to cause harm, and they prefer the current situation to any harm, in a messed up form of the trolley problem.
I would also urge you to capitalize the P, as the Progressive positions in SF are not really recognizable as progressive in most of the US or world. It's more of a factional battle in the culture war than about what are more generally agreed to be progressive values.
@ushanti is really amazing, pulling the Progressives kicking and screaming in to approving small amounts of housing. I have no complaints about Preston either. But they are both outliers in the Progressive camp, not the core of it!
Edit: from what I know of Preston, at least. I'm not in SF, just have to deal with the terrible politics there providing cover for conservatives in my area to be reactionary in housing. And this is the core reasons that the Progressives in SF are so bad, they say all sorts of regressive things (like seemingly supporting Prop 13?!) because they are too deep in a culture war to realize the policy that will support the progressive values they claim to support, but all too often, do not. For example refusing to make 100% affordable housing by-right.
To the extent that this means the freedom of poor people to get out of the way of rich people, you can see how some would not be excited. SF's black population has fallen by half in recent decades, for example.
Honestly, the geographic narrowness of the tech boom has always been weird. At the same time we've been selling the limitless power of the Internet to connect people, we've also been working for companies whose structures didn't demonstrate that, and in a financing ecosystem where physical proximity to VCs was a major advantage. So San Francisco got turned into a bedroom community for South Bay companies in areas that refused to build adequate housing for their workers.
Thanks to the pandemic, that is evaporating. We'll see what happens in 6-12 months, when everybody's vaccinated. But the people I'm talking to are unable to remember why commuting every day was ever a thing, and they're very reluctant to go back to it. In which case, we'll write SF's housing issues off as just another bubble.
You're totally right that SF has forced poor people to get out of the way of richer people. They've done this by downzoning the city, refusing to build anything more. This means that only the wealthy get to live there. Prime example is Haight-Ashbury downzonings.
When there isn't enough room for everybody, the rich get served first. So everytime somebody protests a new housing development which adds to the supply, they are advocating for the rich to stay, and to kick out the same number of people that would otherwise occupy those units.
In the 20th century, we declared housing a human right. But in San Francisco, we have declared that only the wealthy should be able to afford housing, and that the everybody else should leave.
It's important to note that jurisdictions in the South Bay refuse to build more housing. Both Google and Facebook tried to but were blocked by the government.
It means government authorities don’t have the authority to restrict people from moving in if they are US Citizens or otherwise in the country legally certainly not on the basis of whether they were born, grew up in the City or based on the type of job they have and its location.
An HOA might, I’m not too familiar with them, but as I understand it even they have legal limits on the restrictions they can place on people moving in, so maybe not. Someone else would have to chime in on that one.
I understand what the words nominally mean, thanks. But based on America's long, long history of de jure and de facto segregation by race, class, and income level, it's reasonable for people on the sharp end of that to not take "freedom of movement" very seriously as some sort of American core principle.
It reminds me of this classic line: “The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal loaves of bread.” -- Anatole France
There so much land in the US. People don't have to live in San Fransisco. These people grew up there, they want to live in their home. You know, that emotional thing that money can't really explain.
Sure they see the people arriving in, with huge paychecks that drive prices up, and them out as bad.
Though this is not an uncommon view in SF at the moment, I find it horrifying. What has made SF such a great place from the 1970s to ~2010 has been its willingness to accept new people, including the strange and the weird. That's not to say that it's been a great city for everyone, the first-wave gentrifiers from the 1960s pushed out Black people from the neighborhoods they took over, like Haight Ashbury, and the downzonings they enacted over the city have greatly amplified their material wealth while keeping out those without wealthy.
But for a brief 40 years before the super-constriction of supply happened, it was a welcoming place to lots of people that couldn't find homes elsewhere, because there were at least some empty places to rent out.
What drives up the prices isn't that people with big salaries are there, they've always been there. What's driving up the rents is that the people with big real estate holdings have said that the people with paychecks can't build anything new. So instead of those big paychecks going to building more infrastructure and subsidized low-income housing, those big paychecks are going only to current landlords, and pushing out anybody without a big paycheck.
SF housing is a game of musical chairs, and all the people that found their chair in the 1970s and 1980s easily because there were lots of empty chairs have decided that there should be no more chairs. That provincial, close-minded, and ultimately xenophobic attitude is what makes the housing market so unfair.
I think you make a lot of good points here, but I think a little more weight needs to be placed on the "big paychecks" part. When my wife and I bought a house here (in SF) a couple of years ago, we had to make offers on nearly 20 homes over the course of 18 months before we had an offer accepted, and we were coming in with an all cash offer at or above asking price every time. The problem we ran into was that there were usually ~7 offers ahead of us (also all cash obviously, but even higher over asking). The income disparity is so extreme these days, and I hesitate to say "income" because these are not senior engineers at FAANG that we were bidding against, these were people who likely earn 10s of millions a year and/or come from extreme family wealth. The wealth gap really is staggering.
Right, and imagine that if instead of all your money going to the profits of the previous owner, your money could be used productively to pay labor to build new housing for you!
Instead of your wealth being transferred to a laborer who has less wealthy, it was transferred to somebody who is likely quite a bit more wealthy. And instead of your wealth being used to improve the city, it was all used for the profits of somebody els.
Exactly, that's what I am griping about. There's more than enough land to accommodate more housing to be built, but existing neighbors to that land have forbidden that through regulatory capture of city zoning laws.
The downstream consequences of this "zeitgeist," the homelessness, the displacement, the destruction of communities, the people right on the edge of eviction doing everything they can to make rent, people overcrowding into apartments so they can get enough salaries together to cover the cost of a room... I'm tired of my friends being forced to move. I'm tired of people living in their cars until they can find some place to crash. In a land of great wealth, this is horrifying. We put people, with jobs, playing their part in society, through a damned meatgrinder just so some assholes don't have to see a new building. I'm not typically a fan of journalism that's driven by personal stories, but in the case of housing it's really important to pay attention to them because the stats alone don't tell the story of what it means to get evicted and to have your entire life upturned because the zeitgeist demands that rents MUST GO UP rather than somebody somewhere pay for a condo and subsidize below-market-rent for somebody else.
Calling the state of housing the Bay Area anything less than "horrifying" is sugar-coating it, and I would thank you not to tone-police others.
I certainly didn't say "unending population increases" or "above all else."
But if you think that building enough housing for the people means unending population increases, that's really in line with the garden variety xenophobic anti-immigrant thinking I grew up with in the Midwest.
The zero-sum philosophy of a newcomer arriving meaning that a current resident loses out, or that the newcomer is "extracting" from the community rather than contributing to it, is also gaining popularity in SF, and is also a very common xenophobic trope.
> I certainly didn't say "unending population increases" or "above all else."
If you don't think that, then there's a certain density level where it's considered fine to oppose it, and there are certain things one could prioritize above population increases that could lead people to favor restrictions. Maybe some of the people favoring restrictions think the high point of density has been reached, or perhaps they favor restrictions because of what values they place above population growth. It's worth at least considering before we simply dismiss them all as xenophobic.
Pointing out specific, xenophobic viewpoints doesn't mean dismissing everybody as xenophobic. If they have legitimate density complaints, please bring them. But I will also point out that these density complaints are even more xenophobic in origin. Density restrictions and zoning in San were invented a century ago to push the Chinese populations out of their neighborhoods.
And for me, this isn't about more or less restrictions. This is about meeting the needs of the people of a city. Not just the wealthy, not just keeping buildings the same, not just the people that have lived there the longest. The needs of the entire people. Which includes people that don't yet live in the city but need access to the economic resources.
So I definitely think that there should be density restrictions, but rather than maximums there should be density minimus. It should be illegal to build a single unit on a 5000 square foot lot anywhere in San Francisco. When somebody tears down a tiny Victorian, they had better replace it with many homes rather than just one. And if somebody remodels those exclusionary Pacific Heights homes, they better be adding more units, IMHO.
For some it's a practical, not emotional. If your job is in the city, and does not allow working remotely, the choices are either commute an hour by car each way, commute for roughly as long via public transportation, or live closer to work.
Hopefully with Covid forcing more sane remote work policies across the board, fewer people are forced to live somewhere they don't want to.
That's basically what happened. There is an overabundance of jobs but since there is no need to live in San Francisco the fundamental mismatch between commercial and residential property has been resolved temporarily.
Though there was mostly never a need to live in SF for a lot of the tech company jobs. Many/most were people who wanted to live in a city in the Bay Area even if their jobs were in the South Bay. I assume it's an exodus from the Bay Area generally.
i imagine the people fighting hardest are the people who bought in /after/ the rents went up to absurd prices, and thus didn't profit hugely but will take a hit if the prices fall. (see taxi medallion investors in NYC)
In my experience (which is admitttedly mostly anecdotal, but comes from having attended a number of public forums/planning meetings etc.) another huge group of people fighting hard against new development are the ultra-left wing of SF local politics. These people aren't against new housing per se, they are just rabidly anti-developer. They spend so much time delaying projects by trying to get developers to increase the amount of below-market rate housing in their new developments that the developer eventually just gives up because the whole process takes so long and the potential profits dwindle down to nothing.
I rented in SF for the past 10 years, and bought earlier this year. I don't look at my primary home as an investment; it's me paying to live in a place I love. Obviously I'd prefer that my mortgage not end up underwater, and a capital loss when I eventually sell wouldn't be awesome, but that would be a small price for me to pay for housing in this city to become more affordable for lots of people.
But I'm extremely lucky that my financial situation is such that my home is not the bulk of my net worth. For most homeowners in the US, their home is not only the vast majority of their net worth, but it's the basis for their retirement nest egg (with the intention being to sell in retirement and trade down to a smaller home, keeping the difference in cash value). So while it grates on me, I can absolutely understand how homeowners will do everything in their power to not only protect their home values, but ensure they keep going up, year after year.
At the same time, though, it does feel a little greedy to see people who bought 20-30 years ago holding on to their obscene hundreds (thousands?) of a percent gains so jealously, to the detriment of so many others. But again... it's hard to blame them too much, considering how uncertain retirement finances can be in the US. Solving that problem decisively with a housing windfall is an attractive proposition.
I imagine there are some truly awful people who are very rich and continue to push policies that keep their home values high, even when they don't really need them to stay high to support their lifestyles. But I expect that's a small minority of people, if only because few people are that financially secure.
Over the years I’ve come to the realization that a number of “kitchens” in luxury apartments are clearly designed for making at most breakfast and otherwise looking pretty. It’s not all luxury apartments, not by a long shot, but a surprising number were unusable due to layout mistakes or a complete lack of equipment (on the owners side). The conclusion I came to is that the people who rented these units valued a pretty kitchen as an aesthetic item, not as a usable thing. I presume they must have mostly eaten out for all their meals.
Perhaps there’s a similar process at play here. If land is incredibly expensive and one intends to eat most of their meals out, it doesn’t actually make sense to rent a full kitchen. Might as well either cut rent and get a half kitchen, or save that space for activities you’ll actually do.
Not just new construction. Studio apartments in old buildings have also been retrofitted into 1-bedrooms by gutting the kitchen and carving out one of these crap kitchenettes from the main room, including in a building I used to live in.
When I was exploring listings to see how the pandemic affects prices earlier in the year, these “kitchens” I described were also the norm over in the Sunset and Richmond around... Septemberish? Why? I don’t know, in some cases the stove had actually been removed, but maybe the full sized fridge was left in.
Were mini-kitchens the norm in September, or were they all on the market because suddenly everyone needed a full kitchen? If I lived in SF during the first lock downs, upgrading to a unit with a full kitchen would be very high on my housing priority list.
When we moved out of Santa Monica, our craptastic unit was re-rented inside the 30 day window and occupied two days after we left. Why? Because it had a tiny sliver of outdoor space, which suddenly mattered a lot. I imagine that all of the tiny condos in the area are staying on the market longer because the idea of WFH from less than 500sq ft. sounds awful to pretty much everyone now.
That’s a good question I don’t actually know the answer to, but you’re right that I should have considered it.
I think it’s worth investigating later, but for now I’m inclined to say it is probably a little of column A and a little of column B.
If I hadn’t personally observed apartments renovated to remove features try and pass it off as a 1 bedroom prior to the pandemic, I might have considered that angle initially, but for now it is still coloring my view of what I saw in September. I think this is becoming more of a norm, and they were the norm as far as what was available at the time, but this could also have been that units with kitchens were getting filled faster at the same time I was making my observations.
What infuriated me personally wasn’t that there were so many, but that the asking prices were about the same as the asking price for an equivalent unit with a full kitchen. It’s a seller’s market, that’s what I’ve been more or less communicating all up and down the thread, but damned if that doesn’t peeve me.
> If land is incredibly expensive and one intends to eat most of their meals out, it doesn’t actually make sense to rent a full kitchen.
It is hard to beat the economies of scale of a restaurant, as much as the "you only need to factor the cost of raw food" camp like to tell otherwise. From a purely economic perspective, a kitchen at home, when other sources of food are widely available, is tough to justify. From a wider point of view, a kitchen is easier to justify as a nice luxury, being that cooking at home is something that people enjoy doing. When land is cheap, it is a luxury that can be afforded. When land is expensive, it is not surprising that it's the first thing to go. Similar to why people are likely to maintain a garden at home when land is cheap, but not when land is expensive.
This doesn't pass the sniff test to me, at least for most COL levels. The only way that our household was able to reduce our food budget by eating out was to massively reduce quality in order to meet caloric needs. For roughly the equivalent quality of ingredients it was much cheaper for us to cook at home. And that's before we got a bigger house in a lower COL area with a chest freezer, which allows us to bank high quality ingredients when they're on sale or buy in bulk, especially for meat. I could probably eat cheaper still at McDonald's, but at the cost of my health.
Subjectively, I don't think that cooking at home is a "luxury". Maybe being a foodie is an upper class thing given the extra cost and time investment associated with it, but historically huge chunks of the middle class have cooked at home for a large chunk of their meals. Generally speaking only the lowest economic strata of the working poor depend heavily on fast & packaged food, and that's largely a factor of both time and ingredient availability. If you're working two or three jobs or live in a food desert, you're not going to cook at home no matter what the unit economics are.
That being said, I do have a general theory about high COL businesses. After moving out of our high COL city (Santa Monica, for the record), we've started building out a home gym and programming our own workouts. What we realized is that while our old gym provided a lot of knowledge and social structure, the primary service they offered was land and equipment. They were able to charge a premium because we literally couldn't afford enough land to put the equipment. Now that we live in a lower COL city with a large garage, the financial balance points towards it being cheaper to just buy all the equipment rather than paying for a gym membership. At the extreme end of land cost, I can see this even applying to kitchens too, since a good kitchen takes up a fairly large portion of an apartment.
“massively reduce quality in order to meet caloric needs”?
Please define “massively” for us. It sounds like you were eating larks tongue in aspic and are now buying year-old potatoes at the Latvian coop. Remember, some in an international audience may have done just that at some point. Is that what happened?
Wonder if a functional kitchen should be thought of as an expense-management device. No matter what the financial situation, in the US without a kitchen you can always find something to eat to keep body and soul together, but with a functional kitchen you can always eat something both tasty and healthy (if you can cook). You can choose to cook if you have the cash; you may need to do that if you don’t. The fact that you always can is a very consoling fact in rough economic times.
> Please define “massively” for us. It sounds like you were eating larks tongue in aspic and are now buying year-old potatoes at the Latvian coop. Remember, some in an international audience may have done just that at some point. Is that what happened?
Whoops, my bad!
Due to the step nature of purchasing food, the break even points change depending on exactly which meals we're talking about dining out for. The more you eat out, the higher the cost per home cooked meals due to loss of economy of scale and spoilage.
My wife, the keeper of the budgets, calculated that the break even point for work lunches was $11 a lunch. This is doable, but it basically means relegating yourself to low end fast food. In the area where I lived (Southern California) that put even Chipotle out of reach for my preferred configuration. There are certainly places that can reliably deliver 800 calories for less, but that'll cost you in the long run in different ways.
> Wonder if a functional kitchen should be thought of as an expense-management device. No matter what the financial situation, in the US without a kitchen you can always find something to eat to keep body and soul together, but with a functional kitchen you can always eat something both tasty and healthy (if you can cook).
I think that's a pretty good way to think about it. As GP has pointed out you do need to purchase an actual kitchen too, but I think that the cost is fairly marginal compared to buying a home in most markets.
> You can choose to cook if you have the cash; you may need to do that if you don’t. The fact that you always can is a very consoling fact in rough economic times.
If one wants true consolation in rough economic times, buy a chest freezer. Nothing provides emotional security like a hundred pounds of meat and vegetables frozen in the garage.
Is that because, based on other comments here, you're already invested in a kitchen and, as a result, are forgetting to factor in that substantial cost? But that would be like if you owned your own silicon fab. You would no doubt also wonder how anyone could afford to buy their processors from Intel for hundreds of dollars when you can make your own for pennies. But you're not actually making them for pennies when you need to lay the capital upfront.
> Subjectively, I don't think that cooking at home is a "luxury".
The luxury isn't cooking. The luxury is being able to have a large room full of machinery dedicated to preparing meals for, on average, 2.5 people. These days, average people can barely afford living spaces as-is. That room adds to the cost substantially and is not likely to be recouped against eating out, unless eating out means eating at places that are selling entertainment alongside food.
It is true that the typical home kitchen can be more cost effective than food entertainment, but that's only because your home kitchen does not have to provide the entertainment portion. I do not see these being reasonably comparable when talking about the cost of prepared food. Once you add the cost of equivalent entertainment at home, the food entertainment restaurant looks pretty cheap again.
> Generally speaking only the lowest economic strata of the working poor depend heavily on fast & packaged food
Generally speaking, the poor have to buy used houses that already have kitchens for a lot of historical reasons. They have little opportunity to not become invested in the means of production, even when it is not ideal from a purely economic point of view. There are exceptions of places without kitchens, as mentioned earlier in the thread, but they are typically only found where land values are high, where the cost of keeping an existing kitchen is higher than repurposing it.
The wealthy, who are most likely to build new houses, that will one day be sold to the poor, want the luxury of having a kitchen even when it is not economically sound, and so the cycle continues.
> The luxury isn't cooking. The luxury is being able to have a large room full of machinery dedicated to preparing meals for, on average, 2.5 people. These days, average people can barely afford living spaces as-is. That room adds to the cost substantially and is not likely to be recouped against eating out, unless eating out means eating at places that are selling entertainment alongside food.
So, my kitchen has a range, sink, dishwasher, and full-size refrigerator. It is small but it is a full kitchen. It is the smallest "room" in my apartment; I probably pay a few hundred dollars a month for it. The cost difference between cooking at home and eating out makes up for that in a couple of weeks for me.
> Is that because, based on other comments here, you're already invested in a kitchen and, as a result, are forgetting to factor in that substantial cost? But that would be like if you owned your own silicon fab. You would no doubt also wonder how anyone could afford to buy their processors from Intel for hundreds of dollars when you can make your own for pennies. But you're not actually making them for pennies when you need to lay the capital upfront.
You're right that ignoring the cost of a kitchen discounts the cost of cooking at home, but I think you're drastically overestimating the cost of purchasing a kitchen. In another thread you mentioned $60,000 for a kitchen, a number which I think is way too high. I suspect that this is a case of the average being dragged up by the outliers. After all, high end kitchens can get very expensive, but we're not looking at high end income earners.
So, let's look at it from the perspective of someone buying a used home. Let's assume that they're buying basic, at median prices and reasonable sizes.
A basic kitchen remodel is somewhere in the neighborhood of $24,000[0][1], including all new cabinetry, countertops, flooring, plumbing, and appliances. Presumably installing a new kitchen in a new building is significantly cheaper since that is less labor intensive than remodeling. The median house costs in the neighborhood of $100/sq. ft[2], with a typical small kitchen being anywhere from 70-100 square feet. Even assuming that the cost/ft doesn't already include the kitchen itself, we have a bare minimum price of about $34,000 for a basic kitchen fully installed.
(This does not account for the fact that the $103/sq. ft. number includes the kitchen that comes with the house, and thus we are double counting some costs).
A 30 year mortgage on $34,000 is $441.76, which is $5.89 a person a day for a 2.5 person household, or $2.94 each for lunch and dinner. So in order for a basic kitchen to pay itself off, each meal must be at least $2.94 cheaper than what you would pay dining out. This is obviously quite hard to do if you're buying the cheapest calories available, but trivial if your typical meal is more expensive than say, Chipotle.
And of course, this is a pessimistic analysis. As you've mentioned, your typical American is purchasing a used house, which absent a growing market means that they're financing the depreciated value of that kitchen.
Now if the cost per square foot was closer to $850 per square foot, a not unreasonable estimate for San Francisco proper, one would quickly question whether the $59,500 was worth it for the space of a small kitchen alone.
> The luxury isn't cooking. The luxury is being able to have a large room full of machinery dedicated to preparing meals for, on average, 2.5 people. These days, average people can barely afford living spaces as-is.
I would argue that if having a kitchen is such an obvious luxury as you propose, we'd see more housing move to eliminate it. Instead our evidence is that you have to be extremely far up the COL curve before having a kitchen is no longer worth the space. Even in incredibly crowded markets like NYC it is more common to see apartments give up a separate bedroom before falling back to a half kitchen.
SF is certainly the outlier in terms of cost, so if any place in the US was going to have a local trend of abandoning full kitchens or even half kitchens, it would be there.
> Generally speaking, the poor have to buy used houses that already have kitchens for a lot of historical reasons. They have little opportunity to not become invested in the means of production, even when it is not ideal from a purely economic point of view.
Yes, the poor do have to buy kitchens. But they also buy cheap kitchens, which continues to tilt the equation towards cooking being cheaper. Instead it appears like time and energy are actually what drives people towards dining out, not cost.
I worked as a line cook in college. The place I worked was in a HCOL city, but nowhere close to SF. Our general rule was that items should sell for about 4x the cost of ingredients to cover all overhead.
I'm a salaried employ with no expectation of overtime, so my opportunity cost to cook for myself is essentially $0/hr, but even if I factor in a fairly reasonable $15/hr for my own labor, I'm still easily under 4x raw input cost for most dishes, which makes sense since I don't have to pay (or already pay regardless) other overheads like rent, taxes and FOH staff.
One is that $15/hr is a dramatic underestimate of the opportunity cost for many of the people who would otherwise be eating out. Minimum wage in Mountain View & Sunnyvale is $16.05/hour. My wife & my salaries, if converted to hourly, would be several hundred / hour. We cook at home because we're salaried and so don't actually reap that opportunity cost in cash, and because the transaction costs of finding a restaurant, driving to it, and waiting for food dwarf the food preparation time (indeed, if we're already in the car near food we're far more likely to eat out). Which brings me to...
Transaction costs for meals out are really high, largely because of the automobile. Restaurants in the U.S. are spread out, with large amounts of parking that the restaurant owner needs to pay for. Because you have to hop in the car to go elsewhere, you're far more likely to wait for a table rather than find a less full restaurant. That means restaurant owners need to build in waiting space (more rent), and host staff (more labor), and carefully predict staffing needed (more labor). It means patrons waste time waiting for a table, and then ordering, and they're locked into their choice of restaurant once they show up, which means that they're more inclined to research options carefully before picking where to eat.
I visited my in-laws in Taiwan last year, and the food culture & economics are dramatically different there. Restaurant meals out are the equivalent of $US4-5. Most restaurants are what we'd call fast-casual: you walk in, the menu is posted behind the counter, you order, get your food, and sit down at a small number of tables. When you're done you wipe up your area and bus your food yourself. The whole restaurant is usually family owned & operated; there might be 3-4 employees total. If the place is full, you walk next door to the equally-good restaurant there. ("Destination" restaurants like Din Tai Fung do exist, and they charge American-ish prices of $20-50/plate.) This is all within walking distance of your apartment, so when you're hungry you take the elevator down, walk outside, and find someplace, with minimal search or transportation costs. As a result, there's a big culture of eating out, and most people have just a kitchenette and don't use it for many meals.
> One is that $15/hr is a dramatic underestimate of the opportunity cost for many of the people who would otherwise be eating out. Minimum wage in Mountain View & Sunnyvale is $16.05/hour. My wife & my salaries, if converted to hourly, would be several hundred / hour. We cook at home because we're salaried and so don't actually reap that opportunity cost in cash,
You can’t say that your opportunity cost is $x and then also state you did not have a choice to earn $x. They are contradictory statements. Unless you are a robot capable of working as much as you want with no downtime, this type of calculation make no sense.
Not to mention the costs of eating out include unhealthy meals, among others.
Sure I can, because this post is not about me. I'm an example to illustrate a point. The point is actually about the economic rationality of centralized food production - whether it is more efficient for one person to cook for many, or for each person to cook for themselves, in aggregate. Economics doesn't care about individual people; it cares about incentives, efficiency, and the behavior of abstract firms in response to those.
The rest of my post was about specific ways that the behavior of individual firms (using myself as an example) may diverge from what the economic model predicts, specifically because of transaction costs. That and a counterfactual (Taiwan) where these transaction costs don't exist, to illustrate how behavior then converges on what economics would predict.
taken to the extreme, I would wonder wether kitchenless apartments would become popular in SF, NYC, or LA given the opportunity. In a studio or 1-bedroom, you could offer 20-30% more space for living rooms or other activities.
> It is hard to beat the economies of scale of a restaurant, as much as the "you only need to factor the cost of raw food" camp like to tell otherwise. From a purely economic perspective, a kitchen at home, when other sources of food are widely available, is tough to justify.
It really depends what one eats. If one is okay with eating widely available low cost foods, then yes, commercial kitchens are more efficient. For example, Burger King here will sell you a three whopper, three cheeseburger, and three fries family meal for $14.99 (silicon valley prices, likely lower in the rest of the nation). Pretty hard to compete against that if one considers the cost of making a burger from scratch and cleaning up the mess from deep frying at home.
But fast food is a low margin high volume business. Looking at higher margin items, like what you'd eat in a steakhouse, the economics of a kitchen change dramatically. For example, I recently bought four USDA prime tenderloins from Costco for roughly $58 total. Each one of them, plated and served, would be $35 to $50, excluding taxes and tip. Given that cooking those is pretty easy (either with just an inexpensive cast iron pan and oven, or using sous vide if one wants to get fancy) and takes a grand total of five to ten minutes to make, then the kitchen becomes a much better value proposition.
And that's saying nothing of people with restrictive diets, where oftentimes it's just easier to cook at home. Depending on which friend I'm dining with, the restrictions might be celiac (strict no gluten, not fad diet no gluten), low/no carb, pescatarian, vegan, religious dietary restrictions, nut allergies, and so on. Sometimes the combinations basically exclude most of the restaurants out there, and at that point, it's easier to cook at home than go out only to be restricted to a few items in the menu.
> It is hard to beat the economies of scale of a restaurant, as much as the "you only need to factor the cost of raw food" camp like to tell otherwise
I'd be interested in seeing your math on the subject, and it probably depends on location and at what rate do you "bill" your time, but restaurants have a lot of overhead ( property, staff, taxes) that offsets economies of scale.
Even without going all-in with cheap foods ( like rice or potatoes), I can't imagine eating out in similar quality and quantity being cheaper than cooking it yourself ( again, depending on how you count your time spent).
Of course McDonald's cheapest items will be cheaper than making yourself lobsters, but that's not really a fair comparison.
It seems the average Big Mac meal is $6 these days. It provides approximately 1,000 calories, and the average person needs approximately 2,000 per day, so we'll assume you'll need to order two. That puts the food costs at $12 per person.
The average cost to install a kitchen is around $60,000. If we assume a rate of return of 5%, that is $3,000 per year right there that the money needs to provide to justify it being invested in a kitchen and not invested elsewhere. That covers more than half of the individual restaurant cost right there and leaves only about $4 for everything else. Does $4 even begin to cover the time it would take you to make your own Big Mac meal (I agree that it isn't fair to compare with lobster) at home once, let alone twice? While the average home has 2.5 people, not just one person, we've only just scratched the cost of having a kitchen. We still have ingredients to pay for, the opportunity cost of occupying the land, electricity/gas, taxes, repairs and maintenance, etc. You're blowing your $30 budget in pretty short order. Okay, if you are one of those TV families with 14 kids, then perhaps you can gain some economies of scale at home.
Yes, if you've already invested heavily in having your own kitchen, then you can become more price competitive with a professional kitchen. Though that is true of a lot of things. After you've invested heavily in having your own silicon fab, you're going to laugh at how much Intel is charging for their chips as well. The means of production comes with a cost, though. And while it may be a sunk cost for most, it should not be ignored on that basis.
The real world is complicated, though.
1. If you're buying a used home, as most people do, they rarely come with silicon fabs but virtually always come with a kitchen, leaving you little choice in whether or not you want to invest in one. If land is cheap, it usually doesn't make sense to divest yourself from owning a kitchen. However, if land is expensive, then the calculus changes. When land is expensive, the land occupied by a kitchen can be put to more productive use that outweighs the investment you have already made.
2. Because most people are invested in home kitchens already, restaurants aren't optimized for providing food you want to eat on a regular basis. Eating a Big Mac twice a day, every day isn't sustainable. But at the other end, non-fast food restaurants focus on providing entertainment. Your kitchen can compete with them as your kitchen doesn't have to be entertaining. To be fair with them, we would have to include the cost of having a living room, TV, Netflix account, etc.
"The average cost to install a kitchen is around $60,000."
An ordinary home kitchen? That is ... quite a lot.
I am in a different part of the world, but I still managed to equip a home kitchen with reasonable-quality appliances (no scraping the barrel, mostly Bosch and Whirlpool) for some 4000 dollars in 2019.
Unless the talk is about some big ass mansion, I cannot imagine spending 60 000 USD on a kitchen, the very price of the materiel used does not add up to even tenth of that value even if you choose mid-range stuff.
You can have a nice 300 x 60 cm wooden counter for like 200 USD.
> Well, every room tends to have walls and floors.
And every room would be equally judged against its economic value. It could very well be that having an maintaining your TV room is more expensive than going to the movie theatre as well. If you were designing a domicile based purely on optimizing cost, as posed earlier, it is very likely that it wouldn't be anything more than a small bedroom, with everything else more cost effectively provided by outside third-parties at scale.
But there is, of course, more to life than numbers. A small bedroom and nothing more does not seem like an overly desirable place to live. Being able to watch TV at home is nice. Being able to cook at home is enjoyable. However, the topic is what it is and as a result those factors don't matter for the purposes of this particular discussion.
> It seems the average Big Mac meal is $6 these days. It provides approximately 1,000 calories, and the average person needs approximately 2,000 per day, so we'll assume you'll need to order two. That puts the food costs at $12 per person
Yeah, i assumed so. Eating Big Macs is... let's say suboptimal. If you eat only that, you'll probably have all sorts of health issues. When counting actual food, fresh and with vegetables and all that, it's slightly more expensive than Big Macs. Around here, cheapest option for a decent actual meal is ~8-10/eur/person.
> The average cost to install a kitchen is around $60,000
Seriously? In France fancy kitchens are at 10k, "starter" ( recommended if you're going to let or for first buy) are at 2k, everything included. I guess if you start from $60k, you need to cook quite a bit more to make it financially viable.
And that's if you have close to no dietary or allergic restrictions.
$60,000 is an over-estimation; that is what a high end kitchen with nice materials and custom cabinets would cost. The typical cost is $13k to $37k with the median being $25k nationally[0], depending on the size of the kitchen and local labor costs.
> Around here, cheapest option for a decent actual meal is ~8-10/eur/person.
Same here, but always coupled with a value of entertainment at that price point. You cannot directly compare the entertainment experience to your home kitchen, as already mentioned. You, at least, would have to include some of the cost of your living room, TV, Netflix account, etc. or whatever analogs of entertainment you have in your home. At which point 10 eur is going to look pretty cheap.
> "starter" ( recommended if you're going to let or for first buy) are at 2k, everything included.
Whoa. I'm not sure you could even put up one wall of a kitchen for $2k in North America. Maybe if you're buying a stove and cooking under the stars you could get in for that amount. That's not what anyone I know would call a kitchen. Definitely not what is being referred to as a kitchen in this thread.
What exactly are you including in the cost of your kitchen? A cheap stove and refrigerator are about $500 each. Cabinets for the small but fully functional kitchen in my small bay area apartment could be had for as little as $1000 based on a quick look at Home Depot. Countertops can vary widely, but lets throw in another $2000. That could be enough for granite if you don't have too much counter space.
For quick and dirty estimates, it's reasonable to double your cost of materials to get a total job cost. Framing is going to be less than $1000 in lumber (probably a lot less) for an apartment kitchen and that's at today's historically rather high lumber prices. Electrical is going to be maybe $500 at most. I'm a lot less versed in plumbing so I can't estimate that off the top of my head, but lets say that it somehow comes out to as much as the framing and electrical combined. Adding all that up and doubling it brings us to $6000 in construction costs.
All in that's ~$10,000.
$2000 isn't realistic if you're counting all materials from the ground up, but $60,000 is a comical number. That might be the average cost of your typical McMansion kitchen with high end appliances, but it's not representative of what it's going to cost to build a kitchen in a small to medium sized rental apartment.
> $2000 isn't realistic if you're counting all materials from the ground up
Kitchens certainly don't magically spring up from the ground after the spring rain. You naturally would have to count every last input cost for any kind of meaningful comparison. The restaurants certainly are when pricing their food.
> Adding all that up and doubling it brings us to $6000 in construction costs.
For, say, a 150 sq.ft. kitchen (the average sized kitchen)? Which means if we theoretically placed 10 of those rooms side by side, totalling 1,500 sq.ft., you could build what is essentially an entire house for $60,000? I realize that doesn't include all the fixtures, but it still seems quite low. Labour must be pretty cheap where you're from.
I don't know what to tell you except I have experience actually doing this. A full house needs a roof and foundation, which I neglected in my original estimate. I don't have time to work out an estimate on an entire roof and divide it to assign partial cost to the kitchen, but I doubt the roof and foundation together are going to add any more than anther $6000 for the kitchen alone. The overarching point is that we're still a long way from $60,000 for a kitchen.
Seems to be a lot of that going on around this topic. If you don't count every last penny, you're not being fair to what it costs to cook at home. I get it, if you only count the receipts of your rice and bean purchases, it will be pennies a day. That's not your cost, though.
> The overarching point is that we're still a long way from $60,000 for a kitchen.
I did mention that labour might be cheap where you are from. Prices can swing wildly from place to place. Labour is, by far, the largest cost in the construction, so it wouldn't be too surprising to see the cost of the final product swing widely alongside that.
The good news is that I'm not sure the exact amount matters much at the end of the day as if labour is cheaper, restaurants will also be able to produce food cheaper. No matter how you slice it, you're just not going to be able to compete with the economies of scale of a restaurant.
But ultimately it doesn't matter as people don't cook at home for rational economic reasons, they cook at home because it is an enjoyable activity. You definitely don't have to sell me on that. I love cooking. I would never trade my kitchen for an extra dollar in my pocket.
Indeed the all in amortized cost of a full, ergonomic, kitchen in downtown SF, or that of any major city in a developed country really, doesn’t make much sense on a rational basis.
I wonder how long it will take for the majority of downtown housing to changeover.
>But at the other end, non-fast food restaurants focus on providing entertainment.
Could you expand on this? I have no idea what you mean. Aside from some niche restaurants like Benihana, I can't think of any sit down restaurant at any price point that provides any more entertainment than McDonalds.
Non-fast food restaurants spend a lot on locations (for nice views, people watching, etc.) interior build-out (fancy design, murals, furniture, music systems, etc.), and staff (attractive young hosts, servers, etc.). They also market themselves in particular ways to bring in specific groups of clientele.
None of that has to do with the food in any way. I assume this is what the parent poster means by “entertainment”: all the reasons you would go to a restaurant other than food.
>will try and sell you on a “kitchen” that is a mini-fridge, tiny sink, microwave and a hot plate whilst still charging you full rent.
To be fair, that is a Kitchen to a great number of people on this planet.
I shared a mini fridge, tiny sink, and a hot plate with 2 other roommates when I lived in Paris for a few months and the rent was not cheap their either.
The difference is that usually ( certainly in the case of Paris) there's plenty of very affordable housing available in the suburbs with good transport connections to the city and some other suburbs.
Yeah but you can buy an apartment 25 miles / 30 min from the city center with a minimum wage salary (I know, I have friends who did it). Try doing that in the Bay.
Housing is expensive in the city and some nearby suburbs ( mostly to the west and southwest), but less so the further away you are. Thanks to the RER train system even far away suburbs, with cheap or cheapish housing aren't that far away - e.g. i have colleagues with houses ( with big yards and two stories) in the 200k euros range south of Paris, in fancy-ish suburbs, and are 40-50 minutes from the office ( i live in a suburb right next to the city and i travel entirely by subway, and it takes me 50 minutes, because the subway is much slower).
Depending on what you want though, it can indeed be very expensive - e.g. if you want an apartment in the city to profit from the night life ( after 1am the transport to the suburbs is only with buses and much slower), it is going to be very expensive to buy.
And that's just for "regular" people. Each city in France is required to have a minimum percentage of social housing, to which you can have access ( including to buy) if you're below a certain threshold of income ( so on minimum wage, you're there).
Thanks for the input. Can you please tell me which are those suburbs with 200k homes outside of Paris? I'd definitely move there at that price, sounds like a steal.
Though I'm a bit skeptical as 200k is enough for a house in Eastern Europe on the outskirts of Bucharest, but in Austria where I am now and average house outside of Vienna is way over 600K so the Paris suburbs you describe seem suspiciously cheap to me at only 200k since Paris is more expensive than Vienna.
it is simple.
rich suburbs are sometimes even pricier than paris.
suburbs with massive ethnic populations (1st/2nd generation or immigrants) are dirt cheap but for some of them that means getting food at the hallal butcher,eating kebab, going to a hairdresser where the windows are closed so that you can't see women inside, high crime, dirty cities ran by leftist at best, communist at worst that deny high income to move in those cities (because high income votes right) which spiral into more crime and more diversity stomping away what makes france france.
Airbnb + rich tourists wanting a flat in paris also destroyed real estate in paris (which is a small city)
Oh and before the downvotes im a 2nd generation immigrant.
To the BOS's credit, they are too busy trying to remove Zuck's name from the hospital he donated 70 million to rather than to focus on actual problems.
It's also surprising considering how high crime is in San Francisco. In terms of real estate you should be getting a discount to take on the risk of living there, not the other way around.
For comparison I was paying €330 for a brand new 35 sqft apartment with 2 separate rooms, a small balcony, amazing heat and noise insulation, 5 minutes from a bus stop and ample parking, all in a nice area without very dense buildings. And this was considered expensive. The reduced price here is still x10...
Do you have a source on this? From what I've seen, Vancouver real estate (and Toronto) is still ludicrous (given Canadian wages).
I'd also like to see a vacancy tax or perhaps an even more directed law prohibiting foreign ownership of a certain level. Then again, I'd also like to see Prop 13 not apply to commercial property, not be passed on in inheritance, and not apply to non-primary residences, but these ideas all seem to be nonsensical in CA legislators and citizens' minds.
Since assholes flagged parent comment I'll add my comment here.
Foreign investment, is really not just foreigner in the traditional since. It also includes anyone from outside the city looking for a place to park their share of the fire house of liquidity the central banks are handing out to the ubber wealthy.
Sure you can stop foreign investors like a nouveau riche Chinese national that owns a successful business in China. But that stuff doesn't even slow down old money.
demand for investing in the limited supply of apartments based on their profitability is not the same thing as demand for the actual product of housing, which is what supply and demand in the housing market is supposed to be about - you're basically proving the point that incentives here are perverse
There is lots of supply of money relative to supply of comparable investment opportunities (in societies with stable governments).
There is lots of demand for housing relative to supply of housing.
There is lack of supply of cities with equivalent income opportunities and amenities of SF relative to demand for that type of city.
All various ways of discussing the supply and demand curves that cause prices. And multiple solutions to address each one, assuming the goal is to make prices go lower. Such as increasing income/wealth tax, vacancy tax, increasing property taxes, increasing supply of housing, increasing cities like SF with labor laws similar to CA, etc.
No? If you build new housing units it doesn’t matter if outsiders buy them. There will be more units to satisfy demand, both foreign and local.
And buying a unit to rent it does not change the housing supply. It is new people moving to a city that fills up supply. Is that what you meant by profitability: buying an apartment to rent? Every city has landlords.
On a semi related note, I've seen a lot more 'stop' and 'stop it' on the internet lately. Arguably the various forms of saying the same thing come and go in terms of what is commonly used, but I've been surprised to see such empty words suddenly so common.
Personally I would be a bit embarrassed to just tell people to 'stop it' as to me it seems sort of childish, but apparently not everyone.
Because it gets old listening to the same tired uninformed troupes from some random person on the internet that is just regurgitating misinformation.
For people that actually live in San Francisco this is a real issue that affects our daily lives. Having some random person spreading more incorrect info is insulting and actually potentially harmful to the people that actually live here and have to pay those rents like I do.
I pointed out that you were wrong about Vancouver. You had no rebuttal. Living in San Francisco doesn’t make someone an expert on the Vancouver housing market.
> Because it gets old listening to the same tired uninformed troupes[sic] from some random person on the internet that is just regurgitating misinformation.
Not to be harsh, but your frustrations are yours alone. Nobody else is terribly motivated by your pet peeves, and when you snap at people with "stop it" their response is going to be less "they must be tired of something" and more "what an unreasonable <bleep>".
> For people that actually live in San Francisco this is a real issue that affects our daily lives.
Living in a city does not give you exclusive right to discuss its issues, nor does it give you a monopoly on information about that city.
And by your own theory, you shouldn't be talking about Vancouver, since apparently you do not live there.
> Having some random person spreading more incorrect info is insulting
"You're wrong and shut up" (paraphrased) doesn't stop people from repeating what you perceive to be misinformation. All it does is convince them that you're an unreasonable person to interact with. If you want to actually stop the "misinformation", provide arguments. Because I guarantee you that nobody here will respect your preposterous order to "stop it".
> and actually potentially harmful to the people that actually live here and have to pay those rents like I do.
I know that there's an increasing trend towards viewing speech as violence, but this is ridiculous. My opinion on rents in SF is not harming you, least of all because I have literally no power to affect policy in a city over 500 miles away from me.
And even if you still persist in believing that we're somehow hurting you by talking about your city, then a dismissive attempt to shut down the conversation is doing you no favors, because you haven't convinced anyone here that they're wrong. They'll just keep repeating what they believe after they've finished downvoting your complaints into oblivion.
I suggest informing people rather than resorting to 'stop it'.
I don't have an opinion on prices in any of these places, but when reading your posts I don't think your posts in this thread don't provide any information.
Yes cash, but not necessarily foreign. I recently went through the process of placing bids on 2 houses in SF and both had cash offers higher and both cash offers came from local residents already living in SF.
That does not mean the funds did not come from overseas. It is common that it will be passed through a local resident, by way of LLC, for the actual purchase.
SF has (had?) the highest percentage of millionaires/billionaires in the US. It is (was) arguably the richest city in the US or possibly the world. Many of the thousands of fresh millionaires that it mints yearly come from very large windfalls... which are immediately used to purchase houses in cash. At the same time, SF is building literally no new detached single family houses.
In these cases, the funds came from tech money. I made sure to check at the time so I could better understand the market. One buyer was friends with the seller, but they didn't know until receiving his formal offer. SF is a small city, especially in tech circles.
You are just restating the issue but shifting the blame. The is still the lack of supply to meet demand, and blaming all that demand on foreign investment doesn't fundamentally change the issue.
So if you want to live in SF with kids you'll have to pay at least 3000$ per month. Is the pay scale there just completely inflated for non-tech jobs due to the tech jobs and if not, where do the policemen, teachers, cleaners and so forth live? I can't imagine them earning a salary in which paying 3000$ per month is sustainable? Where do all people with "normal" jobs live?
So those jobs gets un-filled and whoever that hires/pays for those jobs will need to raise the price for said jobs. This will re-attract people back because it is now possible to live off the higher pay for such jobs. Ad-infinitum as the market determines the price.
Walnut Creek. Etc. They use the Bart to commute in from far away. But do remember a police officer can make 100k a year + they might marry a police officer.
If the city would rezone all of the single family homes into higher density buildings, this wouldn't be a problem. Flood the area with supply and the cost will go down to reasonable levels.
This is a problem all across the nation. Everyone wants a single family home, so this leads to two things: outrageously high costs of homes, or people moving out to the suburbs and thus worsening the rush hour traffic and smog issue.
Having lived on another island, with the same woes of SF (limited land, high growth), the problem is always the same - even though it's been on a much smaller scale.
The people that have owned for the past 30-50 years, are completely unwilling to give up on their single family homes, gardens, etc. They basically demand to live a nice and cushy suburban life, in the middle of a big city.
It then takes forever to build vertically, because for every projects that's proposed, there are hundreds, of not thousands of protests from neighbors that'll lose some sunlight, depreciation of property value, and what not - or they just don't like the modern architecture. So it can take YEARS to just get the first shovel in ground, because these projects go through so many rounds in city councils and what not.
That's how you end up with extremely partisan / one-sided city councils, consisting of established home/land owners, that will fight tooth and nail to impose draconian zoning laws, and general NIMBY-politics.
> unwilling to give up on their single family homes
I think that expecting people to "give up their homes" is more than unreasonable. The reasonable compromise being that builders can build in more densely once the current owners sell it.
Absolutely. Upzoning never forces owners to "give up their home"-- maybe the issue is owners don't want their neighbors to be able to sell their homes to developers either.
That's absolutely it. People not only are unwilling to sell - as in their right - but also insist that everyone else be unwilling to sell. If they are willing, the permitting process is made to be as painful as possible, in an effort to discourage everyone involved.
Not necessarily true. An upzoning will likely increase the value of the land, which will result in higher property taxes (assuming this is a normal city with no prop13 nonsense).
The higher taxes could effectively force a land owner to sell their property.
Often part of what existing land owners are fighting for is preferential zoning which artificially keeps the "highest and best use of land" a low density detached house, which keeps land values relatively low.
If the developer can get permission to build 3-5 story apartments on the lot, then their land suddenly becomes way more valuable than the single home ever was. Most retirees will gladly sell and live in luxury elsewhere. If a few don't, it won't make a difference.
If the developer can get permission to build 3-5 story apartments on the lot
wouldn't that only work for a single unit? Like, yes, if inside a single-family-zoned block a unit would get a special permission to be the only one to build high density, sure that piece of land would be more valuable than before.
But if the whole block gets rezoned, then there's a race to the bottom.
Many single family home owners will strenuously object to having a developer build a 5 storey apartment building next door because they don't want additional noise, traffic, and people looking down into their private back yard. It directly impacts their quality of life.
I was having a conversation with a person in my HoA. She complained that, when THEY moved in, the "big" houses (gesturing at my 2-story) didn't exist, and they had a lovely view of the fields past my side of the street.
Well, lady, if you wanted the view, you should have bought my lot.
The concept of air-rights is a good one - if a developer wants to build higher, they can acquire the air rights of the properties close by, at a price the residents find acceptable (for losing their unobstructed views etc).
The population in San Francisco is at an all time high. I wonder why the popular solution is to transform the city against the wishes of its long time residents into something that newcomers want, and not develop new urban centers elsewhere for newcomers. People act shocked that residents advocated for the kind of city they want and not the kind of city other people want.
Honestly I'm surprised no other city in the bay area has taken the baton and aimed to overtake SF in terms of relevance by becoming the densest, most thriving city in the region. Oakland is at least trying to cope with demand in some neighborhoods. I'm rooting for that.
Some have, e.g. Daly City. The issue is that the rent is skyrocketing because people are desperate to live in that tiny patch of land that is precisely walking distance to their and other startup HQs. It’s a massive network effect.
I would say it’s basically impossible to recreate a dense city based on today’s codes of construction requiring numerous safety/ADA measures in the US.
In an existing city, the cost to purchase land and buildings that would need to demolished, rezoned, and rebuilt as a higher density area with accompanying infrastructure is astronomical and wouldn’t be possibly by anyone other than the federal government only because they can print money. And politically, that effort would be dead on arrival.
The giant parking lots and 6 to 8 lane roads are what would need to go in order to make a place walkable on the level of SF or NYC. Additionally, a lot of the smaller, quirky high density living in these cities is because they didn’t have to comply with ADA at the time of construction. If you start adding elevators and ramps and the space needed in passages and doorways for wheelchairs to turn around, you will end up with a much larger footprint.
Granted, ADA and other upgrades in quality of life are nowhere near the big problem of the cost of reducing lot and block sizes retroactively. The design for cities made for cars and for pedestrians are fundamentally opposed, and cannot coexist.
Moving away from car-friendliness will do so much more for density and walk-ability than doing away with ADA compliance, by easily a factor of 1000. I built a house which is largely ADA compliant, and lost maybe 10 square feet, most of that was due to converting traditional doors to pocket doors, which requires wider walls. For the most part, all of the doorways could accommodate the wider door requirements without moving any walls.
If I got rid of my oversized two-car garage, I could recover maybe 400 square feet. Without a driveway, another house of the same exact size could be placed on the same lot.
Cars are antithetical to density. Discouraging their use will greatly improve city density, while also having environmental benefits.
I don't have a citation for you, but it sure seems that something requires new construction apartments in SF to devote half of their square footage to wheelchair accessible bathrooms... I'd guess every apartment I lived in in SF would be illegal to construct today due to things like clearances.
> In an existing city, the cost to purchase land and buildings that would need to demolished, rezoned, and rebuilt as a higher density area with accompanying infrastructure is astronomical
This happens all the time in NYC, though. Anywhere from a several-story small/medium apartment building to a large skyscraper.
I think the limiting factor is much more likely to be air rights and zoning than safety standards.
I’m referring to cities that are currently not walkable due to huge lots with big box stores and hundreds of parking spaces and 6+ lane road crossings.
Seems like an easy enough solution, though in an environment of plunging rents developers very quickly seem to put projects on hold and shift gears to other sorts of things. I've witnessed this first hand in my city whenever there's bumps in the road (eg. global financial crisis, recent introduction of various foreign buyer/speculation taxes).
This should intrinsically make sense. Private developers don't have to build and there's other ways for them to invest their money.
Now if the developer was a public entity with a mandate that they had to build now that would be different.
And a lot of people only want a single family home because they want a certain amount of living space. In a commodified housing market, they would likely pay less for that space in a condo.
I want a single family home because it has no shared walls and a private backyard space for my kids and dog. It's not that hard to find condos or apartments with decent floor space.
I live in a rural area, so I'm no expert...but how do you weigh the value of private property of San Fransiscans vs. the communal good of more apartment units? Surely you wouldn't "knock down" old houses, or would you? Just curious as to your thoughts.
Rezoning doesn’t force anyone out of their homes. It just lets someone sell their homes to someone who will turn around and build a larger building. Buildings in the old zone are grandfathered in.
But folks who want to live in a single family home in the middle of san francisco can still do so. Just don’t sell the house.
The best land for high density construction in SF are the smaller rent controlled buildings, not single family homes. These smaller rent controlled buildings are near lively neighborhoods and transit, and are also often at the outer edge of their useful lifespan. I have yet to see a policy proposal to open up this land for development because nobody wants to give up rent controlled units.
Increasingly, single family detached homes in the interior of SF are owned by the very wealthy who can remain in the city to shape policy over the long term, while renters come and go. So don't expect anyone at City Hall to swing a wrecking ball in the direction of Pac Heights.
The problem has solved itself already - the US is big and empty. There is little reason to stack people twenty stories high in a Zoom economy. So much talk here of policy changes, LVT etc etc...just freaking move!! That's a very trite response but it also is the best one. If anything, the pandemic has taken a wrecking ball to the entire thesis of New Urbanism and dense development...many Bay Area residents have already figured it out, don't be the last to get the memo.
Yes, even at current levels the typical SF dwelling is not affordable to the typical SF income, to say nothing of the typical income of a person who works in SF, which is much lower.
SF is still a major city and there are premiums due to that. You're talking about having rents in SF close to those in places like Nashville or Dallas which I think is totally unrealistic.
> there are still over three times as many apartments currently listed for rent in San Francisco than there were at the same time last year with an overall vacancy rate that’s ticked up to around 10 percent (and climbing).
In terms of prices, rent is "sticky" whereas the price of something like apples is not. Meaning if apples are not selling, the price is cut quickly. Rent prices go down slower, but high vacancies and high supply are a leading indicator that prices will go down more.
Anecdotally, I was successfully able to negotiate 1300 off my rent here in the peninsula. I was paying 4500 for a 3 bedroom, nice mid century modern before COVID. After February, I will be paying 3200 for at least another year with an optional 2nd year at the same price. It's a good time to be a renter here.
The prices are now so low on renting, that my plan to eventually buy a house farther north (Oregon or California) is now put on hold while I muster up a bigger down-payment.
Apartments are getting cheaper. I’m not seeing houses getting cheaper in the rest of the bay. Renting a house where I live in the peninsula is about the same cost as it was a year ago. Maybe 10% less.
Basically, anything sharing walls or space is going down but not the other stuff...
This is also what a realtor told me. People working from home means they need bigger spaces, and COVID means they need these spaces by themselves, not shared with other people. IIRC condos haven't been selling well but houses certainly are.
> COVID means they need these spaces by themselves, not shared with other people.
Definitely curious to see data to back that up. I’ve seen a couple friends who used to live alone move into shared housing during the pandemic because they craved more social contact than they could get living alone. I don’t know anyone who’s moved from shared housing to solo housing in this time. Movement away from single-person housing lines up with the price pressure you’re seeing, too: small apartments losing value; houses not losing as much.
I moved into a new downtown apartment in a major midwestern city back in April thinking this would be over by May. Now I'm stuck in a dystopian downtown. My lease is up in April though. I'm looking forward to putting everything in a POD and heading back to where I grew up in small town America. Hopefully it will help all cities go back to reasonable prices, for people who still want to live there.
I did the same! I likely could have extended my lease to monthly and negotiated an even better deal had I known how long this would last. I saw so many people in my building moving out, and a lot of the rooms in my floor are still empty 7-8 months later.
State St. (the only real 4 blocks of downtown Madison has) still has a ton of boards up from the BLM protests, and last I heard the count for closed stores this year was almost 40.
Ouch. If you can put up with the winters, Madison is quite a bit nicer than Chicago, even in it's current state. But, it's not really a city. Aside from 3 blocks around the capitol, there's basically no density and you're driving a minimum of 10 minutes to get to anything worthwhile.
I grew up here, but I personally hate winter and can't wait to get out of this entire region.
I've only been up that way to see The House on the Rock. I can't stand the winters though, or Mayor Lightfoot's disastrous policies. I'm definitely moving down south.
If you’re in CA, you can probably break the lease if you really want to. You might be able to negotiate a rent reduction at least to save you both some hassle.
How does it work with the eviction moratorium now? I mean, what would happen if you just stopped paying rent?
I suppose worst case the landlord would get a judgement for the rent, which they’d have a very hard time collecting on. Civil judgements don’t affect credit scores anymore.
look for vacant units in your building (if you're in an apartment) and see if you can negotiate a lower rate with your landlord based on the price of the units that are currently up for rent. if you're not in an apartment, you might be able to do the same thing with houses in your area
You could incentivize them by offering to extend your lease early, if you can lock in a lower rent.
You should at least try to lower your rent. The worst thing that can happen is your rent doesn't change. You might get a discount, which you certainly won't get if you don't ask.
Unfortunately, I can't do that because I will be moving for a new job when the lease is up. Agree that its worth an ask, but don't think it's particularly likely anything will come of it.
In the Noe Valley rent is still pretty darn high. While that is to be expected in this area, a lot of people have moved out and the neighborhood is a little vacant. With the massively high rents I imagine most landlords paid off mortgages, so could these expensive properties remain empty indefinitely?
Yup. I was part of a startup that raised in the millions. Of that, probably 30-50% went to office rent and the rent of the employees. Might as well be a direct line from investors into Bay Area landlords’ pockets.
Doubt it. I moved to SF in 2001 and that conversation had already existed for 20 years and continued forward for 20 years.
The second prices become reasonable again, tons of folks will happily move to SF because of the weather, parks, pleasant social norms, etc. And once those folks move in, the price goes up again. It's a never ending cycle.
Property crime is way way way up. Violent crime is down overall due to just less people being there, but the violent crime rate/% is still higher than before. I saw somewhere that you’re more likely to be assaulted on BART now.
It is mixed with most categories of property crime up and most kinds of violent crime down compared to 2019, except homicide which is up a bit but the denominator is small.
Rent will jump back up just as soon as the vaccines are out and the people who moved to Boise or wherever this year can go back to restaurants they're missing without it making them feel sad.
Probably not. The labor force ecosystem behind those got hung out to dry this year and overwhelmingly don't have the capital to move. It's the upper (and upper middle) consumption class that could move on a whim, and will move back on a whim.
You don’t want to use brick in a seismic zone, reinforced concrete is overkill for a 2 storey house, and steel frame is not just overkill but also uses sticks and cardboard for nonstructural components.
As far as I can tell, almost every building in western USA that isn’t tall is wood frame construction.
Yep, first (ground) floor is concrete with a slab "roof" and then a four-story stick-framed building constructed above that. Ground floor is either retail or parking. I guess they pass fire code but they look like tinderboxes to me.
The numbers don't pan out until for buildings with fewer than 5 floors or so. I don't know the street, but this will almost certainly be a 3 story house, max.
Lots of historic reasons for why Canada and the USA build with wood, but beyond that and going forward, I expect we're going to see even more of a pivot toward wood buildings as both countries try to meet their climate goals. Concrete is a big CO2 emitter while wood is CO2 storage.
Interesting note: this apparently applies to 2 beds, but not 1 bedroom apartments. To me, that suggests the drop has been almost entirely people with roommates.
As a result, I don’t expect property values to fall in the next year. It just doesn’t make sense to cash out low until it’s clear those people (young, mobile) aren’t coming back & won’t be replaced.
More apartments built will not help make housing more affordable for normal people.
Learn about the NYC real estate market- even pre covid apartment vacancy was extremely high, and the true numbers are unknown because building developers are manipulating the market by releasing units slowly.
With all the excessive inventory in NYC, you'd think that a normal person (defined by median income) could afford to buy... But it's still not possible here.
More apartments built are the only thing to make housing more affordable for normal people. But, when you think of them, you're thinking way too small. You need to think in terms of, like, literally doubling the number of apartments available, and they may then be in reach of normal people once more.
You also need to get yourself together and reverse that trend where your transit system has carried fewer people more slowly for more money since the eighties. (The bus-rapid-transit corridors are a good start, as they're much more transiting for much less money than new subways, but you're still thinking too small, and need to 10x your ambitions.)
These are bad faith arguments and therefore you are either debating in bad faith, or a dupe. San Francisco's gross water demand has been falling consistently for the last 50 years. Not per-capita. Gross. In 1998 the demand was 82 million gallons per day and in 2019 it was 63 million, with a population 17% greater. The more people you pile into a city, the less demand there is, because grossly wasteful activities like washing cars and watering grass get squeezed out. The east bay's EBMUD service area has experienced the same trend: total water demand has plummeted since mid-century and now stands at its lowest point in history, despite the exploding population.
Please make your points without personal swipes. Your comment would be fine without the first sentence—it's quite interesting. There was no need to spoil it with a personal attack.
Not only is that very unnecessary strong language, but I find the types of squabbles around water rather unproductive. Sure, (referring to your other comment) one can see that efficient toilets have been productive in doing what they are supposed to do, but that also totally dismisses things like the fact that sewage systems designed/engineered in the past were created for specific flow rates that things like high efficiency toilets and faucets and generally low water usage have caused problems with.
It also oddly erroneously equates water usage with some sort of negative thing in and of itself, akin to saying that rain is wasting water. It is not the use of water that is the problem, ignoring the rather minimal cost of things like moving the water, which is overwhelmingly a fixed, not variable cost. The real and only consequential problem is the contamination and pollution of water through things like significant quantities of soaps/surfactants, as well as almost unremovable harmful chemicals like birth control and other pharmaceuticals, preservatives from vehicle tires, and carcinogenic PFOA/PFOS that are now said to essentially be in EVERY SINGLE PERSON ON THE PLANET.
I can assure you that pumping a million gallons of water out of a well and letting it seep back into the ground is not nearly as destructive and damaging as the emission of various hormones into the municipal water system by women simply going to the bathroom.
In other words, if I were to use essentially nothing but moderate levels of natural surfactants, e.g., animal/plant fat produced soaps and did not take or use products created with "chemicals"; I could use tens of thousands of gallons of water per day and it would make no difference to the water cycle or availability. However, I could also use the amount and number of different destructive, polluting, toxic products that the average self-righteous person uses and I could pollute millions upon millions of gallons of water EVERY SINGLE DAY, all, while feeling self-righteous about my low water usage, while tossing new technology and plastic products produced by pumping tons of chemicals into Asian rivers.
A lot of these things are about perspective. You would ask that you take a step back and reexamine whether you are actually rational and using the scientific method that requires the questioning and reexamination of all assumptions and facts, or if you are being militant and extreme, aka an activist.
You seem to be speaking about a theoretical water system, or one that relies on an aquifer that can be considered infinitely capacious, and which recharges from its own wastewater, but that's not the situation in which the SFPUC finds itself. It has one source and it relies on rain and snow falling in one single particular place. Therefore SFPUC has to treat its supply as limited in a way that an aquifer system that's effectively a closed loop doesn't need to worry about. SF's wastewater does not recharge its water supply in any predictable way.
You're going to need to present some evidence for this, I think. I don't even know what an "inferior toilet" is. I've pooped in a lot of SF toilets and can assure you that they've all gotten the job done satisfactorily.
I've lived in California my whole life, and I have to agree with the sentiment that our water fixtures are not what they used to be 40 years ago. For example, the shower head we wanted to get is illegal in California, because the flow is too high. When we bought a new toilet we had to get the low flow toilet, which definitely clogs more than the old ones did.
What I don't agree with is that this bad. These are minor inconveniences. Sometimes I have to use the plunger, and the shower is less relaxing. Not a big deal. I'd rather that than water rationing.
Early in the pandemic I bought a bidet, not wanting to compete with the demand for toilet paper. Since then there has been a huge decrease in frequency of plunger use in the house. Once you get used to it it generally seems like a big increase in quality of life.
How can you say that when the evidence is drastically against you? Even in this thread it was pointed out that gross water usage is down for decades across the state and especially in the cities.
This is clearly positive given that just a few years ago we were on the brink of water rationing, even with these measures in place.
TL;DR: Toilets clog more with lower GPF. Showers clean less effectively - you only need to go to a country with no "eco" pressure or flow rate limitations to notice this yourself. Washing machines and dishwashers perform poorly with low flow rate and no TSP.
Basically any appliance that people complain about and have a bad time with is only that way because of environmental regulations.
> I don't even know what an "inferior toilet" is
That's because you're used to using garbage and you've never experienced anything better.
Toilets are probably the least acute example, since they have mostly gotten them almost back up to their former reliability. Cleaning appliances, like showers and dishwashers, are the most acute.
> That's because you're used to using garbage and you've never experienced anything better.
I grew up in Pennsylvania for the first 21 years of my life, moved to SF for seven, and have lived in Chicago for 3. I've traveled pretty extensively. I can assure you I know how toilets, showers, sinks, washing machines, and dishwashers work. As someone with a breadth of life experience and full control of my faculties, I cannot say I've experienced any of the issues you describe. Do not make assumptions about my life experience.
If _anything_ the worst issue I've experienced in some parts of SF is low water pressure, which has nothing to do with fixtures or appliances and everything to do with infrastructure.
I'll tell you who won't pay for it: existing homeowners, because they rely on new buildings' property taxes for anything to work. And in SF, they rely on payroll taxes from high income earners.
And in SF, the "dig once" policy means that anytime something substantial is done, nearly everything is redone, which is why Van Ness has been under construction for sooooo long: utilities.
The property wealth in SF appreciates at absolutely massive rates, but they rely on poorer new entrants to fund everything. And that old property wealth is the same political power that stops the city from a accommodating new people, restricting entry to ever more wealthy new entrants.
Here's the thing: maintenance of existing infrastructure that serves existing residents is almost entirely paid for by astronomical "impact fees" paid by new developments. In the East Bay, 85% of EBMUD's maintenance (not capital!) budget is funded from impact fees. These can be really high. Any new dwelling in the East Bay pays a minimum of $26000 for water capacity and a minimum of $4100 for wastewater capacity. It's a big pyramid scheme and the existing residents better get a clue and permit some new construction, or the public utility districts are going to have to change their strategy and get all that money from annual assessments on existing properties.
So it delivers 97% of the product to the user. Seems pretty good. What is your standard? According to the EPA the typical water system loses 16% to leaks, that means SFPUC is well above the typical system performance.
Modern construction is amazing and better than you would think at avoiding ripping up roads, but yeah, that's gonna have to happen too.
Who pays for it? This is infrastructure 101 stuff. You want the people who use it to pay for it, so you finance it and have the new tenants pay for it.
You need to do this anyway, current infrastructure does not last forever. Electric lines, gas lines, optic cables, sewage systems, everything has a lifespan and at the end of the lifespan you either exchange it or risk cascading failures. At that moment, adding capacity for new construction is not a huge extra cost, especially if the density is high enough.
BTW, utility tunnel is a thing, and places like SF can probably afford some, to prevent disruptions to the surface.
I think the implication is that you also enhance the infrastructure to support these apartments. Note that the population of SF increases by about 20% during the workday due to commuters.
Aren’t the sewers in SF literally over a century old?
An entire city's entire sewer system isn't all built in one year. Real life isn't Sim City.
There is constant maintenance and replacement. You don't have to be an urban planner to know this, you just have to look at the construction going on in your own neighborhood.
Some of them are from 1875 to be precise. I know because a section of Mission St collapsed when I was there. The causus belli was a decrepit sewage tunnel from the 1870s.
> More apartments built are the only thing to make housing more affordable for normal people
What? No! Rent control is among other something that can lower the rent for normal people. I know SF has rent control, but currently it only applies as long as you don’t move.
Missed economics class? It's basic supply and demand. Rent control doesn't do anything to make housing affordable for people trying to get an apartment in the city, all it does is make it near impossible to find an affordable unit (because people who are under rent control are unwilling to move), and push up the price of non controlled units.
Rent control as implemented can only make housing just-as-expensive, and rent control cannot make housing affordable for normal people.
Put a plain 2BR in the Mission at, idk, $1500 a month (which Google tells me is a bit over the US median), and you'll have to hold a lottery to figure out which of the ten thousand families trying to get it, actually get it.
Maybe you don't always have a lottery, maybe the big winners are people who were in the right place at the right time as an accident of history. Either way these people are anything but normal. The normal people are the tens of thousands who can't get an apartment at that price. In the end it fails for the same reason that you can't "solve" poverty by running a state lottery and seeing a "normal" person win.
And even if we don't have a problem with this as inherently inequitable, it's just ... such tiny, tiny, small-scale thinking.
I’m not thinking small. I wonder if a confluence of several efforts would come together and make a real impact. E.g. make it illegal to charge more then x for an apartment evaluated at y. Make it illegal to raise the rent more the x over inflation (also between tenants). Make it illegal buy housing with the intention to sell for profit. County could buy housing with set rent to drive down the market rate. Make it illegal to own a house that stays empty more then x months.
EDIT: I know it might seem unfair if you are a landlord or in the housing speculative market. But heck, you’ve had your chance to play a fair game, and seriously screwed us over. You’ve proven your self unworthy as a player in a fair market to a point that you shouldn’t be allowed to play it.
No this won't work. As I said just let the government provide housing for a reasonable price directly. Private landlords can still make money by undercutting the government but they can't charge more because getting your housing from the government will always be cheaper.
Rent control increases market rates for rent by constricting available supply.
It can decrease your rent if you never move, but that decreases the liquidity of the market, and traps you in a crappy small apartment for longer than you’d live in it otherwise.
The freakonomics podcast had a decent episode about this. They frequently host liberal economic ideas as well, so don't assume the opinions come from some landowner backed think tank.
California requires winning a plebiscite to build public housing. This is not optional.
When it does manage to build public housing, SF spends approximately a million dollars a unit to do so. That's purely to get a habitable unit. It includes none of the maintenance costs, which will increase over time, or the social services required to make public housing work as intended.
With that in mind, giving literally 100% of San Francisco's budget to building public housing could produce 12,000 units. That would mean shutting down Zuckerberg General Hospital, street cleaning, street repaving, SFO, schools, and anything else SF does.
Incidentally, the Supes only actually get to control about $3.5bn of that. So now we're reduced to 3,500 units a year... in a city where population growth averages 11,000 people a year. And we still haven't talked about social services, maintenance, or how allocation of what will never be enough public housing units will work.
I think these numbers lay clear that public housing is unlikely to solve SF's housing woes. Don't hesitate to ask if anything is unclear!
>With that in mind, giving literally 100% of San Francisco's budget to building public housing could produce 12,000 units. That would mean shutting down Zuckerberg General Hospital, street cleaning, street repaving, SFO, schools, and anything else SF does.
You are skipping over the part where the government can change the relevant laws that make public housing expensive. Public housing also doesn't have to be built by the government directly so if private construction firms can do it cheaper the government can let them build the housing.
I believe that that's such a good idea that SF already agrees with you, has for years, and put it into practice long ago. The people who labor on public housing construction projects in SF are rarely city employees directly and generally employees of construction companies.
The items that make this expensive have to do with the standards that must be met, zoning and approval processes, and so on. These are things that a private construction firm, under contract with SF, does not find easier or cheaper.
Personally, I like the idea of SF maybe getting in the way of housing construction a bit less. But I also understand that voters seem to like the system as it is. Plus, only some of these laws are readily changed by SF - the plebiscite for public housing law is a state prop from the 70s. Many of the other requirements are also propositions at either state or local levels.
As you say, it's completely true that the government can change the relevant laws. It's just perhaps more subtle than that, as there are multiple levels of government involved and some of the relevant laws are quite challenging to change.
I'm honestly not sure what effective policy kneecapped by developers you're talking about. Can you help me understand? I don't think any of the things I mentioned were set up or advanced by developers to kneecap effective policies, but I'd love to learn more!
If anything, I would naively expect most of the relevant policies here to be things property developers would be quite strongly against. Perhaps you can enlighten me with critical factors I've overlooked?
The hospital administrators insisted. He made what was clearly a mistake in letting them use his name after giving $70 million to the hospital his wife did her residency at.
Benioff Hospital would be unaffected, but only because it's in no way run by SF.
Public housing only makes rents go down on market-based properties when it can offer serious competition to those market-based properties, which means lots of new public housing. (Something that I fully support, and something that is actively being worked on by some groups in California, just not any of the supposed "tenant" groups that never support new housing.)
Even in Red Vienna or Singapore, there are still market-rate housing! And the only way they keep the market rate housing low is by having enough housing. Singapore, in particluar, is really good at building tons of public housing. And their policies would horrify all the preservationist fake-progressives in SF, because they just build build build, and do it at heights greater than three stories. And Vienna's public housing would similarly horrify the fake progressives in SF that stop all new housing.
Public housing is great, but if you're looking to see it happen in SF, look to the Mods, not the Progs.
To paraphrase, poorly, the story of Color of Law by Richard Rothstein:
The housing projects in the US were implemented in extremely racist ways: segregation, then don't maintain the public housing at all. Public housing for white people in the 1930s was great, then with the red scare, the government decided that subsidizing home ownership would prevent the spread of socialism in the US. It was quite effective, but access to cheap home loans and cheap new developments was racially segregated: only new developments that would be largely white would get the FHA-subsidizided home loans. This is the well-documented "red lining."
This led to the economic segregation where the housing projects were only for Black people, were in areas without access to good schools or jobs. It's no wonder the housing projects failed, because they were largely doomed to failure.
I support rent control fully, but it does nothing to lower rents. It keeps them the same, at best. It's a way to protect current tenants, which is good, and we should support, as an "ownership-lite" model of residency.
But it's only one, very small, tool in the arsenal to make cities work for the people. It must be accompanied by robust protections to new people as well. The flaw with rent control in isolation is that it assumes that people never move, are never born, and never die, and that cities never change. In order for rent control to be a useful tenant protection, it must be accompanied by robust rebuilding when more people need to live in the city.
I’m not talking about rent control as it is currently done in San Francisco. We need more. Like you say, rent control should also apply when a new tenant moves in. A landlord should not be allowed to raise the rent arbitrarily when a new tenant moves in.
Also rent control should not be the only measure. The county should also buy up housing and rent for cheaper to drive the market rate down, price gauging should be illegal (for everyone, not just foreign investors). etc.
>The county should also buy up housing and rent for cheaper to drive the market rate down
Almost, buying up housing is fine if the government changes zoning and upzones existing properties. It is better to go one tiny step further and make the government guarantee housing for a fixed price because then it is truly forced to fix the problem.
Once you have done this important step the government has many options. It can either fix the demand side or the supply side.
The supply side is easy to fix by changing zoning laws to encourage taller residential buildings and then by actually building them.
The demand side can be fixed by changing the tax law so that commercial property is no longer the only source of property tax income. This lead to an imbalance of commercial vs residential property which then lead to lots of workers without housing which then lead to a race for apartments driving up prices.
You're still missing the most important component for affordability: more housing. Not simply conversion of existing market-sold housing to price controlled, but more.
Lets say that everything gets converted to rent-controlled in an area. A child becomes 18, graduates from high school, and wants to stay close to their family to maintain their emotional connections. If everything is rent-controlled, but not enough housing is built, they have to be on some sort of waitlist or lottery to stay in the area. This will push out so many people.
The only solution is to make enough housing for the people that want to live in an area. Without that, we are rationing it by price, by lottery, or by waitlist, and all of those will destroy the emotional connections that both you and I want to maintain.
If you want the government to implement an upper bound for housing prices then you must introduce a housing guarantee at a fixed price. The government will be forced to build housing directly and if it cannot do so it can just change the relevant law that prevents it from doing so and then build the housing or reform the law so that there is no imbalance in regards to commercial and residential property which creates an endless supply of jobs but not enough housing for the new workers.
Rent control ultimately increases the cost of housing by suppressing supply. Price controls don't work.
And how is rent control supposed to follow tenants? They just show up to a unit costing $3,000/mo and say "my rent control rate is $800/mo, so you need to rent to me at that price." No sane developer would ever build in SF if that is the case, thus exacerbating point #1.
This is absolutely false. Every three years, by law, NYC does a housing and vacancy survey of tens of thousands of apartments (the most recent survey was in 2017). The raw data is here[0], and selected findings are here[1]. You can see in in the selected findings that the vacancy rate in NYC in 2017 was 3.63%, which is INCREDIBLY low. A "healthy" vacancy rate is closer to 7% or 8%[2].
I'm no expert, just a virtual tourist via YouTube.
According to (1) average Tokyo apartment size is 20 square meters or a little over 400 square feet vs 700 square feet in San Francisco as found from a quick Google search.
Considering some Japanese rent and live in Cyber cafe cubes that are even smaller I'm not sure how fair a comparison really is between the two. Japan in particular seems to have small appliances geared towards smaller footprint apartments.
Joking aside, the lifestyle is also different. Tokyo and HK where I live are known for tiny apartments, but they're also cities where residents spend far less time at home, offering cheap options for eating out, many places to hang out outside home, reliable transit, and extreme safety from crime at all times of the day. I'm far more comfortable in a tiny HK flat than I would be in the same size in SF. Thankfully I have the luxury of a decent sized space in both now.
Sadly you are correct about Japanese vs American sizing. But beyond that hanging clothes to dry vs having a dryer, inbuilt grills on stoves, rice cookers, dishwashers being rarer, etc all add up to more efficient use of space.
> More apartments built will not help make housing more affordable for normal people.
Pre-covid, I knew engineers making $100k+ living with four roommates in a somewhat run-down apartment. Sure, $100k isn't that much, but it's enough that they should be living somewhere nicer without the roommates. People who should be in high-end apartments are living in low-end apartments, displacing "normal" people who would normally live there. If you build only mid-high-end apartments, the priced will come down to the point that the average tech worker can afford them, and they'll move out of their four roommate situation. That will free up inventory at the lower end, and prices will drop.
This really is just supply and demand. It does funny things at times (see the backward bending supply curve of labor), but until there's a surplus of housing, this isn't one of them.
>>true numbers are unknown because building developers are manipulating the market by releasing units slowly.
Why would they do that? Not to mention that NY is kinda big for developers to band together to manipulate this. My guess is that developers try to sell/rent units as fast as they can....and faster than the other guy.
How about mixed-cost buildings? Some higher-cost "luxury" units whose price/rent subsidizes the lower cost "essential" units, where firemen, teachers, local people can live.
More broadly, if housing is so expensive people with full time jobs can't easily afford it, build more housing. Subsidizing it for certain groups is NIMBY-enabling tokenism.
Land value tax would be simpler. Tax everything based on the unimproved value of the land. Unoccupied homes and apartments become money-losers, and owners are forced to sell them to people who would rent them out or occupy them, or else it becomes a money-losing enterprise. No need to figure out what's occupied or unoccupied, and no loopholes. Just tax the externality and let the market figure out the rest.
Vancouver does this, and it reveals that vacant homes are not the problem. There's a small additional revenue stream, and some college students get to rent our mansions for cheap, but it's simply not enough homes to have much of an impact.
The vacancy/spec tax spiked the amount of rentals hitting the market the year it came into effect, adding 8000-11000 that year depending on if you factor in new builds.
You're only gonna get that big impact one time, but it goes to show that the tax was worth doing.
Doesn't solve the problem by itself, but the tax will help.
The amount of units that suddenly appeared showed that there was a small percent of units "leaking" from every new build that never hit the market.
Really hard to do. Not because it’s a bad idea but because it’s hard to identify a vacant apartment. One example using utility bills as proof of residence can be gamed by paying people to go turn on the lights for a while. How can you tell that the property is actually empty?
You mean add additional taxes? Presumably they are already taxed.
Does SF have homestead property tax exemptions? Where I live property taxes are quite high, unless the property is owner occupied. The second homes and rentals subsidized the taxes of those who live here.
SF, like all of California, has the worst possible property tax scheme. They passed "homestead" protections but did it for all property tax, not just homesteads.
Any property tax, from vacant lot to strip mall to vacation home to industrial plant, can not rise above 2% per year. Meanwhile property values rise 5%-10% per year. The only way for property to get reassessed at market value is to build on it or sell it.
This subsidizes speculation. If you own a vacant lot since 1970, and pay an effective tax rate of 0.05%, and building on it raises your taxes to 1%, you're taking a huge risk by deciding to enter the market now. Similarly, that super old 6-unit apartment building from 1930 has a ridiculously low tax basis; upgrading to 20 units hugely increases taxes.
If the problem is developers making a bunch of apartments and releasing them slowly, wouldn't such a tax just mean they'd switch to a strategy of making them slowly to get the same effect?
Literally nobody has ever done this. Large apartment builders have banks breathing down their necks. They try to lease up as fast as they can, which generally takes about a year to get to 90% because there's a lot of friction in getting people to move.
The governor of my state ripped toilets out of one of his mansions to make it "unlivable" for tax reasons. No doubt the developers could stall finishing units if they had to.
This would be specifically to fix the problem of a builder making a bunch of apartments and slowly letting them into the market to artificially inflate home values.
Presumably, the building company would be the owners for all the empty apartments which would make it easy to find and tax. It would be more difficult to detect someone buying a home/apartment as an "investment".
> This would be specifically to fix the problem of a builder making a bunch of apartments and slowly letting them into the market to artificially inflate home values.
At what point do they become apartments though? When the Certificate of Occupancy is issued? "No problem; those units aren't finished yet. [They need a smoke alarm to be legal units and somehow we haven't found the time to get around to it yet.]" Or whatever the threshold is between "this is a vacant lot" and "this is a taxable unoccupied unit", you're just providing incentive to stay on one side of that line if there is a glut of builders using this strategy.
IDK, probably have to do some research into how much time it takes to finish a unit to say when the clock starts ticking.
For example, obviously a smoke alarm is something that takes 15 minutes to install, so that wouldn't be when you start the clock.
You might be able to base it on when any single unit is sold in the block. That is "You sell 1 apartment, you've got a year to sell to rest or you are going to start seeing vacancy taxes".
Same in Indiana. But the proposed idea was to tax more heavily all unoccupied properties, not merely "all properties other than one's primary residence."
Berlin has such laws since 2014 and it is working poorly. Turns out that it is hard to get an overview of empty apartments. City government has to rely on other tenants reporting empty apartments.
You know, it's been a while since I left Potrero Hill, but I think that I heard the feds had taken over the public housing projects on the south side (you know, back where OJ Simpson grew up) because they were basically uninhabitable. What's the status on that?
But you know, that's last generation projects. What's the status on today's "affordable housing" projects? Oh, you say it costs $750,000 in construction costs alone for an "affordable" 2BR apartment? Oh dear me, that's rather ridiculously steep, isn't it...
Singapore relies heavily on cheap foreign construction workers. In order for that model to be applied in SF would require opening the Mexican border to allow for cheap immigrant workers to come to SF. That’s not going to fly for many reasons.
I always thought that most of the construction workers in SF are illegal immigrants from Mexico and have been for the last 30 years or more.
I always thought that there were about 8 million illegal immigrants in California, then 9/11 happened, but even after 9/11 the number never dipped below 1 or 2 million -- and if it got that low, it was only for a few years.
Also, I thought that when the numbers have gone down, from 8 million to 4 million, say, it is more because of an increase in economic opportunity in Mexico than it is because of an increase in the effectiveness of US border control.
And I thought that even with all his talk, Trump didn't improve US border control significantly.
But I don't have any direct motive to stay informed on this issue. E.g., I don't hire cheap workers. So it is possible I am misinformed.
That article puts the price of a new 5-room apartment in 2010 at $448,700 Singapore dollars (USD $337,000 at today's exchange rate). That's about 50% of the NYT's cited 2BR=USD$750k that doesn't even include the price of the land.
San Francisco as a political entity has neither the will nor the project management capacity to build anything at reasonable prices.
[0] - https://www.city-journal.org/oakland-rezoning-california-hou...