> This line of thinking is what leads to situations like San Francisco, where price controls on housing lead to few developers willing to build there.
Not sure what "price controls" you're talking about, but the reason it's expensive to build in SF (which reduces the appeal for builders) is zoning, the byzantine planning process, the ability of local residents to effectively block or delay projects, and weaponized environmental review.
> Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return?
Building housing doesn't need to be an investment opportunity. In a better world, I'm sure there would be plenty of people who would be happy to build housing with only enough profit to pay employees a comfortable wage. These sorts of people don't have the ability to break into the industry, though.
Policy restricting housing is indeed another factor impeding housing. The price controls I'm referring to are rent controls (which applies to ~70% of apartments in SF, and the threat of reintroducing rent controls looms) and affordable housing mandates. The affordable housing mandates require that a certain percentage of units are rented at set prices.
Again, if housing isn't an investment opportunity, then why would anyone build new housing? Sometimes people get together and build co-ops. But those are rare, and it's only available to people with a lot of capital on-hand. Plus, it runs the risk of the project going over-budget.
Lots of businesses make less than stock market index returns. You can be a builder that doesn't want to beat the S&P and still support your family doing it. Not everything has to be about massive accumulation of wealth or "growth at all costs". Plenty of people are OK doing a day's work for a day's creature comforts and leaving it at that.
Sure you can deliberately invest in a way that doesn't generate the best returns. You can be a philanthropist and build housing for free! But the vast majority of people are indeed looking to maximize returns.
Correct. With one major exception (that is, a dozen or two of the couple-hundred units in Trinity Place on Market Street) SF's rent stabilization ordinance does not apply to buildings constructed after ~1979.
So, it would be good for GP (PP? family trees are hard) to consider the implications of the fact that ~70% of the rental apartments in SF were built BEFORE 1979.
price controls is rent control. SF. see also: NYC
"you can raise rent by X% per year AT MOST, no more than that"
if inflation / supply/demand is >X%, the landlord eats it.
Thus landlording might be for some, more appealing elsewhere.
Cali also has prop 13 i.e. rent control on real estate taxes. So if I bought my house in 1955, I might pay $100/year in property tax, the guy who just bought a completely identical house next door this year might pay $15,000 a year in property tax. On basically the same house. How is that fair? kinda a boomer "I got mine" type mentality. Also part of the bay area real estate problem, in addition to zoning/byzantine planning, borken process - why would anyone want to move out?!? Moving out would mean +$15,000/year tax, every year. Just stay put.
Of note in Singapore there's not really the concept of "apartment building" business and it works fine (very dense NYC tier housing there). The reason why is the more "units" you own, taxes become progressively more brutal, an apartment building would be tax armageddon. So most rentals are a person who owns a few condo type units and rents them, few enough that taxes aren't bad. Most people aim for owning, and for owning there is a private sector but a public government sector that provides home at more reasonable prices with various perks and incentives. That's how to handle housing when you've got tons and tons of people and almost no land.
> So if I bought my house in 1955, I might pay $100/year in property tax
Ok it's fine to point out drawbacks of Prop 13, but making up stuff doesn't help.
Prop 13 baseline assessment used 1976 values, so buying in 1955 doesn't make any difference, it still started on 1976 valuation.
It goes up 2% every year, so for this scenario we're talking about a house that was worth well under 10K in 1976. The median house price in the US in 1976 was 48K (so surely higher than that in California).
Eh, the order of magnitude difference is pretty spot-on.
Housing prices are absurd, and their rate of increase massively outpaces the rate of increase for pretty much every other thing a person would purchase.
Zoning restrictions in just three cities (San Francisco, San Jose, and New York) are responsible for all of the United States' GDP being lower by double-digit percentage.
It is in the interest of the entire country that these regions be forced to allow maximum housing development, because it will raise incomes across the entire country.
>Do the tax payers of SF not get a say in how their community is managed?
We know why zoning density restrictions exist, because their birth place was across the bay in Berkeley, whose proponents loudly extolled its benefits in pushing out anyone who was not White. This was the original intent of getting a say in development: to prevent undesirable racial minorities from moving in next door.
San Francisco weaponized housing density restrictions to push black people out of Haight-Ashbury, and to this day, continues to fight any and all housing development that might reverse this grave injustice.
If New York and the Bay Area alone relaxed their zoning, their GDP would be 33% higher, and US GDP would be 3.7% higher (as of 2009), and national average income would be $3,685 higher.
It’s a problem when every town/municipality thinks like this, and then larger state- wide governments are faced with the dilemma of an angry voting population tired of high housing costs.
You can either get ahead of a state-wide solution and implement something where you have some control that works for your community, or you can do nothing and wait for the state government to begin to remove zoning from local control.
High rent costs are not something a town/municipality can solve. In a most ways, it's also something a state government cannot solve.
"High" rent is relative to the area, and rent is high across the entire country currently.
Lack of rental housing drives up rental prices. The lack of rental housing is largely due to unnaturally low interest rates. People qualified for oversized loans, and bought up the rental supply, converting them into homes instead.
Since cash was easy to acquire via loans, this resulted in an unprecedented period of time where housing prices were driven upwards with near-zero limiting factor. That was the market where people were overbidding asking-price by $50K+ without even seeing the house... that was/is a very unnatural market. This bidding process resulted in significantly overvalued homes, which made them inaccessible to lower-income people. So the rental market shrunk significantly, and housing prices went through the roof... then runaway inflation came knocking, making everything that much worse.
Which is to say, all of this is the creation of poor federal policy, and there isn't much your state or city can do about it.
No, rent is not high across the entire country. It's high in a select few metros, and fairly low everywhere else. Municipalities can't unilaterally reduce rents, but the can exacerbate the problem by disincentivizing housing through regulation and price controls.
True, just as people from Mexico don't have a right to live in the rich and nice USA, people from the sticks don't have a right to live in the rich and nice SF.
People from Mexico don't have a right to live in the USA, any more than people from the USA have a right to live in Mexico; and the people moving into SF and complaining have top 3% incomes.
Not sure what "price controls" you're talking about, but the reason it's expensive to build in SF (which reduces the appeal for builders) is zoning, the byzantine planning process, the ability of local residents to effectively block or delay projects, and weaponized environmental review.
> Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return?
Building housing doesn't need to be an investment opportunity. In a better world, I'm sure there would be plenty of people who would be happy to build housing with only enough profit to pay employees a comfortable wage. These sorts of people don't have the ability to break into the industry, though.