Here’s a great article about a very innovative bit of digging into the causes of high housing prices in San Francisco (“A guy just transcribed 30 years of for-rent ads. Here’s what it taught us about housing prices“).
The article, by Michael Andersen, tries to summarize a detailed analysis in a blog post published over the weekend by Eric Fischer.
Read through Andersen’s summary, then wade through some or all of Fischer’s original.
It’s really very interesting to see the data for housing and rents charted over a long period of time. These data allowed Fischer to calculate how changes in employment or rates of new construction would impact rents in the city.
Here’s Fischer’s own conclusion:
San Francisco is an expensive city because it is an affluent city with a growing population and no easily available land for development. Sonja Trauss is right that building more housing would reduce rents of both high- and low-end apartments. Tim Redmond is right that building enough housing to make much of a dent in prices would change the visual character of most streets, although the result could be more like Barcelona than like the Hong Kong that he fears. The unsettled question is which of these is the higher priority.
Building enough housing to roll back prices to the “good old days” is probably not realistic, because the necessary construction rates were never achieved even when planning and zoning were considerably less restrictive than they are now. Building enough to compensate for the growing economy is a somewhat more realistic goal and would keep things from getting worse.
In the long run, San Francisco’s CPI-adjusted average income is growing by 1.72% per year, and the number of employed people is growing by 0.326% per year, which together (if you believe the first model) will raise CPI-adjusted housing costs by 3.8% per year. Therefore, if price stability is the goal, the city and its citizens should try to increase the housing supply by an average of 1.5% per year (which is about 3.75 times the general rate since 1975, and with the current inventory would mean 5700 units per year). If visual stability is the goal instead, prices will probably continue to rise uncontrollably.
Andersen boils it down to a couple of simple sentences:
For the love of god, keep adding homes. Keep adding homes so things don’t get any worse and you’re not trapped in a lose-lose-lose shitstorm like San Francisco.
You can download Fischer’s data if you want to mess with the numbers yourself.
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This analysis holds true for Honolulu and other cities with limited land. Another article in the SF Chronicle on Sunday discussed the policy of loosening restriction on in-law units (a.k.a. ohana homes, if the lots are large enough). Current application costs for adding a modest addition in the Bay Area averages $29,000 –yikes! –and that doesn’t include the actual permit fees. Some cities are creating a new category for in-law units that don’t change the footprint of the house–for example, turning the master bedroom into a separate unit. This increases density and the number of available units at far lower costs than building high-rises or building more sprawl on the Ewa plain. Dpes anyone know the real-world cost/ease of permitting a legal in-law unit int he C&C of Honolulu?
Building more homes only helps if those homes are used for housing. If they are used as vacation homes or for vacation rentals, or just kept vacant for speculation, they aren’t going to help control housing prices.
More evidence that the Governor has to veto the internet brokers bill for single point tax collection with no questions asked. Would be interesting to get some solid reporting on how the DPP amendments to this bill were dropped so fast right after they were added. Making life simpler for the State Tax Department doesn’t justify undermining residential zoning on Oahu and aggravates our housing woes big time.
This is why the Governor has to veto the internet brokers’ bill to have single point of collection for taxes on vacation rentals and b&bs with no questions asked. Would be interesting to have some real reporting on how the DPP amendments got dropped from this measure as soon as they were added. Making life simpler for the State Tax Department while undermining residential zoning on Oahu will only aggravate our housing woes.
It should be noted that SF also has long had a rent control ordinance, which keeps rents wonderfully but artificially low for tenants who have remained in the same units for many years, but does nothing for new renters and creates an incentive for landlords to try to evict rent control beneficiaries in various ways or remove units from the rental market. Rent control also discourages the construction of new reasonably priced rental units, though they can be required as a condition of various development approvals. Affordable housing in SF is now mostly limited to government-owned public housing or government-subsidized housing owned by private nonprofit developers. There are endless waiting lists for tenants seeking each type, and each type has its issues.
If you read through the recommended articles, they addressed the impact of rent control on SF rents. Essentially, the data didn’t show much of an impact one way or the other.
Yes, the analyses were pretty thin and the authors drew no firm conclusions regarding rent control’s overall impact on the SF housing market.
My point was that rent control in SF distorts the market and affects different people in different ways. There are clear winners and losers. Rent control absolutely does have an impact.
My view is that it was a well-intended attempt to address skyrocketing rents in the short term, but that it became sacrosanct and produced unintended (but predictable) effects in the long term.
Much like SF’s profligate spending on homelessness and drug abuse, the nanny-state impulse has not solved the problem, and in some ways has made it much worse.
http://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html?action=click&pgtype=Homepage®ion=CColumn&module=MostViewed&version=Full&src=mv&WT.nav=MostViewed&_r=0