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Tag San Francisco

San Francisco Turned Sisyphus: Why the City Can’t Fix the Housing Crisis On its Own

Housing prices in San Francisco are obscene. And, in large part, that’s because the city hasn’t permitted enough new construction. But that’s not the entire story. For as hard as San Francisco has resisted development, the Peninsula cities have resisted it even more. And in so doing they’ve pushed the responsibility of development onto their Northern neighbor. If San Francisco’s housing crisis is to be resolved, the Peninsula cities will have to quite literally grow up. Bad Neighbors San Francisco is synonymous with tech, but there’s plenty going on just down the road. Menlo Park has Facebook. Mountain View has both Google and Linkedin. These two cities alone are home to over 1,300 other tech companies and the story’s much the same elsewhere on the Peninsula. But where firms have sprung up and jobs have become abundant, housing has remained in short supply. Tech companies bus an estimated 7,500 workers from San Francisco apartments to Peninsula offices every day. They don’t do this for fun. There’s simply not enough housing near major employers. And what is available is often unaffordable, even for tech workers. But if housing prices are as bad or worse on the peninsula, one might ask why we only hear the word “crisis” in San Francisco. The reason is simple. What makes for crisis in San Francisco is nothing but windfall to the South. According to the U.S. Census, San Francisco’s homeownership rate is 36.6%. Mountain View’s is 41.8%, San Mateo’s is 53.6%, Palo Alto’s is 55.4%, Menlo Park’s is 56.2%, and Cupertino’s is 63.7%. Homeowners in these cities aren’t faced with skyrocketing rent. And thanks to Prop 13, they also pay almost nothing in property tax–no matter how much their homes appreciate in value. They not only face no downside from the anti-development status quo, they […]

Trickle-Down Housing Economics? Laying Reagan’s Ghost to Rest

In a recent 48 Hills post, housing activist Peter Cohen aimed a couple rounds of return fire at SPUR’s Gabriel Metcalf. The post comes in response to Mr. Metcalf’s own article critiquing progressive housing policy. Mr. Cohen bounces around a bit, but he does repeat some frequently used talking points worth addressing. Trickle-down economics Mr. Cohen calls the argument for market-rate construction ‘trickle down economics’.  Trickle down economics actually refers to certain macro theories popularized during the Reagan years. These models assumed a higher marginal propensity to save among wealthier individuals. And given this assumption, some economists concluded that reducing top marginal tax rates would result in higher savings. This would then mean higher levels of investment which would, in turn, have a positive effect on aggregate output. And from there we get the idea of a rising tide lifting all ships. Note that none of that has anything to do with housing policy. Labeling something ‘trickle down’ is a way to delegitimize certain policy proposals by associating them with Ronald Reagan. It’s somewhere between rhetorically dishonest and intellectually lazy. Though to be fair, it’s probably pretty effective in San Francisco. The concept Mr. Cohen is trying to critique is actually called filtering. In many instances, markets do not produce new housing at every income level. But they do produce housing across different income levels over time. Today’s luxury development is tomorrow’s middle income housing. The catch, however, is that supply has to continually expand. If not, prices for even dilapidated housing can go through the roof. For a more thorough explanation, see SFBARF’s agent based housing model.   If you build it, they’ll just come But even accurately defined, Mr. Cohen still objects to the concept of filtering. He cites an article by urban planning authority William Fulton to make […]

Market Fundamentalism in the Mission?

There’s a proposal to place a moratorium on all market rate construction in the Mission District, one of San Francisco’s most rapidly gentrifying neighborhoods. Needless to say the proposal has sparked a debate. And Dan Ancona’s Putting Market Fundamentalism On Hold is another rock hurled into that particular fray. But in trying to take the anti-moratorium/pro-supply camp to task, it falls into the same unproductive bomb hurling we’ve been watching now for years. The following are a few thoughts on some of the points Mr. Ancona makes in his recent piece. Talking Past Each Other The first point is about a fundamental misunderstanding of the motivations behind the moratorium. Mr. Ancona makes this mistake, but so do the exasperated anti-moratorium/pro-supply advocates he quotes at the beginning of his piece. Hint: The moratorium is not about lowering housing prices. To be sure, the anti-moratorium camp wants lower aggregate housing prices throughout San Francisco and the entire region. The indisputable way to accomplish this goal is by building more housing. And as far as the anti-moratorium camp is concerned, this includes plenty of  below market rate (BMR) construction to mitigate some of the distributional effects of development. For the pro-moratorium camp, however, this doesn’t cut it. Lower aggregate prices are not their goal. Their goal is keeping the existing population of the Mission intact and in place. Even a 70/30 ratio of market rate development to BMR construction wouldn’t do that. There would still be demographic churn and this is specifically what they want to avoid. For the pro-moratorium camp, lower housing prices are all well and good, but not if that means the dispersal of the existing community in the process. Searching for the Endgame The second issue is that there’s no endgame for the pro-moratorium camp. Mr. Ancona seems to think there is, but doesn’t go […]

How to Fix San Francisco’s Housing Market

Want to live in San Francisco? No problem, that’ll be $3,000 (a month)–but only if you act fast. In the last two years, the the cost of housing in San Francisco has increased 47% and shows no signs of stopping. Longtime residents find themselves priced out of town, the most vulnerable of whom end up as far away as Stockton. Some blame techie transplants. After all, every new arrival drives up the rent that much more. And many tech workers command wages that are well above the non-tech average. But labelling the problem a zero sum class struggle is both inaccurate and unproductive. The real problem is an emasculated housing market unable to absorb the new arrivals without shedding older residents. The only solution is to take supply off its leash and finally let it chase after demand. Strangling Supply From 2010 to 2013, San Francisco’s population increased by 32,000 residents. For the same period of time, the city’s housing stock increased by roughly 4,500 units. Why isn’t growth in housing keeping pace with growth in population? It’s not allowed to. San Francisco uses what’s known as discretionary permitting. Even if a project meets all the relevant land use regulations, the Permitting Department can mandate modifications “in the public interest”.  There’s also a six month review process during which neighbors can contest the permit based on an entitlement or environmental concern. Neighbors can also file a CEQA lawsuit in state court or even put a project on the ballot for an up or down vote. This process is heavily weighted against new construction. It limits how quickly the housing stock can grow. And as a result, when demand skyrockets so do prices. To remedy this, San Francisco should move from discretionary to as-of-right permitting. In an as-of-right system, it’s much […]

The Nation’s mass transit hypocrisy

by Stephen Smith I was heartened to see an article about the need for mass transit in the pages of The Nation, though I was severely disappointed by the magazine’s own hypocrisy and historical blindness. The article is in all ways a standard left-liberal screed against the car and for mass transit, which is a topic close to my heart, though I’d prefer a more libertarian approach to returning America to its mass transit roots as opposed to the publicly-funded version that The Nation advocates. The first bit of historical blindness comes at the end of the second paragraph, when The Nation argues for government investment in mass transit on the grounds that it will “strengthen labor, providing a larger base of unionized construction and maintenance jobs.” But don’t they realize that the demands of organized labor were one of the straws that broke the privately-owned mass transit camel’s back during the first half of the twentieth century? Joseph Ragen wrote an excellent essay about how unions in San Francisco demanded that mass transit companies employ two workers per streetcar instead of one, codifying their wishes through a series of legislative acts and even a referendum. Saddled with these additional costs, the streetcar companies could not make a profit, and eventually the lines were paved over to make way for the automobile. Mass transit companies, whether publicly- or privately-owned, cannot shoulder the burden of paying above-market wages and still hope to pose any serious threat to the automobile’s dominance. The second, and perhaps more egregious error, comes a little later, when The Nation lays the blame on every group but itself for the deteriorating state of mass transit in America: Nonetheless, smart growth and transportation activists still have high hopes that the Obama administration and a Democratic Congress will revitalize […]

Links and Weekend Listening

I’ve been swamped in my day job, but want to share the following: The blog, Agents of Urbanism recently gave praise to Market Urbanism. Thanks Matthew! Please check out Agents of Urbanism and Life Without Buildings, who followed up on Agent of Urbanism’s praise. I enjoy both blogs. Carl Close wrote How “Urban Renewal” Destroyed San Francisco’s Fillmore District for The Independent Institute’s blog, The Beacon. And finally, I came across some fantastic lectures at the Foundation for Economic Education, by Sandy Ikeda. I highly recommend listening to the MP3s during your free time this weekend. He discusses Jane Jacobs, urbanism, history, sprawl, economics, and most things of interest to readers of Market Urbanism: Urban Planning Private Cities

Video: Both Sides of Proposition 98

With the referendum approaching, the debate over rent control is heating up in California. This video is pretty balanced in showing both sides. There are some memorable quotes, like “social security and pension plan would not pay the market rent, so I just wouldn’t eat.” I guess this guy values his $375/mo apartment over food. Or the pro-rent-control activist who says, “If you can’t find a place now, what will it be like if we lose rent control?” Another says, “Economically, this would be devastating.” I encourage them to take microeconomics, but I think economics was banned in San Francisco. Was that Proposition 76?

Rent Control Part 1: Microeconomics Lesson & Hoarding

This post has been released as the first in a four part series: Rent Control Part One: Microeconomics Lesson and Hoarding Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part Four: Conclusion and Solutions Opposition to rent control among economists spans the political spectrum, including over 90% of American and Canadian economists.  In fact, Swedish socialist Economist Assar Lindbeck famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it.” (Assar Lindbeck, The Political Economy of the New Left, New York, Harper and Row, 1972, p. 39) Without getting into the morality of restrictions on property rights, I will discuss the more subtle consequences of rent control over a series of posts. Quick Microeconomics Lesson: As stated by the National Multi Housing Council: Rents serve two functions essential to the efficient operation of housing markets: they compensate providers of existing housing units and developers of new units for the cost of providing shelter to consumers; and they provide the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock. In this respect, housing is no different from other commodities, such as food and clothing — the amount producers supply is directly related to the prevailing market price. Those of us who have studied microeconomics understand the near-universally accepted supply/demand consequence of rent-control: a decrease in the quality and supply of rental housing over time. But, for those who need a refresher or quick intro lesson, Professor Alex Tabarrok of George Mason University and the popular Marginal Revolution blog explains the microeconomics of rent control in this video: When you have some spare time, watch this more […]

Markets for Parking

Matthew Yglesias: Parking How much will they pay? Well, it’s hard to know in advance which is why you need markets. But that’s what you should have — as much parking as the market will bear. Not government-mandated parking, and not government-provided free or discount parking. Let people build garages and if it’s more economical to provide less parking, let there be less parking. SFGate: SFpark would micromanage city’s scarce spaces As SFpark is envisioned, parking rates would be adjusted based on time of day, day of week and duration of stay. People would be able to pay not just with coins, but with credit cards, prepaid debit cards and even by cell phone. If a meter is set to expire, a text message could be sent to the driver. More time could be purchased remotely. It’s a step in the market direction for public parking spaces, but why not privatize all those spots? chicagobusiness.com: City links CTA improvements, higher parking fees While proceeding with these plans, the city also is privatizing operation of its thousands of parking meters. That could provide the city with a substantial cash infusion.

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