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Monday, October 25, 2021

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News + PoliticsThe Panama Papers and SF's housing crisis

The Panama Papers and SF’s housing crisis

Dirty money, laundered offshore, is fueling the boom in luxury real estate in US cities. How many SF condos are owned by crooks and despots?

The whole world is talking today about the Panama Papers, the amazing leak of documents from a law firm that specializes in helping the rich hide their money. Leaders of numerous countries are involved. Vladimir Putin is a player. The prime minister of Iceland may have to resign. The government of Pakistan is caught up in the scandal. And there will be a lot more as investigative reporters continue to dig through the terabytes of data.

We know that a lot of the new condos in SF are second homes -- but how many are owned by despots and crooks using the city to launder their money?
We know that a lot of the new condos in SF are second homes — but how many are owned by despots and crooks using the city to launder their money?

So far, none of my top corporate and political bad guys are on the list – no Donald Trump, no Koch Brothers, no Ron Conway (and my list goes on and on). But it’s clear that there’s a connection between all of this shadowy money and San Francisco. In fact, there’s a connection to the SF housing crisis.

On NPR this afternoon, the vice president of Transparency International talked about how the offshore deals impact ordinary people – and the first thing she talked about was housing in cities like New York and SF. See, the shadowy banking system allows people with illegal money – money from arms trading, money from drug sales, money stolen from the people of a struggling country – to launder it and use it, among other things, to buy real estate.

So, she said, the bidding wars that are driving up the cost of housing in cities, and the mega-priced condos that are shoving out other types of housing in places with scarce real estate, are directly linked to this dark money.

The Miami Herald documented this nicely.

Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford.

The Herald had access to the documents, as part of the international team of investigative reporters that catalogued and analyzed the records. Nobody from SF was on that team, so we don’t know yet exactly how many of the high-end condos that are squeezing out more modestly priced housing are funded by corrupt money.

But it would be completely insane to believe that all of that new housing that the mayor is praising is being built without some of this illegal, secretive cash. It’s happening in every other major city, and it’s happening, probably faster, here.

We know that a lot of the luxury condos going up are not occupied by people from San Francisco, and that in fact a lot of them aren’t occupied at all. They are places to hide money.

And now we know they are places to hide illegal money.

So let’s stop arguing that all of this new high-end development is helping the housing crisis. It’s not. But this type of development is almost certainly helping some very nasty characters bring their wealth ashore in quasi-legal ways.

And if you think that city planning has anything to do with what’s getting built in San Francisco, check out today’s Chron story on hotels. The Planning Department never decided that the city needs more commercial hotel rooms; maybe it does, maybe it doesn’t, but that was never discussed at a commission meeting. There was no public debate over whether hotel rooms are the best use of very scarce land in places like Soma.

No: The capital markets shifted, and decided that, for the moment, there’s more return in hotel rooms than in luxury condos. This has nothing to do with Nimbys opposing housing; in fact, it has nothing to do with any type of land-use discussion.

In San Francisco, the city doesn’t really plan; it responds to what the international capital markets – which, we are reminded today, are often deeply corrupt and venal, want to do.

That’s a key reason we have a housing crisis: We trust in the private market, and the developers who exploit it, and the investors who get rich off it, to solve the problem. It’s never worked in SF, and it never will.

I would love to see the city investigate how much of the new housing we so gleefully allow and the mayor so proudly supports is being purchased by crooks and dictators, and how much of that money has come out of the pockets of poor people the world over.

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.
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  1. […] So what do these MASSIVE tales of money laundering have to do with heritage conservation?  Well, if you have been following my blogs here and in Traditional Building recently, you know I have been taking on the issue of historic districts and real estate prices. Both the Bay Area and Manhattan are known for their otherworldly real estate prices, and what the Panama Papers have shown is that one of the prime receptacles for laundered money is real estate.  In those markets (also Miami, which has like only a couple decades of dry real estate left).  Look at the Panama Papers article here. […]

  2. Google

    Just beneath, are quite a few completely not related web-sites to ours, on the other hand, they are certainly worth going over.

  3. There is nothing completely new about drug & crime money being laundered through real estate. The sheer scale of unoccupied “luxury” condo’s etc lends quite a bit of credence to this story. Miami was built initially on illegal booze money during Prohibition and a second round later thanks to cocaine dollars. It looks like a lot of trolls reading this article are worried the truth will come out again. It’s folly to think that San Francisco (and the Bay Area in general) are immune. My work takes me through a number of neighborhoods & I’ve seen houses sold & then stand as silent as a mausoleum ever since.

  4. Where does the map that is featured so promentily fit with this story? What are the data points? and the source?

  5. This is what the world looks like through the eyes of a liberal. This twisted vision is his idea of reality.

  6. “Trumped” again by insults instead of arguments. (Ever considered running for higher office, Flo?)

    75,000 more people over the last 10 yrs; 10,000 evicted over the last ten years. More have moved away and more have moved in.

    Maybe we should guarentee people a place to stay. Again, how do you pay?

  7. more unproven garbage journalism. idiots are hungry for more misdirection. gotta feed them something i guess

  8. This is just one of many thousands of tax shelters around the world. Don’t expect more than a tiny fraction to be outed by this data leak

  9. I am in agreement about the hoops, and red tape.
    But the city isn’t telling me that New Development is hurting the middle class, in fact they’re saying the opposite as they try to rezone chunks of the city to accommodate more development.
    Longtime residents can see the effects of building on every unused plot, and redevelopments contributing to the mess this city is in.

  10. Actually new development is not the culprit but this is what the city wants you to belief. It is a nightmare to get building permits in SF and it is a nightmare even in dead markets. SF puts developers through so much red tape that by the time they are able to build they have spent millions and need to recoup the money by passing it on to the renter. I only know this because I did a build out on my business and it was a nightmare and this was in a dead market. The FBI has raided the department of building inspections 3 times because it is so corrupt. This city is a mess and I don’t see it getting any better any time soon.

  11. “This city has destroyed our middle class”

    You lost me here, because new development is one of the culprits.

  12. Okay sure we without a doubt have dirty money in this city but to blame the housing crisis on this is ridiculous. We have a housing crisis because SF makes it impossible for developers to get building permits. Sometimes it can take up to five years and then the developers have to pass the cost down to the consumer. Can we please talk about the real problems which is DBI (department of building inspections), the Planning department and our inept board of sups. This city has destroyed our middle class, killed small business because of too many regulations and this is also the reason that we don’t have housing. Let’s please talk about the real issues in this city and not made up issues. God knows we have enough to of them to talk about.

  13. PRECISELY. Exploiting an international story of corruption to further an argument for a completely and utterly unrelated issue.

  14. Yeah we have 60,000 new housing units in the SF pipeline… that are about to run smack into the worst IPO market since 2007 (et cetera). The problem is not housing supply and demand, rather the problem is speculative bubbles and a boom/bust economy where the normal business cycle is amplified to epic proportions. This can only be cured by ending central bank intervention in the free market.

  15. Australia has found a good solution — foreign nationals are only allowed to buy new construction. That way, the economy benefits from the new construction, but locals are not boxed out of the existing housing stock. Of course this would never happen here, because all of our policies are designed to benefit the speculator class, not the working class.

  16. If a fugitive PRC Army executive officer isn’t free to launder his ill gotten gains through San Francisco real estate does FREEDOM! have any meaning at all?

  17. We have an *AFFORDABLE* housing crisis. Not a housing crisis. There’s a big difference. There are plenty of homes and luxury condos for the wealthy in this city. Look at any corporate real estate website based in this city and you’ll see the pages of inventory of homes/condos for the wealthy. Why does this site continue to omit the word “affordable” when writing about this topic? Sloppy writing.

  18. Actually the Nationality impaired non English speaking,, maids, servers and cooks don’t make minimum wage. They get paid in peso’s so they can send it back to their big family. The tour guides, entertainers and waiters are making less than $12 an hour, or tips at tip wages. Would you like me to ask them? Cause they will tell me and the companies will be pissed off at me.

  19. It’s a short paragraph, I have criticized entire scientific books, surely you can list the inaccuracies from two sentences. I mean you picked apart the entire article, but you can’t list the inaccuracies in two sentences… Wow.

  20. I love how people don’t care about affordable housing or about dark money, but rather what a journalis thinkst about the possibility of a corruption and a constant attempt to get people who read it to stop, by commenting in the comments.

    Mr. Nothing to see here, okay thanks now I am going to look really hard.

    What’s your real name? Do you work for the City? Are you a Mason??

    What in the world do you have against building new affordable housing, when you cannot even fill luxury condos or apartments and are loosing money?

    Oh, sorry, are you scared that the bubble will burst even more?

    Last but certainly not least, what is your issue with poor people?

  21. I love how people don’t care about affordable housing or about dark money, but rather what a journalis thinkst about the possibility of a corruption and a constant attempt to get people who read it to stop, by commenting in the comments.

    Mr. Nothing to see here, okay thanks now I am going to look really hard.

    What’s your real name? Do you work for the City? Are you a Mason??

    What in the world do you have against building new affordable housing, when you cannot even fill luxury condos or apartments and are loosing money?

    Oh, sorry, are you scared that the bubble will burst even more?

    Last but certainly not least, what is your issue with poor people?

  22. Time to check the names of the Seattle Players, Never believed that this homeless crisis wasn’t manufactured by some Political Big Wigs, Land Developers and Non profit heads..

  23. A very shortsighted view of tourism. Maybe in your world tourists stay at Motel 6 and dine at Burger King. The hotel maids, the servers, cooks bartenders, tour guides, entertainers, artists winemakers. They are all doing better than minimum wage.

  24. Also when I read something like this I read the article then I read a handful of comments to see how it’s going down. While reading the article for instance I thought “what a crappy and misleading caption to this google map!! has someone already mined this many Bay Area zip codes from the Panama data dump??!?” And no they haven’t. But reading your comment helps me fine tune that indeed I feel like I’m seeing crappy journalism — even if I still read it from time to time.

  25. I don’t feel like you overreacted, and thanks for your comment on my comment. We all probably need to remind ourselves to engage in constructive dialogue more frequently.

  26. Fair enough, and I certainly don’t mean to suggest that annoying me is equivalent to trolling (if it sounded like that I didn’t word my comment correctly). Obviously what I think is of no concern. And I guess I’ve just gotten over-sensitized to ad hominem and acrimonious comments that often end useful debate. I certainly don’t agree with everything Tim says but I find his perspective thoughtful and appreciate that he takes the time to generate 48Hills so I try to be thoughtful re. critical remarks. But I understand that debate can get a little heated and I no doubt overreacted here.

  27. I’m not demonizing them. I’m not saying everyone is guilty. I’m not even saying any percentage is guilty. But I’ve been around the world a bit. I’ve lived with people who are rich and poor. Most are pretty law abiding. But I can tell you that most of the people pulling the trigger in the big cities like Chicago or DC are poor. The same goes for the countryside too.

    The simple reason is that people who’ve got a pretty good job and a pretty good house have no reason to rock the boat.

    This is just class hatred to claim that rich people are manipulating the system to avoid prosecution. Most of the time they’re rich because they obey the law. They may bend it to suit their purposes but they generally obey the law.

  28. It’s an excellent question. I often think to myself, “I should never read 48Hills again.” I’m sorry that you find my comments annoying (I’ll think about how to make them less so) However two points:

    -I basically only disagree with the author’s housing analysis (which is a lot of this blog). I’ve posted positive comments on other topics. I often agree with the author on homelessness and criminal justice. I even agree with the author on appropriateness of AirBnB regulation (though I don’t believe that AirBnB has had a huge impact on the housing crisis).

    -I don’t consider my comments trolling because my comments are not offensive or provocative in content (I shouldn’t have said this post was “borderline hysteria” and just removed the comment) and I don’t make them with the intent to inflame. I make them because I believe the author, a journalist, often misrepresents or omits material facts. I believe that folks reading these articles deserve that additional information, which is why I comment and usually provide links to where I’m getting my information.

    I really don’t care if people disagree with my opinions, I only really care that they have the chance to evaluate all the relevant evidence.

    Another point: I’ve donated to 48Hills during every annual fundraiser. I disagree with the author, but I also read it and comment frequently. I consider it my “troll toll.”

  29. Nice try. Our neighborhood has had lots of residents of Chinese descent for a long, long time. It is also full of Irish, Mexican, El Salvadoran, and families from all over the world, and thank the stars for that. Indeed, the vast majority of my neighborhood is probably foreign. My own family is from Poland. I’m as pro-immigration as they come. I think every Syrian refugee should be brought to the US and given a free house and a lot of other things. I think the path to US citizenship — and voting — should be as swift as it once was for my family.

    It’s completely understandable that a Communist official, intimately familiar with the workings of the Chinese government, would send his family to live overseas. Many of us would probably do the same thing. I’d be elated if his family actually lived in the house for any duration of time greater than a week or two. As it is, the house sits empty, save for the few brief weeks when a new set of people appear, all hell breaks loose, the police have to come, and so on. The issue isn’t that Chinese people moved in: it’s that they HAVEN’T. It’s that no one really lives there, and the house appears to be used for various questionable purposes instead. That’s the problem, as it is with many usually-or-permanently empty homes in the city.

  30. I didn’t say it is a bad thing. There are advantages to being a tax haven as well as being one of the most desirable places to buy property.

  31. You say “our” housing. through what legal process does someone else’s housing become “our” housing? Housing unless it’s public housing, or rent controlled, is not a public “resource” it’s private property.

  32. Absolutely.

    Though if we take negativity and prejudice out of the equation, there was an infusion of all cash purchases with money out of China. Everyone knew it. People would list homes hoping for it.

  33. Well, sure, but people that blindly believe anything that has a citation (https://www.painscience.com/articles/bogus-citations.php) attached deserve what they get. While Tim doesn’t command the research budget of a fancy investigative journalist he does collect more information than a lot of men in the street, so 1 vote here for letting people vet their own citations.

  34. @karl young – Understood, but as I said in my comment you sometimes see 48Hills listed as a source elsewhere. During the election there actually were mailers making accusations with a footnote that linked to 48Hills. The material from this blog injects misinformation into the general debate and that works out as a negative for all of us.

    Today’s example — a post entitled “The Panama Papers and SF’s housing crisis” is now out there and can be Googled…and only those who read it know that the author didn’t perform the journalistic work needed to justify the headline..

  35. Just curious why, if you consider 48Hills to be such garbage, you spend time reading and commenting on the articles ? I’m sure Tim speculates, and even occasionally gets a little hysterical, but your comments sound a little like the definition of trollery. I agree that it doesn’t seem like there’s currently much direct evidence of crooks investing in SF (well, as a renter, I might stretch my definition of crooks to include real estate speculators but that’s another story). But this is a blog and Tim can speculate all he wants. And you are obviously free to comment on his speculations, but it’s kind of annoying to go through comments sections where the same people continuously and relentlessly trash the blogger; it seems like continuing to read the blog would be a waste of their time.

  36. There is an almost hilarious amount of just plain factually wrong claims in that statement.

  37. “Subsidization” from what source? Where does the money to build and operate these BMR units at a massive financial loss actually come from?

  38. Riiiigggght…it has nothing to do with the housing bubble burst of 2008, the affordable housing that was the result of that burst, the boom of the tech industry bringing in new workers, the lack of housing on the peninsula where those jobs were located, etc etc… Meh…I’m sure complicated history had nothing to do with it. You’re right. There is a single root cause to the problem and it’s one single person with one single agenda. Black & white! No gray around these parts!

  39. The v rich are able to craft the system to their liking. In some ways, it makes a mockery of morals. But its legal. The poor only have the system given to them.

    Public Housing seems to suffer from rules imposed from above (union plumbers to change a light bulb), and lack of resident interest/ability/resouces (no tools to change out a washer).

    Thats where the ‘secretive cash’ is. Oh, and payouts for racial/sexual harrassment by admin at the expense of upkeep for the residents.

  40. The “solution” is heavy subsidization of non-profit developers; or downright donations from The City.

    IOW, an arm and a leg.

  41. And it’s something we as a nation can be proud of. Non-Americans look at our country, our legal and baking systems and want to keep their money here. That’s a big vote of confidence for any country’s economy; and we benefit enormously. (anytime you take a dollar bill out of the US, that’s a gift to the TReasury as that money rarely comes back into our economy).

  42. Not exactly.

    Several instances of developers building 9 units (slighly larger, therefore pricier) rather than make the 10th one BMR.

    Not sure about extraction (exaction?) fees. But seems like it would be the reverse, or neither.

  43. If people are already living here, then they don’t need new housing, eh? When the population increases by 10s of thousand and only 10s of hundreds of units are built, there will be problems.

    So here we are.

    You’re an architect. Whats the break-even price point for new (non-lux) developement? … So how do we get people, who are already working overtime, to work extra for less? There may be a ‘social good’ (for current residents?, or for new residents?) to such construction, and I’m sure you could fill all those cheap units you develop in no time. But how do you build them? With whom? Where? And with what?

    Got more epithets?

  44. I’m sorry but that’s so naive. I’m not saying everyone is corrupt but to demonize the poor saying they’re more likely to be committing crimes is just being prejudice. People living in the projects and the ghetto are struggling, day after day, NOT sitting on a suitcase of cash. How many companies out there exploit slave labor.

    The only difference between rich crime and poor crime is that rich people can hire the best lawyers and pay off people to keep their mouths shut.

  45. You forgot about the $850K “affordable housing” units in the Mission. Or the millions unspent in BMR developer fees. Lack of site acquisition by NonProfits. Or favoritism in Small Sites spendings.

    And lest we forget, due to the high cost of living here, most people with resources retire and move elsewhere (well, the civil servants do). But SF seeks to cement in place people who couldn’t pay rents almost anywhere else in the country at levels they pay here. Yes, there’s an element of mercy in that. But even good intentions can have bad consequences. Call it squeezing out teachers, or forcing low paid workers into longer commutes. But “we” can proudly proclaim that folks on SSI have cheap rent and protection right here.

    Its changed a bit since I got here, but not in the essence —
    California’s the Garden of Eden,
    a paradise for you and me;
    but you better go back to beautiful Canton, San Salvador, Dublin, Your Town, Tennessee,
    if you ain’t got the Do-Ra-Mi.

  46. Absolutely. Also worth noting, nobody was selling at that point unless they had to. Most sellers were lucky if they came out with enough left over to pay off a bill or have a nice dinner.

    People were convinced in retrospect that it was driven by Tech cash, but aside from some sales near Dolores Park, which was bullet proof, most of it was foreign money.

    The other secret, nobody is talking about…. a lot of long time upstanding San Franciscans bought for their overseas families, or suddenly came into a lot of cash.

  47. Tourism: An industry that creates wealth for a few and has millions of jobs (globally) that, in the best case, pay minimum wage. Sorry, the industry needs to be more equitable with all of its employees or we need to replace it with another industry that will.

  48. “The crimes committed by the wealthy are fewer but tend to be higher value.”

    Here – let me fix that for you: “The crimes committed by the wealthy are not adjudicated. ”

    See Academy of Art as an example.

  49. I don’t have the answer, but if we stop abusing the catchphrase, and use the honest definition of the phrase, it would probably help that goal.

  50. I keep saying it, the market ballooned because of all cash buyers. Well…who has all cash?

    The all cash requirement was a result of policies, and a crises, and there were properties available for cheap, which meant parking money in SF real estate was an obvious choice for those with foreign assets that were dropping.

    Are we labeling Chinese money, or Rich People Money as Dirty Money now?

    Who the hell do people think is funding these new developments? It requires major capital…and we’re not talking Ron Conway money either.

  51. We needed leaked documents to figure this out? Do people really believe that all cash buyers are hard working members of society? Hahaha

  52. That depends on what you define as “REAL crime”.

    There is almost definitely more crime committed by the poor, in terms of actual counts. The crimes committed by the wealthy are fewer but tend to be higher value.

    I suspect that most voters look at it the same way as I do. If some rich white guy embezzles some money out of a corporation or other wealthy guy, and hides it offshore then there is no immediate effect on me.

    But if some black kid from the ‘hood whacks me with a baseball bat and takes my wallet then it feels a lot more personal and potentially life-altering

  53. What exactly is your solution to make new apartment developments “affordable”? ” Affordable housing” is just a buzzword that is devoid of meaning or context. What actual MECHANISM do you use to achieve affordability?

  54. And let’s not forget the Art School….taking SRO residences and criminally turning them into…SRO residences for …students! Paid for on …Credit!

    And we need housing for the current population…. No, not public housing…fancy condos!… built in areas without supermarkets where the homeless don’t even want to be sheltered!….

    We’ve got perspective alright.

  55. The sub-10 unit exemption only applies to the developer fee exaction, not the BMR requirement.

  56. One of the reasons AirBnB was able to establish such a strong foothold in San Francisco is because the city hasn’t built any new hotel rooms in the last 15 years. Literally. There are actually fewer hotel rooms in SF than there were in 2001, despite a significant increase in tourist traffic. The hotels are already at capacity and the rates are already astronomical. Visitors had no choice but to start seeking alternative accommodation to come here, which I is when residents realized they could rent rooms and apartment units to them. Which is what led to AirBnB, which is another thing you people are blaming the housing shortage on.

    The City’s economy is all interconnected. You can’t just say “build housing and nothing else”. You need a comprehensive approach to this problem.

  57. “Buncha Chinese foreigners moved into muh neighborhood. Brought their damn gangs along, making noise all hours of the night, disturbing the peace, sucking up all the good housing and driving out us hard working native folks. The city really outta do something about this…….”

    It’s been fascinating to watch the “progressive” residents of 2016 San Francisco revert to 1860’s-style Yellow Peril hysteria in the wake of the housing crisis. People in SF are feeling the squeeze because of complex economic issues with no simple answers? Screw it, let’s blame the Chinese! 150 years of history and we’ve come full circle.

  58. Hide it? I don’t think so. I know about white collar crime and there’s relatively little of it. The computerization has made much of it very difficult to accomplish.

    Now some of them are ruthless bastards, but I’ve found that many ruthless people do quite well by playing with in the system, but playing as hard as possible. It’s rarely a crime.

  59. So let the tourists pay more for their rooms. We need housing. They can make do with what hotels we’ve got ’til we get our own house in order.

  60. The city makes all new housing developments rent 25-40% of the constructed units at below market rates.

  61. Without tourists, there are no tourism jobs for them to commute to.

    Without hotel occupancy taxes, there is less revenue for the city to pay for services including transit upgrades and housing subsidies.

  62. You’ve got an axe to grind on a non-existent issue. Tim et al have been writing about the multiple causes: AirBnB, Ed Lee / Ron Conway, VC funding over-inflating the paychecks of a select few, foreign investors / vacant properties, lack of BMR, inadequate mass transit, lack of housing development on the peninsula…

  63. Because it’s in a housing crisis, and soon none of the residents working in that service and tourism industry will be able to live within a reasonable commute.

    Any more questions, moron?

  64. You absolutely should be building housing to accommodate the people living in / moving to an area.

    Meanwhile, back in reality, most people can’t afford any of the housing being built!

  65. Yes, when 50,000 new people move to a city over a five year period, you shouldn’t build new housing to accommodate them. Just keep the housing supply the way it is. That’ll obviously stop rents from rising.

  66. Yes, why on earth should a City whose single biggest economic sector is tourism build hotels…….

  67. tl;dr version of this article: “We have no idea know how many SF homes were purchased with dirty money laundered by foreign ologarchs named in the Panama Papers, but I’m going to assume it’s a lot.”

    Brilliant analysis, Tim.

  68. That’s heresy. The housing crisis is 100% the result of Ed Lee creating a tech boom. No Ed Lee, no housing crisis.

    Don’t you pay attention to what you read here?

  69. Yup, frustrating. My problem with this blog is the possible redirection of attention away from meaningful solutions.

    Example: The housing shortage is not caused by “6,000 units being taken off the market by Airbnb”. If you look at the $14M in taxes paid by Airbnb it equates to about 1,300 units a night average. But apparently “there is increasing evidence” that 6,000 of those 1,300 are units that have been permanently taken off the market. If Airbnb went away tomorrow it would have a very marginal effect on the situation.

    Same thing with the Twitter tax break. It was approximately $3 million.

    And then when you see 48Hills quoted as a source you really wince. Come on, do some homework.

  70. The link links are on an article from the Paul Krugman on the actions by De Blasio (one of the most progressive mayors in the country) – you couldnt get further from supply side trickle down economics that him.

    NY is loosening zoning restrictions AND mandating affordable housing to be build by those developers who avail of the new looser zoning laws. This is the right approach IMO.

    And NY is as good a comparable to SF as you are likely to get.



  71. The rich are more law abiding? No, they just have the money to hide it better. While not all wealthy have their hand in some kind of illegal/black market activity, if you’re naive enough to think they’re just fine people with lots of money then I guess you probably still believe in Santa Claus and the tooth fairy too then. Try googling ‘white collar crimes’ and that’s where those ‘law abiding’ rich people you know are doing. They may not be out on the street selling cocaine but it doesn’t mean they’re not profiting from other people’s misery.

  72. This leak for done by a huge global coalition of news outlets in the 1st place called the ICIJ.

    The International Consortium of Investigative Journalists is an active global network of 160 reporters in more than 60 countries who collaborate on in-depth investigative stories.

    The fact that no major Americans are implicated (so far at least) reflects positively on our system compared to the rest of the world.

  73. You’re absolutely right. I don’t even care that the author has these opinions, it just grinds me that he routinely omits or misrepresents material facts. San Francisco deserves a progressive daily that actually questions the Mayor or Supes about what they’re doing and why they’re doing it, and this just ain’t it.

  74. Reversion to the mean. It’s coming, regardless of what a few corrupt or secretive marginal buyers are temporarily doing to the real estate prices in SF. The fireworks will be spectacular.

    And, BTW, it’s not only crooks, but many ordinary people who are forced into real estate due to low interest rates, impending inflation and asset bubbles across bonds and stocks.

  75. Housing prices in SF are not going to come down for any reasonably foreseeable future outside of a recession, if that. From supply – be it high end construction, market rate or affordable housing construction – doesn’t really matter. From demand side – restricting offices, raising fees etc – can have maybe some marginal effect on slowing the growth rates. At this stage the shortfall to close the gap is too big. Even if we chip away at demand or supply (use progressive or neoliberal policy prescriptions) or both, it will still tkae a long time to make a real dent.

    Really unfortunate but thats my view on the reality of our fair city.


  76. It has everything to do with NIMBYs opposing housing. NIMBYs happily go along with development requirements that make housing more expensive and less lucrative because they know it stops housing from getting built. That makes the hotels a better investment.

  77. I don’t posit the problem is illusionary, but that building nothing but luxury condos at break-neck speed will do little to solve the real problem.


    “As a result, experts say the Bay Area is not close to filling its housing hole, except at the high end of the market, where much of the new construction has taken place.”


  78. You don’t deny that population has sprung up, yet housing units have only crept up – and yet you posit the problem as illusionary.

    Who’s the real idiot?

  79. I think you have a very strange view of what Planning does if you think it is their job to decide how many hotel rooms the city has.

    The reality is that the market decides how many hotel rooms are viable. There is little point in building an extra 10,000 hotel rooms if nobody wants them. But if the demand is there then they should be built – after all the jobs are all unionized and hotel taxes are very lucrative for the city. Planning does not decide things like that but rather examines each proposal on its merits and according to the general guidelines.

    As for offshore bank accounts, there is a widespread assumption that if someone has one then they are a crook. That is far from the case. There are perfectly legitimate reasons to hold assets overseas and, as long as the relevant taxes are paid (either there or here) then there is nothing wrong with it.

    So while some crooks may have such accounts, most people who have such accounts are not crooks.

  80. I think this post makes an important point, and it is one that we are not equipped, as a city and state, to deal with. It has been true for decades that real estate is a #1 way to launder drug, human trafficking and other such dirty money, all around the world. San Francisco is no exception. On a personal level, I’ve watched this play out in two homes near mine. When the first one flipped (from a $699k list to a $1.5m sale), the realtor — who owns a company that targets only overseas buyers, in her own words — said a Chinese Communist official was the buyer, and that his kid would eventually be living in the house. The house was empty for nearly a year before anyone moved in, as it took that long for the official’s kid to partake of the student visa racket that is the open admission Academy of Art (itself an entity that has illegally converted properties to housing, and that the Planning Department claims it has been trying to fine and reign in). After the kid moved in, the picture across the street resembled growing up in Detroit: all primary business conducted between the hours of 3-5 AM. Fights in the street. No car that cost less than $100k. When neighbors asked, we were insultingly told all of this was “Chinese food delivery.” Nope, it’s gang stuff.

    They have since purchased another $1m+ house next door. No one will live there either.

    What do you do? What process does one follow with the city, especially when observed behavior (gang fights in the street) gives neighbors reason to be afraid?

    I don’t agree with several points in this article. I believe that San Francisco is 40+ years late in developing the housing it needs for its current population. The very expensive price of land drives up development costs, as do the materials required for earthquake-safe building (people like to discount all of this, but these are real costs). I also believe unpopular and contradictory things: that rent control and strong tenant protections give landlords an incentive to rent properties short term instead, and gave long-term renters no incentive to buy houses even when SF housing was vastly less expensive than it is today.

    These views don’t make Tim’s points any less true or relevant, however. Thanks for this article, Tim. I keep looking for the names of those across the street in the Panama Papers. I wouldn’t be surprised to see them there.

  81. “I bet there’s more “illegal, secretive cash” in public housing for poor people than in high rises for rich.”


  82. So old fashion I know…. but why not find the facts first and write the article second?
    Not one fact about SF in the whole article. Likely there will be some dirty money in the new housing… but why not find the fire instead of writing about the smoke? Gee it’s called journalism… try it out..

  83. What an idiot.

    AirBnB takes housing off the market for often illegal hotels.

    Leaving development to Market forces has lead to valuable land being used for hotels for out-of-towners instead of housing for residents.

    No inconsistency in thought or rhetoric there. Just the simple idea that we should use our scarce resources for residents over tourists.

  84. This story is thin on details, but it wouldn’t suprise me if Redmond is right. A while back the NYT investigated ownership of a particular condo tower in Manhattan and ran into the same kinds of shell companies exposed in the Panama papers. A similar investigation here — beyond Redmond’s reach and of no interest to the Chronicle — might reveal some links to the Panama papers shell companies if and when all of them are revealed.

    With increasing international scrutiny banks are no longer a good option for shady operators. Real estate is what’s left.

  85. And yet we will still have mouth-breathers who took ECON 101 saying ‘Build, baby, build!’

  86. @hiker_sf:disqus – I’m sure that you honestly believe that you read something about Tim’s home ownership in my comment but, in reality, there was nothing there about it. Look at it again. There must have been a voice in your head but in the real world it wasn’t there.

    If it helps, what I was referring to was a self proclaimed “investigative journalist” who reads about an international story and has a knee jerk reaction to use it to bash the mayor of San Francisco.

    Just for the record, do you know what a real investigative journalist does???

  87. No it didn’t “just happen”.
    It is the direct, predictable result of 4 decades of under-building of housing caused by nobody else but ourselves and our poor anti-housing development policies.

  88. which news outlet will actually analyse the data on this angle first? It will be super interesting to map the data. anecdotally we know that banks have been buying up a huge amount of urban land, but this article hasnt dug through anything

  89. This is pretty paranoid.

    “But it would be completely insane to believe that all of that new housing that the mayor is praising is being built without some of this illegal, secretive cash. ” Why is always suspicious to be rich? In my experience, the rich people are more law abiding. They tend to like the system because the system likes them. It’s the poor who often deviate.

    I bet there’s more “illegal, secretive cash” in public housing for poor people than in high rises for rich.

  90. Ah yes, from the chorus of those who say that Tim is part of the problem because he is ‘sitting’ on a million-dollar-plus home, as if it were Tim’s objective to do so, and therefore he has no standing to complain about injustice.

  91. What
    is Mayor Ed Lee and our San Francisco City Supervisors doing about the rental backed securities that are
    eviscerating the rental market in San Francisco? Rental backed securities are the direct descendants of the
    mortgage-backed securities that crashed the economy in 2008. This time,
    however, investors’ income streams are coming not from monthly payments
    on frequently predatory mortgages but from the rent checks of thousands
    of ordinary tenants. Investors and “all cash buyers” are buying up our
    neighborhoods, kicking us out, raising our rents, and leaving us with
    less control of our communities than we have ever had.

    Are you aware that public sector pensions are heavily invested in these
    risky investments? There are literally thousands of apartments that are
    sitting vacant in San Francisco and thousands of other renters have
    received (year over year) rent increases since these investors began
    purchasing buildings in San Francisco? Many market rate renters in San
    Francisco are seeing annual rent increases of $500.00 a month.

    Housing Crisis 2.0 is coming soon http://youtu.be/HCDDESkNaAw« les

  92. @Andy M –
    Methinks you’re taking this too seriously. Tim read about an international situation and immediately tried to use it to bash the Mayor of San Francisco.

    Move along, nothing to see here.

    In a few days the housing shortage will once again be caused by tech and not by the Sultan of Brunei.

  93. Relying upon the marketplace to solve problems doesn’t work. Just look how non-smokers (75%+ of the adult population in California) were subjected to smoking in offices, restaurants, bars, etc, until the state finally stopped it. The marketplace had decades to respond and did not.

    The speculation and the driving-up of real estate prices by criminal money is real. Not only that, but stupid people with money like to congregate together, so a criminally-funded real estate “hot spots” attracts others with money like flies to shit.

    And politicians/planners/venture capitalists pat themselves on the back, saying how much better the neighborhood is.

    Open an expensive boutique that will never be profitable and voilà, fat-walleted lemmings will pay $2 million for a nearby dump and actual working class people, who own long-term businesses, who built these neighborhoods and have generations of family history of caring about San Francisco get pushed to Salinas. And while they are being pushed out out of San Francisco, they will be subjected to louts who say “they should have studied more”, or “they had a bad business model” that should have considered a 700%, crime-syndicate-driven rent increase. And city leaders will shake their heads and say that “something” should be done while they are pushing for more luxury condos, more high-end office to be built, and actually go on junkets to stimulate MORE of this.

    It is the chips of wrath.

    And anyone who thinks that this ‘just happened’ is a fool.

  94. I get your overall point, Tim. But can you please quit lazily parroting this corporate anti-Putin meme? Putin is NOT a “player.” After a major dog and pony show of graphs and charts and videos to find a link to Putin, the UK Guardian comes up with… nothin’. His name isn’t anywhere on there, neither is anyone from his family. The best they can come up with is some friends.

    Among those who *are* “players”…
    -The US-installed oligarch who currently rules Ukraine on behalf of Washington, Petro Poroshenko. No charts or graphs needed -he’s a direct account holder
    -The British have more decorum. Prime Minister David Cameron doesn’t have an account. Only his dad.
    -The new right-wing President of Argentina, Mauricio Macri

    So why does the corporate media scream PutinPutinPutin? Why does the UK Guardian have a major smoke-and-mirror show about Putin, but not one single solitary word about their Prime Minister’s father (and disabled comments for the story to boot)? Ever stop to think about that? No? Then I would say stick to something you know about, like San Francisco politics.

  95. I don’t even know how to respond to this post. It’s borderline hysteria.

    1) In re: housing

    Despite the author’s derisive hatred of market-rate housing, it’s actually working (though you’ll never read about it here). Many cities have used the housing building boom to counteract the rise in housing prices. DC, Seattle, and Denver are cited here: http://cityobservatory.org/in-some-cities-the-housing-construction-boom-is-starting-to-pay-off/

    Indeed, even SF is starting to see prices begin to level off.http://blog.sfgate.com/ontheblock/2015/12/18/sfs-november-median-1-br-rent-goes-down-almost-5-percent/

    Building market-rate housing alone isn’t the only solution to an affordability crisis, but there isn’t any solution without it.

    2) In re: hotels and “land-use discussions”

    First, developers are proposing hotels. They haven’t been approved or built. Just proposed. As each project works its way through Planning, each will get a hearing where the public gets the opportunity to weigh in. That’s what it means to “propose” something. It’s someone asking the city if they can do something and then the city having a land-use discussion to determine if what was proposed is appropriate.

    Second, the wave of new hotel proposals is actually pretty small (16 proposed buildings/2950 total rooms)when compared with the number of units currently in the housing pipeline (over 66,000).

    There’s still many orders of magnitude more capital investment in housing than in hotels. This is a relatively small uptick. And it is not surprise given that SF just had it’s best year for tourism ever.

    The slight uptick in hotel proposals is absolutely the result of land-use discussions: We’ve capped office space under Prop M, and housing development regulations are both byzantine and ever changing. As a result of that discussion, it’s no surprise that a small number of developers are going to propose hotels. The discussion about land-use never stops.

    3) In re: Panama Papers

    One of the professed aims of this blog is to hold the powerful accountable. It’s very likely that some of the ill-gotten wealth revealed in the Panama Papers found it’s way to SF. It could be in housing, tech, or tourism (maybe all three), but this blog failed to investigate or provide any actual new information or evidence to further that claim. It isn’t enough just to put on your tin-foil hat and cry “conspiracy.” In the last paragraph, the author calls on the city to investigate the connection between “crooks and dictators” and housing construction. If such a connection exists, then it is the job of journalism to find it.

  96. So, we don’t need no stinking’ hotel rooms, but 6000 “hotel rooms” are created thru ABnB; which last month was the cause of our “housing crisis”.

    And now Criminal Capital is the cause of our “housing crisis”. But we underbuild and underbuild while population increases by 10’s if not 100’s of thousands.

    Its getting so you can’t tell the players without a Kim-card.

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