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News + PoliticsThe problem with the Mission Moratorium report

The problem with the Mission Moratorium report

City’s economist misses a few key points in his analysis of the impacts of the Mission Moratorium

Does anyone really think you can drop this building at 16th and Mission and not see rents go up nearby?
Does anyone really think you can drop this building at 16th and Mission and not see rents go up nearby?

By Tim Redmond

SEPTEMBER 14, 2015 — The Chronicle gave a big banner headline to the study by the city’s economist that says the Mission Moratorium won’t solve the housing problem, and might make things worse.

The notion that a pretty mainstream economist would say that supply and demand are determining factors in the price of land in San Francisco is hardly a surprise. The analysis by Ted Egan is about what we could have expected.

But it misses a couple of crucial points that are really at the heart of the measure, which will be on the ballot as Prop. I.

For starters, Egan assumes that building new market-rate housing will have little or no impact on the value of neighboring property:

The report also finds that new market rate housing tends to lower, rather than raise, the value of nearby properties, and therefore a moratorium on market-rate housing would not protect nearby existing housing from rising prices.

That makes sense in an abstract way: According to the Economics 101 textbooks, if there are 1,000 houses in a neighborhood, and you add 1,000 more, each existing house becomes less valuable. The same way that, if you’re selling beans at the market, and five more people come and set up next to you and start selling beans, your prices are going to come down.

But that’s not how it works in the real world, particularly not in a neighborhood like the Mission District in San Francisco.

Take the area around 16th and Mission. Gentrified, yes – but still not the same in terms of property value as, say, 22nd and Valencia. Is Ted Egan seriously saying that putting million-dollar condos at that corner won’t drive up property values in the surrounding areas?

Many modern urban economists argue the opposite: that the price of beans doesn’t come down if having five stalls stalls instead of one turns the market into a destination for thousands of more wealthy artisan-bean-buyers, and that adding new high-end housing to a low-income neighborhood makes other wealthy people feel comfortable living there and drives up everyone’s costs. It also drives up the cost of retail space at the street level, driving out older community-serving businesses.

That’s kind of like Gentrification 101, which (sadly) they don’t teach in a lot of college economics programs.

 

Oh, and demand for housing in SF right now is pretty close to infinite – Egan himself says that it would take at least 100,000 new units to bring down prices. So building new market-rate housing in the Mission can’t possible reduce prices.

Seriously: Anyone who wants to argue that building the Monster on Mission above the 16th Street BART station will bring down nearby property values needs his or her Ph.D examined.

Which means, of course, that a moratorium on development will, for the moment, prevent large projects that drive up costs for everyone.

The other issue is more tricky, but also very real.

The mayor of San Francisco has no legal right to say to a property owner: Sorry, there’s no way we will ever allow you to turn your industrial or retail property in the Mission into market-rate condos, even if the zoning allows you to build them. So your property is worth a lot less than you think, and you might as well sell it to the city, cheap.

That would violate a whole lot of state and federal laws.

On the other hand, if the voters decide that they want to put a moratorium on new market-rate housing in the Mission, and there’s a possibility that the restrictions could continue for a longer period of time, it might, in fact, make property that the owners want to turn into luxury condos worth less money.

That’s the reality of zoning. If the city – for good and logical reasons – zones some property only for Production, Distribution, and Repair, that land is by definition less valuable. You can’t charge as much rent for PDR space. You can’t sell a plot zoned as PDR at the price that land zoned for highrise office space or condos would command.

There are lots of reasons for PDR zoning (industrial use and residential use aren’t always compatible) but the main one right now ought to be the price of land. Once property can be used as condos, PDR uses will be instantly and forever displaced.

So while adding new market-rate housing won’t bring down land prices in the Mission, a moratorium might. And with so little land available, and the need for affordable housing so desperate, that could be a good outcome – for the city, not for the landlords.

 

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

150 COMMENTS

  1. I have posted this before, but here you go again:

    https://www.apartmentlist.com/dc/washington

    Scroll down to the part where you can see Rent Growth: DC vs. US.

    Washington DC rents are down 0.9% YoY, just like I said.

    You are right, we need to build a huge amount of apartments to satisfy all the pent up demand from decades of under-building. There is no time to get started like the present. The only other choice is even more gentrification and displacement.

  2. I do think we need to increase the existing housing stock but its not the ONLY solution to affordable housing if its a solution at all. Also the likelihood that this will work in SF is the fact that Scott Wiener and his developer brigades are moving the trend to higher density micro housing. That means less 2 bedroom units.

  3. That is false. Please post any CURRENT link that verifies this claim. Prices have risen significantly since the report you posted.
    Just for arguments sake though lets look at how that works in SF. First off this is a very narrow segment. It is only 2 bedroom units. In SF .9% reduction means we are talking about a reduction of rents that are in excess of $4400 per month. I will use that number though. That means a rent decrease of less than $400 per month. Going by most accepted data having stress free rent means spending less than %30 of your income so that means we are still talking about a salary of $120k per year to afford that fantasy rent. That is not a”affordable housing”. That is also pretty unrealistic numbers. The best case scenario, being very very generous.
    When this was true in DC it was the result of an increase of housing stock of %35. If we use the existing stock in SF from that same time period (2013) it would mean building 329 Millennium Tower structures. That building is the second tallest building west of the Mississippi and took 5 years to build. It has 400 units many of which are NOT 2 bedroom. That means the very best ROI is based on the ratio .09/131,600 that is the decrease in rent divided by the amount of units it will take to get that reduction = .000000068 return. If it works at all.

  4. For some reason my reply was taken down. DC rents are still down 0.9% year over year. Sure wish we could say the same here. If we only would build enough to meet the demand like they did in DC we could.

  5. If it were true it would require building 329 Millennium Tower structures using the base SF Housing stock from that same period. I’m fine with doing that, but we then we need a moratorium to come up with an actual PLAN. Rather than just letting Ron Conway’s ball washing little bitch boy Scott Wiener build anywhere he wants. It would also make sense to plan out how many of those units will be outside of the so called “market rate”, which, if we are generous, tops out at about 5 mil. Everything above that is LUXURY housing that has nothing to do with any supply and demand equation in any way. But that doesn’t change the fact that 2 bedroom units in DC have gone back up.

  6. And this second time it needs to be expanded to the whole city, because it did not appear to have any effect the first time.

  7. Wrong because, get this, the building, the improvements are legally distinct from the land, dumbass. Look at your property tax bill, stupid.

  8. I am saying there have not been “tens of thousands” of evictions in the eastern neighborhoods. And you offer no evidence to that spurious claim

  9. If development next door is so valuable, why is NIMBY a catchphrase?

    Because developers use NIMBY to marginalize any democratic opposition to their plans exactly as proposed.

  10. Two and a half years ago, I was able to buy a house in the Western Addition. A similar, but slightly smaller one, recently sold for almost twice what I paid for mine. And while many homeowners gloat over such splendid fortune, I do not.

    I asked agent who listed the place I bought what he thought was going on. He told me explicitly that the new luxury development at 555 Fulton Street (about five blocks from my house) has substantially contributed to huge rise in prices nearby. So, although the developers, the mayor, some supervisors and their various gasbags insist this won’t happen if the Monster is built, the real estate agents (at least speaking off the record) will be honest.

  11. Of course a housing crisis can increase homelessness, among many other negatives. It’s not necessarily about evicted people being on the street. How do we decrease the number of people on the streets? We move them to supportive HOUSING. Get that? HOUSING. In this climate no nonprofit can compete to build BMR housing not to mention targeting the homeless. The housing crisis is affecting everyone.

  12. No research is perfect, but at least they’ve done it. Moratorium supporters don’t back up their claims with anything besides saying that it’s what the people of the Mission want. Even if that were true, what the public wants is different than what is sound economic policy.

    What no moratorium supporter can seem to answer, and an issue that Tim dodges in his post, is what happens to all the people who want to live in the Mission after you institute the moratorium. Do they go away because there aren’t fancy new condos and apartments to buy and rent?

  13. Your argument rests on the highly dubious premise that laws that affect the use of land are somehow not land use rules.

  14. A few thousand “winners” can’t compare to the many tens of thousands suffering the costs of that misdevelopment.

  15. How the rules are divided up into sections does not necessarily inform on what they affect.

    Any rule the city has that affects how a property may be used can reasonably be regarded as a land use rule.

    Why does just one set of codes need a “pause” Why not all of them? None of them? Can you walk and chew gum at the same time

  16. Land use controls are in the Planning Code. Rent Control is not in the Planning Code. Does idiocy come easily for you or do you have to work for it?

  17. And that is not working, hence the moratorium and the polling data that suggests support for a moratorium. Too bad that the moratorium calls upon the same cast of compromised self interested characters to propose a solution, but 18 months of no more approvals can only be a good thing.

  18. Standards of research? Here is RAND’s data standard:

    The data and information should be the best available.
    Data and other information are key inputs to research and analysis. Data-generation methods and database fields should be clearly specified, and the data should be properly screened and manipulated. The research team should indicate limitations in the quality of available data. In addition, information presented as factual should be correct and verifiable.

    CoreLogic is the best available source for home sales data. Its methods and data meet these standards.

    What alternate data source should Egan and Khan have used?

  19. The CoreLogic data is publicly available data that happens to have carefully compiled and sold in a convenient package. You cannot _possibly_ be advancing this ridiculous line of argument in good faith.

    This is like a climate change denier declaring research done in Matlab to be flawed, because they’d need to buy a copy of Matlab to replicate it.

  20. Or you could classify it as “open, public” data. Of course if you had that and it was in your interest. Alas, it’s not …

    If personal interest is to drive these big public decisions, why even do any analysis at all?

    “Anyone can buy it” – interesting statement. What’s the price? just like anyone can rent or buy housing in SF, right?

    If it’s not open and public, then it’s closed and proprietary. In other words secret. A secret doesn’t mean that no one knows about, rather just a select few. As in this case …

    Some questions:
    – how was this data vetted?
    – why was this data appropriate for this analysis?
    – why only include data from SF?
    – how were the results independently reviewed?
    – where are the data and analysis documented at a level so it can be reproduced?

    Hence, multiple catastrophic research failures ….

  21. This is about standards of research. Sounds like SF has none … even though it apparently is the belly button of tech and analytics etc.

    “Saved the city money” – well, how can you know that? You agree with the results due to personal bias. Not because of vetted data and analysis. The big money to be saved is due to rationale land and other city policies.

    “It’s all there” – um, where? Can you share the link? That is not a high standard in 2015, right?

    “Anyone can do” – except for a city in crisis with a 9B$ budget, for which this data is of utmost importance.

    “Identical data” – that is you wish it was identical, but how can you know?

    We’ll, we should be grateful that at least you didn’t do the analysis ….

  22. “Egan himself says that it would take at least 100,000 new units to bring down prices.” Oh! A concrete recommendation of what the city could actually do to FIX (not put a band-aid on) the housing crisis. Makes sense since 50,000 people have moved to SF in just the past five years. Well, it’ll be a tough challenge but if we all rally around the cause of making the city affordable for everybody, we can do it. The 16th and Mission project is 345 units, so we need 290 more similar projects, hard but not impossible, let’s get started! Even if we only hit 1/3 of that goal, actual empirical evidence from Washington DC shows that’s enough to drive down rents, so we can all stop quibbling about who published the proper confidence intervals.
    http://www.washingtonpost.com/business/capitalbusiness/costar-increased-supply-of-apartments-pushing-rents-down-across-all-building-classes/2015/01/02/4c50f348-9056-11e4-a900-9960214d4cd7_story.html

  23. Been through what? Content-free rhetoric about ‘handwaving’ is not the same as a reasoned discussion of the model.

    The paper doesn’t quote any F statistics, but doesn’t have to. The dataset is large. Influential points might be a question for the proximity results, but those repeat across the city, suggesting Mission results are not driven by outliers.

    This is not causal inference. The model tests a prediction (‘adding new high-end housing to a low-income neighborhood.. drives up everyone’s [housing] costs’) in a particular way, and finds no evidence of the predicted effect.

  24. You are confused about terms of art and the further you defend your misconceptions, the more ignorant and stupid you come across.

  25. There has been no reconsideration of land use controls in the Mission since Campos lost his assembly bid and decided that he could cross developers. The nonprofiteers who put the moratorium forth did not do so until Campos had lost. They all sat on their asses while 90 luxury condos projects were approved during Campos’ term.

    This is all about the nonprofits and directing resources their way instead of rezoning the Mission to benefit folks who live here and want to stay. The nonprofits could live with massive evictions so long as they get money to buy parcels and provide “services” because that is what they’ve done for the past decade.

  26. Goodness of fit, outlier control, independence of variables, linearity… we’ve been through this.
    Can I ask you, then: what would you say it takes to falsify a statement of causality based on an OLS analysis?

  27. We know exactly how they reached conclusions: fit price to square feet, age, bedrooms, bathrooms, neighborhood and year sold, from 1967 to present. Add a new-units-per-distance-squared variable at three lags in both the Mission alone and the city as a whole, and test the coefficient.

    The method is plain vanilla. What’s missing?

  28. But, I think Tim (the other Tim) has a point. If you build swank units @ 16th & Miss, its not only gonna make the swells comfy, but it gonna make Les Miserables moreso. And all those retail outlets that now serve … the Community .. we be displaced by retail serving … that new community, which isn’t really a ‘community’ cuz they don’t have seniority.

    If we really want to lower the price of RE in the City, lets get rid of all these high-paying jobs (don’t stop at the County line, either, go all the way down to SJ). Next we import a bunch of felons from MX, shoot up a few tourists, and … get our message out. Then we get the cops to recirculate the homeless into every block n hood, and lay a stink on the City.

    If we wanna lower RE values, we gotta do a little ‘block-bustin’. Otherwise, the rent … go up.

  29. Huh? No, I’d love to see a ‘study’. I’ve seen all kinds of city studies, and this ain’t it, at least not what was presented to the public. If I think their conclusions are bogus, I’d say so, if not, not. Right now there’s nothing I can say about their conclusions, because I don’t know how they reached them.

  30. Now you’re asking me to look at the demand side of the equation? Ill do that for Cleveland if you do it for SF.

  31. Because it is easier to just classify the CoreLogic data as “private, secret data” and use it as an example of “backroom deals benefiting rich industry by to the detriment of the citizens”.

    Meanwhile, back on planet earth anyone can buy and use the CoreLogic data. But again, it is easier to call it “secret”.

  32. “San Francisco progressives are more interested in sticking it to the man than figuring out the most effective policies.”

    I’m probably fighting a losing battle, but I’m going to insist on some scare quotes around progressive here. I know they think they are, and they probably are on some other issues, but there is absolutely nothing even remotely progressive about preventing badly needed housing (let alone housing next to some of the best public transit access in the area) from being built, heightening a shortage and affordability crisis, inducing further sprawl, commuting misery, and greater displacement, all to enhance their property value and/or indulge in their nostalgia about what “their city” is supposed to be. Progressives want urban living to be an option for all who want it, not limited to those with massive wealth or good timing.

  33. I see we’ve reached the “you can use ‘studies’ to prove anything; better to just assume my priors are correct” stage.

  34. That’s the problem when you’re completely driven by ideology. San Francisco progressives are more interested in sticking it to the man than figuring out the most effective policies.

    They say the city only needs more affordable housing and not market rate housing, but apparently think it’s essential to step over people’s property rights in order to preserve an unknown quantiy of yep, market rate housing.

    If market rate (i.e. “luxury” to progs) housing isn’t necessary and doesn’t help lower or stabilize rents, why do they care so much about these? Oh right, Ron Conway.

  35. Why don’t you go to redfin, type in Cleveland or Cincinnati, pick homes built in 2015 and see what you get back. Yes, developers still build stuff in rust belt cities…even if “unreal” to you.

  36. CoreLogic saved the city money. The dataset is fifty years worth of home sales data. It’s all there at the Assessor-Recorder and DBI. What CoreLogic does, anyone can do, given enough time, money and effort.

    Why would using a third party to gather data invalidate any results? What is the utility of spending millions of public dollars replicating identical data?

  37. Don’t forget that Tim Redmond also ignored how the report says the moratorium would increase rents and evictions. Egan found that 97% of new upper income SFers move into existing housing, displacing others. Until we start building lots and lots of housing, displacement of existing residents will continue.

    I’m all for the AirBnB regulations prop, the affordable housing bond, and the prop on use of surplus government land. But the Mission Moratorium just makes progressives look stupid.

  38. >”Since talk of the moratorium first came out of Campos’s mouth, we’ve had more time to “revisit” than the original moratorium would have given us.”

    Excellent point and it makes one wonder about the true motives of the moratorium. If its backers are intent on establishing new rules then where are they?

  39. A key report by a city official, trying to address a true crisis, relies on proprietary data which cannot be made public? By all standards of research the report and analysis are moot and should be redone. Without the data all those small but supposedly significant coefficients are just castles in the sky.

    Of course the other piece this reveals, is that while the Mayor keeps talking about addressing the housing crisis, his administration is not even positioned to gather data. And relying on private, secret data to address public questions of this magnitude, charting the future of the city in big ways nonetheless, is not a surprise given the record of backroom deals benefiting rich industry by to the detriment of the citizens. Not a surprise, yet still very disheartening.

    Meanwhile the crisis gets worse by the day, tensions are flaming. It’s affecting quality of life for everyone.

  40. It’s one of them…the concept that people should focus their energy on a few thousand units that may or may not be off the market because of Airbnb is highly counter productive.

    We’re told that the problem is so massive that it’s a waste of time to build new units, but Airbnb units would make a big difference, despite the fact that if Airbnb went away they would still be expensive market rate units, even if rent controlled.

  41. Since talk of the moratorium first came out of Campos’s mouth, we’ve had more time to “revisit” than the original moratorium would have given us.

    What do its proponents have to show for it, research-wise? You didn’t need to wait to start the analysis, you know.

  42. Tim is getting his wish. It is a reasonable argument that NIMBYism, zoning and rent control have displaced far more people than a free market would ever have done.

    But Tim’s SFH in 94110 is worth over a million so that will console him.

  43. Evidently he doesn’t like it when homes are built and made available to people who want to live in them.

    And he doesn’t like stores that sell food to people who want to buy food.

  44. Rent control is not about controlling land use? Huh? Of course it is. It restricts what property owners can do with the property they own.

    The point is that we do not need to pause anything to come up with a good idea. The reality is that the NIMBY’s want a pause for the exact opposite reason – they do not have any good ideas.

  45. Rent control is not a land use control. Zoning is a land use control. Heights, bulks affordability, Floor Area Rations, etc, those are land use controls. State law provides for a moratorium when policy makers determine that the existing land use controls are not working and they should be revisited. If you have a quarrel with this, then you should have taken it up with the Republican legislature that passed this provision in the 1940s when they passed the provisions in the state government code that required land use plans and zoning.

  46. They seem to think we’re arguing for more housing as just some kind of talisman, rather than as a good intended to fill the needs of a specific quantity of people.

  47. This viewpoint doesn’t make any sense.

    Despite more solar panel installations than ever before, the climate is still warming. It doesn’t mean we shouldn’t build solar panels.

    Despite the aspirin I took ten seconds ago, I still have a headache. This doesn’t mean that aspirin is useless.

    Despite taking a few bites of food, I’m still hungry. Food is still a useful thing to eat when you are hungry.

    There is a massive shortage of housing in this city. It wasn’t created overnight, and it won’t be solved overnight.

  48. Yes I suspect jhayes is a renter and doesn’t have a finer appreciation for the nuances of real estate values.

    I have mixed feelings on this. I generally welcome more valuable homes being built on my block. for the same price, it’s better to have the worst house on a good block than the best house on a bad block.

    But I don’t like having the smallest house on the block as the bigger, better homes will block my light, my sun and my views.

    Then again, I do not think the sole factor in any planning should be the rather idealistic aim of making SF RE cheap. I doubt that is possible in any event.

  49. Why does anyone need a pause in order to think?

    How about thinking all the time?

    We don’t have to “pause” rent control to think of ways to improve it.

  50. A moratorium is supposed to provide a pause to assess and change land use controls. That is what happened during the Live/Work moratorium in 2001, the legislation called for a task force to be appointed, it was, it took a factual record, made recommendations and then legislation was passed accordingly.

    In this case, instead of a task force that would meet in public, the nonprofits and the Mayor would do what they do behind closed doors.

  51. “the first rule of real estate — location, location, location”

    “the presence of a multimillion dollar home next door will boost the value of their property?”

    Your former statement exposes the fallacy in your latter statement.

    The multimillion dollar home is proposed there because the property is _already_ valuable, due to its location. That does not mean the multimillion dollar home boosts the value of the general area.

  52. Interesting: going by the CPI, rents in the Bay Area relative to NY/NJ/LI peaked during the first tech bubble, and remain well below that peak. House prices, by contrast, are at a high since the all-transactions indexes begin in 1975.

    Zillow ZRI per square foot is $5.2 for New York County, $3.5 for San Francisco.

    Sources https://research.stlouisfed.org/fred2/graph/?g=1QnD and http://www.zillow.com/research/data/

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1QnD

  53. If more homes = higher prices then why doesn’t SF simply adopt a policy of demolishing homes, which would make housing costs decline according to your perverse counter-intuitive logic?

  54. It’s hard to imagine someone as generally ignorant as Tim writing in complete sentences. He deserves 7k rents and all his friends evicted.

  55. Yes, somehow Tim goes FROM the fact that we can never build enough new homes to make housing cheap TO the opinion that we should therefore build none.

    Weird.

  56. I am yet to meet anyone who intends to vote YES on this. And that includes people who are voting YES on the housing bond and the Airbnb prop.

  57. Tim, your last few paragraphs are confusing and contradictory. You start out by saying that the city cannot pass a law with the deliberate intent of devaluing a property that they intend to buy. And that is of course correct. it would be a de fact taking.

    But then you try and say that it somehow might be all right to do that if it is a proposition which is then renewed. I fail to see the difference.

    Spot zoning a lot as PDR will have the effect of devaluing it. But the city cannot do that, then buy it on the cheap, then re-zone it back to residential and building housing on it. That is blatant abuse of power.

  58. WOW! Way to COMPLETELY ignore half of the report. You don’t address how the moratorium will increase evictions, raise rents, or the finding that 97% of new upper income residents move into existing housing, often taking someone else’s home.

    What a horrid rebuttal. It’s clear Tim Redmond is just hoping his followers don’t take the time to read the report. Everyone needs to vote No on I because it’s bad legislation that will inevitably result in lawsuits rather than reduce the price of land.

  59. People forget that rents can and will keep going up if there isn’t some effort to increase housing. We’ve pretty much already left the situation where home ownership is a possibility. We’re now getting into the area of people making six figures needing to live with roommates. It can happen and will if something doesn’t change.

  60. You mean citing a “whole lotta state and federal laws” isn’t the paradigm for academic research? Well, then, you oughta have you PhD taken away, sir!

  61. Are you implying that NYC is building many luxury condos, thus prices haven’t increased as markedly, or that SF is building condos and NYC is not, and that is why our prices have risen so much?

  62. “Might it be possible that while the sale value for land will go down, the price of existing units will go up at a faster rate because of it”

    Exactly this.

  63. So you think overdevelopment is going to reduce housing costs in SF? Excellent. That’s EXACTLY the best case scenario.

    So why on earth would you want to stop that with a “reactionary” moratorium?

  64. The moratorium is reactionary.

    Quite reactionary, in fact. Why should any social democrat or other progressive support such a reactionary policy?

  65. It does nothing remotely resembling that. Neither the Rust Belt’s decline nor the previous housing crisis had anything to do with a conscious attempt to reduce housing costs by banning development.

  66. You’re very, very confused. It just so happens that yes, there are some new downtown condos being built in Rust Belt cities. They’re not luxury by coastal standards–in my current city of residence, they sell for about 150-200K (and and labor are cheap and plentiful). They sell pretty well–people would rather pay for them than deal with the inevitable inconveniences of older, often long-neglected housing stock. It’s fairly common for developers to aim too high at first and bring down the price.

    Once again, you need to get it out of your head that the problem is a particular style of housing, rather than a general shortage of housing. Old and new housing stock alike is completely unaffordable for the middle class in San Francisco because there’s not enough of it. “What Tim is saying” is breathtakingly delusional.

  67. All else equal, a vacant lot next door makes a property in San Francisco more valuable. A newly developed home blocks sunlight and views, and adds neighbors who may throw loud parties or want an easement. The lot is nicer.

    If development next door is so valuable, why is NIMBY a catchphrase?

  68. Two things come to mind here: 1) statistics lie and liars use statistics; 2) the first rule of real estate — location, location, location. Is there anyone here who doubts that, all other facctors being equal, the presence of a multimillion dollar home next door will boost the value of their property?

  69. So the whole point of the moratorium is that nobody can think of a solution, so we’ll all just sit on our asses and do nothing? And maybe someone will eventually have an idea?

    That’s quite an ambition.

  70. It was 7,000 units and 50,000 people (2010 to 2014), but yeah, there is some real blinders-on post-hoc thinking going on out there.

  71. “No one can produce any example of price reduction because it is a fantasy.”

    What an insane comment. Look into housing values in many–most! rust belt cities have seen homes decline in value. I live in one such city. I know people who are desperately trying to sell homes for less than they paid decades ago. A few years ago, I negotiated a rent decrease after my annual lease was up, because I knew vacancy rates were up in the area and the apartment complex was losing residents. Your “fantasy” happens *all the time*.

  72. Calvin’s really got that critical distance thing down. He is critical of anyone who questions him and he is at distance from anyone remotely impacted by his sinecure policies.

  73. That would probably be the best case. But the whole legal point of a moratorium is for something to happen, to reconsider the zoning that is not working.

    I could imagine the nonprofits and the Mayor cutting a deal under these circumstances to benefit each other and further screw San Franciscans.

    Again, like they did in 2008.

  74. I don’t really think “it would take a *lot* more housing to fix this housing crisis” means that we shouldn’t build at all. People need homes and we should build the homes to meet that demand.

    And that should happen without displacing people, without tearing apart low income communities and communities of color, but we cannot preserve San Francisco in amber. There needs to be more density, there needs to be more housing.

  75. I’m appreciating your sarcasm. I guess the 3k new houses we built were enough for the 30k people who moved here in the same timeframe (year after year). It wasn’t all those people who caused the housing inflation, it was the new units. I see.

  76. What on earth are you talking about? Real estate is completely capable of losing value, and no smart, informed person would buy it unaware of that. Ask anyone owning a house in the Rust Belt. Or anyone who bought a house just about anywhere in 2006.

  77. http://cdn1.blog-media.zillowstatic.com/3/Figure4-ab128d.png

    While New York’s rents are high, they aren’t as high as SF’s and the rate at which it is increasing is much slower. Now their progressive mayor plans to build even more housing, because he must obviously be a Republicn developer shill.

    Unfortunately Redmond and progressives in SF don’t believe that building more does anything.

    “Egan himself says that it would take at least 100,000 new units to bring
    down prices. So building new market-rate housing in the Mission can’t
    possible reduce prices.”

    The fallacy that Redmond makes here is that he believes you need to get to the 100,000 units before anything happens. Building 50,000 units, or even 25,000 might not make all housing affordable, but it would slow the increase in rents or even modestly lower it. I think most San Franciscans would be happy if they had New York’s 2.1% increase vs. our 14.9%.

  78. Here’s one example of what I’d like to see. Anecdotally, gentrification proceeds by a few businesses and a few people moving to a formerly shunned area, making it less shunned, and the thing snowballs to make the area pricey. During gentrification new buildings go up; take for example the new buildings which have gone up in recent years on Valencia. You’d think that neighboring buildings would appreciate at the same time, whether as a result of the new buildings accelerating gentrification, or independtly of them. Since this is not what I see in this model, is it because the model is wrong? Are my ideas of gentrification illusory? I can’t tell, because I can’t see their work.

  79. What are you confused about? You claimed “they’re adding stock in NYC and prices are going up in every sector”. Wcw pointed out that NYC has added relatively little additional stock, both in absolute terms and relative to population growth.

    That, like Egan’s report, seems to falsify your theory that “more new housing = higher prices.”

  80. Tim Redmond is like the worst Wikipedia writer ever.

    “Many modern urban economists argue the opposite.” Really? Which ones?

    Many scientists also argue against global warming, and that’s like a whopping 3%. I can’t believe moratorium folks haven’t gotten all these economists to chime in on the measure. The line must be out the door!

    Oh right, the best they can do is trot out “historian” Calvin Welch and have Tim repeat it as fact.

  81. OLS is cheap and easy, but it’s simple. If Egan and Khan modeled both the Mission and the whole city with proximity and three lags, and there was a small but significant effect each time, then there almost certainly is no large, positive effect hiding in the numbers somewhere.

    Nobody cares if the effect is small and negative, zero, or small and positive. What this work tells us is that the chances that the effect is large and positive is getting really small.

  82. I don’t know what’s wrong with it. Maybe it’s fine, maybe it’s not. How can I tell? All I know is that this kind of model has many gotchas: is the statistical model correct? Are the results skewed by a few outliers? Are all the assumptions of independence correct?
    I am surprised that such a dataphile as yourself is being such an apologist for this paper, purporting to be a study but more of an executive summary.

  83. I’m sure the commercial data was fine. OK, they did give a significance level. I still don’t know what the relation between the data and the model are. Every year hundreds of similar studies are published trying to show relationships between diet and health, between traffic and well-being, between salaries and alcohol use, what have you. Some are confirmed, some are contradicted, some are not published because they don’t follow proper protocol. I cannot evaluate what they did or whether it’s valid based on what’s in the report and neither can anyone else. As the authors say (p. 26), “The reason for this finding of a negative impact of market- rate housing development on home sales is not immediately obvious, and would require investigation that goes beyond the scope of this report.” Even they can’t explain their result, though they make some guesses.

  84. From 2010 to 2013, NYC added 94,000 people, but only 9,500 housing units.

    Unless you put 10 people into each unit, that’s a problem.

  85. The results were consistent: proximity to market-rate housing had a statistically-significant negative effect on housing prices, in all three models. (The analysis was then repeated using all market-rate construction in the city, not just new market-rate developments in the Mission. Again, the results showed statistically-significant negative effects on housing prices.)

    The method is on page 37: to the existing price model, it adds a proximity variable equal to the number of market-rate housing units in nearby developments divided by the squared distance.

    There’s something to see. It’s OLS. What’s wrong with that model?

  86. Priced Out – With reference to “Economist blasts building pause,” (Sept. 11), things are indeed clarified. Chief city economist Ted Egan concludes in his report “that new market rate housing, in the Mission and across the city tends to reduce, rather than raised, the value on nearby properties.” Oh, I see. Now we know why housing prices and rents are falling. It’s amazing — speculation and evictions are making housing affordable. If only we had realized this sooner, we wouldn’t live with the fear that we’re being priced out of San Francisco. What a relief this “research” is.

  87. my ltr. to editor SFC published today:

    PRICED OUT
    With reference to “Economist blasts building pause” (Sept 11), things are indeed clarified. Chief city economist Ted Egan concludes in his report “that the new market
    rate housing, in the Mission and across the city, tends to reduce, rather than raise the value on nearby properties.” Oh, I see. Now we know why housing prices and rents are falling. It’s amazing — speculation and evictions are making housing affordable. If only we had realized this sooner, we wouldn’t live with the fear that we’re being priced out of San Francisco. What a relief this “research” is. kathy lipscomb

  88. Y, they give the correlation coefficients on page 37, for example “For k = 1, the effect was significantly negative at the 99%
    level, with a coefficient of -.011.”

    But look, just go on assuming nothing he did was right and that the commercially available data is fabricated and that we need a moratorium so that we have time to produce graphs.

  89. Yes, that’s exactly what happened when the BOS Budget Analyst report came out against Airbnb. The powerful and influential forced the study to be redone.

    Yes, that’s exactly what happenend.

  90. The Mission is already a destination for artisan bean buyers, and everybody who lives there is squatting on a hill of really valuable beans. Halting all construction won’t change that.

  91. Jon, I have looked at these again and again. The data they used was bought from a commercial outfit, so they can’t share them. They explain the model that they fit the data into, but there’s no indication of how closely the data fit the model. There are no error estimate, no confidence intervals, no indication of outliers, no graph comparing the model results to observations. I understand they had to do this in a hurry. Maybe if we have a moratorium, there’ll be more time for a solid, thorough model that the public could evaluate before acting on its results.

  92. OK…in Egan’s report there are pages 30-37 that explain his data sources and calculations in a lot of detail. Sorry that you aren’t able to see them but that doesn’t mean that they’re not there.

  93. I just miss the days when progressive politics put you in what we called the “reality based community”.

  94. Not to worry, plenty of other sites and publications would attack it then, and they would have more pull and influence to force the study to be redone.

  95. Look, if the research doesn’t support the progressive viewpoint then it’s wrong and nothing that you say is going to make any difference. They can’t handle data that works out against them.

    Meanwhile, can you imagine the 48 Hills headline we’d be looking at if Egan’s report supported the moratorium?

  96. Egan did not. He gives the results, based on proprietary data. I was looking forward to taking a closer look at their methods, but there’s nothing to see.

  97. Egan’s white paper makes careful use of the available data to cast doubt on existing arguments.

    Redmond then makes an empty restatement of those same arguments and then calls it a day.

  98. Ugh, Legoland Mission. Didn’t Whole Foods already build that fugly thing at Market and Dolores? I’d rather keep the scrappy public space as is.

  99. It isn’t true that Egan “assumes that building new market-rate housing will have little or no impact on the value of neighboring property”.

    He doesn’t assume, he did an extensive study of housing values from 1967 to 2015. You can see the methodology and details starting on page 30 of his report.

    You can question the methodology of Egan’s study if you wish but he laid it out in great detail for all to see.

    Tim had to ignore it for obvious reasons.

  100. Indeed. And Tim doesn’t even try to tackle other issues Egan raises in his report, like that even if market-rate development is outlawed BMR housing developers would have to outbid the current use of the property in order to buy the site. I give this a 2/10.

  101. I agree that it may make the value of empty lots less valuable, but the problem that the folks in the mission are facing is that rents have gone up too quickly. Obviously property prices and rental rates are related, but not the same. The moratorium will certainly keep developers (especially big ones) at bay, but it will do nothing to stem the demand for rental units. Might it be possible that while the sale value for land will go down, the price of existing units will go up at a faster rate because of it?

  102. The section in the report entitled “Preventing Indirect Displacement Effects”
    rebuts Tim’s argument about artisinal bean buying districts using
    multiple models of pricing.

    The section in the report entitled “Maintaining
    Sites for Affordable Housing” rebuts Tim’s argument about keeping land
    prices down by pointing out that affordable housing developers also have to competing with existing land uses – not just market-rate developers – and that there’s an opportunity cost, in the form of losing mandated BMR units that the city will now have to replace itself.

    This report actually pretty clearly explains exactly why _every_ single argument about the moratorium helping affordability in SF is misguided, but I suppose Tim’s gotta grab at whatever straws he can.

  103. The real issue here is what happens during the moratorium and how that would impact a whole range of issues moving forward. I wonder why Tim does not discuss that.

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