Friday, March 5, 2021
News + Politics What's wrong with bringing down land values in SF?

What’s wrong with bringing down land values in SF?

The city controller worries about affordable-housing mandates driving down the value of land. But that might be very good for SF right now

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The key phrase in the affordable report by the SF Controller’s Office, released today, was mostly buried in news accounts. The headline in the Chron said “affordable rent demand could slow construction.” The lead sentence: “Requiring private developers to rent 20 percent of units in new apartment buildings at below-market prices would slow down construction of housing, the city controller concludes.”

Sounds awful. Sounds like we better cut the affordable-housing requirements. Otherwise nothing will get built at all.

Would most of us be better off if land prices went down?
Would most of us be better off if land prices went down?

But of course, the study only looks at market-rate projects, which don’t make the city’s housing crisis any better anyway. If we require less than 40 percent affordable housing, the new projects just make things worse.

Here, though, is the real killer, the thing that makes me want to shake my poor addled head and tear out what’s left of my graying hair:

The idea is that the higher the affordability percentage, the less money developers will pay for the land. At greater than 18 percent affordability, the value of the land will drop to a level so low that owners won’t sell the land.

Huh? What? Seriously?

We are looking at a time when every available piece of land that could be market-rate housing seems to be for sale. When everyone who owns developable land has made a total killing in the market over the past couple of years. When the biggest obstacle to the construction of more affordable housing is … the cost of land.

And now the controller says that we should be worried about reducing the over-hyped, over-speculated, vastly-too-high cost of land?

On a policy level, all this says to me is: jack up the affordability requirement even higher. Bring the price of land down even more. At some point maybe it will be cheap enough that the city can start buying more sites.

If we don’t get more market-rate housing for a while, so what? It just makes things worse anyway – according to the city’s own studies. I think the best thing that could happen to this city (and I say this as a homeowner) is a drop in the value of property. That – unlike the build-at-all-costs approach – might actually make housing more affordable.

It would also save blue-collar jobs by making it less attractive to landlords to get rid of production, distribution, and repair tenants and artists and sell their land for high-end housing. It would help small businesses by keeping their leases from soaring as high.

Ordinary working people might have a better chance at buying homes.

It would, or course, hurt speculators and real-estate investors. This is not such a bad thing; it might discourage speculation and sent the out-of-town house flippers somewhere else.

Anyone with me here?

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.

12 COMMENTS

  1. Have you guys not heard of “filtering”? Even if you build luxury apartments (unless they are bought up by non-residents as pied a terres) the people moving into them will move out of someplace else, and somebody will move in there and move out of someplace else again, etc. I agree in the current crisis we still need some subsidized housing too.

  2. Private property owners have shown they are not capable of acting in the best interests of the public. All housing should be owned by the City, and rented to residents on a sliding scale. Let the commercial property owners cannibalize each other, instead of the general public.

  3. There are lots in the outlying neighborhoods that could be developed. Why aren’t they? Based on interviews with developers I have seen, It seems that to make the BMR pencil out even at 12%, it needs to be a larger project, 40 or 50 plus units, unless some commercial is part of the mix. There are not very many places for large projects in the Sunset – Parkside. I think there were two projects, two blocks on outer Sloat and one on 19th Ave, and both were condos not rentals.

  4. As the percent of BMR goes up the price of market rate units goes up, fewer developers are willing to build, and landowners look for uses other than residential for their property. I suppose that would benefit production and blue collar jobs. Currently around 70% of those jobs are filled by those who don’t live in the City.

  5. With an attitude like that, it’s no wonder that so few cares about displacing the likes of you.

  6. Yes, thank you, Tim! Let us for god’s sake bring down the value of the land, which will bring down the cost of housing, so that maybe teachers, cops, nurses, dental assistants, etc., can afford to live here. And maybe the techies, in their tight jeans and boring grey hoodies, who congregate in Dolores Park, will go home to Duluth.

  7. Yes, absolutely. I’ve been saying this for a long time. Land should not be subject to the whims of the “market.” Fair market value isn’t fair. Highest and best use, the standard always used, should not be what the market will bear, but what is best for the community, the environment, overall social values. Unfortunately, it will probably take a Constitutional amendment to get there. And that ain’t gonna happen. So we need Land Trusts, regulations, co-housing, more regulations, and stop letting developers poor mouth. You can;t make an obscene profit? Too bad. How about you make $15 an hour like the other poor schmucks who need to make a living in this world?

  8. Methinks you misunderstand the report. its not about protecting the land-owners per-se but getting to the point that they’ll decide to sell the property because their revenue from existing uses are higher.

    Property owners have done very well through no special action of their own and their paper gains shouldn’t be protected. At the same time, if we want to build the housing our city so desperately needs, especially in the outlying neighborhoods, then we need these property owners to make the decision to do something on their land. Otherwise they’ll keep their parking lot, which can be very lucrative with no holding or operations costs.

    Some will go on say that the current requirement maximizes the amount of BMR units that would be produced; and that’s great. Here’s the thing though…the need for extra BMR or so units will swell as the demand for unbuilt housing pushes further into our existing occupied stock. Because at the end of the day, putting people into economic competition with those who have more money will rarely if ever end well for those less.

  9. Absolutely agree. Thank you for pointing out the absurdity of the Controller’s statement. The affordability requirement targets large projects, many of which are being built on land that is being converted from industrial uses, with historically lower land values. Many of these sites are in the eastern part of SF. In the Eastern Neighborhoods Plan, this land was identified as an opportunity to build affordable housing, not as an opportunity to maximize profits with mostly market rate development.

Comments are closed.

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