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> I think it's more ridiculous to look at San Francisco and claim that the problem is that we aren't building enough...

I have no understanding of this (common) sentiment. We are adding jobs at 10x the rate we are building new housing. There are only two variables in the equation. You can not will the relationship between supply and demand out of existence.

> That's what happens when you let developers build whatever they want

No, this is exactly what happens when you don't let developers build to accommodate the market. According to the article, a 640 sq ft single unit costs 500K$ to build [1]. The worse case scenario is that after spending hundreds of thousands of dollars, the project is delayed by any one of dozens of parties that can block development for years.

In summary, of the 1/10th of the required housing we do build, it is quite literally __impossible__ for any of it to be affordable and turn a profit. Any laws that make building more onerous will only exacerbate the problem.

1. http://www.spur.org/publications/article/2014-02-11/real-cos...

The very first chart in that SPUR publication shows you that the vast majority of development costs are in land and construction. If you do the math, the regulatory costs in that chart amount to 16% of the total. This is consistent with what I've read from architects and urban planners -- regulatory expense in SF is <= 20% of building costs. And most of that is a set-aside for low-income housing.

In other words, regulation is a red herring. Even if you eliminated all regulations, the cost of building a housing unit here would be beyond the reach of most people. Land and construction, in a tiny, dense city where everyone wants to live in the same three neighborhoods: it's expensive because it's expensive.

Regulator expenses in building houses may only be 20-40% of the cost, but this isn't true of the price! In healthy markets, houses are priced close to the cost of construction. In SF (in the 90s), house prices were over 140% the cost of construction [1]. I'd expect the difference to be even larger today because regulations are more ridiculous.

I agree, if we eliminated all regulations, the cost of building a house would decrease perhaps 40% at the most. I'd expect some of this savings to be passed on to tenants. If this were the only consideration, housing would still be unaffordable. But, without regulation, we'd also see at least 10x increase in new construction. Housing would be built until it were no longer profitable. IE, the price of apartments would approach the cost of building them (from astronomical to merely expensive).

The Bay simultaneously welcomes any and all new jobs while it refuses to build housing concomitant to the demand. It will never be cheap to live here, but maybe we could drop the distinction as the most expensive city in the country.

1. http://www.researchgate.net/publication/228180251_Zoning%27s...

> But, without regulation, we'd also see at least 10x increase in new construction

This is theory. Reality would be very different.

What like 9x increase? Clearly more housing would be built if were simply allowed. Developers are building to the maximum units/sqft permitted on every project.

I would suspect more like 1.1-1.2x.

Essentially, for most homeowners their home is their biggest investment and they should be expected to act in their economic self-interest to preserve and increase the value of that investment, and thus we can expect them to do what they can to prevent more homes from being built.

I've been interested in a possible analysis for a while (maybe I should finally dig in and do it myself). My hypothesis is that San Francisco isn't as nimby-istic as it appears, that this is an artifact of a political and geographical oddity. San Francisco is a 7x7 square mile city and county that is already reasonably dense (on average - parts are extremely dense, the only place outside NYC with 100k+/sq mi density, whereas other neighborhoods 4 miles away are leafy suburbs). It's also a peninsula, and much of the area to the south is designated open space.

Here's the thing - I'd be interested in analyzing other metro regions where a long standing, dense urban core isn't its own city and county, and see what percentage of growth happens within it or outside it. In other words, let's look at sub-regions with existing stable population density of above (say, 20,000 inhabitants per square mile for the last 50+ years) and see how much construction has occurred within them.

For instance, does Atlanta have a small, historic downtown with an existing housing base that has been relatively dense and stable for 50 years? Has the growth in Atlanta come from tearing down 80 year old buildings in neighborhoods with 20k/sq mile populations dating back a while, or has it been in the suburbs and exurbs that count as "Atlanta" but wouldn't count as "San Francisco"?

I don't know the answer to this question, but I think it's an important one to answer before concluding that SF is uniquely "nimby-istic" toward housing in some cultural or political way. You can probably tell where I'm leaning with this, though - that the NIMBY attitude, to the extent that it exists, has more to do with low density areas like mountain view resisting new housing than high density areas like much of SF.

If San Francisco were more NIMBY-tastic than its sister California coastal cities of Los Angeles and San Diego, then one might expect its housing prices to pull away from those two.

Instead, they seem to move in lock-step: https://pbs.twimg.com/media/BolI6BiIMAAgpWT.png

Prices in SF, LA, SD all move together with the economy but increases in SF have outpaces almost every other city. This has been going on for decades and hard to see on your chart as differences in price changes are compounded up over the years. 50 years ago prices were much closer together today they are far apart:

Avg $/ Today (Trulia) SF $854 LA $478 SD $355

This doesn't address the larger region, though. Some of the development on the outskirts of San Diego counts as San Diego, whereas anything outside the 7x7 grid of San Francisco wouldn't show up in the numbers.

Take some of San Diego's more historic neighborhoods that were build a long time ago, and track the home value. For instance, how much has a 4 bedroom 3 bath spanish style house build in the 1920s near La Jolla Cove (or in Mission Hills, if you want to keep it in SD proper) changed in value? That would be a better basis of comparison to SF.

I agree that without getting into the details you can be misled. "Cities" are defined many ways: city, county (same as city in SF but not in LA or SD), metropolitan division, metropolitan statistical area and combined metropolitan statistical area depending on your data source. Frankly it is a big mess and often you are not told which definition is being used. Not only that the definitions change over time! I had to deal with this data for many years - not simple at all.

Which one is most appropriate depends on your goal. La Jolla or Mission Hills are probably a lot more like SF than the SD MSA so likely perform more like SF but will still be tied to SD.

Unfortunately sales only occur infrequently and tend to dry up completely in recessions. This along with lack of data as well as different definitions make tracking detailed property types like 4br 3ba Spanish in La Jolla difficult and unreliable if not impossible. And in SF (city & county) that property type is very rare (also SF does not publish style data like some area - I think SD might). Best you can usuallydo is by bedrooms in a zip but only if the market is pretty active.

My original point was a simple one: even though real estate moves together across the country with the business cycle over time area can still diverge significantly. This has happened in SF vs LA/SD and in California as a whole vs the rest of the US. To see this look at the index levels over longer periods. Maybe go with a big areas like MSA/CMSA so you have lots of data and get both mature inner city and fringe suburbs - this is what Case-Shiller public indexes are like.

That's a good point, though it could just indicate that the nimby delta between the regions remained constant over time.

Why blanket punish and make every single development on the waterfront more expensive because of a single Warriors arena project that was eventually moved to Mission Bay?

All of these little costs, process hurdles add up and make housing more expensive. The broad point is that these citizen anti-growth initiatives, which might have a single poorly-designed and consulted project in mind, end up having very long-term and consequential impacts on housing prices across the board.

This 2014 study examined 7,300 land parcels in the Bay Area and found that if you increase the number of independent reviews for a construction project by one standard deviation, average land prices increase by about eight percent.

http://blogs.lse.ac.uk/usappblog/2014/07/01/regulatory-const...

I agree and am concerned about how the point of the economic cycle we're in affects the profile, goals and objectives of people we attract to Silicon Valley. You tend to get more true believers at the low points in the cycle versus the gold-rush folk we're seeing now.

What do you think is the best way of dealing with this? We can either build a lot more housing or drive away jobs and companies if we think they're too greed or speculation-driven.

"Why blanket punish and make every single development on the waterfront more expensive because of a single Warriors arena project that was eventually moved to Mission Bay?"

It's a long and detailed backstory, but the executive summary is that you've got a group of lawmakers who were inclined to rubber-stamp the sweetheart deal, so you can't just write a law that allows them discretion on the outcome. The arena plan required a zoning variance that was being granted for this particular project, and so the initiative targeted the exception-granting process for zoning. It was as specific as possible to the arena project, while still being effective and legal.

In any case, it's still possible to build housing on the waterfront -- it's just not possible to get zoning exceptions without public review. I think that's probably a good thing.

Still possible, but you have to run an entire political marketing campaign, complete with mailers, etc. Furthermore, with a ballot-box planning process, developers are going to bypass the typical considerations that the city's professional planning staff usually asks for in favor of whatever they think is broadly marketable to a voting public.

The cost of these additional processes adds up. Urban containment and growth control are not free. In many cases, these policies do legitimately protect a certain quality of life, but they are also effectively a tax on newcomers and prospective residents.

California home prices started deviating from national norms around the mid-1970s after individual communities and the state supreme court started enacting growth control policies. It created a system that is so politically unpredictable that we're simply not able to produce enough housing to keep up with population growth at a time when the country is re-urbanizing.

"Still possible, but you have to run an entire political marketing campaign, complete with mailers, etc."

...to get an exception to zoning rules that have been around for decades. Want to build within the established rules? No election required.

Let's not confuse this with something truly ridiculous, like the statewide proposition that capped property taxes at their 1970s levels. I'm not arguing that every citizen initiative is a good idea.

Yeah, but those zoning rules like the one affecting Pier 70 are their own products of bizarre, political, anti-development NIMBY-ist quirks.

I believe some of the buildings on the pier are actually 92 feet high from the pre-war period, but some good, old downzoning in the 1970s moved it to the forty-feet level like much of the city.

Agreed on Prop. 13. Nightmare. Totally messed up municipal and public school finance for decades.

Sucks that even though the SF city budget is nearly $2 billion larger annually than it was in 2011, we can't seem to divert more funds to teachers because of how convoluted the school financing formula has become post-Prop. 13.

The effect of Prop 13 is much, much more than this. It gives homeowners an incentive to hold on to property as long as possible.

The article mentioned "this uninhabitable home possibly infested by rodents and held up by a couple of poles" selling for $1.8M, but neither that or the linked one mentioned the owner was paying tax on only $70k of assessed value.

There are often comparisons made to Texas-- in this case, someone owning a $1.8M house would be taxed around $54,000 a year in Texas, versus the $700 he was paying in property taxes in California.

This isn't public review, it's a public vote. A vote is a vastly different barrier to entry than review. One of the biggest complaints I have about the west coast--and, yes, I'm a transplant so I bring my own ideas to the party--is this obsession that everything should be put to a vote. The initiative process is broken in this regard because it increases that expectation.

Public officials, especially elected ones, are supposed to have discretion. That's why we elect them. If they screw up, we vote out the people responsible, not erect more set-in-amber barriers to doing things in the future.

Yeah, well...you're sort of grinding your axe on the wrong stone, here. This law wasn't passed because people believe "everything should be put to a vote" -- it was passed because a lot of people were (IMO rightfully) pissed that their elected representatives were essentially giving away public land to the wealthy. It's a story as old as politicians.

I wish there was another way to block that sort of thing that didn't require citizen initiative. But if it comes down to passing an initiative that requires populist approval to violate existing laws or shrugging and walking away because we can't vote the bastards out until after there's an arena on the waterfront...well, I'm glad we have initiatives for that. I don't generally like the outcome of direct democracy, but this is a case where the initiative process worked exactly the way it was supposed to.

But if something violates the law isn't that why we have courts instead of passing something that will continue on for the next few decades?

The law allows an (IIRC unelected) review board to grant zoning variances. What happened here was that the review board was rubber stamping the exception because powerful local politicians wanted it to happen, because...well, money talks.

Essentially, the citizens passed an initiative that ensured that the existing zoning laws had some actual teeth, instead of just trusting politicians not to violate them with impunity.

Lets make a car analogy:

If you restrict a Japanese car seller to only export 10k cars to the USA, that car seller will inevitably export 10k luxury cars. The reason why they do this is because the demand for luxury cars wont be exhausted by such small numbers. Once they can sell unrestricted, they will definitely go for the far more profitable median market cars, because they can sell far greater volume of them.

If you want to prevent gentrification, you would allow massive density increases. The middle class out buy the rich in aggregate.

This blog article gives a better overview of the concept: http://urbankchoze.blogspot.ca/2014/06/how-density-limits-br...

It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate development costs don't really have economies of scale -- it costs a lot more to build skyscrapers, both in terms of construction costs, and in terms of land (rezone a parcel to increase height limits, and the cost of the land goes up to match the new use).

Said another way: unlike cars, the fixed costs of real estate dominate the cost of the final product at all scales of "production".

It's not about that, it's about manufacturers going for the low hanging fruit first if they are restricted to selling a small limited amount. These manufactures in my example have already gotten the economies of scale by developing for their local market, so on a marginal basis, it doesn't apply in this metaphor.

On a cost basis, those unit construction costs are around $200k for a 3 bedroom 'family' condo vs. the $1 million that a condo would currently cost today in the SF bay area. Big difference and actually affordable for a $70k/yr annual income vs the $335k/yr income required for a $1million dollar condo.

>Honestly, I think it's more ridiculous to look at San Francisco and claim that the problem is that we aren't building enough, when you can walk up to just about any live/work space in SOMA, and see the tenant list is mostly startups. That's what happens when you let developers build whatever they want -- they build for the most lucrative allowed use of the land. And that usually isn't residential construction.

So why aren't the developers building taller commercial buildings? Startups are lucrative, right? So why don't the developers just build twice as high and sell twice as much floorspace for twice the revenue? They're free to build whatever they want, right?

Can't do that. Proposition M, passed in the mid-1980s, caps the amount of office space that can be built in a given time period. We're right up against the cap at the moment.

Prop M doesn't impact the stuff I'm talking about, which is (nominally) residential construction being used exclusively for business use.

The prevalence of this kind of "live/work" space in SOMA is an artifact of the "building up" that happened the last time there was a technology bubble. We can see how well that worked out: a lot of people were evicted from older construction, only to have it replaced with more expensive new construction that is mostly being used for business purposes, because no actual human beings can afford it.

You got your history wrong. Few if any people were evicted to build live/work units in SF. Live/work units were build exclusively in areas zoned industrial (i.e. old factories and warehouses) - not apartments[1]. In fact it is illegal NOT to run always be running a business in a live/work unit[2].

Most live/work building's rules will require that you maintain a business license. Although most live/works are used primarily if not exclusively for housing the city does not seem to care as long as they get their license fees.

Did you just make up you "facts" to support you ideology? Give the reverse a try someday. ;)

[1] http://www.sfgate.com/bayarea/article/How-S-F-s-live-work-de...

[2] http://www.sfgate.com/bayarea/article/Fees-considered-for-S-...

Well...here's a fact: I live in the neighborhood, in one of those residential units that you're saying didn't exist before the 1990s. It was built in the early 1900s. There's always been residential space in SOMA, and yes, a lot of it got knocked down to build these lofts. The live/work zoning changes were to allow rezoning of industrial spaces, but that doesn't mean that SOMA was exclusively industrial.

I don't know if "most" live/work units require a "business license", but I know that they weren't intended to be office buildings -- which is what you seem to be asserting. They were the "solution" to artists being pushed out of the city during the last major boom. And it backfired.

Nobody said SOMA didn't have residential property. It is a patchwork of different uses and zonings.

But you are simply* wrong that housing was destroyed or people were evicted to build live/work. As you now admit it was only built on industrial property. It is against the law to live in industrial properties - it simply not safe. However it is possible that people living illegally in industial space were evicted.

You stated that "a lot of people were evicted" to build live/work. Can you document even one example.

C'mon timr! You are letting you opinions corrupt your understanding of the facts. The world is just not so simple that everything will conform to preconceived beliefs. You need to actually check the facts not just make them up. Just admit you were wrong, move on and try not to do it again.

*-typo: simple->simply Thanks timr!

I didn't say that live/work lofts were created from industrial space. I said I live in an older, non-industrial property in SOMA, and that there are/were many examples of same. And while the live/work legislation was a compromise to allow rezoning of industrial space, that is not the same thing as saying that live/work lofts replaced only industrial spaces. That's not true.

Two seconds of google:

http://www.sfgate.com/news/article/PAGE-ONE-Loft-War-Raging-...

"At Shift Media Inc., a small but prosperous firm on Bryant Street in the Mission, half a dozen employees work in a high-tech bunker developing Web sites for some of the nation's biggest companies. Another 20 businesses with 50 more workers share the building....Late last year, a new owner bought all the buildings on the block. The tenants in one were evicted so that it could be converted to lofts."

My point is -- and always was -- that the "build up" mantra was heeded in the late 90s, and developers used the new leniency not to build housing for artists and low-income people, but to build offices and luxury housing. This will happen again.

As explained live/work was only built on non-residential land - residential units were created and none were destroyed. This is good for housing and only bad for industrial users no longer welcome in SF anyway.

You link does not support your claims. Shift Media is a business (ironically web dev) who lost their lease and moved - nobody lived there. The artist mentioned - who actually did lose her home - was living illegally in a warehouse. So unless you against enforcing zoning - not sure what we can do.

Live/work has been good for housing but way to small to have have an impact. Although I agree it did not live up to it's pro-artist hype. This was do to poor drafting (possibly intentionally or possibly just impossible - try defining "artist") by the SF BoS. Developers just followed the rules which were then changed a few years later. Similar thing happened in NYC at least twice (e.g. AIR in SOHO.

Today it is pretty much impossible for developers to build housing for low income people in SF without heavy subsidies. Land is just to expensive and building costs too high. Only huge easing of development regulations to make more buildable land available and costs lower would make a difference but you are against this as are most people in SF. So we should expect more of the same and the slow and steady gentrification will continue - it is totally predictable.

"As explained live/work was only built on non-residential land - residential units were created and none were destroyed."

No. You're wrong. The quote explicitly says that the developer bought out a whole block, and kicked people out of private residences, in addition to converting warehouses. This was not the only occasion where that happened.

We are just going around in circles timr. The Cronicle article (as usual) is pretty poorly written so it's not clear who was evicted. Given the regulation at the time concerning demolition, rent control and live/work I am confident no housing was destroyed and no legal residential tenants were evicted. To say the article "explicitly" says this is wishful reading. Oh well. We disagree about a fact.

One last link - here's the planning dept report on the original 1988 live/work law. Fits what I remember hearing about it's origins in the mid-1990s. Shows the difficulty we have getting the results we want even with the power to make the rules and tons of resources. I'm not optimistic.

https://archive.org/details/citywidelivework19sanf

So why doesn't the initiative say that? Why run a vote on requiring votes on all waterfront development height changes?