Saturday, April 17, 2021
News + Politics Why allowing more housing makes property more expensive

Why allowing more housing makes property more expensive

Loosen zoning restrictions and you get higher land values -- but there's another approach, and it's not really all that crazy


Fred Sherburn-Zimmer, director of the Housing Rights Committee, stood on the steps of City Hall yesterday morning and explained why allowing the free market to set local housing policy makes no sense.

Fred Sherburn-Zimmer addresses a rally in support of the Peskin-Mar housing plan
Fred Sherburn-Zimmer addresses a rally in support of the Peskin-Mar housing plan

Every time a big market-rate housing project is dropped into a working-class community, she noted, evictions and rents go up all around it. After the Monster in the Mission was proposed (not even built), she said, tenants from all over the area were in her office complaining about rent hikes and eviction threats.

“If we get ten affordable housing units, and 100 people are displaced, we didn’t get shit,” she said.

Pretty simple.

The rally in support of a measure by Sups. Aaron Peskin and Eric Mar that would allow more density all over the city – but only for truly affordable housing – came a couple of days after I got into a big Twitter debate with Kim Mai-Cutler, she of the burrowing owls and vomiting anarchists, over my suggestion that big market-rate projects in the Mission and the Tenderloin won’t do much good for anyone except the developers and the wealthy.

Tenant groups rally in support of Prop. C and the Peskin-Mar bill
Tenant groups rally in support of Prop. C and the Peskin-Mar bill

Cutler, and the SFBARF people who agree with her, say that restrictive zoning has driven up land costs, making all housing too expensive. If we only allowed more housing of all sorts, eventually prices would come down.

And if what I tend to support, which is a complete shift to what is known in Europe as social housing – that is, housing that is never part of the private market – how the hell are we going to pay for it?

I argued that, in fact, if done right, restrictive zoning brings down property values – which ought to be the point. And I had a two-word solution to the money problem: Tax Zuckerberg.

But it’s hard to have this discussion in 140 characters, which is why I am not good at Twitter fights, so I thought I’d flesh the whole thing out a bit.


Zoning is a tool that communities can use to direct what types of land uses go where. It’s also, potentially, a way to change land values.

Let’s look, for example, at the Eastern Neighborhoods of San Francisco. Until fairly recently, much of that land was zoned only for industrial use; in the 1980s and 1990s, housing – presented as “artist live-work” housing – started to get approved.

That made the land more valuable: Production, Distribution, and Repair – the PDR that planners talk about – typically can’t afford the same rent per square foot that people looking for market-rate housing can. So warehouses and print shops and small factories found that the rent was going up so high that they had to leave, at which point those buildings were demolished and turned into housing.

Then the city planners created what’s known as Urban Mixed Use, a zoning category that allows housing, offices, and PDR. Guess what: Offices, particularly tech offices, command rents as much as ten times as high as PDR can pay, and condos are at about the same level.

So the owners of every site that could be offices or housing saw their land values increase dramatically. No surprise they got rid of PDR tenants in favor of higher-paying uses.

San Francisco is a small city, with limited land. There’s not much empty space left, so most of the time, when you build something new you have to get rid of something that’s already there.

If you zone areas exclusively for PDR, and you don’t allow any exemptions, and you enforce the law, then you suppress the increases in land values that you see under the current zoning. If you are forbidden by law to rent your space to anyone who can pay more than $4 a square foot, your land is worth less than if you can rent it for $40 a square foot.

Let’s remember: We were never talking about taking high-value land and downzoning it. All of those landowners bought the property under the old, more restrictive zoning, and paid a price that reflected that.

So by changing the zoning, we increased land values and drove out one sort of use in favor of another.

In other words: It was the loosening of zoning laws that drove up land values (which are a huge factor in the cost of housing). Upzone all the neighborhoods for higher density and height without very strict affordable housing mandates and the same thing will happen all over town: Land values will go up. People who already own property will get richer. People looking for an affordable place to live will get nothing.

Now let’s go a step further. Let me make a proposal that is no more ridiculous than the notion that allowing unlimited new building will bring down housing prices.

Suppose we take zoning more seriously.


Suppose the Planning Commission creates a new category of zoning – Below Market Rate Housing – and defines it to mean housing that is priced for people making between 20 and 70 percent of the neighborhood median income. Then the commission applies that zoning to every vacant site in the city, and every site that is occupied by an abandoned business.

In a sense, in a much more limited way, that’s what the Peskin-Mar legislation does: It allows more density, but as part of that bargain limits the use to 100 percent affordable housing.

In my broader scenario, the land where the new BMR zoning applies can no longer be used for luxury condos. Its value drops.

Then the city makes an offer to buy every single lot, at the current assessed value (what the current owner paid) plus a decent premium so nobody loses money.

(Yeah, there are probably legal issues here. I’m not a lawyer much less and expert on “takings.” But there are ways to make this concept work in at least some places, particularly those now zoned for something other than housing or offices or places that require special permits to change uses.)

The city then builds nothing but permanently affordable housing on those sites.


So how the hell do we pay for that? It’s a question that we ought to be demanding that Bernie Sanders and Hillary Clinton answer. Because the housing crisis in SF is not unique – Los Angeles has tens of thousands of homeless people, New York is a disaster, Portland and Seattle are seeing problems … urban housing is a serious problem all over the country.

Let’s do a little math for a moment.

According to most sources, the top one percent of American households earn about $1.7 trillion a year. They pay an average effective tax rate of about 27 percent.

That means the one percent pay about $456 billion a year in taxes.

Before the days of Ronald Reagan, people at the highest income levels paid around 70 percent of their marginal income in taxes. At points between WWII and 1980, that level was as high as 90 percent.

But let’s go lower. Let’s start with 50 percent. At that rate, the US government would collect an additional $385 billion a year. Move it up to pre-Reagan levels and we’re talking an additional $725 billion and $1.2 trillion a year.

Then there’s $90 billion a year in obvious corporate tax breaks.

None of that makes up for the vast wealth concentration that 30 years of Republican-style policies (by both Republicans and Democrats) have created. Thanks to those tax cuts, the one percent now own about $11.6 trillion in assets in the United States.

A modest 25 percent wealth tax would generate $2.9 trillion.

I suppose someone could argue that if we did that, all the rich people would move somewhere else, but seriously: Where are they going to go? (And, oddly, if everyone in the one percent left the country, housing prices might actually come down in the Bay Area.)

Neither Sanders nor Clinton is talking seriously about using federal money to address urban housing problems. But neither of them can seriously say that the money isn’t there.

In fact, even modest tax hikes and the closing of loopholes would generate more than enough cash to fund a massive program of social housing construction in American cities. Instead of complaining about CEQA and zoning rules, that’s where the BARFers – who are supporting local candidates on the GOP side of the Democratic party when it comes to taxes – ought to be putting their energy.


There’s really no way to get around it: Aggressive government action, including zoning and planning that seeks to bring down land costs and large new spending programs for urban housing, are the only solutions to this problem.

So how do we do this in San Francisco, since today’s political reality suggests that my proposals at the federal level aren’t going to happen anytime soon (although I would love to hear the SFBARF crew endorse a 25 percent wealth tax on the one percent to pay for social housing)?

Well, the Peskin-Mar legislation is a start. It’s based on the idea that density is fine, that rezoning is fine, that using undeveloped sites in neighborhoods all over town for housing is a good thing – but that the housing has to be affordable.

There’s at least $310 million in city money potentially available right now for acquiring and developing these sites, and that can probably be leveraged with state and federal grants to twice that or more.

No mayor in decades has ever put together a study group to look at every possibly way the city can raise money by taxing the wealthy (and not giving tax breaks to the likes of Twitter). If Mayor Lee were serious about the housing crisis, he would do that immediately.

In the meantime, we have to live with the most basic rule of a housing crisis: Don’t make things worse.

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.


  1. Thanks for taking this one on. It is obvious to anyone what has been through the changes that the sky high real estate values came about after the height limits were raised. The more people you cram onto a plot the more money you think you can make. There are also a lot of empty units that are being kept off the rental market and that jacks up the value as well.

  2. An absurd argument. Increased evictions, rising housing prices, and new development in the same neighborhood are SYMPTOMS of the same problem – increased demand. All occur in neighborhoods where demand is rising.

    To ignore this fact is hallucinating – and the same sort of denial that disbelievers in climate change possess. Ask ANY urban economist.

  3. I don’t know the Kelly Dwyer story, and I don’t want to read it simply to poke holes in it. I don’t doubt a family would rather stay here, rather than move to Vacaville, although it wasn’t long ago that people were moving to the suburbs for improved quality of life. Vacaville verses an aging high rise in the City. I think Vacaville starts to sound a-ok. Renters in San Francisco have continued to rent, irregardless of home ownership availability. The desire might be there, but a lot of renters are renters no matter the circumstances. It’s not a new situation, and the solution as it turns out wasn’t to put families into bad loans and fill homes with bodies. And I don’t think the solution is to build indiscriminately, anticipating a population of transplants.

    We’re in a bad 4 years period that calm itself down. It’s easy to get caught up in the politics, and lobbyists groups who will gain at the expense of San Franciscans.

  4. my only point about the ADU is that it’s a steady revenue source but one not reflected in the zillow/trulia pricing models, suggesting that the value is low on their pages.

    i don’t dispute your sense of the ‘wants’ but for example look at the chron story about kelly dwyer. she & her family rented a SFH, got pushed out thru a price hike, and ended up moving to the boonies of vacaville. but reading the story i certainly got the sense that they’d have bought a 2br condo in SF in a heartbeat if it didn’t require their mortgaging their kids. but that wasn’t an option so they move to the way out. i think a lot of others – families with & without kids – are in a same boat and would gladly accept an apartment if they could keep their lifestyle, their meatspace social networks, and their neighborhoods.

    damn this is all fucked…

  5. I’m not sure I follow you on the in-law, with low rent.
    My belief is much of the city is “under market”, and we tend to misrepresent the high end of the market as the low end in discussions. You can pay what you want to pay, is how i look at it. I say this knowing there is a poor student out there paying $3k to live in a basement, that’s not up to code, who for whatever reason, didn’t bother looking at studios in the Tenderloin for $2k.

    I’m with you that there is no real in between. The so called Yimby people are pushing me towards the Moratorium crowd, because they’re talking about hitting the single family homes, and few of them actually live in our City. That, and they’re batty. Which side wants to protect property rights? None.

    Speaking of single family homes, I think most people move to San Francisco in part out of a love for all the cool old houses. People want to live in them, they’re not dreaming of moving here and paying through the nose to live in the same condo towers you can find in every other City. People who prefer the condos are similar to people who used to only shop for new homes, unloved in, pristine, and willing to live in Vallejo, etc. The new homes at a middle class level lose their sheen and crumble, typically stay maintained. But they’re all different audiences. The cross over only comes when you’re the student living in an in-law for $3k, and you find out you can get into a condo with a full kitchen for $3.6k. But it takes a specific kind of renter to turn up a full house with a little backyard, for a 1 1/2 bedroom condo with nothing near it.

  6. the answer to your question is mostly yes, the existing residents will be mostly protected. virtually all of the housing except for a few dozen SFHs is outside of the spec market either as public housing, BMR restricted, or affordable co-op.

    new condos and SFHs may be no be perfect substitutes from a commodity perspective but they’re close enough that the price sensitive will move between them. also, i know plenty of condo dwellers who left their rent controlled units so that freed up more rental housing.

    which is why ya gotta look at the ambient conditions. i own my home and it has a secondary unit. with little market rate development in the neighborhood. the house has doubled in value in 15 years (after accounting for the improvements we’ve made). this doesn’t even account for the rent on the ADU which is 2/3rds of current market rate after only 3 years with this tenant.

    one of the challenges for a reasonable discussion of housing is that everyone is stuck in their ‘solutions’ box and unwilling/unable to step outside their rhetorical comfort zone. so one end we have YIMBYs evangelizing about the magic of the marketplace while paying little to no heed to the concerns of those nearby while at the other end we have the tenants union railing against capitalism and developers and proposing policies that have a 5-year organizing horizon.

    then there are poor schmucks like me who look around and say you’re all fucked and your arguments are only resulting in more people being displaced while those who profit from it go scott free.

  7. Urban housing is not actually a serious problem for the country – there’s plenty of affordable housing available in Las Vegas, Detroit, Pittsburgh, Phoenix, the list goes on and on. If the federal government did ever manage to raise a bunch of additional revenue, subsidizing housing in a handful of ultra high end housing markets would be a pretty tragic waste of it.

  8. Given that these projects are supposed to make money, I think investors could be found, like by selling bonds. No need to redirect city pensions or alarm the unions.

  9. It’s not a bet or something you can control. It’s not like condos are bait, and suddenly the Mission and eventually Excelsior homes, will lose their appeal. People that like new construction are usually their own breed.

    The Excelsior landlords aren’t fighting off lines of transplants. The current tenants are safe because the area hasn’t gone through the transition it needs to before the transplants will start to consider it as an extension of Mission or Bernal. Transplants are drawn to neighborhoods, they don’t run to an SFH that hasn’t been renovated since it was built, because the condo they were masturbating to in Socketsite didn’t get approval.

    India Basin is a perfect example. If they put 40 high rises, a Sightglass, a monorail, and landscape it so it looks exactly like UC Berkeley, and for whatever reason, people want to live there, will your neighbors rent stay the same? Or will people who don’t even know the area exists suddenly take interest after the NY Times style page comparing it to Tribeca, and quoting Gwyneth Paltrow as to why she decided to move to San Francisco.

  10. its a lovely theory that data simply can’t back up. i used to believe it but i’ve come to the conclusion that putting poor people in competition with rich people is a loser’s bet. i’d rather put up some douchebag containment units and put those folks in there.

    here’s the thing though, what you describe above is far more likely to happen when the landlord of the SFH in the excelsior looks around and sees that he can cash out big because the people who’d live in the condo that’s not being built can simply take over his property. and at least according to the SF controller’s office, we’re simply not seeing any significant ripple effects in prices from new construction.

    and WRT to personal experience…i live in india basin outside the gates of hunters point shipyard. we got a few new condos a few SFH’s about 15 years ago. then nothing until hunters point.

  11. Apparently what you don’t consider enough new development is at least enough to start displacement. On a micro level, it takes one new building to have an effect on an immediate area.

    The Mission is no longer going to be a first destination for new working families. It’s not simply that they have been priced out, they’re in the hottest neighborhood in the City.

    Take the Excelsior. If you put a large condo there today, what would it do? It would bring people into the area to live in that condo that couldn’t afford the Mission, and very few would be the working class types. Along with it would come the boutique, the Whole Foods, and the quality of life would improve, until it becomes more livable, and approachable for transplants, and bridge/tunnel types, who would have never wanted to live in Excelsior previously. If the area becomes more livable and hip, it’s initially healthy for the community – but it doesn’t protect the previous residents, it creates more demand for their homes. It’s not hypothetical, it’s what has played out in San Francisco, and elsewhere over and over. And your answer of “Well jeepers, they just didn’t build enough of those condos, and build them fast enough”, is absurd.

  12. part joke, part not. there’s no question that displacement is happening, the argument is why.

    lets look at the mission for example. according to MEDA about 8,000 persons have been displaced from the mission in these past several years (is it as much as decade? i don’t think so). anyway, its hard if not impossible to say that this happened due to overwhelming amounts of development since the mission simply hasn’t built very many units of any suuport. what has happened however is that more wealthy people have decided they want to live in the mission and the owners of the properties (in which those people now live) decided to let them through harassment, buyouts, illegal evictions, and straight up sales followed up my owner-move-in evictions.

    at the same time, new folks like the ones who’ve lived in the mission for the past 40-50 years – lower income working families – simply can’t afford to move into a neighborhood where they’re now competing with rich people.

    so, no. i’m not a displacement denialist. but i have a story for why that happens that’s simply much more plausible than the one told by development fighters.

  13. I’m looking at current trends, and they are going up. As far as I can tell, what you’re saying is that when rents are going down in any of those places, it has because of construction. But how do you explain it when they go up, despite the supposed abundant construction? What is your proof that construction, as opposed to economic factors, are what is driving rental price fluctuations in these or any other places?

  14. Seattle, Vegas, and DC are going up (per RentJungle). Houston, Phoenix and Atlanta show small dips for January/February, after a long climb. Not a discernible trend, and you’ll need to do more to demonstrate that that dip is due to construction and not economic factors.

  15. I gave you my reasoning. It’s not arbitrary. It’s hard to look at the effect of variables when they are changing over a longer period of time.
    Tell me this: why haven’t Palo Alto prices risen faster than Seattle’s this past year?

  16. I’m rejecting the ‘evidence’ people point to me for specific reasons, which I attempt to explain. This eveidence consistes in repeating the same kind of data over and over again, and I find it inadequate, whether it’s presented once or a hundred times.
    No, I don’t know of anyone who has even tried to slow down growth in order to lower housing prices. I would like it to be considered and studied. I’m not issuing a planning blueprint. But looking to the past, an influx of high-earners into a city raises housing prices. An influx of mid- or low-earners only raises density.

  17. It’s been a while since I looked at that article (two years now). The part of the article relevant to this discussion is section 7. All the studies it quotes correlate housing construction or housing regulations against housing prices. Not one of them takes into account local incomes and their distribution. So is SF expensive because it doesn’t build enough, or because tens of thousands of people are coming here with the money to outbid everyone else? That question is not even asked.
    And I’m not going to go into the name-calling and the snark at the people who don’t share her opinions.

  18. I would dispute your suggestion of “half the current rate”; but I might have to agree on 60-70-80%; which in itself is a break for the middle class (like, Teachers) who are set to move out.

    And unlike Tim’s savior Bernie, there is a possibility thru local action. We have the County Retirement System with $20B in assets. Sure they’re constricted by rules about fiscal prudence; and I’m not sure if those are CA laws or maybe even US. But if so, it might behoove the pols to redirect/recatagorize/borrow on future labor contracts which direct future ‘pension’ funds into an SF Land Bank or such – to be used to build and maintain that middle class housing.

    Of course, yo’d have to get the unions on board. But if the voters backed it, and the pols pushed, maybe even the unions might see the wisdom of the “risk”. Heck, some of their members might cherish the thought of living here themselves. Just as long as it doesn’t turn into another entltlement for a City worker w/ 5 yrs of service.

  19. The graph is tax revenue/GDP. Its not the same denominator and hence the difference but it captures the idea of how much revenue the govt collects from income taxes has historically been independent of marginal tax rates.

  20. It is entirely arbitrary. When you dont provide a rationale for why the specific window was chosen, its arbitrary or its not arbitrary but instead cherry picked. I gave another much larger window defined by the current starting point of the cycle.

  21. More building will slwo the rate of inflation. To expect it to lower prices is a fig leaf.
    ” I am saying that the only thing that will lower prices is a change in the demand curve to make income more equitable.”
    What is the empirical evidence where this has been done successfully via policy (outside of global/regional macro and natural local micro factors)? You reject all the evidence a number of people point you to but offer nothing to support your own assertions.

  22. I think this whole “seniority” angle is a twisted way of looking at it, as is thinking of displacement as a helping hand, providing growth to people who are “stuck”. The point is, people shouldn’t have to leave, and creating vacancies, resting turnover, isn’t a worthy goal for a community.

    It’s a bad time to attempt upward mobility compared to 5 years ago, but basing housing policies or creating something called “social housing” based on one end of the cycle is shortsighted.

  23. It’s more of a thought experiment to show that, if the city had the will, it could provide decent housing at half of current market rate, and make money doing it. That could address the needs of a currently neglected group: the middle class.

    Tim Redmond was suggesting that to do anything more than we currently are (i.e., accommodating the rich), we’d need massive new federal taxes, and a plan for distributing that money to cities to build affordable housing. That’s like saying we can solve the problem in approximately… never.

    Anyway, yes I was imagining that this would be “social housing”, owned by the city, and rented at reasonable rates (according to a set schedule), with some kind of means testing. If you went with free market, I’d guess you could charge more than the numbers quoted above, even though these apartments are small and lack granite counters, jacuzzis, and parking.

    You could also imagine the thought experiment differently, where the city delegates the project management to developers who stick to the agreed schedule of rents, and make most of the money in the end. (The city gets a cut for enabling the project and maybe guaranteeing the loan.)

  24. Amazing that even folks like Tim think the federal government needs to increase taxes to pay for housing. We could cut down on military spending a bit, or just issue more bonds, or both.

  25. But that’s how Tim plans to pay for his social housing program … so he does want to collect more money.

  26. Along with the higher rates were higher exemptions and deductions.

    BTW, my effective tax rate for 2015 was 13% (@ marginal = 15%). Feels kinda high looking at your graph.

    But CEO pay has grown exponentially – from 10x to 200x.

  27. Its not ‘me’ thats deciding. We have Prop 13 and RC. Those ‘programs’ allow people to stay in place (prioritizing ‘seniority’) – sometimes/many_times past their initial need/desire. Those initial motivations get subsumed by the economic incentives of RC/13; so they stay – often ‘stuck’. Meanwhile, those staying take vacancies away, and that pushes up the price for anyone else.

    In some forms of rent control (and I would argue we’ll be there sooner than later), units can be passed on to family/children, which solves a micro economic problem of sorts (cheap digs) but disturbs the flexibility of the larger economy to adapt to changes. Same with people holding onto large homes/units as an empty nest.

    Tim’s thesis to increase Social Housing would only extend those types of disparities. Great, if you can sustain yourself to fit your housing. But that feels like its bass-ackwards, wouldn’t you say?

  28. In a sense, I’m arguing against myself. $400k for a 3Br?!! Wow. In a market where buyers are acting sight-unseen … .

    OTOH, you are right – NIMBYs will riot, cars will get torched … . But I still think that $300/ft construction is more akin to what SFHA has than more well done stuff. This is SF – stuff naturally costs more here than in other parts of the country; and its not just land value, In addition, development is soo busy that finding extra help is going to produce marginal value (which won’t be helped by low-bid proposals).

    And of course, there’s the point about finding the upfront money to do these projects on that scale. Current “affordable” housing developers are blessed with a pot of ‘in-lieu’ money, but can’t get it together to build, while developers gladly pay in, rather than include BMR units or build them off-site, where they’d be spinning their wheels while others build for profit.

    And am I correct in assuming these would then be let out to the ‘market’? Or is this to be divvied up as “social housing’?

  29. Development is the bread and butter. Developer IRR comes from the increased value of real property at higher and better uses. Any appreciation during the development process is gravy.

    That homeowners are anti-growth in part to maintain property values is not controversial. The function of real property in building wealth is such a trope that the single most expensive piece of US housing policy subsidizes homeowners to borrow to buy housing.

  30. The 1-year window is not arbitrary. I wanted a narrow window to highlight current conditions. Seattle is building a lot right now. Amazon is also expanding a lot there. What we are seeing is that high tech salaries are dictating housing prices, regardless of how much is being built.

  31. It’s not fair, and it’s not well-researched.

    What are the problems with the article? I have seen occasional grumblings by people who dislike the Burrowing Owls article in general, but I haven’t seen anyone say what specifically they think was wrong with it.

  32. I am not saying, and I never said, that “less building and more zoning result is lower prices.” I am saying that more building will not lower prices. I am saying that the only thing that will lower prices is a change in the demand curve to make income more equitable. In our area that means less high-paying jobs (and more mid-paying jobs).

  33. But the appreciation is the developers’ bread and butter, unlike homeowners. We are chasing here the argument that the politics of developing more or less housing is driven by money. Homeowners (or their children) benefit in the long run from appreciation, but by and large they are fine whether their house appreciates by $100K or by a million. Developers absolutely require profit on their project.

  34. OK, I don’t know what percentage of developers sell immediately, and what percentage continue renting. I’d like to see some numbers.
    In any case, 100% of developers are doing it for the money. Most homeowners did not buy their houses looking for a windfall, and many are cash-poor relative to their equity.

  35. I am not saying that at all. I think looking at prices makes no sense – you have look at inflation rates. I am pointing out your inconsistency.
    Also the extrapolation is just as arbitrary as using the 1y year time frame. Since the end of the crisis in Jan 2009, SF area home prices are up 75% vs Seattle area home prices up 22% per Case-Shiller.

    But I ask again as at least 3 others people have repeated asked you – what is your evidence of the success of the ideas you support? Where does less building and more zoning result is lower prices? Please provide research and empirical results to support your assertions accounting for all the variables and specifics that you ask everyone else to provide.

  36. Sure, the small handful of developers who also rent the buildings make more returns. Most don’t do that; they sell the building to a rental business once it’s built.

    But how many homeowners are seeing windfall profits, compared to that minority of developers? Virtually all of them.

  37. Spread is wide, average is higher, more options exist. Here’s my evidence, where is yours?

  38. Seattle’s older houses are not staying low priced. People are being pushed out of Seattle, rather than being pushed to older houses. I don’t know of any place, anywhere, where your scenario holds.

  39. OK. I see what you mean.
    So prices rose in Seattle by $188, at the same time that Palo Alto prices rose $215. How is the difference significant? Seattle is becoming less affordable, and at these rates will catch up with Palo Alto in a decade.
    What makes you think that this $27 difference is attributable to building a lot vs. building very little?

  40. Huh? We don’t issue housing according to social needs. Not even Communism attempted that one. And viewing it as “Seniority” is childish.

    We’re not taking about privileged or advantaged, we’re talking about working class, middle class, even upper middle class who are paycheck to paycheck. They picked their home, probably settled from their dreams, and have a life. Development shouldn’t be what pushes them out of their homes or decreases their quality of life.

    20 years, 40 years later, it’s really not up to you to pop up and decide someone else needs, or deserves it more because of proximity to a school they’ll only be attending for 3-5 years, or a job that’s not guaranteed.

  41. haha. maybe. still may not be enough. but then we will switch to protesting about Twitter tax breaks!

    Also MKR, do you live in Flint, Detriot or Baltimore?

  42. So we maybe talking past each other a little. The point was about Tims logic on how to fund this ‘policy proposals’ by raising the tax revenue to nearly double current levels. I am pointing out that government revenue/GDP was not higher when marginal rates where 90%.
    The chart doesnt dis-aggregate executives etc.
    Either way, executive pay is a separate discussion and I agree on your final point.

  43. I’d wager it’d take more than that. Something like a land grant and no property taxes for 99 years.

  44. Don’t you mean they *did* get paid less? Because, btw, they totally did get paid less, in large part because the tax rate was so high (they are setting their own salaries, why pay yourself more when it doesn’t actually increase your income much? More fun to buy a company jet, fund Bell Labs or whatever).

    Regardless raising the marginal tax rate to very high levels is a very silly way to raise money.

  45. Sorry I wasnt more clear. I agree on that point very much.

    My comment was that expecting more from the government without much higher middle and lower class income taxes and the highly regressive VAT is fantasy.

  46. My point is that they didnt get paid less as evidenced by the tax dollars collected. The higher ‘marginal’ tax rate didnt translate into an higher ‘effective’ tax rate.
    Thats why what Tim is saying is utterly wrong. He thinks the blue line is the same at the red line.
    He is hoping to nearly double the blue line (by going from effective rate of 27% to 50%) by referring to the red line which used to be much higher in years past.

  47. I don’t see how it’s moot. It’s a place where people are willing to pay and there are still serious housing issues. It’s proof that just that isn’t enough. I’m sure Sweden would be much better if they allowed new affordable housing to bypass the absurd building rules in more central areas.

  48. “Flint Michigan or Detroit or Baltimore”

    Why would they do this? You would essentially have to pay them to move there.

  49. Executives used to be paid less, in part because of higher marginal tax rates.

    I’m still not sure what your point in posting this graph was so maybe we are talking past each other.

  50. Huh?? if you arent collection more money, how are you ensuring incomes arent that high?
    I can say the tax rate is 100% or 10% but if the individual is paying the same dollars, its a distinction without a difference.

  51. Not sure what your point is. You don’t set a 90% marginal tax rate because you want to collect more money, you do it to ensure incomes aren’t that high.

  52. Average rents can go up when a lot of new units come online,especially in places that have high development and construction costs but don’t have a high percentage of renters. What is more interesting would be to know how existing apartments fared. In SF the answer is clear. Even a dumpy old apartment is super close to the market rate. The spread between neighborhoods is less. This happens because of the shortage. In places with higher vacancy rates, the older lower quality places in less desirable locations stay cheap, BECAUSE you added 10% to the rental stock at the high end. The average went up, yes, but a person looking on a limited budget has a lot more options.

  53. “Yeah, there are probably legal issues here. I’m not a lawyer much less and expert on “takings.” But there are ways to make this concept work in at least some places, particularly those now zoned for something other than housing or offices or places that require special permits to change uses.”

    And there it is. Tim’s entire housing “platform” is essentially: “pretend we’re in Europe.” Social housing is great, however most land in SF is already privately owned, and we have those pesky 5th and 14th amendments to wrestle with. Even Europe’s approach has is issues re: DEMAND.

    See: Stockholm, Vienna, Rome, etc.

  54. Tax the Chinese (and Putin) who are buying all these houses too while we are at it (other than the taxes they already pay of course)! That’ll show them!

  55. Y has also argued for policies to lower demand to lower house prices with no evidence to what the impact of that would be on jobs, incomes, the economy, government revenues.

  56. In your comments in this very article.
    “Can you show one American city that has recently managed to lower housing prices significantly by building, without anyone panicking about lowered property values?”

  57. Well, all right… 1970 is “since forever”. It’s pretty surprising, though, that Seattle was so much more expensive than SF until 1950, like 30%-50% more. I wonder if that’s an artefact.

  58. Go back to college. You can’t escape the fundamental facts. No matter the equity pulled prematurely by cash out re-fi’s, the actual reconciling occurs at time of sale, and this is why we have underwater mortgages and foreclosure. Sounds like classic sour grapes from someone who failed to learn that renting isn’t the best choice for how to channel your paycheck. Sure, I rented for decades, learned from it and made huge sacrifices to escape having a landlord. Peek outside your little bubble and you too might have opportunities. Quit expecting to be handed a platter, already filled.

  59. Bullpuckey. People refinance every day and pull these imagined billions out of their homes. there is a whole industry called reverse mortgages that allow people to live high on the hog on these imagined billions.

  60. Your imagined Billions in profit are not in anyone’s pocket. Reality check: any theoretical profit is not realized unless you’re actually selling. If you just live in your home, the “paper” value can go anywhere, but it’s not “real” until you sell and capture that value. If you want to remain in your house, it’s not so relevant. If anything is a scam it’s your attempt at interpretation.

  61. As usual these goals are laudable but the trick is how do achieve them.
    How do you ‘convince’ someone – companies and/or people – to move to Flint? Tax incentives? But then people like Tim call it ‘corporate welfare’. Coercion maybe?

  62. This is correct. And that is why lower prices is very very hard outside of recessions and thus the wrong benchmark.

  63. Sweden also has a VAT of 25% and 51% tax rate for 65k-85k USD income (31% below 65k) – this is a huge increase from US level – really really huge for the middle to lower class.
    As soon as people are willing to pay that we can talk about Sweden, otherwise its moot.

  64. But surgery has empirical evidence of success. Whats your evidence that a 25% EFFECTIVE tax hike help? Considering it has never happened before.

  65. by your own standards – One – this time frame is too short and arbitrary. Second – you your self have said (in the article!) about asking for places where ‘prices’ have gone down based on supply.

  66. I totally agree with your take on the moving goal posts and total asymmetry on the standard of evidence from Y – what he deems to be sufficient or satisfactory from others but fails to come even remotely close to when asked of him.

  67. Hi Cameron – Y is smart and genuine but he tends always points out why he thinks all the data and lit is insufficient to convince him but cant show data to support his views. I have had similar discussion with him and I dont think any amount of research you show will change his mind. Thats just my opinion. He may (and will probably) dispute it 🙂

  68. Lowering housing prices significantly is a benchmark that has no basis in history or data. You have to look at inflation, not level of house price which only fall in and around recessions.

  69. Tim – I think you dont understand the difference between statutory tax rates, marginal and effective tax rates. 90% was NOT the effective tax rate. it wasnt even 50%. Ever. Might want to look into the numbers before you ‘report’.

  70. Right, there are compromises. This also assumes changes in the law so the city would fast-track projects like this and relax height limits as needed (while preserving earthquake safety). These are close to being so-called “micro apartments”. Yes, those have been done before. (E.g., see

    Re: the low interest rate. I’m assuming the city would back the loan. (Maybe it’s not a loan, but a bond.)

    Re: $300/sqft construction means shoddy buildings that fall apart in under 30 years: I hadn’t heard that. Doesn’t seem to work that way in the rest of the country.

    To summarize, our current situation is this: “We can’t do anything for you, unless you’re rich.”

    That’s a long way from, “We can accommodate you! But there are some serious compromises.” Yes, it’s not for everyone. But the current situation is not for anyone. (Except the rich 😉

  71. Thank you.

    Extremely optimistic, though. Actual BR size is realistically half that (if that); accounting for kit/BAs/halls in unit. Also, no count of halls/elevators/stairs in “living area” per floor, so not 2500′ per floor.

    These look like 3Br units, of <750 sqft; priced @ $400k – unusual indeed; so extremely small; cheap-ass level; not built to last.. Mort interest is also low, for multi-unit developments like this. And what about windows? Are there any current examples of allowable construction like this?

    While these units might be comparably priced for people currently sharing a Bedroom, don't assume folks will last 30 yrs under these conditions. Maybe at twice the price.

  72. cuz all the peer-reviewed lit sez that not building will make things “affordable” again?

  73. ROI in new start real estate in SF right now is about 10.5% on average. Homeowners on the other hand do absolutely nothing, risk nothing, create nothing, and are pulling in 12.5%.

    But the bad guys are the home builders not the home owners.

  74. ..and some developers go bankrupt.

    Looking around, Shorenstein appears to get IRRs around 10 (unlevered), around 15 at the fund level (after leverage but also after fees). Lennar seems to require project IRRs (again levered) in the mid-high teens. Unlevered IRR of 10 looks like a developer hurdle.

    House prices from 1975 have a price return of 8, plus for owner-occupants tax free rental equivalent income, less carrying costs but plus tax deductions. At a flat cap rate of 4 and carrying costs net of tax benefits of 1, unlevered homeowner IRR was 11.

    Local homeowners have done better than developers. Much better over many periods, since cap rates have rarely been as low as 4.

  75. True, but there are still many issues with “sprawl” in Sweden even if it doesn’t look like ours. For example one of the places I lived was Ultuna, near Gottsunda in Uppsala. Gottsunda is infamous for being a “ghetto” because of relatively isolated public housing. The transit was excellent but it still took 20-30 minutes to take a bus to Uppsala, which isn’t even a very big city, and then 30 more to get to Stockholm. That’s not very good for working people or the immigrants in that public housing. I think Sweden will suffer many serious consequences to its density-hostility.

  76. ..I compared the change in the number of housing units to the increases in median rent and home value for each ZIP code in Los Angeles County. The result? Almost no relationship whatsoever. Where new development was heaviest, prices went up a lot. Where development was almost entirely absent, prices also went up a lot.


    Nothing is more important [than low residential vacancy rates], and data from the American Community Survey confirm this. Zooming out to look at the 20 largest U.S. cities rather than local ZIP codes, the correlation between prices and vacancies is four times stronger than the correlation between prices and new development.


  77. Good urban planning has to occur over a period of generations. You can’t really have good urban planning by short term local politicians who just want to get elected and show good “numbers” ie job growth or employment. you need to look ahead 20 or 30 years and think, “who is going to be living in this city in the next generation and what are their needs going to be?” in my opinion that hasn’t really happened in the United States in decades, perhaps not since the early part of the 20th century. The baby boom generation of corporate and political leaders have been very bad long term planners for the most part.
    One of the major challenges for national politicians to decrease social stratification in the US is to find ways to entice profitable prosperous businesses to locate in poor communities . Granted San Francisco is one of the most beautiful cities in the world, but if everyone wants to live there it isn’t going to work out over the long run. You need to try to convince some company like Apple or Facebook to locate some resources in Flint Michigan or Detroit or Baltimore. I haven’t heard any of the national candidates talk about this.

  78. Developers can’t build enough units to satisfy the wealthy 10% that can afford high prices so even allowing a doubling of construction starts doesn’t have any impact on what one would call a typical supply / demand situation. No different than the overall housing industry nationally where millions of units are being built, but precious few as affordable starter homes. As much as I have no room for more government intervention (on anything) unless there’s a “not for “crazy” profit” approach developers will keep building what’s more profitable. Not counting land costs (which in an earlier post I suggested that the city handle that) we put in place highly appointed eco-homes for a fraction of the price being charged in SF. We’ve taken that model to numerous cities and it works like a charm. This summer we are beginning to train vets and inner city youth so that they can take the skill set to other places.

  79. ‘Keeping people in their homes’ – this is good because their current home is cheaper than an alt? Or maybe its more expensive but provides closeness to job/education/medical/social connections?

    If someone needs medical help once a week, is that reason to keep them closer than someone who needs to attend school three times a week, or work once a day?

    This idea of ‘social housing’ presumes that a certain crop of people should be favored. But “seniority” is not a great way to bestow advantages – specially with the derivative needs of that seniority trumping other primary needs.

  80. “enough housing units so that more people can live close to their work, family, and schools.”

    Agree on your criticism of Tim’s zoning idea, but I think you’re missing the boat on the above quote. The place we’re at is keeping people in their homes without having to move away, unless they chose to, and maybe, maybe, giving a little more opportunity for people to move here. Anything more is exploiting a bad situation. And only a few years ago, we would have been talking about people keeping their jobs on top of it.

    Living closer range when the city is small to begin with, isn’t a priority. The school system doesn’t assure you will attend a convenient school, and using this as an opportunity to wage war on commuting are really missing the boat.

  81. I think though (haven’t experienced it first hand) Sweden also has one important advantage over the Bay Area. Like many northern European countries, it’s made a sustained, massive investments mass transit, especially rail. As a result less dense areas outside the city core are well served by public transportation, offering at least some of the benefits of urban living to those unable to secure housing in the city itself. In the Bay Area it would be radically cost prohibitive to develop that type of mass transit for similarly dense communities. Pretty much the only hope of a reasonable urban experience is either building to high density either to make mass transit economical or to allow neighborhoods to be walkable.

  82. “The City Observatory link is outdated: Seattle prices have been rising
    since then. And its argument is, “we’ve been building a bunch, and
    prices were rising. Now they are not, so probably building more has
    lowered prices.” That’s not a proof.”

    You’ve used these arguments against me before as well. Conspicuously, without a single reference to defend your own view point. No report, article, study that has to do with urban planning can be perfectly up-to-date and be based on exactly similar situations to SFs. But the fact remains that no reputable researcher/analyst/urban planning professional supports the anti-density positions that you take. First implying that no literature exists to support a position and demanding citations, when in fact you know perfectly well that such literature exists, and then dismissing the citations en mas when presented while providing none of your own, is a bit tired.

  83. You hope. It doesn’t always work out that way, and you just decided the market is based on information nobody has.

    In truth, there’s no single MLS for rentals so nobody can know for sure what’s on the market at once. Renters in a soft market can usually sense how motivated the landlord/management company are, but again, that might have zero to do with the market as a whole, and everything to do with their own finances. If they just had a problem tenant, they’re going to be very careful who they rent to.

    No, with development, it can just be about a marketing plan on how they want to roll the units out. Too many vacancies in one building is different than units available on the market.

  84. To set rents, tenants do not ‘truly determine’ units on the market. They look for places they like. When there are many, units that cost too much go begging and landlords lower rents to fill them.

    If landlords withhold units, it is because what people will pay is determined in part by.. how many units are on the market: quod erat.

  85. I appreciate Tim’s heartfelt and forceful arguments. However, I respectfully disagree with his logic and conclusions.

    What Tim is essentially arguing for is exclusionary zoning through a price control. Let’s take his argument here:

    If you zone areas exclusively for PDR, and you don’t allow any exemptions, and you enforce the law, then you suppress the increases in land values that you see under the current zoning. If you are forbidden by law to rent your space to anyone who can pay more than $4 a square foot, your land is worth less than if you can rent it for $40 a square foot.

    TLDR; we should remember that the end result that we want is not high or low property values, rather, it is enough housing units so that more people can live close to their work, family, and schools. By focusing only on lowering property values, this policy does the exact opposite at the cost of limiting the number of housing units and excluding people who aren’t lucky enough to be incumbent inhabitants.

    The end result is less than ideal. Yes, by imposing zoning laws that mandate that land can only be rented out at X price for Y use, then the price of the land will be lower than the market equilibrium, all else being equal — it will be X/sq ft. But is this a good thing?

    Who benefits? Incumbent renters that are already living here when this type of zoning is enacted. And how much do they really benefit? Yes, they are now in a house – which is awesome and should be celebrated, but that unit is prevented from market level appreciation. So in five years from now when the cost of housing in the free market has appreciated by 30% and they get that sweet gig in San Jose that will really advance their career it will be extremely difficult for them to move because all of the other housing prices have gone up except theirs — because by law theirs is capped. Not to mention they will be missing out on generous federal government capital gains tax breaks on primary residence appreciation.

    Who loses? Everyone else. Why? What results is a shortage (as we currently see in real life SF) because only housing with a marginal cost lower than $4/sq ft will be built and we have done nothing to address the issue of demand. In the current environment there are more people that want to live in SF than there are housing units. So there will be people on the sidelines that are essentially waiting for housing to free up. They are essentially trapped in that unit unless their wealth has appreciated form some other source.

    Who has resources to wait out the storm and secure a housing unit when one frees up? The poor, the homeless, the unemployed, the down on their luck, of course. Wait no…it’s the rich, elite, and well connected. Whenever there is a shortage it is those with resources and political connections that have the ability to ride it out and secure the good that is in demand.

    Additionally, what Tim also doesn’t account for in his example is that he has created a dual market system. So, in his example, in East SF the price is capped at $4/sq ft, but in other places it is presumably allowed to float at market rates. By zoning off a particular area and capping prices there, it causes all that displaced demand to shift to another area, driving up $/sq foot in that area. It is just shifting demand to somewhere else.

    You might argue, well hell, just impose a price cap on the whole city, but for each time you expand the price cap you are just displacing demand onto somewhere else, and you have to ask yourself, why is there such high demand anyway? The number one reason is that SF has a ton of jobs. People want to live close to their job so they don’t have to commute. Pushing demand outwards only exacerbates sprawl, traffic (both on the freeway and within SF because people now have to drive in from far flung places and park somewhere), etc.

    The government’s role here is not try and keep land values high or low, it is to enact policies that will produce enough housing for SF predictably growing population. Sadly, this proposal achieves a low land value at the cost of actually creating housing — which is what people NEED at the end of the day.

  86. Not true. Prices take into account what the going rate is, and evaluate other inventory, but how many units are on the market can never be truly determine, and it’s definitely not the guide for price.

    And in markets where there’s too many units available in new developments, they withhold them from market to keep pricing up.

  87. Oops, sorry about the broken links. Fixed. Thanks for pointing them out.

    Seattle prices have been rising since then
    Ah, ok. I guess they need to keep building.

    That’s not a proof.
    You keep moving the goalposts.

    You asked for “reams of data and statistical work”
    You got some, but that wasn’t enough. You asked for examples:
    Can you show one American city that has recently managed to lower housing prices significantly by building
    Given some examples, you now want proof.

    You’re proving the original poster’s point. Land-use economics –– like climate science, evolution, and vaccines –– is complicated. In these debates, when some political actor doesn’t want some policy, they demand yet more rigor, ask for ever more data, and push the burden of proof onto others. That’s what you’re doing in this thread.

    I’ve presented a model of how I think the housing market works and some evidence. You can present yours, so we can talk about it.

  88. Except that what people will pay is determined not only by what they earn, but also by how many units are on the market.

  89. Some of them wouldn’t have deep enough pockets to wait it out. Others would find ways to make a profit even at reduced prices.

  90. Not sure about that, but personally, I do support more housing mainly for reasons other than housing prices.

  91. Cameron, let’s be careful not to oversimplify something that’s complicated. Supply and demand is one of the drivers, but not the only one.

  92. The City Observatory link is outdated, and pSeattle prices have risen since then. And its argument is, “we’ve been building a bunch, and prices were rising. Now they are not, so probably building more has lowered prices.” That’s not a proof.

    The other links need to be fixed.

  93. Rents in Seattle have been lower than SF’s forever, more or less, that’s why they are still lower. However, they are rising faster than here. At this past year’s rate, their prices will catch up with the Bay Area in a decade.

  94. Thanks to comments like these, I’m coming around to supporting Moratoriums. Thanks everyone!

    SFBARF’s robotic proselytizing would make Scientologists blush. It’s wrapped in such divisiveness and misunderstanding of recent history that it’s embarrassing.

    Nobody should have to explain to a “Renters Federation” that in this case, the Housing Rights Committee are telling it like it is.

  95. Right. Housing prices are detremined by what people will pay, not by how many units are on the market.

  96. That’s out of date. Rents have stalled in Seattle for a few months, then started going up again.

  97. “maintaining character of neighborhoods” and “historic preservation” are actually just code for “keep my neighborhood white and rich”!

    Cameron Newland, if you really lived in San Francisco, I’d call you out for how wrongheaded and bigoted you sound. We’re talking about preserving diverse areas. You’re not talking about public housing, or housing for the poor, so stop pretending you’re speaking on behalf of the poor.

  98. You must be joking. You can’t defend yourself under the guise of science if you’re a Displacement Denialist.

  99. PA vs. Seattle is Apples vs. Oranges, but what the hell, I’ll jump in anyway. The PA housing market is overwhelmingly dominated by tech workers, while Seattle has a much more diverse workforce. I suspect the reason why PA rents haven’t gone up as much is because PA’s rents already hit the tech-salary ceiling. We’re talking $2562 PA vs. $1587 Seattle, right? I suspect as a percentage of the average tech worker salary, $2562 is already the ceiling. This is just one reason why it’s silly to compare the two cities. The populations are totally different, both in terms of magnitude (Seattle has almost exactly 10x more people than PA) and composition.

  100. Everyone uses absolute prices to compare prices.

    Would you buy a $10 burger from one place just because the $8 burger at another place used to be $6??? But the $8 burger is a 30% price increase!

  101. Can you show one American city that has recently managed to lower housing prices significantly by building, without anyone panicking about lowered property values?

    So, your position is that we shouldn’t try building enough housing to lower prices because it might work?

    But, sure, I’ll bite:

    “But there is good news on that front: rents in Seattle, Denver, and Washington, DC appear to be easing significantly.”

    Also, see figure 3:

    Also this report from the CA Legislative Analyst’s Office:

    There’s also bunch of SF-specific studies from the city controller’s office:

  102. That’s on average assuming mostly 3 and 4 bedroom units. For studios, yeah the deal wouldn’t be as good. They’d have to be smaller or cost more.

  103. I wish we could find a way for the Progressives to admit that they were catastrophically, tragically wrong about housing without them losing face.

  104. Just tell that to Saudi Arabia, Israel, and Spain, who are reclaiming seawater via desalination! It’s not cheap, but it works.

  105. Seattle is building fast because their population is rising quickly and their economy is growing fast and is creating lots of jobs. Seattle’s rent prices are lower than San Francisco’s because Seattle’s apartment vacancy rate is 3.5% and rising (source: whereas San Francisco’s is below 3% and not moving. This indicates that Seattle hasn’t built enough housing to avoid a housing shortage, however, its rate of housing construction is high enough to dig itself out of the hole within a few years. Seattle’s housing construction boom is paying off!:

    “…rents in Seattle, Denver, and Washington, DC appear to be easing significantly … the average Seattle rent fell by $59 in the last quarter of 2015, following a long period of rapid increases.”


  106. IMO we could even disagree about what drives housing prices and just agree that more housing is better than less housing and we would have policy consensus.

  107. This blog post is from last week, however, it relies on a publicly-accessible dataset that goes back decades (in fact, it goes back further than SF’s own data!).

    Regarding affordable market-rate housing, I’d point you to Chicago and Minneapolis. They’ve both been able to build densely and keep housing prices reasonable. Chicago is the most relevant example because it’s a dense metropolis that is more comparable to San Francisco, whereas Minneapolis is a bit smaller and is more comparable to Seattle and Portland.

    I didn’t post solely opinion. I posted a link to some REAL DATA that can be used to get some insights into a real problem that affects San Francisco. Which one of your posts contains a link to real data? All I see is you questioning the sources that other people are mentioning and then stating that you “have looked at the literature”, but I don’t see you citing any data yourself. As a result, I don’t think you have any standing to call others out for spouting off “opinion”. Come up with some data and then maybe people will look to you as a source of objectivity! 😀

  108. When it comes to housing and markets, nobody is more conservative than a San Francisco progressive.

  109. Why wouldn’t developers stop as soon as the glut lowered prices at all? Why would they keep building more and reduce their profits, rather than wait for prices to go back up?

  110. As Tim points out in the article, some developers have bought land cheap when it was still zoned PDR, and are benefiting from changes in zoning and neighborhood desirability. Some people are walking away with huge ROIs. Those richer developers who can wait 10-20 years to charge ever-increasing rents rather than sell condos immediately are making even more.

  111. That could work. SF would be taking on a huge debt burden, but lenders would probably line up to fund the program because SF rents are high, which ensures steady cash flows. This sounds eerily similar to Singapore’s HBD program. If it worked there, there’s no reason why it couldn’t work here, too.

    My question, though, is why not let the private developers do this instead of having the city do it? Why clone Singapore’s HDB in San Francisco if you can recreate the same incentives without having everything funneled through government?

  112. Pretty sure a few days ago there was a post that showed, using hard data, that SF housing rents could be explained by just three things:

    “It’s a chart that almost perfectly predicts the San Francisco housing market using only three variables:

    1. The number of jobs located in San Francisco County.
    2. The number of places in San Francisco County for people to live.
    3. The total amount of money that is paid to everyone who works jobs in San Francisco County.”

    Michael Andersen: A guy just transcribed 30 years of for-rent ads. Here’s what it taught us about housing prices

  113. You can get a studio for $900/mo in Seattle. If they can do it, why can’t we?

    Though it might not pencil-out in your mind, try thinking out of the box. I mean, imagine that SF developers were able to build 20,000 new housing units per years instead of the 3,000 that they build today. At some point, we would probably have an oversupply of studios, and studio rents would fall. Clearly, the construction cost for a brand new studio apartment in SF aren’t cheap, however, that doesn’t mean that some amount of new studios going on the market couldn’t bring down the market price of studios down to $900/month. Basically, what I’m saying is that all of the existing studios that aren’t new-construction factor into studio prices, too. You probably wouldn’t have to double the number of studios in SF to bring prices down by half. A smaller increase might do it. That said, if SF studio prices his $900, then developers would probably just stop building studios, and the market price would hit its equilibrium again and would probably stabilize somewhere closer to the cost to build a new studio.

  114. Fine. I was replying to “AlbertoRogers”, who claims that homeowners like Redmond are the beneficiaries of increasing housing prices, and therefore anything they say is motivated by callous self-interest.

  115. My mistake, I was thinking of Peter Cohen’s house. Tim’s has only appreciated to triple the initial sale price. (“only” LOL)

  116. All right. I don’t know of anyone who uses absolute prices to compare anything. Even so, $215 and $188 is a small difference, compared with the big difference in new construction between the two.

  117. Relative to incumbent homeowners and the pennies on the dollar spent on their now-expensive houses? Not a lot in terms of Return On Investment. Redmond’s own house is worth what, 20 or 30 times its original sale price? When do developers see those kinds of returns?

  118. That’s a good question – clearly, the developers have their own financial interests in mind when they’re advancing plans for their own developments, however, the more important feature of real estate developments in a competitive marketplace is that the people (that is, renters, home buyers, and offices) actually benefit from massive development of residential and office space. Though it’s true that the developers stand to make a lot of money, all that new housing and office space that goes on the market will serve to bring down home prices and residential and office rents FOR EVERYBODY. What I’m saying is that the result of all these greedy developers seeking profit is that the people pay less for real estate, and if that’s the case, then why oppose the actions of greedy developers when the middle class, businesses, and low-income renters all benefit from it?

  119. It’s simple math. Palo Alto’s housing prices rose more in nominal terms than Seattle’s did – not on a percentage basis, but on a nominal basis.

    More importantly, Palo Alto and Seattle are not comparable. Palo Alto has only 1/10th of Seattle’s population. It’s apples to oranges. Try comparing Seattle and San Francisco, which have a more or less equivalent population.

  120. My point is that Seattle is building fast and is getting more expensive. That flies in the face of the theory that building more lowers prices. Why isn’t PA getting more expensive even faster?

  121. Such a well-reasoned response! I mean, how could people *not* pay attention to your eloquent brilliance! Clearly you’re not a troll.

  122. Agreed! If only the anti-intellectual leftists could understand basic things like math, then we’d get closer to forming a consensus and realize that supply and demand is what drives regional housing prices.

  123. That Experimental Geography blog is from last week. It’s interesting, but it’s not “reams of statistical data”. Can you show anything that has been published before and vetted properly? I have done my homework, and I have looked at the literature. Can you show one American city that has recently managed to lower housing prices significantly by building, without anyone panicking about lowered property values?
    Take a deep breath before posting these long screeds. I hate reading so many words and not getting anything but opinion out of them.

  124. I couldn’t agree more. Focusing on land values just serves to confuse people about the real prize: affordable market-rate housing for EVERYONE.

    Tim fails to mention that with dense urban constructions, it’s possible to increase housing supply and decrease housing prices even as land prices rise.

  125. True, but Seattle isn’t comparable to Palo Alto. Seattle is comparable with San Francisco. Also, more importantly, $2,562 is much greater than $1,587, so clearly, Seattle is doing something right. I mean, why celebrate the city whose rents are 61% higher than the other? The city with the high rents is clearly the loser, not the winner.

  126. I admit that geographically, San Francisco is more limited than cities like Los Angeles and Chicago, but that doesn’t mean that there isn’t enough room in San Francisco for everyone who wants to live here.

    While I agree with your main point, San Francisco proper is not exactly the extent of the known world.

    San Francisco – 121 km²
    Oakland – 202 km²
    Manhttan – 59 km²
    Brooklyn – 180 km²

    With higher density in San Francisco and the rest of the Bay Area, and improved regional transit, there’s no reason for the area to be unaffordable. The only problem is, this goes against the interest of landlords and preservationists, and requires local governments to get their acts together.

  127. I think Tim is sincere in his beliefs, which makes it really tragic. If so much of your identity is wrapped up in being a progressive champion of the less fortunate, could you ever admit that you’d been on the wrong side of an issue like this?

  128. Last time I checked, Seattle is still affordable for middle-class families. San Francisco is the poster-child for overly-restrictive zoning and the consequential dearth of affordable housing.

    Seattle has seen an influx of high-income folks who work for companies like Microsoft, Amazon, and Zillow. The natural consequence of this influx of high-earners is a rise in housing prices and a housing shortage, however, this has been blunted by Seattle’s recent apartment building binge. I was in Seattle last weekend and saw a bunch of brand new highrise apartment buildings that had popped up in the six months since I’d last been there. Though over-simplistic folks might think that these new buildings are only a sign of the arrival of the tech yuppies that are displacing the poor, the truth is that the new highrise apartments are accommodating/absorbing the influx of tech yuppies so that the middle class and the poor can stay where they are (and NOT get displaced). This is an important distinction.

    The Bay Area has been dealing with some of the same demographic challenges that Seattle has, however, Bay Area cities have given up on trying to build enough housing for the people who want to live here, whereas Seattle has directly confronted the problem, and as a result, RENTS IN SEATTLE ARE HALF OF SAN FRANCISCO’S!

  129. According to RentJungle, from 1/2015 to 1/2016, Seattle 1BRs have increased from $1399 to $1587 (13%). Palo Alto 1BRs have increased in the same time from $2347 to $2562 (9%).

  130. Occam’s razor people, occam’s razor. Career activists and politicians hate this concept.

    “The principle can be interpreted as stating Among competing hypotheses, the one with the fewest assumptions should be selected.”

    EDIT: Or they don’t understand it.

  131. Here’s a start:

    It’s a bunch of data that, when analyzed, clearly shows three things that increase the price of housing:

    – high wages
    – low apartment vacancy rates and/or low housing production
    – increased population

    These three factors are the main factors of housing prices, and “reams of data” backs this up. Feel free to look it up yourself – it’s not my responsibility to do it for you.

    Anyways, from a policy perspective, it’s not reasonable to restrict wages or population, because the people would never support that. China, for instance, restricts the ability of country peasants to move to big cities like Beijing and Shanghai. This would never happen in the US because we’re a free country where people can live wherever they want to (and can afford to live). So if restricting wages and restricting population is off the table, then what policy tools do politicians have to solve our housing shortage/housing crisis? Obviously, it’s addressing the low apartment vacancy rates by increasing apartment and condo construction. Real estate economists will tell you that when a region’s apartment vacancy rate is above 5%, rents will fall, and when apartment vacancy rates fall under 5%, rents will rise. This general rule is as true today in San Francisco as it was in ancient Babylon. It’s supply and demand in action. In 2014, the rental vacancy rate for San Francisco was 2.68% according to Census ACS data, while the nation’s rental vacancy rate was 6.32% in 2014. That means that in 2014, San Francisco had a shortage of apartments for rent, and as a result, rents rose, while nationwide, there was a slight oversupply of apartments, and rents fell.

    Tim Redmond’s article argues against supply and demand and instead prioritizes restrictive zoning and government intervention. That flies in the face of “reams of data and statistical work in favor of anecdotes and an argument that simply can’t be proved.”

  132. I’d like to see your calcs, cuz I don’t think thats possible.

    A studio for $900/mth?! Dreamer. So HOA (“upkeep”) = $250/. Which leaves $650/ for construction; which would give you a mortgage for <$140,000. At $350/sqft (cheap-ass construction, not suitable for lasting more than 30 yrs) might get you 450 sq ft for that studio.

    But you haven't bought the land yet!, you aren't paying taxes, utilities, insurance – and you're hard pressed to find someone to build to those specs.

    So show me your 'work'.

  133. True. I heard that they have rent control on all housing. There is no social housing in Sweden (rent control is supposed to provide affordability for all) but they do have council housing which is open to everyone at all income levels.

    “It took an average of 10 years to get a rental apartment through the Stockholm housing office”.

    SVT News: 30-year waiting list for apartment in Södermalm

  134. I have, in Sweden where they usually do socialism really well. But in Stockholm and many other places there are very serious housing shortages. There I really think it’s a combo of the very strict zoning-like laws and social housing. Gov Brown’s proposal to loosen the rules for affordable housing seems like it may not have that affect.

  135. LAND VALUE TAX ON NIMBY could work!

    Any people who are successful at stopping development in their local area would automatically push themselves into higher and higher land value tax brackets. Land but not buildings would be taxed.

    The money raised by taxing land using progressive tax rates could be paid to developers for every new apartment they build. The amount could be a fixed amount, say $10 000 per apartment, so that the cheaper apartments are the ones that are favoured.

    This might require changes to property tax laws / constitution, but it would promote affordable housing, promote increased density, the development of vacant or derelict land and strongly discourage land banking.

  136. Palo Alto should look to Seattle, where years of rapid highrise downtown construction have gone hand-in-hand with some of the fastest rising rents in the country.

  137. So what about the people who make more than 70% AMI but less than what’s needed to afford market rate housing? I’m all for building affordable housing for those at the lower end of the economic spectrum, but adding supply of market rate housing at rates greater than SF has been for the last few decades is the only way folks in the middle (by SF standards) will ever be able to afford housing. Look at Seattle and D.C., there’s plenty written about how their recent building booms have slowed price increases.

  138. Agreed. SF is full of socially-liberal folks who are totally conservative when it comes to housing: “maintaining character of neighborhoods” and “historic preservation” are actually just code for “keep my neighborhood white and rich”!

    If only SF’s old guard could see that building more housing would make this city more inclusive, diverse and vibrant! Keeping SF the way it is will only cause the poor and minorities to be forced out, so let’s build enough housing to accommodate everyone! THAT’S true progressivism!

  139. best thing ever to appear on techcrunch is a very dubious honor as the articles on there are dumpster fire garbage. and i have read that article, it’s fine and well written but doesn’t lend her any more credibility as some sort of expert on the subject.

  140. This article’s policy ideas are pure fantasy. You want to spend hundreds of millions of dollars in public money on housing instead of letting private developers solve our housing crisis for free (if given the right incentives)? Your idea sounds like a centrally-planned, Soviet-esque overpriced boondoggle!

    Restrictive zoning is the cause of our housing shortage. I admit that geographically, San Francisco is more limited than cities like Los Angeles and Chicago, but that doesn’t mean that there isn’t enough room in San Francisco for everyone who wants to live here. In fact, even Manhattan hasn’t reached its full population saturation. Prices in San Francisco and Manhattan could be driven low enough to make them affordable to the middle class, and all that would be required is enough new housing to bring prices down to reasonable levels.

    All the signs (market prices, apartment vacancy rates, etc) point to a huge housing shortage in San Francisco right now (as well as the broader Bay Area). It’s misguided to say that the solution to our shortage is more government and more regulation when there is a much simpler solution staring us in the face: building enough market-rate housing to accommodate all the people who want to live here.

    In fact, even the most successful subsidized housing programs yet implemented seem to point to a simpler, private-sector solution to our housing woes. Let’s take a look at Singapore, for example. Singapore is an expensive city that has a fantastic affordable housing program called the HDB (housing development board), and it’s nothing like what San Francisco has. Essentially, it’s a housing program that gets low-income and middle-class folks linked up with HDB-developed high-density condos that are mortgaged – NOT rented. It gives Singaporeans the right incentives (i.e. the people who live in affordable units aren’t averse to redeveloping parcels because the people who live in low-income housing stand to benefit). Also, new housing developments in Singapore aren’t demonized because they’re seen as providing much-needed housing on a very crowded island. This is quite different from how new housing developments are perceived at in SF. In San Francisco, low-income housing and rent-controlled tenants tend to rent their units, which gives them perverse incentives (i.e. they tend to be against redeveloping parcels because they may lose their subsidized apartment if their building is redeveloped). 65% of housing units in San Francisco are rentals. The interesting thing to note about Singapore’s success with affordable housing is that its HDB program is essentially the city giving special zoning breaks to a quasi-public housing development entity. If San Francisco gave that same kind of laissez-fair zoning treatment to private developers (i.e. let them build dense and let them build fast), we would see much more housing production and consequently, market rate housing prices and rents would both fall. I guess what I’m saying is that we can recreate Singapore’s successes with housing production without creating a leviathan public housing agency like they did. All we need to do is change incentives to favor home ownership, favor the creation of market-rate affordable housing (aPODments/micro-units/SROs would be a good start), and favor new developments, and if we can make these incentives happen, the result is that we’ll see higher rates of home ownership, lower rents, and lower housing prices, and once housing prices are more reasonable, there will be no need for San Francisco to spend hundreds of millions of dollars on taxpayer-subsidized housing. Singapore reformed incentives to support the construction of hundreds of thousands of new housing units. Why is San Francisco seemingly incapable of doing the same?

  141. “reams of data and statistical work in favor of anecdotes and an argument that simply can’t be proved.”
    What “reams of data and statistical work”?

  142. “It’s a fair, well-researched look at the housing crisis.”
    It’s not fair, and it’s not well-researched. It’s well-written, though, which is why it gets quoted.

  143. > NIMBYs would hate it and you’d have to deprioritize private automobiles

    did you misspell “upsides”?

  144. Surgery will “theoretically help”, but that’s not going to happen. So let’s just drink lots of snake oil.

  145. uhh, lemme guess dude, your neighborhood will NOT be the one that gets this “BMR” zoning classification, right?

  146. Agreed! This article from Mr. Redmond is liberal anti-intellectualism at its finest! They squirm when they see it from the right (Trump, et al), yet they’re just as guilty of it themselves, just on a different set of issues!

  147. $310M left in city coffers, that should get uls, lets see… 600 units. Everyone who doesn’t win the lottery is still screwed. Except oops, I think most of that money was earmarked for rehab and buyback of high profile Mission buildings.

    This Density Done Less solution doesn’t come close to the scale of the problem, and is really just a poison pill to kill the AHBP which SELF FUNDED 30% affordable housing just like what you propose. Allied NIMBY groups HATE the AHBP because it would spur development faster. NIMBY affordable complex groups hate it because it creates buildings not under their full control. The result? Classic triangulation that has kept the market in cardiac arrest since the dot com boom.

  148. San Francisco should look to Palo Alto, where extremely tight zoning has produced a wealth of truly affordable housing.

  149. What about people who aren’t at 70% or below the median? Seems like all we’d get from this is a narrow segment of BMR housing for a small few lucky below-average earners while the rest of us would be left chasing ever more expensive houses with a restricted, artificially limited market. Essentially, this would help the City engineer a situation where all the middle class and working class people are left out. You’d have the wealthy, like Peskin and Mar, and then the lucky few government-subsidized poor – I guess that would be the worker pool for the rich.

    What is wrong with PDR space moving further out? We have mass transit all over the place and some real estate currently occupied by auto repair shops and garages would be better as residential with the work space a bit further out in cheaper areas.

  150. Nice, but I think you missed a key point that makes your line of thinking even better.

    Rent used to be “too damn high”, but it has since moved well past that to levels that are “certifiably insane”. (Say “too damn high” = $850 per bedroom per month, roughly, and certifiably insane is twice that, i.e. around current market rate in San Francisco.)

    According to my calculations, the city could buy land, construct apartment buildings, and rent the apartments at “too damn high levels” (which are pretty high <— KEY POINT), and cover ALL COSTS, including land, construction, property taxes, upkeep, and interest on a 30-year loan with NO MONEY DOWN to cover land and construction costs. At the end of 30 years the city would have made money, as it would then own valuable assets that cost it nothing.

    The only downsides are that NIMBYs would hate it and you'd have to deprioritize private automobiles so

  151. Tim’s Tautology. Increase zoning density, and land prices go up. True! But meaningless. The real issue is land cost per buildable unit. If a piece of land is valued at $2M and zoned for 10 units, we have a land cost of $200K per unit. If we change zoning, and the land is now zoned for 20 units, and the value of the land goes up to $3M, we now have a land cost of $150K per unit. THIS IS A GOOD THING!

  152. I have consistently knocked this blog for not putting it’s full housing philosophy down on paper, so I’m glad that Tim finally laid out his vision in this post.

    However, readers should not be confused the Peskin-Mar bill does nothing of the sort of idealized socialized housing program that Tim suggests. No where near it. Not even the same planet.

    Don’t get me wrong. Affordable housing development should be upzoned. It should basically get unlimited height, in my opinion. But what Peskin-Mar actually does is gut a program that could provide more affordable housing in EVERY multi-unit development, with one that will basically never produce much at all.

    The idea that the federal government will provide us with the largess to meet our housing needs is a pipe dream and not serious public policy. $310 is basically nothing. It will build maybe 600 units. Twice that is 1200 units. That’s a pittance when the market-based housing pipeline currently has over 60k units in development.

    Also, if Tim were right that restrictive zoning lowered prices than all of those single family homes on the West Side should be cheap. Housing is not PDR space. As long as you have too little housing for the people that want it, rich people will always outbid poor people. No amount of zoning or price restriction will change that.

  153. Fantasy. Utter fantasy. We need at least 50,000 new units to accommodate those already here. At a conservative all in $700k for land and construction, we’re looking at $35 billion. San Francisco only has the ability to tax in San Francisco. Divide by 346,000 households in SF, and we only need to tax each household in SF $101,156. Great plan.

  154. “It was the loosening of zoning laws that drove up land values (which are a huge factor in the cost of housing).”
    Focusing on land value is a red herring. We should focus on minimizing the cost of homes.

    Legalizing density allows several less-wealthy households to collectively outbid one wealthy household for a parcel of land. The higher land values are only higher because the less-wealthly households are allowed to team up.

  155. There is one abiding rule in politics that I always follow when I’m trying to figure out a person or a group of people’s motivation to take a particular position on any given policy. “Follow the money” It never lets me down. In 2015 alone, San Francisco home owners like Tim saw a whopping $131 BILLION appreciation in value!! $131 billion in their pockets for doing little more than occasionally hiring Sue Hestor to block new homes and duping a few unfortunate souls in the Mission into believing this nonsense that the real enemy are the people who want to build homes rather than the people who own homes. That has to be the greatest investment of all time. My hat is off to the Tim Redmonds and the Calvin Welchs of the world! this scam makes Goldman Sachs look like a bunch of amateurs!

  156. “After the Monster in the Mission was proposed (not even built), she said, tenants from all over the area were in her office complaining about rent hikes and eviction threats.


    Pretty simple.”

    Also, umbrellas cause rain.

    “In a sense, in a much more limited way, that’s what the Peskin-Mar legislation does: It allows more density, but as part of that bargain limits the use to 100 percent affordable housing.”

    The AHBP offers three extra floors of BMR housing for 100% affordable (<80% AMI) developments. The Peskin-Mar proposal offers two extra floors.

    You're applauding a reduction in affordable housing.

    “In the meantime, we have to live with the most basic rule of a housing crisis: Don’t make things worse.”

    To be clear, every professional economist thinks that restricting housing construction is making things worse.

  157. It’s theoretically true that you could help the housing crisis by imposing massive tax increases and using the money to build affordable units at 500k a pop. But you, me, and everyone else on here knows that is not going to happen.

    A plan of “impose a 25% wealth tax” is functionally equivalent to no plan at all.

  158. isn’t she a tech company shill aka “tech reporter”? why is she suddenly acting like an urban planning and housing expert?

  159. Then how about taking a patch of land, have the city purchase it, have a local builder construct AmeriSus homes than would be the most affordable in the city. With SF owning the land, the land lease could be a long term revenue generator.

  160. there’s a reason why the house you paid under $300K for is worth over $1M and its not because we’ve been building too much housing.

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