The Chron’s C.W. Nevius again gets the housing market all wrong

"Supply and demand" argument ignores the reality on the ground -- market-rate housing isn't bringing down costs

The Chron’s C.W. Nevius announced last week for all the honest world to see that the law of supply and demand is alive and well in San Francisco and that one needs only to look to the South of Market to see its reality.

Nevius, who believes that the sit-lie law solved homelessness, that Scott Wiener was the “smart money” winner in June, and that San Francisco is a center-right voting town that somehow elects progressives, asserts that:

So in places like SoMa lots of new housing was added and prices have come down, and in places like the Mission, where the new housing stock is low, prices are staying high.  Sounds, to me, like supply and demand.

This SPUR talking point passing for reporting is based upon his rigorous economic analysis, which consisted of three conversations: one with a person “shopping the market”, and two realtors from one company.

To be fair, he did mention that “real estate blog Zumper” reported that the southeast section of the city had “the highest rents in the city” based upon the tracking of hundreds of units of actual rents, but this mere fact did not keep him from his appointed rounds of announcing, by neighborhood, that where supply was constrained rents are high, where supply was added, rents are low, except where they are not.

Let’s take a look at what Zumper reported for August that C.W. mentioned but then dismissed.

48hillszumper

Soma, at $3,850 median for a one-bedroom rent, was the tied with the Financial District for the second most expensive area to rent, second to South Beach, which had even more new construction of market rate housing than Soma.

So, gosh, Chuck, rents are highest in areas where the most new market rate development has occurred. And just so you know, big guy, a hell of a lot of market rate development has occurred in the Mission, which is why residents took over City Hall in protest.

Which neighborhoods have the lowest rents according to Zumper? Excelsior, Sunset, Pacific Heights, Inner Sunset, Bayview, Outer Richmond — that is neighborhoods which have had the least new development of market rate housing.

So it would seem that the actual facts are that that more market-rate development that occurs in a neighborhood the higher the rents are.

Looks to me that the facts show the “law of supply and demand,” at least as explained by Nevius, still don’t apply here.

Back to you, Chuck.

  • Jonathan Bonato

    Calvin Welch is anti housing, ideology before people.

    • Don Sebastopol

      I believe about half the below market rate units are condos and they are typically purchased by young professionals early in their careers so it is housing for young people who might need to wait a few years before they can afford the market rate. However, BMR units increase the market price so more young people are harmed than helped.

      Also, Millennials are aging. I think I heard 12,000 a day are turning 30. As they age their families and incomes grow and they will be demanding more than 900 square feet of living space. There is a limited supply of family friendly housing in the City.

  • Senor_Wences

    Me and my bros are here to take over your soccer field first, then your housing stock.

    • deus

      I’m pretty sure they paid for the permit to use the soccer field and followed all the rules, which were also posted for everyone to see. But sure let’s blame them anyways, because tech amirite.

      • Senor_Wences

        I know, right? We totally got that permit that no neighborhood kid would be able to afford. Monetize the public lands bros! We could have just taken one of our big, super white luxury buses to any field in the city or say even on TI, but, no. We wanted the one in The Mish ‘cuz Tacolicious is nearby and it has good drinks with no brown people as customers, yo.

        • deus

          Right, RIGHT! Definitely THOSE people (damn techies) wake each and every morning and be like “Ugh time to kick out another brown kid with ma’ privilege”…
          “What will it be today? I know let’s pretend to be interested in playing soccer in the neighborhood we live in and just for fun, let’s look up the rules posted both on the field and online, and pay for a permit.
          Let us choose a time when brown kids come to play and then MUAHAHAHAH kick them out! ”
          “Ah man, the work gentrifiers must do in this City almost makes it worth paying so much for this studio.”

  • Don Sebastopol

    There was another previous article mentioning the the price of high end rentals has come down attributing it to the increase in the supply. There is a limit on what people are able and willing to pay. To keep prices up requires an increase in the supply of higher income earners. There is also an upper limit on that. However, SF is still a bargain compared to comparable properties down the peninsula.

  • danimalssf

    Isn’t the real question how much would the rents in that ‘hood be without all of the new construction? $3,850 may be a good, compared to the $5,000 it might’ve been without the new units…

    • Don Sebastopol

      Good point. The question is not the comparative rents by neighborhood but the fact that the rents came down south of market. The increase in the supply is probably one factor that caused the decline. The article makes a false relationship.

  • Andy M

    Zumper data is pretty flawed, because it’s only an indicator of new listings posted on Zumper, but even so this is some pretty amazing cherry picking. South Beach and SOMA are very expensive, true, but so are Pacific Heights, Russian Hill, North Beach, Potrero Hill, which had very little development.

    According to Zumper, rental prices spiked about a year ago in October and have been declining slightly since, which coincides with the advent of a lot of new supply entering the market this year. https://www.zumper.com/blog/2016/09/zumper-national-rent-report-september-2016

    No one is saying that rent-control isn’t vital to maintaining an affordable San Francisco (I, for one, wish it could be extended to all the buildings in the city); likewise for public housing. The Tenderloin is a great example of that, but new market rate housing must be part of the solution or we’ll never house everyone.

    • curiousKulak

      The Tenderloin has ‘rent control’ but much of it doesn’t have ‘eviction control’ (“affordable housing”).

      So, while your rent may be capped at, say, 30% of income (however low or high that is), if you somehow run afoul of the mngmnt … “sorry, Charlie”. And your being asked to leave is not some long, drawn out court fight, its … Boom.

      So, shut your yapper and be a happy camper, amigo. (Great model for a Great America).

  • sfparkripoff

    Calvin hit the nail on head with this article.

  • jhayes362

    Say what you will about Nevius and his support for more housing in SF. But I have to say he’s got it right in today’s column (9-22-16).

    Following the path of its Peninsula neighbors, Nevius writes that Brisbane wants to build out 8.3 million square feet of commercial space with no housing. The developer originally proposed more than 4K units of housing, but the city said no.

    Nevius quotes the Brisbane mayor as saying workers in the commercial space can live in San Francisco. Here’s a link to the story: http://digital.olivesoftware.com/Olive/ODN/SanFranciscoChronicle/Default.aspx

    I’m sure I’m not the only one who is sick of San Francisco being treated as a bedroom community for Peninsula workers and of policies by Ed Lee and his developer buddies that is allowing this to happen. Anyone for a barricade on highway 101?

    • JustJake

      SF is a “bedroom community”? Although I know you have a point to make, thats simply a hilarious statement. Try Lafayette. They are polar worlds apart, and one *is* a bedroom community.

      • jhayes362

        You can play semantic games, but the problem is real. Brisbane wants the property and business taxes from commercial development, but none of the hassle of housing and serving the people who work in it, not to mention the changes in culture it would bring to a bucolic and tiny community. This is not an unusual attitude all the way down the Peninsula to Silicon Valley. What do you suppose those Google buses are for?

        Meanwhile in San Francisco we have a housing crisis and calls to build, build, build more housing at any cost. Pro-development city officials, enraptured by streams of money, are more than willing to accommodate them. It’s a perfect storm: greed by developers, selfishness by Peninsula and Silicon Valley cities, and stupid elected officials in San Francisco.

        • Jon Schwark

          something like 250K people who work in SF don’t sleep here. Much more than leave the city for work. This is an imaginary problem really, or you could say a regional problem we contribute to more than San Mateo county and Alameda County.

    • Do Something Nice

      I think SF should sue Brisbane over this.

  • whateversville

    Questions for Calvin.

    1. Is new development the only cause of increased rents, or are there other factors?

    2. If there are other factors, what makes you conclude that “[the] more market-rate development that occurs in a neighborhood the higher the rents are”? How do you know it’s not the other factors?

    3. If new development is the main driver of increased rents, how do you explain the rent increases in Bernal Heights, which added 17 housing units in the past 5 years, or the Outer Sunset, which lost 10 units over the past 5 years?

    4. With ~25,000 homes, the Mission contains 6.6% of the city’s housing units. In the last ten years, 6.3% of the new housing in San Francisco was in the Mission. Is that really “a hell of a lot”?

    5. Imagine you’re at a party with 25 people, and you think more people coming soon. You order 2 extra-large pizzas. That is, objectively, a lot of pizza, but not enough to feed 25 people. Should you order more pizza, or will that just make people hungrier?

  • Pingback: The Chron’s C.W. Nevius again gets the housing market all wrong | Grassroots Actions()

  • Kraus

    And our gosh-darn “moderate/neo-liberal/right-wing/muslim/community-organizer” President is getting it “all wrong” as well:

    https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Housing_Development_Toolkit%20f.2.pdf