
Abandoned stores, empty homes: why San Francisco's boom looks like a crisis - gpresot
https://www.theguardian.com/commentisfree/2020/jan/09/san-francisco-gentrification-second-wave
======
supernova87a
Like so many things in the Bay Area, this is a self-created problem. Despite
living here, I have little sympathy for the sob-stories who voted for the
exact policies that put them out of business. It infects every level of
policymaker thinking (at least what they choose to publicly state and run for
office on). It's a fruitless desire to resist development and population
growth, no matter what the cost. And we're seeing the costs obviously now.

The political inclination of government (and the mistaken belief of voters) to
"keep things the same" and prevent gentrification or any kind of development
matching the demand for people to move here may play well for votes, but is
causing every problem you can see.

The constraints on housing and development trickle down to _everything_. The
cost of hiring people, the price of retail/commercial space, the inability to
police / prevent crime, the emptying out of formerly affordable neighborhoods,
traffic, homelessness, etc.

This is not a puzzle. When you make land so valuable (which pleases some), it
leads to things that cannot show their value clearly to be priced out. And the
very policies that are intended to protect the people who got here first (a
very questionable policy), end up hurting them. The more you try to control
rent, the worse the situation gets. Politicians intend well. But intentions
are highly overrated. Effects are what matter.

As long as we refuse to build up, out, and have rational transportation
systems (overcoming local inertia against building them), and accept that
we're growing, this will continue.

~~~
downerending
I had an offer from a FAANG a few years back, for a BA job, and turned it down
because I realized I couldn't afford to live there on the offer. I can't
imagine how "ordinary" people survive.

~~~
blaser-waffle
Roommates, long commutes, squatting, maybe some rent control.

Got an old friend in the Tenderloin, and he loves it, even though he's got a
wife and 2 roommates.

~~~
downerending
I sort of regret having not done this in my 20s, but decades later, there's no
way I'm putting up with that, when so many better alternatives are available.

------
jseliger
At least the writer understands incentives:

 _Since California passed Proposition 13 in 1978, property tax rates for those
San Franciscans who owned property back then have been severely capped. Owners
may pay Nixon-era property tax rates, while renting out those spaces at rates
that have exploded in the last 40 years. They, too, can afford to let
buildings sit empty._

There have also been vacancy taxes proposed:
[https://reason.com/2019/12/10/san-francisco-ballot-
measure-w...](https://reason.com/2019/12/10/san-francisco-ballot-measure-
would-tax-empty-storefronts-in-attempt-to-boost-retail-sector/), but Prop 13
reform would seem to be the more obvious route.

~~~
copenja
Won't forcing property taxes up just force lower income owners to move?

You buy a home in a poor neighborhood. Twenty years later the value
quadruples... and now the cost of living skyrocket?

Also, would make retiring tricky.

~~~
nradov
Yes which is why most proposals for reforming Proposition 13 would leave the
current system in place for primary residences.

------
aazaa
> Some might say this is all simply market Darwinism, just with more cold-
> pressed beet juice. But it’s interesting that the free market exists only on
> one side of the equation. Since California passed Proposition 13 in 1978,
> property tax rates for those San Franciscans who owned property back then
> have been severely capped. Owners may pay Nixon-era property tax rates,
> while renting out those spaces at rates that have exploded in the last 40
> years. They, too, can afford to let buildings sit empty.

Tax policies play a big role in setting up market distortions like those
happening in San Francisco. It's not just the rate, but the basis. Strong
Towns has a discussion of the idea that taxing land, not improvements leads to
better outcomes:

> A parking lot in a bustling downtown is the classic example of a property
> where nearly all of the value is in the land itself, not the asphalt on top
> of it. In a rising market, you can hold onto the land and watch its value go
> steadily up (thanks to all the things your neighbors are doing to make the
> place more productive and successful). You can collect enough in parking
> fees to cover the taxes, and cash out when you're ready to cash out. Your
> property tax bill will be relatively low, because it's based on the sum of
> land value and improvements. The land may be in a central, prized location,
> but the "improvements" on the property (that's tax-assessor speak for any
> sort of structure built on the land) are worth next to zero.

[https://www.strongtowns.org/journal/2019/3/5/whats-with-
that...](https://www.strongtowns.org/journal/2019/3/5/whats-with-that-empty-
lot-in-the-heart-of-the-city)

This line of thinking may also apply to empty shops in SF. As long as the
overall property is covering expenses, why bother making the improvements
needed to attract new tenants (and thereby adding the tax burden) when you can
just sit back and watch real estate prices head to the moon.

~~~
gwern
You know, the most ironic thing about all this is that Henry George invented
Georgism in... San Francisco:
[https://en.wikipedia.org/wiki/Henry_George#Political_and_eco...](https://en.wikipedia.org/wiki/Henry_George#Political_and_economic_philosophy)
The more things change, the more they stay the same.

~~~
aazaa
That was a relevant passage indeed - hadn't heard of George before:

> George was in a position to discover this pattern [mere land possession
> harms the poor, and can be discouraged through a land tax], having
> experienced poverty himself, knowing many different societies from his
> travels, and living in California at a time of rapid growth [1870s]. In
> particular he had noticed that the construction of railroads in California
> was increasing land values and rents as fast as or faster than wages were
> rising.

[https://en.wikipedia.org/wiki/Henry_George#Political_and_eco...](https://en.wikipedia.org/wiki/Henry_George#Political_and_economic_philosophy)

------
hourislate
It's a problem all over in many big cities. Toronto is experiencing the same
issues. Small businesses are being pushed out. You have a Deli or a Coffee
shop that has been there for decades close and some kind of Boutique shop move
in since they can afford the 5-10k a month in rent.

The trend now is for small shopping plazas or outdoor malls being sold off to
developers to build Condo complexes. Complete neighborhoods have no shopping
anymore forcing residents to drive instead of walk to get groceries or enjoy a
stroll.

It doesn't help that these cash strapped cities (Toronto) just rubber stamp
any new development since the tax haul will be several times what they got for
what was there. A 20 story Condo brings in a lot more revenue then a parking
lot and strip mall. I won't even start about all the green space they are
selling off to developers. It's out of control.

~~~
nordsieck
> It doesn't help that these cash strapped cities (Toronto) just rubber stamp
> any new development since the tax haul will be several times what they got
> for what was there.

The problem is not too much building, but not enough. The only real solution
to the real estate problems in expensive cities is to get enough new building
that real estate values tank.

I could fix the SF real estate market in 10 seconds (although it would take
maybe 10-20 years for developers to enact the change).

1\. Minimum residential zoning is 15 story multi-family (subject to
engineering limitations)

2\. Axe rent control

3\. No requirement to conform to the character of the neighborhood

This would make lots of people very unhappy. People wouldn't like it that huge
buildings are going up next to their 1 story house. People wouldn't like it
that their real estate values will tank my 80-90%. That's a big part of the
reason why there will never be a fix.

But that level of change is what's necessary to fix the problems the city has.

~~~
neuland
One thing I don't understand is the "their real estate values will tank
80-90%" part. I live in a transforming rural area and one-by-one all the
farmers have been selling their land to developers to make planned
neighborhoods. They control the supervisors, zoning, and planning boards, and
they have to be dragged kicking and screaming to allow these developments.
However, their land values have gone up a ton in the last decade: basically a
whole order of magnitude from on the order of 10's of thousands per acre to
100's of thousands per acre.

I think the same applies to your single family home next to a 15 story condo
building. Instead of selling to a another family, now they're selling to a big
developer and can price it waaaaay higher, because the developer will be
getting significantly more value out of the land than they were.

And still, they'll not want to do it. There's still farmers holding out,
despite single digit million dollar offers for 10-ish acre plots. And it's
great if a small number of them do hold out, because it makes it possible to
have some green space down the line when the area has fully developed to a
single family house level suburb.

But I think the main issue is the culture. Farmers want to maintain their way
of life. Single family home people want to maintain their way of life. And so
on. People don't like change.

~~~
nordsieck
> One thing I don't understand is the "their real estate values will tank
> 80-90%" part. I live in a transforming rural area and one-by-one all the
> farmers have been selling their land to developers to make planned
> neighborhoods. They control the supervisors, zoning, and planning boards,
> and they have to be dragged kicking and screaming to allow these
> developments. However, their land values have gone up a ton in the last
> decade: basically a whole order of magnitude from on the order of 10's of
> thousands per acre to 100's of thousands per acre.

> I think the same applies to your single family home next to a 15 story condo
> building. Instead of selling to a another family, now they're selling to a
> big developer and can price it waaaaay higher, because the developer will be
> getting significantly more value out of the land than they were.

I think the way to think about property values is this: what is the highest
value economic activity that can be accomplished on the property?

In your first example, it's pretty clear that building lots of houses (in the
presence of sufficient demand) is a much higher value economic activity than
farming.

The home to condo example is a bit more complicated. For the very first person
to sell to a developer, I think your point is sound.

However, each additional bedroom that's created in the city decreases the
value of all other bedrooms by a small amount. This not only directly
decreases the value of a single family home, but it also decreases the value
of a condo building, which means that developers will be willing to play less
money for land.

Eventually, builders will stop building - the cost of construction will be
more than they can sell new condos for. At that point, I believe the remaining
home owners will have suffered a dramatic decrease in the value of their
property.

Where does the equilibrium land? I don't think anyone knows for sure. But new
construction goes up in some pretty low value real estate markets. 80-90% is
just a guess on my part, but I don't think it's too far off based on current
prices.

~~~
neuland
That's a great explanation. One other thing that contributes to the
equilibrium I think we haven't mentioned here is migration. You mention that
as the number of accommodations increase, the price of existing residences is
shifted down. This is supply. But demand is changing too. And I think that
demand to live in the bay area is absolutely huge. As supply increases, I
believe that either new people will move in to meet that supply. Or, under-
housed current residents of the bay area will level up (ie. move out of a van
/ garage / attic and into a "real" dwelling).

Another thing to mention is that the remaining single family houses will have
a different kind of value once they become rarer. Owning one of the final
single family houses in San Francisco is the ultimate flex. You still have a
backyard; you can still walk to things. So some super-rich person will come
knocking and want to buy just as a status symbol or as a way to get the way of
life they want but still in the city.

------
dilap
I don’t get it though, as a building owner, what do I gain by kicking out a
tenant and then letting a building stay empty?

~~~
mywittyname
Managing tenants can be more trouble than it's worth. The people buying up
these properties likely prefer security and liquidity more than maximizing
their return. Tenants make the building more difficult to sell because they
often come with very long leases.

There's also a strategy of waiting for rent prices to appreciate enough before
leasing to corporate clients. You could get 10y $1000/mo from a small time
coffee shop, or you can wait 5 years and maybe get Starbucks locked into a
10y, $5000/mo lease after the area grows up a bit.

~~~
jaypeg25
Seeing this exact story happen all over DC right now. Just yesterday a locally
owned bar announced it was closing because it couldn't come to terms on a new
lease with the property owner. The insinuation was that the owner would
happily let the place sit empty until a national chain was willing to take it.

Similarly, 14th St in DC even just a few years ago was becoming a vibrant, fun
spot to shop, drink, and eat in. This was after years of neglect in the area.
Over the last year or so though a string of bars and shops have closed and all
been replaced with banks. Capital One Cafes, Citi, etc. I have no idea how all
these banks are functioning (I thought brick and mortar banks were on their
way out?) but it's a damn shame.

~~~
ghaff
It's always a matter of some surprise to me just how much prime retail real
estate banks fill up. As you say, it's not so much for the tellers any longer.
But I guess it's to project an image for people getting loans or doing other
types of more complex financial transactions. In general, they're likely
profitable enough that even though the branches are inefficient in some sense,
the fact that people will be more inclined to use financial institutions with
local branches they can go into in person probably makes it a worthwhile
tradeoff.

------
diogenescynic
San Francisco is just a really poorly run city, but so many people are willing
to look past that because there are tech jobs. There are literally people
shooting heroin and smoking meth in public (across from City Hall no less),
property crime is ignored, and they just keep trying to raise taxes and throw
more money at the problem. It just seems like it’s obvious they are making
these problems worse and not better. I don’t blame businesses for leaving.
After the sky high rent and thefts, it’s probably hard to survive. We chose
this though.

~~~
HarryHirsch
Remember that social services and law enforcement are starved for cash because
of Prop 13 and that the oligarchy doesn't have to care - they can afford gated
estates and private security. That's the Brazilian model.

~~~
Pigo
I've read a lot of reports that most of the big cities in California are going
downhill hard. I'm nowhere near informed enough to have an opinion on these
complex issues, but the constant reports of "state of emergency" and "poop
patrols" make me angry for the people who live there.

It's ponderous how some of the wealthiest cities in the world can't manage
themselves. How do they not sweep out the current administration, and bring in
people willing to change things?

~~~
blitmap
I'm not saying the problems don't exist, but it feels like they have been
amplified in a smear campaign. I think there's been a lot of propaganda to
make SF and California look terrible in general, for political reasons.

Washington D.C. has a large percentage of homeless people than SF. It has been
documented that other cities will buy bus passes for homeless persons to get
them to California cities or other places like Portland, Oregon. It's a
nationwide problem and it feels like the places trying to help the most are
the ones getting flak for it.

You simply can't fix this problem from 1 or 2 states - or a few well known
cities.

~~~
diogenescynic
I'm not part of a smear campaign, but in the last year I've had homeless
tweakers squatting in my garage, had to get a restraining order against a
mentally ill and violent homeless person who just decided to harass my
apartment building, I've seen a HUGE guy sexually assault multiple women on
BART, I've seen multiple people smoking meth/crack and shooting heroin in BART
on my way to work, I see feces and needles DAILY. It's not a smear campaign.
We're sick of living in these Medieval conditions when we work this hard and
pay this much. It's not like this anywhere else in the country. It's really
gotten worse in the past 2 years and seems to be getting worse by the day now.

The final straw for me, was when a bullet came through the wall of my bathroom
at 1AM and when I called the cops they took 2 hours to get there, threw the
bullet in a ziplock bag, then never called me or had any follow up. If this
city doesn't take gun shots or violent crime seriously, then what good is the
government or PD?

~~~
QuixoticQuibit
Whereabouts were you living, if I can ask?

~~~
diogenescynic
Glen Park near Bernal Heights.

------
lmnt
There is an excellent documentary by Fredrik Gertten called "Push" that
explores this phenomenon, definitely worth a watch if there's a screening
nearby: [http://www.pushthefilm.com/](http://www.pushthefilm.com/)

~~~
PeterStuer
Looks interesting, but it seems there is no way to see this film outside of
the organized screenings which for most people means that they will never see
it.

------
gd2
Seems like an important topic to discuss. Serious question, how do should I
understand the concluding sentence/word,

"But walk through parts of San Francisco today, and you get a different sense
altogether: not an uncanny effectiveness, but a panicked swirl of homeless
capital."

What is meant by "homeless capital"? does it mean SF is the capital city for
homeless like Washington DC, or does capital go to opposite of venture
capital, like in banking/finance/Wall St?

~~~
OnlineCourage
Is that really a "serious question?"

There are a lot of homeless people in San Fransisco. Nothing else needs to be
construed.

~~~
eckmLJE
Possibly the phrase 'homeless capital' could mean human capital that is
experiencing homelessness? The way the clause is constructed is pretty
unclear. It could just mean there are a lot of homeless people, and is failing
at being poetic.

------
fallingfrog
It’s a bubble. Get out while you can. Properties with zero income being sold
and resold in a closed loop- an ourobouros of prosperity. What could go wrong?

------
logfromblammo
So what would the unintended consequences be for changing property tax to be a
percentage of the actual annual rent for leased or pay-to-stay properties,
assume a statutory minimum rent for vacant properties, and stay with assessed
valuation times mill rate for owner-occupied properties? The property tax
assessed in this way would be deducted from income, to avoid double-taxation.

The desire to minimize the cost of owning a property should create an
incentive to ensure a residence is occupied by _at least one person who can
pay_ , so the statutory minimum would probably be set such that renting at
below-market rates would be slightly less costly after taxes and insurance
than the tax rate for a vacancy.

------
react_burger38
Blaming prop 13 for high housing costs ignores the real reasons - restrictive
zoning codes, too many environmental reviews, and too many regulations in
general. These combined make it nigh impossible to build enough housing around
the Bay Area for rent to come down. Rent control makes things worse by
reducing the amount of profit on each building. Then add “affordable housing
requirements” which mean each new complex has to essentially lose money on 20%
or so of the units to give them to low income people... and no wonder the rent
is too $&@! high.

I mean look at NYC - property taxes are really high there and the rent is
almost as high as SF, and higher than LA.

------
carapace
Important subject, poor article, IMO.

Here's a background piece that covers most of the history and issues:
[https://www.businessinsider.com/san-francisco-housing-
crisis...](https://www.businessinsider.com/san-francisco-housing-crisis-
history-2017-7)

TL;DR: It's complicated.

Also (and especially for those of us from the Old World) remember that SF is
ridiculously young as cities go, even for American cities. The continent was
largely settled from East to West. The Western part of the city was sand dunes
and scrub. People panned for gold next to Lake Merced.

Here's a thing from 2016 "Employment, construction, and the cost of San
Francisco apartments" : [https://experimental-
geography.blogspot.com/2016/05/employme...](https://experimental-
geography.blogspot.com/2016/05/employment-construction-and-cost-of-san.html)

He got some data:

> I set out to replicate the DataBook's methodology over a wider range of
> years, but quickly gave up on including just two-bedroom apartments, because
> ads in the early 1960s rarely referred to apartment sizes in these terms.
> Instead, for each first Sunday in April from 1948 through 1979, plus a few
> other years, I made a list of all the advertised unfurnished apartments,
> flats, houses, and, later, condos, regardless of size, that were advertised
> in the Chronicle. Mostly I used the San Francisco Public Library's page
> scans of the newspaper but resorted to microfilm for the few later years
> where no page scans are available.

Here's the main take-away:

> in 1956, apartments began to be listed in increasing numbers, but their
> prices also began to rise. Overall, they went up 6.6% every year. Today's
> outrageous prices are exactly in line with the 6.6% trend that began 60
> years ago.

So, big long complicated history, dead simple stable 6.6%/year increase.

\- - - -

Solutions: Bucky Fuller mega-city Old Man River City

[https://en.wikipedia.org/wiki/Old_Man_River%27s_City_project](https://en.wikipedia.org/wiki/Old_Man_River%27s_City_project)

[https://solutions.synearth.net/2002/11/24/](https://solutions.synearth.net/2002/11/24/)

Look at the cross-section: the structure is hollow. It's built like a
suspension bridge. Imagine rotating the Golden Gate bridge around a vertical
axis though its midpoint. See the article for the rest of the description.

Integrated with ecologically harmonious waste reclamation and "bioreactors" to
make _arcologies_ :
[https://en.wikipedia.org/wiki/Arcology](https://en.wikipedia.org/wiki/Arcology)

A few of these in the CA Central Valley on the Sacramento river would take all
the housing pressure off the cities.

------
lr
Government must remove the ability to claim an income loss on the balance
sheets of property owners that purposely leave spaces empty. There is no
reason to double (or more) the rent on a space. They are doing it because
maybe someone will pay, and until then, they get to claim the loss of income
as a write off on their taxes. If this is not true, then how can property
owners, who claim that they need the new rental rate, afford to leave a place
empty for a year or more???

~~~
lotsofpulp
> they get to claim the loss of income as a write off on their taxes.

This is not true.

[https://www.investopedia.com/terms/r/rentalreal-estate-
loss-...](https://www.investopedia.com/terms/r/rentalreal-estate-loss-
allowance.asp)

~~~
lr
How do you know that the owner of the building that Sparky's was in, would not
qualify for this deduction?

~~~
senordevnyc
That's not the point. Even if they did qualify, you can't claim loss of income
as an expense. In other words, you can't say "well, the market rate for this
space is $30,000 per year but it was vacant, so I get a $30,000 deduction!".
That's not how taxes work, at all. So this isn't an incentive to leaving a
space vacant.

