
The Cost of a Hot Economy in California: A Severe Housing Crisis - erickhill
https://www.nytimes.com/2017/07/17/us/california-housing-crisis.html
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tstegart
I always see news articles about companies building campuses and headquarters
out there. Can anyone tell me why Google/Facebook/apple can't just build a
residential tower for 10,000 people next to their building? It seems they get
approval for everything else they build out there.

The only time I went out there it was very suburban, with plenty of room for
more buildings. Seems odd that the businesses with all the money paying all
the taxes can't get a city council to approve giant apartment complexes right
next to their headquarters.

Anyone have the answer? Must be the only place in America where corporations
don't get their way, unless they don't actually want housing for their
workers.

~~~
gregable
Prop 13 is a major component. Property tax grows at below inflation, whereas
commercial tax grows at the pace of the local economy.

So, if you zone housing, eventually the cost of servicing that housing exceeds
the tax revenues from it, and there is little you can do to avoid that
process. If you zone businesses, you get sales tax and similar revenue from
the workers. Financially, it's best to let your neighboring municipalities
build homes for your workers.

There is also a backlash from locals who see higher density housing as the
core cause attributed to most local issues: traffic, crime, overtaxed city
services, etc. This is mostly an incorrect perception, but it's a persistent
one.

These combine to prevent zoning for housing.

~~~
tstegart
The property tax seems like a likelier answer. NIMBY-ism always strikes me as
a weak answer. At least in the midwest, if one city won't build it the city
next door will. Seems odd (and in my view, unlikely) that every single city
bands together and can resits the market forces of the most powerful companies
on the face of the planet.

I'd have thought a municipality would have cracked by now and let everyone
build huge residential buildings and used that population growth to fund
everything else. Seems every weird no municipality isn't building houses like
crazy.

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tabeth
1\. Commute

2\. Cost of living

3\. Income potential

Pick two. Like everyone else, everyone wants everything. There's no place on
Earth that has a short commute, low cost of living and amazing income
potential. Compromise is the name of the game. Public transportation can help,
but even still you'll have a commute. The only solace there is that you can do
other things while you commute.

It'll be very interesting if commutes become on average 1.5+ hours each way
and employers count time spent working while commuting.

~~~
akanet
I don't see any theoretical reason to only choose two, and reject it. We can
choose three. Building more housing to lower the cost of living probably has
very little to do with the bay area's tech income potential.

~~~
tabeth
New York, the only example I can think of, has plentiful housing and it's
still more expensive (yes, all boroughs) than most of the country. Will more
housing help? Sure. The question _really_ is whether or not increasing housing
supply will or will not increase demand more than the newly available supply.

Why not just move to another area? If there's something uniquely good about
the Bay Area perhaps it's that same thing that makes the incumbents not want
to let more people in. It's kind of a geopolitical problem.

~~~
mahyarm
Look at Seattle, it has built a lot more than SF in response to the demand and
as a result, the price of housing has not gone up nearly as much.

So yes, increasing supply does lower price.

~~~
pxeboot
Haven't prices in Seattle been going up at a faster rate then SF during the
past 5 years?

~~~
mahyarm
[http://www.seattletimes.com/business/will-seattle-really-
bec...](http://www.seattletimes.com/business/will-seattle-really-become-the-
next-san-francisco/)

[https://goo.gl/images/xYPfR8](https://goo.gl/images/xYPfR8)

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HarryHirsch
What's the alternative to San Diego or San Francisco if you are in Pharma?
Boston? You really need to live in a hub city, nowadays everyone changes
employers every two years.

Wouldn't it be nice of we could go back to the old times, and there was a
choice between Philly, the New Jersey pharma cluster, Kodak in Rochester,
Solvay in Syracuse, Dow in Midland, MI, Upjohn in Kalamazoo and many more?

~~~
ghaff
>nowadays everyone changes employers every two years

They don't but, yes, there's a lot of clustering for various industries and
industry sub-segments. I expect Kendall Square in Cambridge is bigger than
most other pharma centers these days though.

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wnissen
I am amazed at the scale of the RV housing in industrial areas of Oakland. I
walked several miles yesterday in southeast Oakland and saw up to five RVs on
a block, obviously housing. As the article says, this is not a question of a
few very poor people having trouble finding housing in few very expensive
coastal areas. The Bay Area town I live in has a median household income of
$100K. The payment on a 3-bedroom condo or 2-bedroom home is now just about
$100K as well. And my area is a solid 1.5 hours from San Francisco.

~~~
johan_larson
This is one of those things the municipalities need to stop doing, promptly.
If this becomes an established part of the housing market, it will acquire a
constituency and it will be much harder to stop later. Just look at what a
political mess decades of winking at illegal immigration from Mexico caused.

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muninn_
This is going to be a massive thread I predict. There's a big world out there.
If you can't afford California, or you don't want a 2 hour commute with a
$180,000 salary, then DO NOT LIVE THERE. It's that simple. Are you skilled,
and you can't afford or don't want to afford to live in California? Give up
the damn weather and move somewhere else. I don't even care if it's because
the laws cause unaffordable housing, just don't live there. Besides, if you
drop the housing prices so much that anybody can afford to live in California,
how great do you think it's going to be there? The issue with a place like
California is that there are almost always going to be more people that want
to live there, than there is space. If you build more/better/affordable
housing, more people will move there, then what?

~~~
ghaff
California has been popular for various reasons for a long time. But it's
really since the recovery from dot-bomb that things have gotten out of
control.

Zoning etc. is part of the issue. But by all accounts, the (not so great)
public transit--especially in SF itself--is pretty near capacity as, obviously
are the highways. Can this capacity be increased over the timeframe of a
couple decades? Probably. But there's nothing in the 5-10 year horizon that's
going to make a [EDIT: not so big] difference other than a combination of
people choosing to not live there, incremental housing construction,
incremental public transit improvements, and incremental increases in
congestion.

~~~
eastbayjake
I'm hopeful that autonomous buses make this extra capacity possible. The main
problems are unpredictable/long waits and overcrowding; the proposals I've
seen involve smaller (<20 passenger) buses that run much more frequently and
can fit more people into standing-room space because automated drivers have
better planned acceleration and longer braking. It's so much cheaper and
easier to add hundreds of small buses to the peninsula's streets than to build
rail or subways.

Another crazy low-footprint idea: connecting our city of hills with an aerial
gondola network. [https://www.fastcodesign.com/1671214/a-mass-transit-
proposal...](https://www.fastcodesign.com/1671214/a-mass-transit-proposal-to-
connect-a-city-using-aerial-gondolas)

~~~
ghaff
Honestly? Sounds like magical thinking about how self-driving will make things
possible that aren't with a relatively low-paid human driver today. And
probably wouldn't be available for a few decades anyway. Small buses are
available in a lot of countries today.

~~~
eastbayjake
Unionized MUNI drivers make three times the SF minimum wage [0] before
overtime so they're not "low-paid" by any means, but yes if money were
unlimited we could achieve a smaller-but-more-numerous bus strategy... the
ride will just be really jerky and require more seats at lower capacity, in
addition to costing a prohibitive amount of money.

And "a few decades" seems extremely conservative when we're already testing
driverless buses in San Francisco today [1]

[0] [https://missionlocal.org/2014/06/is-32-an-hour-too-much-
for-...](https://missionlocal.org/2014/06/is-32-an-hour-too-much-for-muni-
drivers/)

[1] [http://www.reuters.com/article/us-california-autonomous-
bus-...](http://www.reuters.com/article/us-california-autonomous-bus-
idUSKBN16E08I)

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timr
While I generally support the legislation discussed in this article, I wish
the YIMBY people would stop talking about this in such simplistic terms. In
some parts of California (e.g. San Francisco's eastern, urbanized third), no
amount of building will _ever_ satisfy the need, because all you can build on
expensive land is "luxury" housing, and when those units don't sell/rent,
developers will just stop building, because the unit economics don't work out.

Some places definitely need to build more housing -- see, for example, the
_western_ 2/3rds of San Francisco, or the cutesy little suburban enclaves of
Silicon Valley -- but this won't help until transit allows people to commute
from those neighborhoods to their jobs. So we should also be saying "YIMBY" to
transit infrastructure and reducing/eliminating the broken tax incentives that
are helping to create the problem in the first place (like the ill-conceived
Mid-Market tax incentives, which have replaced SROs with tech offices, thus
making the homelessness problem _worse_.)

~~~
akanet
I am a YIMBY and we consistently say all those things. I also reject the
notion that the eastern district is "built out" or that developers will stop
when things don't "pencil out".

What pencils or doesn't is a direct consequence of the regulation and tax
burden we place on construction, and there's probably an order of magnitude of
levers we've yet to pull.

~~~
timr
_I also reject the notion that the eastern district is "built out" or that
developers will stop when things don't "pencil out"._

Reject what you like, but you're wrong. Investors don't finance real-estate
projects where the per-square-foot returns don't justify the expense.

The expense, in the case of eastern SF, is >80% land and materials. It's been
documented, extensively, by groups like SPUR. Taxes and regulation are less
than 20% of the cost of construction in San Francisco. It's simply _not_ the
limiting factor [1]

[1] [http://www.spur.org/publications/urbanist-
article/2014-02-11...](http://www.spur.org/publications/urbanist-
article/2014-02-11/real-costs-building-housing)

(You'll note that this link shows $48,000 of a $469,000 unit -- or about 10%
of the cost -- is attributable to permits and regulatory fees. The cost of
land and labor and materials amounts for >75% of the cost.

When you read people complaining about "regulatory" costs in SF, it's really a
political dog-whistle to the BMR housing subsidy, which developers _hate_.
Most self-professed "YIMBYs" I talk to do not know this.)

~~~
akanet
Sure, that's fine. The current level of what investors have demonstrated
they're willing to build is by far below the norm for even SOMA. There is
still a very significant amount of surface parking or 1-3 story developments
in SOMA that could potentially become a very large amount of housing.

~~~
timr
_" The current level of what investors have demonstrated they're willing to
build is by far below the norm for even SOMA. There is still a very
significant amount of surface parking or 1-3 story developments in SOMA that
could potentially become a very large amount of housing."_

That's like saying "there's a very significant amount of land in America that
could become a very large amount of housing.".

Sure it could. Except, someone owns the land and wants you to _pay for it_
(trouble, that), or it's being used for something else that has a higher
value, or it _just isn 't practical_ to build there for whatever reason. Or
maybe the owner doesn't _want_ to rebuild. In any case, be more specific: I
_live_ in SOMA, and I don't know of many vacant lots around here that aren't
already slated for development. These sorts of stories are usually apocryphal.

This is another part of the "YIMBY" narrative that I dislike. You don't get to
point at every building you think could be taller and say "I think that
building could be taller, therefore, SF isn't building enough." That's not how
it works.

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purplezooey
Here's a question: why don't more companies locate in the East Bay? There's a
bigtime 'follow the herd' mentality when it comes to where VCs are allowing
companies to make their headquarters. You don't need to have an office in
Mountain View or Palo Alto. Many of your employees will live in places like
Fremont, Pleasanton and Walnut Creek. Why not start a company there instead?

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unabridged
I would love to see a state pass an amendment removing all density
restrictions on residential zoning and making all commercial zoning mixed use.

