
SF’s Housing Crisis Explained - minimaxir
http://techcrunch.com/2014/04/14/sf-housing/
======
gojomo
This piece is very perceptive in portraying Prop 13 property-tax caps and
rent-control as sibling policies, each feeding destructive "I've got mine"
politics. They both bribe incumbent owners/renters/voters with an economically
valuable seniority privilege, at the expense of the future and flexibility.
Children and young adults suffer the most: they move the most, and none have
the benefit of paying frozen base rates established 20-30 years ago.

I wonder if both rent-control and prop-tax-caps could be knocked down in an
equal-protection lawsuit. Why does the person who moved in yesterday, perhaps
far needier than the longer-term resident/owner (and just as deserving of
basic civic services) have to pay so much more? Is duration-of-residence a
legitimate basis for such strong civic discrimination rooted in law?

~~~
utnick
> Why does the person who moved in yesterday, perhaps far needier than the
> longer-term resident/owner (and just as deserving of basic civic services)
> have to pay so much more?

Property taxes without caps are just as unfair but in the opposite direction.
Why should someone who lives within their means and bought an affordable house
be punished just because a bunch of other people swoop in and drive up prices
around them. A buyer of a house needs to be able to forecast future tax
payments to make an informed decision. If you don't have a yearly increase cap
on property tax rates, the buyers future costs are totally unpredictable and
up the whims of the markets and bubbles.

~~~
thrownaway2424
Give me a moment while I play sad songs on this tiny violin for old people who
are sitting on valuable assets.

 _tiny violin songs, very sad_

OK then, let's talk about reality. Letting incumbents under-utilize valuable
real estate is a bad policy. Anyway nobody gets thrown out of their house for
owing property taxes in California because the local authorities just put
liens on the property. Once the old folks kick the bucket, the local govt
collects on their lien from the heirs or buyers.

There are also several other non-old-people-getting-evicted problems with Prop
13 and its siblings. There certainly is not any excuse for the ability to pass
your property tax assessment on to your children or grandchildren.

~~~
rsync
You realize prop 13 is a statewide policy, not just a north beach community
standard, right ?

So while you're thinking of (and playing violins for) a certain sect that you
know well here in the cosmopolitan city, there are also hundreds of thousands
of "99 percenter" property owners throughout California that really do hurt as
they scrape to make ends meet with the major (and usually only) asset they
will ever own.

~~~
_delirium
One half-fix sometimes proposed to solve the most egregious Prop 13 issues but
leave it in place for the people you're talking about is to limit it to only
owner-occupied primary residences. As it stands today, Prop 13 applies to not
only homes people actually live in, but also investment property, vacation
homes, even commercial real-estate. Imo any "protect the nature of our
community" / "keep old people from being displaced" type justification makes a
lot less sense when we're talking about Intel's property taxes, or about
property held by real-estate investment trusts.

~~~
zenbowman
I think this is far more reasonable.

------
100k
This is by far the most comprehensive overview of the Bay Area's messed up
development priorities I've seen in one place. Kim-Mai Cutler does a great job
stringing all the threads of the housing crisis together.

I don't think San Francisco can build its way out of outrageous rents alone.
The other cities in the Bay Area need to step up and provide the type of urban
housing close to transit that people want. No more surface parking lots next
to train stations.

~~~
bcantrill
Agreed -- an amazingly good piece. I doubt that many will actually read all of
it, but if you're curious about why San Francisco is in the state it's in,
Kim-Mai Cutler gives you no excuses for not educating yourself.

Also, for those that believe there is no alternative: the East Bay remains the
best kept secret in San Francisco. When we moved here from the City for
schools, we were braced for a let-down -- but having been here for six years,
we know now that we will never return to the City, even when the kids are
grown and gone...

~~~
raldi
Please don't capitalize "city" when referring to SF. To smaller cities it
looks pompous, and to bigger cities, laughable.

~~~
binarycrusader
Having only lived in the SF Bay Area for a few years now, everyone I know that
lives in the SF Bay Area refers to San Francisco simply as "the city". They
say things like "I went to the city this weekend", etc. So while I agree with
the silly capitalisation, I also think it's a losing battle.

It's also not a behaviour unique to the SF Bay Area; when I lived in a fairly
rural area (pop. < 10K spread over quite a few miles), the largest city nearby
was often referred to as "the city" by everyone that lived outside the largest
nearby city (which was Kansas City where I lived).

~~~
saraid216
It's weird; I grew up in a San Jose suburb and never once heard of San
Francisco referred to as "the city" or "The City". I heard "Frisco", of all
things, and "SF", but never "the city".

I have no idea what changed.

~~~
greghinch
I was born in 81 in the north bay, then and now we always said "the city".
Possibly geographic?

~~~
saraid216
Ah. I was South Bay. That might actually explain it.

------
selmnoo
Very interesting, that Piketty's "Capital in the 21st Century" is introduced
in this article:

 _A lot of other VCs and founders are also digesting Thomas Piketty’s new
book, “Capital in the 21st Century.” With more than 200 years of data, it
chronicles an inexorable rise in inequality that was punctuated in the middle
of the 20th century by the Great Depression and World War II followed by 30
years of evenly-spread prosperity. Ultimately, it advocates a globally-
coordinated tax on wealth._

I know that it's taboo on HN to get overly political, but I think because of
Piketty's work we should talk about it (particularly, _because_ Piketty's new
piece is so groundbreaking [1] and incredibly well-backed with data). What do
you guys think of his "global wealth tax" \-- tax on capital (including real
property), in the context of the new SV riches?

[1]: The book is being received as "the most important economiscs text of the
decade" by a lot of high-placed economists, etc.:
[http://en.wikipedia.org/wiki/Capital_in_the_Twenty-
First_Cen...](http://en.wikipedia.org/wiki/Capital_in_the_Twenty-
First_Century#Reception)

~~~
apsec112
""How can you dismiss socialism so casually?"

"I've thought a lot about this, actually; it was not a casual remark. I think
the fundamental question is not whether the government pays for schools or
medicine, but whether you allow people to get rich.

In England in the 1970s, the top income tax rate was 98%. That's what the
Beatles' song "Tax Man" is referring to when they say "one for you, nineteen
for me."

Any country that makes this choice ends up losing net, because new technology
tends to be developed by people trying to make their fortunes. It's too much
work for anyone to do for ordinary wages. Smart people might work on sexy
projects like fighter planes and space rockets for ordinary wages, but
semiconductors or light bulbs or the plumbing of e-commerce probably have to
be developed by entrepreneurs. Life in the Soviet Union would have been even
poorer if they hadn't had American technologies to copy.

Finland is sometimes given as an example of a prosperous socialist country,
but apparently the combined top tax rate is 55%, only 5% higher than in
California. So if they seem that much more socialist than the US, it is
probably simply because they don't spend so much on their military."

[http://paulgraham.com/resay.html](http://paulgraham.com/resay.html)

(I know that in the US anything even vaguely leftist gets called "socialism",
but Thomas Piketty, the author, is a genuine strong supporter of the French
Socialist Party, and the focus of the book is explicitly on government action
to prevent anyone from getting 'too' rich. I think it's a fair criticism.)

EDIT: To those not familiar with British history, things got _really_ bad
during the 1970s. Inflation peaked at 27%. The government went bankrupt and
had to go "cap-in-hand" to the IMF for a bailout. Garbage piled up in the
streets because the sanitation workers were on strike. _Bodies_ piled up
because the _gravediggers_ were on strike...
([http://en.wikipedia.org/wiki/Winter_of_Discontent](http://en.wikipedia.org/wiki/Winter_of_Discontent)).
I don't want to get into an argument about Thatcher, but everyone at all
familiar with the history agrees that the country was in a mess.

~~~
collyw
Thats nonsense.

England / the UK is a mess at the moment. They are heavily in debt. They keep
on cutting benefits to the poor and allowing the rich to pay even less tax.
According to your argument everything should be getting better because of
this, but I assure you it is not.

~~~
voicereasonish
You obviously don't remember the 70s.

Do we have rubbish piling up on the streets, dead people piling up not being
buried? Do we have rolling power cuts due to strikes? Are we all on a 3 day
week? Massive inflation and interest rates?

The UK is turning the corner after the disastrous spend spend spend! Socialism
of the last decade.

~~~
josephlord
The disastrous spending of recent decades has been private spending funded by
borrowing not public spending (although arguably the government should have
tried to be more counter-cyclical than it was). The recovery happening at the
moment is due to borrowing restarting and accelerating and is also the first
steps towards the next crisis.

~~~
mseebach
> (although arguably the government should have tried to be more counter-
> cyclical than it was)

That's a very polite way of acknowledging that the UK government ran a massive
deficit-funded spending campaign throughout one of the fattest and longest
boom cycle in history.

~~~
josephlord
Public borrowing was small compared to private borrowing, it would have been
better to take action to limit bank lending to cool the housing market than to
drastically cut public spending. And I don't think many political leaders
would have borrowed much less, under the Tories I think both spending and
taxes would have been lower which wouldn't have produced better results.

------
atgreen
I love the Mountain View burrowing owl reference. Here's a '96 usenet news
article I posted about the endangered burrowing owls I would bike past every
day in Mountain View. It just happened to be right where SGI was about to
build their new HQ, and is now the heart of the Google campus. I had just
moved to Silicon Valley from Canada when I posted this....

[https://groups.google.com/forum/#!topic/rec.birds/vPvrRW_fVX...](https://groups.google.com/forum/#!topic/rec.birds/vPvrRW_fVXE)

------
flomo
I think this quote really nails the mentality in the city:

> As political scientist and longtime San Francisco observer Richard DeLeon
> puts it:

 _San Francisco has emerged as a “semi-sovereign city” — a city that imposes
as many limits on capital as capital imposes on it. Mislabeled by some
detractors as socialist or radical in the Marxist tradition, San Francisco’s
progressivism is concerned with consumption more than production, residence
more than workplace, meaning more than materialism, community empowerment more
than class struggle. Its first priority is not revolution but protection —
protection of the city’s environment, architectural heritage, neighborhoods,
diversity, and overall quality of life from the radical transformations of
turbulent American capitalism._

~~~
jvm
> protection of the city’s environment, architectural heritage, neighborhoods,
> diversity, and overall quality of life from the radical transformations of
> turbulent American capitalism

...and ironically creating some of America's highest market rents in the
process.

~~~
flomo
Sure it's semi-ridiculous to frame this in terms of left "progressivism",
especially as the waterfront battles are being fought by rich people who live
in skyscrapers who do not want other skyscrapers blocking their views.

But I think the sentiment is broadly popular because it gets the heart of why
people fall in love with San Francisco. It's not just the community (whatever
community), it's the housing stock, the 'perfect' density, the hills, the
views, the shops and restaurants, the smell of the air. That's what makes San
Francisco San Francisco. One hundred years ago, Los Angeles looked a lot like
SF. But they replaced 90% of the victorians, they flattened the hills, they
built freeways everywhere. San Francisco was spared that, largely because the
people fought back, and now the people want to fight to preserve what was
saved.

I'm of mixed-feelings about it. The Bay Guardian always warns of
"Manhattanization", but the alternative endpoint is turning into a huge
version of Carmel By The Sea.

~~~
collyw
"...the smell of the air".

Ok, I live in Europe, but I was under the impression that SF had a bit of a
smog problem.

~~~
pcrh
The air in SF is very clean. The prevailing winds come from the very-wide
pacific ocean and blow all the pollution across the Bay into Oakland and
Berkeley.

It does however have a _fog_ problem, because those nice clean prevailing
winds are quite cold and moisture condenses rise when encountering the hills
along the coast. This is in fact the major source of water for the coastal
giant sequoias.

"Coast redwoods (Sequoia sempervirens) are distributed along a narrow band of
California's northern coast. During the summer these red giants take advantage
of the fog to capture water out of the air—and summer is the critical growing
season for the trees, despite being California's dry season."

[http://www.scientificamerican.com/article/fog-that-
nourishes...](http://www.scientificamerican.com/article/fog-that-nourishes-
california-redwoods-declining/)

~~~
brc
Giant redwoods? I thought Giant sequoias grown in the Sierra nevada.

~~~
sempergumbi
giant redwoods = coast redwoods = sequoia sempervirens

Giant Redwoods = Giant Sequioa = sequoiadendron gigantium

~~~
brc
I assume the case difference is just typing and not some sort of case-
sensitivity in taxonomy.

Seems like there is some imprecise naming going on which is why I wasn't sure.

------
tedsanders
For another great take on the housing crisis in SF and elsewhere, I recommend
a book that I first heard about on Hacker News, Matt Yglesias's The Rent is
Too Damn High: [http://www.amazon.com/The-Rent-Too-Damn-High-
ebook/dp/B0078X...](http://www.amazon.com/The-Rent-Too-Damn-High-
ebook/dp/B0078XGJXO)

The over-regulation of home building by cities is an issue not really on the
public's radar, unfortunately.

~~~
pchristensen
Well, the 30-70% of population that are homeowners do have homebuilding on
their radar - they're investors in the housing stock and have an incentive to
cap/limit supply.

------
forgottenpass
> _Today, the tech industry is apparently on track to destroy one of the
> world’s most valuable cultural treasures, San Francisco, by pushing out the
> diverse people who have helped create it. At least that’s the story you’ve
> read in hundreds of articles lately._

> _It doesn’t have to be this way. But everyone who lives in the Bay Area
> today needs to accept responsibility for making changes where they live so
> that everyone who wants to be here, can._

I don't know if drastically changing the housing landscape of SF will destroy
the culture that made everyone want into the city in the first place, but
asserting that it won't is just as tenuous as asserting it will.

All I ever see is rationalization that it won't, because the tech community
takes it as axiomatic that they must pile into the city. By debating the
conclusion we are tricked into accepting the form.

For example: "But everyone who lives in the Bay Area today needs to accept
responsibility for making changes"

That's a lot of people. Including ones hostile to your goals. You would need
to get a smaller and friendlier set of people on board to make a slightly-more
geographically disperse tech scene work in the Bay Area. The self-fulfilling
business "common sense" about SF is much more _momentum_ than _sense_.

------
capkutay
I think that SF's proud antiquity is coming back to bite it. The older
generations fought against development for decades, now the demand for
property is so high they can't afford to live here anymore.

------
Houshalter
That was a very long but very good article.

I still don't get protests over evictions or for rent control. They are
literally forcing the landlord to subsidize their cost of living. But why make
only landlords pay for the subsidy? Why not tax everyone? I'm ok with income
redistribution, but not when it is done so inefficiently and at the expense of
a specific group.

~~~
lilsunnybee
Because the landlords did their building in 1970 or earlier when building
costs were cheaper, or bought the property rent-controls considered. The
article also points out the drastic cut to property taxes a while back, from
which savings generally didn't get passed on to tenants.

------
tizzdogg
One thing the article doesnt really touch on is how rent control, as well as
San Francisco's many other pro-tenant laws, actually incentivizes landlords to
keep rental units off the market. It's basically impossible to evict bad
tenants in San Francisco for reasons other than non-payment of rent. I'm not a
real estate lawyer, but my impression is it can take years and tons of legal
fees to get a bad tenant out, even for reasons that in most other cities would
be easy cause for eviction.

I personally know a lot of mom-and-pop landlords with vacant rental units who
cant be bothered to rent them, because dealing with bad tenants in SF is such
a pain. These are middle-class people who bought multiple-unit buildings 20 or
30 years ago when it was affordable and dont need the rental income, and dont
want the hassle. I would guess that there are thousands of units like this
across the city.

~~~
wankerrific
More anecdata.

If I had a dollar for every time I've heard this one. I refuse to believe that
professional landlords are keeping units off the market when the current
rental market may well represent the top of what they can get for the next 5
years. Most of the long term landlords who bought 20-30 years ago have gone
through at least 3 down markets from the late 80s to now. The current
employment gold rush in SF is just that, and I suspect long term owners
recognize that and want to strike while the iron is hot.

I am willing to change my opinion if anyone could provide any tangible data,
but I only see this argument bandied about with no actual proof.

So in my rebuttal, I would say that I guess that there are less than 100 units
like that across the city. I have no proof, but I _feel_ thats the case,
therefore rent control not bad. See how that works?

~~~
tizzdogg
If you're hearing it a lot, then perhaps there might be some truth to it? You
can refuse to believe whatever you want though.

I agree I'd like to see a real study about this, but yeah anecdotal evidence
is all I've got.

I know of at least 4 landlords like this, and the set of people who I know is
an extremely limited sample size. How many you encounter probably correlates
to how many homeowners over the age of 60 you know. These are people who have
already paid off their buildings, which is usually also their home, and have
decided that the potential income stream is just not worth the hassle of
renting out their extra units and potentially getting bad tenants. Especially
if they have been vacant a long time and would need some sprucing up to put on
the market. They are retired and comfortable as it is and just dont want to
deal with it. Better to just use that unit as storage or an occasional guest
house for family or whatever.

------
kijin
Just pack up and leave the damn place already.

Sorry to be blunt, but that's how "supply and demand" is _really_ supposed to
work. If Seattle supplies the same quality of housing for half the cost of San
Francisco, buyers/renters should flock to Seattle, thereby reducing demand in
SF and eventually causing SF housing prices to come down until the market
finds an equilibrium. Trying to lobby for "below-market-price" housing is
always going to be a losing game; the only long-term solution is to make the
market price lower.

Unfortunately, competition among cities to attract residents is not like
competition in other industries. A lot of people are stuck in a relatively
small geographical area their whole lives due to employment, their children's
education, various kinds of emotional attachment, and the sheer difficulty of
uprooting themselves from a familiar neighborhood. This creates a captive
market, severely limiting the effectiveness of inter-city competition. And of
course, whenever there's a captive market, there's somebody who profits from
it. In the case of SF's housing market, entrenched neighborhood groups and
"below-market-price" renters enjoy benefits at the expense of newcomers to the
city. Perhaps they actually deserve those benefits. Still, it's unfair to
everyone else.

But there's one group of people who can afford not to be bound by the usual
excuses that keep people stuck in a captive market. That's us, the techies. We
don't need to be in any particular city in order to write code. Most of us are
young and don't have kids. Few of us have any "root" in the Bay Area, so we
couldn't care less about being uprooted [1]. There is no reason for us to be a
part of San Fran's captive housing market. We can pack up and leave, all 8% of
us if possible. That would be "supply and demand" doing its work.

Of course, there are a few problems with this proposal, including the fact
that there really is such a thing as social networking of the offline kind.
The Bay Area undoubtedly has one of the best tech "scenes" in the world. But I
see it as a problem that needs to be fixed, not merely an advantage that we're
free to exploit. HN, for example, requires everyone to move to the Bay Area,
perhaps for a good reason. But in doing so, they directly contribute to, and
exacerbate, the hideous distortion of the Bay Area's housing market. It's like
mandating that everyone meet at a particular Starbucks. It makes sense when
everyone you want to meet is already a regular of that Starbucks, but when the
manager of Starbucks begins to take advantage of its captive clientele, you
should seriously start considering an alternative.

Remember, the only vote that the market respects is a vote with your feet,
i.e. a realistic threat to do business with a competitor.

[1] Disclaimer: I've lived in at least seven different cities in three
continents, and harbor no particular emotional attachment to any of them.
Apparently I'm incapable of developing an emotional attachment to geographical
coordinates. But I must confess that I kinda like it that way.

~~~
epistasis
The reason to live in SF is to take part in its vibrant culture. That's why
people live there and take the busses to the boring parts of the peninsula.

There is high demand for what the city offers.

There's also high demand for face-to-face meetings with people to assess and
establish trust. There is no replacement for that, and why experience tends to
cluster together, whether tech here, or entertainment in the South.

~~~
cromwellian
I live in Santa Clara, but I still get to access the city's culture on
weekends -- music, theater, cuisine, et al. Many techies don't even get off
their shuttles until 7pm or more, so I wonder how many actually partake in the
local culture on weekdays, and how many eat and then sleep.

I suppose if you're in your 20s and without children, it makes a bigger
difference, but I find I don't often have the time to do anything until the
weekend anyway, and so there would be little use paying high rents when 60% of
the time, I'm just crashing there and spending all my time elsewhere.

~~~
orky56
The Caltrain stops at midnight though. Make sure you don't have too much fun
and stay out late or else you'll miss your transportation back. Driving is too
unsafe and gets tiring as well due to distance and parking. Somehow, the
majority of residents in the bay area are okay with this the status quo.

~~~
Apocryphon
We're not okay with it. We just have to put up with it because the entire
system is ridiculous. Seems like ridesharing services are one of the ways
we've attempted to deal with it. I can envision in the future private weekend
shuttles that ferry partygoers from S.F. to other places, so people don't have
to deal with the terrible parking situation in the city, and the fact that
BART and Caltrain stop far too early.

------
melindajb
As a 12 year plus SF Resident, married to a native San Franciscan, who has
both rented and now owns property, and who follows local politics closely; I
can report this is one of the most complete, articulate, and accurate
summaries of the situation I've ever read.

Please encourage others to read this.

------
CmonDev
"... one of the world’s most valuable cultural treasures, San Francisco..." \-
oh, Americans :).

------
dnr
Finally, an article on the situation that puts an accurate (i.e. large) amount
of the blame on the cities of the peninsula and south bay.

Also, prop 13 is the worst thing ever. Reading that section was really
depressing.

------
205guy
I haven't finished reading all the comments, but here's my take on the
article:

Great for mentioning the prop13-rentcontrol duality, a lot of people
conveniently forget one side or the other.

Great for delving into the politics of it all, including the neighborhood
associations.

Not-so-great: it was touched on but not really elaborated: why the peninsula
(Palo Alto, Mountain View, Cupertino, the heart of SV) are not densifying to
provide housing for the corporations they have. Some of the downtowns are very
desireable, but still full of single-family homes. Some of the commercial
space could be built up with housing over the businesses, and then these towns
would develop even more character. I think the tech industry got a free-ride
(heh) in building huge campuses in towns that have little residential growth
(and even the towns' resistance to growth is mentioned). Google, Apple, etc,
should be pushing on Mountain View to build 10,000 residential unites in the
area. It's happening a tiny bit, but not nearly as fast as the companies are
expanding.

Most people don't choose 1-hour 40-mile commutes if they can avoid them. But
the corporate buses make that commute feasible. I actually wonder if bus
transport is reported by the employees as income for taxation purposes, and if
not why?

Finally, this issue really seems to stem from regional politics. SF has to
compete with suburbs on tax breaks to companies, yet the suburbs can offload
all the residential problems to the city. Seems like there should be state-
wide rules that make this fairer.

~~~
blazespin
People are choosing the 1 hour 40 mile commutes because they want to be hip
and live in SF. It's going to be decade+ before the valley is hip. If you're
earning 150K plus, do you really want to live on campus? Yikes. No, you are a
young, urban professional that wants to dine, go to the theatre, and socialize
at expensive bars on the weekends.

------
lsiebert
One of the things the article addresses is the fact that other communities
need to build affordable housing, not just SF.

I for one am going to speak to some local political figures. If you live in
any city in the SF bay area, you may as well do the same. Write a letter.
Express your interest in the creation of apartments in the city. Because if
you build housing in the area, people will live there.

~~~
spikels
Almost every city in the Bay Area has a range of affordable housing programs -
from public housing to income restricted rentals and ownership opportunities
to rental and purchase assistance programs. Some are federal, some state, some
local and many are operated by non-profits.

Just search for the city and "affordable housing".

~~~
lsiebert
And yet rents continued to climb, even between the dotcom bubble and the
recent boom, when there was a downturn. plus many programs have a gap between
abject poverty and the working poor/lower middle class americans.

Lower rents and increased availability benefit almost everybody.

------
dredmorbius
A great companion to Cutler's piece (which is excellent in its depth and
analysis) is Andreas Schou's G+ post "So, why is Silicon Valley studded with
an implausibly large number of abandoned barns, shacks, and other things that
don't look like they belong here?":

[https://plus.google.com/112482032780181267192/posts/FLUkbf4k...](https://plus.google.com/112482032780181267192/posts/FLUkbf4kdDN)

This details a great many seemingly illogical (but actually financially
sensible) consequences of California's 1978 property "tax reform" measure,
Proposition 13.

Schou (recently hired by Google) is among the brightest lights on G+ in my
experience. Much as I try to avoid the site, he draws me back at least to
look.

------
danols
"one of the world’s most valuable cultural treasures" Travel much outside of
the US?

------
cft
I think building more upscale condos/housing will attract even more money, and
there will be a positive feedback loop, so the housing will become even more
expensive. This can be observed in Manhattan.

~~~
fiatmoney
Downvotes for this are unwarranted. This is a plausible mechanism, even if
it's wrong, and should be engaged with.

The key thing is the margin for "even more expensive". Fundamentally, yes,
development makes cities more valuable / expensive, _in aggregate_ (after all,
that's why cities exist in the first place). The key thing is how many units
that value is spread out over. If you tear down a slum and replace it with $1M
condos in a supply-constrained market, rents will rise.

But, there are a limited number of people who can afford to buy 7-figure
condos, and it is possible to build enough housing to saturate that demand all
the way down the curve. If you're actually able to tear down a single-family
unit and replace it with 4-unit low-rise apartments, and rent / sell them at a
decent price since people want to move into the city, and _all your competitor
landlords can do the same_ , you'll see more units, more total dollars going
to landlords, and lower prices per unit.

The key thing is to make it cheap to build. Excessive regulation of the kind
the article talks about often does the exact opposite - they make it so you
can build, eventually, but it's only worthwhile if you can be sure of
extracting large rents. Even worse, the high value of land & rent in a supply-
constrained environment puts a lot of vested interests in keeping supply low,
in a vicious circle.

A sure sign you're trapped in that vicious circle is if developers have
"community engagement" and "affordable housing" dollars to throw around.

~~~
com2kid
> But, there are a limited number of people who can afford to buy 7-figure
> condos

Of course, but if the total possible supply of 7-figure condos in SF is
smaller than the total number of people who want to buy 7-figure condos in SF,
then it would indeed be possible to fill the city with nothing but 7-figure
condos and have thusly dramatically increased the price of housing!

------
overgryphon
A lot of the tech employees that are being protested are young, single, and
much more willing to move for economic reasons than families. The ability to
buy a house in the future, not deal with protesters, and probably make more
money overall in a city with lower rents is pretty enticing. Silicon Valley
has a lot of tech companies, but now Seattle and Austin do too- not as many,
but growing. At some point the hatred misdirected at tech employees could
result in San Francisco suffering from less tech investment than other more
stable cities.

------
blaurenceclark
I feel privileged to be mentioned as the homeless guy who was living on a
couch at the end of the article :)

------
malandrew
I wonder if SF could experience some tech detroitification in about 10-20
years, or possibly sooner.

As a tech worker here, I and others engineers I know are becoming
disenfranchised with the housing prices around here to the point that I'm
casually exploring where I might want to move next in 4 years or so if this
situation doesn't reverse itself.

With the number of engineers all feeling the same, it's possible to find
enough people to willing to be a co-founder and move to a much cheaper part of
the world during the formative months/years when your company is pre-profit.
Take Silicon Valley investing connections, a mobile workforce, rising housing
prices and you basically have a confluence of forces that will accelerate a
diaspora of engineers to more places in the world without necessarily giving
up on the tech community that makes SF so desirable. Once decent sizeable tech
communities show up in more places, the greater the likelihood that engineers
in the Bay Area look around and tell themselves "This just isn't worth it. I'm
paying a premium to be around colleagues, but now my colleagues are everywhere
and it's just not worth it anymore."

At the end of the day every engineer without rent control is going to face a
financial decision once a year when rents are raised that could make moving
elsewhere more attractive. What's the point of improving at your job and
earning raises when most of your raise ends up going into your landlord's
pocket. Do that 2-3 times and you are either going to look into someway of
getting into rent control unit or you're going to start considering other
options elsewhere.

All you really need to stay in the area for is to create a solid enough
professional network that you'll gain access to the smart capital in the
region. Once you have that, you can go anywhere since investors will know you,
what you're capable of and that investing in you and your business is a good
idea. If this happens often enough, you're going to start to see more VCs
comfortable with this approach that they'll be able to tell offer job
candidates coming through the VC hiring offices positions in portfolio
companies located in places that might be more desirable to a tech worker than
SF.

I stay in SF because some of the most interesting tech jobs are here. Once
that is no longer a valid assumption and my professional network is
sufficiently geographically distributed, I no longer have anything tying me
solely to San Francisco.

I can't count the number of conversations I've had with other engineers about
thinking about moving to Berlin or Portland or even trying to set up shop in
some cheap remote paradise where we would have the financial liberty to invite
friends to come out and hang out in a guest room for weeks to months at a time
so long as they pay the airfare and living arrangements. Top places on my list
when I entertain ideas like this are small beach towns along the Northeast of
Brazil. I'm often amazed at how many of my engineer friends are onboard with
this ideas, more than willing to exchange San Francisco so long as they know
they will have engineering peers and interesting engineering problems to solve
in some other locale.

Even the cultural attractions that made San Francisco awesome have been co-
opted by the hipster culture and gone mainstream enough that SF no longer has
the strong lead on novel cultural innovations that it once had.

    
    
        "It's an odd thing, but anyone who disappears is said to be 
        seen in San Francisco. It must be a delightful city and 
        possess all the attractions of the next world"
    
        -- Oscar Wilde
    

All the attractions of the next world are starting to crop up everywhere more
and more and here in SF less and less. Eventually the barrier to going
elsewhere and still working on fun engineering problems will be easily
surmountable.

~~~
AJ007
I think what you will see is not a "detroitification", but a seeding, where
every important city in the world has some footprint in software. Detroit's
problem was it was a single industry: automobiles. Software is now all
industries. This is such a relevant topic, where as in the past migration was
triggered by where the jobs where, now an individual (typically unmarried and
without children) can choose where to go based almost just on quality of life.

There are some very interesting concepts around what you are talking about:

What are the most desirable places to live?

Are there cities that are somewhat broken that could fixed?

Are there cities that are totally broken that could flourish?

Should we take cities that will survive massive climate change more seriously
than those that will vanish beneath the ocean?

How critical is the cities' level of individual freedom?

Then there are questions regarding software and technology's impact on the
very nature of the city -

Will better remote work diminish the networking advantages of a place like NYC
or SF?

Will self-driving cars spread cities out?

Will people if want to live in a densely populated area after all of these
changes?

~~~
malandrew
Most cities are broken IMHO since they value automobiles over people. I want
to see more cities that put the commons where you actually can interact with
others first and foremost:

    
    
        * walking and biking are valued over cars
        * vehicles within city limits are only used for delivery of goods. 
        * instead of a network of roads, we have a network of greenspaces[0]
        * more plazas and parks (Medellin has done a pretty good job here)
        * one massive park in the center of the city (e.g. NYC and Munchen)
        * located where precipitation is not a problem
        * cars are only for inter-city travel and stay outside the city (Freiburg)
        * Lots of sports in the city (Rio de Janeiro and Sydney, Australia)
        * People that need to move bulky things often live/work at the city periphery.
    
    

[0] This idea taken to its logical conclusion:
[http://www.cidadedemocratica.org.br/topico/2755-ecos-na-
pais...](http://www.cidadedemocratica.org.br/topico/2755-ecos-na-paisagem)

[1] [http://en.wikipedia.org/wiki/List_of_car-
free_places](http://en.wikipedia.org/wiki/List_of_car-free_places)

------
lstamour
Am I the only one who thought 6,000 new homes was an extremely low number?

Maybe. Here in Toronto, we've had a rough average of 35,000 new homes each
year. I'm used to seeing new buildings and cranes all over town. It's not a
boom town, but I've yet to hear of a shortage either...

And Toronto's population is roughly 3.1x that of San Francisco, but it's held
steady for roughly the last decade at least. 35/6 is 5.8x less, and given the
population growth in SF, the number of new builds should be at least double;
12k perhaps.

Equally funny, Toronto also had a freeway revolt and succeeded. So we have a
relatively livable downtown, plus growth. Go figure. Some corridors in Toronto
are nothing but skyscrapers. Height restrictions do exist, but are raised on a
case-by-case basis (e.g. public art, parks can help negotiate). Even areas
that fought expressways, while mostly single-dwelling, have allowed high rises
along nearby major streets.

That said, we're still trying to make plans to destroy the Gardiner
Expressway, our Embarcadero it seems.

~~~
akgerber
Y'all got this to balance out NIMBYs:
[http://en.wikipedia.org/wiki/Ontario_Municipal_Board](http://en.wikipedia.org/wiki/Ontario_Municipal_Board)

Do you know what kinds of stories you never hear in California: "the OMB,
against the City's wishes, approved development of a condominium/townhouse
complex near a low-density residential area immediately west of North York
Centre."

------
Pro_bity
This is the best TechCrunch article ever written. I wish they let their
journalist spend more time doing well researched pieces like this.

------
timr
_" But in places where zoning regulations create artificial limits on home
production, the final prices to home buyers jump far above construction costs.
In the 1980s and 1990s, they found that virtually all of San Francisco’s home
prices were at least 140 percent above base construction costs."_

The papers she's citing here _exclude apartments_ from the analysis. They're
talking about single-family homes:

[http://www.nber.org/papers/w8835.pdf](http://www.nber.org/papers/w8835.pdf)

 _" The housing price data used in this paper to create the relationship
between home prices and construction cost comes from the American Housing
Survey (AHS). We focus on observations of single unit residences that are
owner occupied, and exclude condominiums and cooperative units in buildings
with multiple units even if they are owned"_

Probably not incredibly relevant to a discussion of rental prices.

------
sirdogealot
[http://techcrunch.com/2014/04/14/sf-
housing/](http://techcrunch.com/2014/04/14/sf-housing/)

>The true culprit behind our housing problems: let us deflect blame to
Mountain View’s burrowing owl!

[http://en.wikipedia.org/wiki/Shoreline_Park,_Mountain_View](http://en.wikipedia.org/wiki/Shoreline_Park,_Mountain_View)

>City of Mountain View evicted a pair of burrowing owls so that it could sell
a parcel of land to Google to build a hotel at Shoreline Boulevard and
Charleston Road.

...wtf?

------
QuantumChaos
SF Housing Crisis Explained: Money allows one to buy things that other people
(sometimes even people poorer than oneself) might have wanted to buy
themselves. From this, two things follow: (1) we should redistribute money so
that the very poor can at least buy something, and (2) nerds shouldn't be
allowed to have much money, since no one likes them, and so why should they be
allowed to buy things that other people want to buy.

------
rwmj
The whole thing is ludicrous. Why can't tech workers work from home, from
anywhere in the world?

~~~
tdicola
Sometimes the fastest solution to a problem is to get everyone in a room with
a whiteboard and deal with it. There are ways to collaborate online, but none
are as efficient as person to person. Also not everyone has a good internet
connection or home office condusive to working 8 hours a day. I'm not saying
people can't work from home ever, just that its not practical for the vast
majority.

~~~
lukasm
Sure, but you need 2-10 people no 30 000. You definitely make remote teams
work from remote offices.

Also is the problem with executives in companies like Google. I believe a lot
of them bought properties and they have no incentive to change the market
dynamics. They working against company best interest.

------
alxndr
And now, the KQED version of the article:
[http://blogs.kqed.org/newsfix/2014/04/14/San-Franciscos-
Curr...](http://blogs.kqed.org/newsfix/2014/04/14/San-Franciscos-Current-Boom-
Repeats-an-Old-Story)

------
pearjuice
Quite ironic how a blog constantly zooming in on the successes and ecosphere
of the Valley attempt to explain the problem. The reason people are flocking
to Silicon Valley is partially found in the overly-positive media reporting by
Techcrunch and the like.

------
wil421
$8,000 and month dollars for a two bedroom apartment, that is ridiculous. You
could own several large house where I live. I am tired of hearing about these
silly SV-SF problems. Build more and the problem will stop.

~~~
orky56
That's Mountain View and just the most desirable part of it. I live in the
same city with rent below $1400 for a 1 bed/1 bath and just a 5 min drive from
the same Caltrain station.

~~~
nostrademons
Where's your apartment and when did you sign your lease? I was just looking
and couldn't find anything under about $1650, and that was older family-owned
apartments in either the California/Escuela area or Shoreline/Wright area.

~~~
orky56
Actually California/Escuela area and signed about 1.5 years ago. On month-to-
month with no rent increase since initially signing a 1-year lease.

~~~
nostrademons
I think you've lucked out in that your landlord hasn't bothered to keep tabs
on the current market. A year and a half ago $1400 was reasonable in the
California/Escuela area; now, Craigslist shows a minimum of about $1700 for a
1BR, up to $2600 for 2BRs.

Enjoy it while it lasts; sometimes the smaller owner-operated apartments can
be nice specifically because they don't raise rents as rapidly as the
professionally-managed ones.

------
hippich
it kinda make sense, why existing population of SF tries to oppose any new
building, but I still can't understand why bigger companies need to be there
physically except may be top managerial stuff? It still make sense to start
startup there, since this city filled with like minded people, but for bigger
companies - why pursue it? Me and quite a few of my (married and with
children) friends refuse even considering moving to SF exactly for this reason
- too inadequate housing situation.

------
mathattack
Very long story. Only halfway through the original referenced article, and I
can tell the writer has some solid economics chops.

------
kzahel
This has a ton of great information and background but could definitely use
some splitting up and organizing IMO. I don't know anybody but the most
dedicated who could spend the hours it would take to digest this. It reads
almost like a wikipedia page.

~~~
computator
> _This has a ton of great information and background but could definitely use
> some splitting up and organizing_

Page length issues seem to bother a lot of people.

I wrote a long one-page web article myself recently, and everybody said it was
too long and needed to be split up and organized.

So I split the article at the section headings into separate web pages.

Everybody who had complained earlier said that my "reedit" was now much
better. But really I didn't make any change other than splitting it into
separate web pages.

Now, I do understand the value of paragraphs, spacing, and section headings.
It's much easier visually. But I never understood the distaste for long web
pages. (Obviously, it should be related material, like a story.)

It seems that some readers prefer 5 separate web pages (that must be read
contiguously) rather than a single page with five section headings. Maybe I'm
in the minority, but I prefer the single page.

~~~
intortus
I actually _did_ read through the entire article in one sitting, but to be
honest I'm surprised I did. My time spent is usually too fractured to permit
this long a focus on anything that isn't either work or passive entertainment.

I can see how one can become dependent on more episodic consumption, designed
to give clear break points and bring one comfortably back into the context at
a later point when ready to continue. Those crutches would be comforting even
if one ends up "binging" on the entire piece anyway.

------
stcredzero
_Santa Clara Valley was some of the most valuable agricultural land in the
entire world, but it was paved over to create today’s Silicon Valley._

Exact same move the Maya pulled. At their tech level, that plus climate change
ended their civilization.

------
qthrul
Item 7: Move to Raleigh, NC

------
beachstartup
i find it interesting that there's always such willful disregard for
analytical inclusion of los angeles, the 2nd largest city/metro in the US,
with a housing market that dwarves all other metro areas but new york.

[http://www.nytimes.com/2014/04/15/business/more-renters-
find...](http://www.nytimes.com/2014/04/15/business/more-renters-
find-30-affordability-ratio-unattainable.html?hp)

los angeles leads the nation in out-of-whack median rent/median income ratios.
what does that suggest to me? that it's one of the last of the major US cities
with poor and lower-middle class people living in it.

~~~
rweba
Important quote from that article:

“Increasing the supply is not going to increase the number of affordable
units; that is a complete and utter fallacy,” said Jaimie Ross, the president
of the Florida Housing Coalition.

As the article explains, the reason is that builders are going to prefer to
build "luxury" units to "affordable" ones. So having a whole bunch of
construction is not necessarily going to lead to anything affordable. A
construction boom may bring the high end rents down a little bit, but they'll
still be out of reach of most people.

~~~
taiki
This is why the Free Market just doesn't fucking work.

The "invisible hand" just doesn't care about marginal actors. Who cares if
there's people being displaced? Free markets!@#*(_!@)#

jesus I need a drink

~~~
mmorett
And replace the free market with what? Communism? Where people like you try to
show your brilliance at dictating how things "should be"? GTFO.

~~~
taiki
Reasonably regulated market where people are free to pursue economic
opportunities but with oversight that protects the underclass and
underprivileged?

~~~
mmorett
We have a reasonably regulated market. What we don't have is a system where
people get to live where they want to live without regards to what they can
afford.

SF renters need to back up the U-Haul truck and find new places to live where
they can afford it. They are not "entitled" to live in SF simply because they
want to.

~~~
taiki
The problem is, you're asking people who've lived in a place for generations
just to up and move because yuppies want easier access to bars and fancy
coffee shops. Surely you can understand why this isn't so simple, I hope.

People who have roots are getting uprooted because they declined or couldn't
get in on the sweet tech boom dollars. A lot of the locals are pissed.

I live in Brooklyn, and I live in a part of Brooklyn that really, if they
figured out I worked in Tech, I wouldn't be shocked if they showed up with
torches and pitchforks as a warning to others.

~~~
mmorett
I understand the problem. I just don't give it any validity. The renters think
their wishes and desires to live in a specific area are more important than
other people who wish to live in that same area. It comes across as immature
and whining.

It's not just renting. It's income as well. There are lots of folks whining
about how others make more money and how that "isn't fair". It's a broad theme
of people complaining and having a sense of entitlement.

~~~
taiki
you don't think it's unfair that a landlord can upend your life and make it
complete hell just so they can get tenants who are willing to pay more?

This isn't about moving, this is about completely changing lives. How to get
to work, who's in the neighborhood, what's the neighborhood flavor like...
it's more than just "living in a specific area" it's about living life.

Income inequality is another issue all together. No, it's not fair that a fast
food joint has the guys who flip burgers and run the cash register do all the
work and get literally the least amount of money the business can legally give
them. And yes, they could just go look for other jobs... if there were any. In
a lot of places, there just isn't other work. For others, their particular
field may have been decimated. A friend of mine was a bar certified lawyer in
corporate finance. ... when he graduated in 2008.

Yeah. life isn't fair, and maybe part of it is roughing it. But another part
of it is also recognizing that the system has been inadvertently rigged
towards the relatively wealthy and hyper wealthy.

There's reasons why there are protests in the streets of the Bay Area, and
tone deaf responses like this are one of them.

------
firstOrder
> parts of the progressive community do not believe in supply and demand

Wow, those left wing progressives must really be crazy. It's not like tech
CEO's would ever say there is a shortage of good technicians. They obviously
believe in supply and demand, and that if demand, salary, working conditions
and long-term career viability were good enough, the supply would arise.

------
patrickg_zill
TLDR "Stupidity combined with an unwarranted trust in government to over-ride
reality".

------
peterwwillis
tl;dr poor people don't want to be forced out of their homes or have their
affordable local businesses shut down, and rich people want to make/keep a lot
of money (partly by pushing poor people out of their homes and closing their
affordable local businesses)

From my perspective SF does not have a housing crisis. They quite obviously
have a culture crisis. Two opposed socioeconomic groups are at war, each
trying to push the other out of the city. Housing remains plentiful, though
obviously not affordable. You want to make housing really affordable?
Introduce a large drug trade and a couple dozen gangs to bring up the
mortality and crime rates, and you'll see those housing prices rocket
downwards.

If you would rather live in a city with plentiful, affordable housing - 16% of
which is abandoned or unliveable - come on over to my side of the country. You
might want to bring a car and some pepper spray, though.

~~~
krasin
this tl;dr misses the import part: "Homeowners have a strong economic
incentive to restrict supply".

~~~
peterwwillis
What homeowner has a strong economic incentive to flood the market with more
affordable housing, driving down the value of their own?

~~~
dllthomas
A homeowner who isn't planning on selling (or borrowing against the asset)
anytime soon, and whose taxes move with the market price of housing.

~~~
akgerber
Property taxes don't move in line with the market value of housing in
California, unfortunately.

~~~
dllthomas
That's precisely the point.

------
d23
> Sorry, this isn’t a shorter post or that I didn’t break it into 20 pieces.

Sorry, I didn't read it because you're a lazy writer who can't be bothered to
consolidate the piece into a cohesive, easy-to-digest narrative. Oddly enough,
I should be fish in a barrel, -- a mid 20s moving to SF for career; yet you
couldn't take the time to work on maintaining my attention for more than a
couple bullet points. The hilarious part is that you self-righteously reject
that which you ultimately give in to, ("sorry [...] that I didn’t break it
into 20 pieces") presumably under the continuing theme of "look at me for
being better at not being better than people."

So yeah, sorry I didn't read. Let me know how your blog post does.

------
worklogin
I wonder what would have happened to the "Yuppie Eradication" project had the
owners of said vehicles possessed defensive means such as firearms.

------
krashidov
Can somebody give me a perspective on how much they pay for housing ? I did a
quick craigslist search expecting studios to be 2500 a month but it only took
me a minute to find a very reasonable 950 A month studio apt.

[https://sfbay.craigslist.org/sfc/apa/4423411641.html](https://sfbay.craigslist.org/sfc/apa/4423411641.html)

~~~
sAuronas
That's because you're way out on the edge of the city in a commuter ghetto and
by the looks of it you'd still be paying more than $2/SF to live in squalor
(that unit is a dump, sorry). I apologize for the negativity but no one should
be paying that much to commute without a nice spec (floors, kitchen and bath).
You deserve better than that kitchen.

~~~
krashidov
You're not being negative. I'm just trying to understand the extent of the
problem. I'm a student, and I've lived in worse than that for about $820. (It
was right next to campus).

According to google maps, this was about 10 minutes away from the heart of San
Francisco (when there was no traffic). I'm guessing google doesn't paint the
whole picture, and it really is as far as you say it is.

Personally, if I had gotten a job in downtown SF with 6 figures, and no
family, I'd have no problem living there and saving up. It doesn't look THAT
bad does it? It's even got an outside area. Just my opinion though.

~~~
taurath
I lived a block away from that apartment. Note 2 things - theres only 2 or 3
of those available in the entire city (and you have to compete for them), you
will have a slumlord-style landlord who won't tolerate any noise or usually a
single guest, your fixtures won't work, there will be stabbings and shootings
within a block of you (not west/east oakland, but enough to have to be careful
at night).

------
madamepsychosis
HN, tell me why this wouldn't work: tax anyone renting an old property (i.e.
built more than 15 years ago) for 50% of the difference between the rent now &
before the tech boom. Put this to subsidise development of affordable housing
in under-developed areas like SOMA.

Really, the lowest hanging fruit is just building reasonable transport through
the whole city. At the moment it seems like only 30-40% of SF is actually
being used. Demolishing freeways & replacing them with housing would not be a
bad area either. Smaller houses, like the ones in European cities, would help
a lot as well.

~~~
raldi
Because there are way too many people exploiting the existing system; even if
such a change were enacted, it would be immediately overturned via ballot
proposition. Remember not just Prop 13, but also Gray Davis.

------
timr
_" But this paper conflates correlation with causation. He argues that when
there is a decline in new housing units, there is also a decline in price."_

I knew this was going to happen: people have heard a trite sound-bite about
"counter-intuitive" statistical logic so many times that they ignore that
correlation is usually a pretty damned good signal for a causal relationship.

To wit: of _course_ there's a correlation between price and new housing units
-- because _it is causally related_. When prices go up, developers have
greater incentives to build. More importantly, in a city with as high a
density as San Francisco (and yes, folks, it _is_ dense -- the second-densest
city in the US, in fact), with as many architectural challenges (seismic,
geographic, etc.) the limiting factor for new construction is land and
materials, not red tape.

Nobody wants to hear this, but it's true. The fixed costs of building here are
so high that developers won't do it unless rents go up. That's why new
construction costs upwards of $4k for a 1-bedroom unit, and why new
construction in SF doesn't place any real downward pressure on rents -- except
(perhaps) in the very long term. At best, you're treading water. Developers
don't build into a falling market.

But really, the best response for the people who keep asserting that "building
up" is the magical solution is to point to Manhattan: it's the densest city in
America, yet it's just as expensive as San Francisco, if not more so.

There are no magic bullets. San Francisco is expensive because there's a lot
of money chasing a tiny little bit of land. You don't need a dissertation to
explain it.

~~~
w1ntermute
> with as many architectural challenges (seismic, geographic, etc.) the
> limiting factor for new construction is land and materials, not red tape

Are you kidding me? There are plenty of other cities in seismically active
regions where they've built upwards with great success. All of you people who
blame earthquakes for SF's inability to build upwards should put your money
where your mouth is and get rid of all the red tape - then we'll see what
really happens.

> But really, the best response for the people who keep asserting that
> "building up" is the magical solution is to point to Manhattan: it's the
> densest city in America, yet it's just as expensive as San Francisco, if not
> more so.

Wow, how is it that so many people forget basic economics whenever the topic
of Bay Area housing comes up? Prices demand both on supply and _demand_. You
are making the (false) assumption that demand is the same in SF and Manhattan.

~~~
raldi
_> There are plenty of other cities in seismically active regions where
they've built upwards with great success_

For example, Tokyo.

~~~
timr
...and the last time I checked, Tokyo real estate is amongst the most
expensive in the world. Which was my point.

~~~
raldi
Oh, I thought your point was what you actually wrote:

 _> with as many architectural challenges (seismic, geographic, etc.) the
limiting factor for new construction is land and materials, not red tape_

