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Housing markets: The spectre haunting San Francisco

economist.com

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Re: Housing markets: The spectre haunting San Francisco

#51

Post by andrewfong »

jmckib wrote: post #38
andrewfong wrote: post #21

Earlier quoted context omitted.

> While building in SF proper would decrease rents there I'm not sure that's a given. Building lots of luxury housing in SF might actually decrease rent in Oakland and other parts of the Bay Area but not have an appreciable effect on rent in SF proper, at least in the short term. In fact, you could even argue that because of network effects and gentrification, building more luxury housing in SF would actually increas…

The point they make in the article is that the rich are going to move to SF anyway, but without available luxury housing they will have to buy up cheaper housing and have it remodeled. So you still get gentrification and network effects, but even higher prices for non-luxury housing than if you'd have just built more luxury housing in the first place.

> The point they make in the article is that the rich are going to move to SF anyway

That's what I'm actually unsure about. The article states it as a given without data or addressing regional effects. There are at least some well-to-do individuals who would purchase non-luxury housing in the North Bay, Berkeley, and the Peninsula rather than SF proper. You can obviously point to activity in places like the Mission and Bernal Heights, but at least some of the demand for unbuilt SF waterfront condos is going to go to the Oakland waterfront rather than something more inland. You can re-model your home, but you can't re-model your neighborhood.

Even if gentrification is a given though, the timing isn't. SF interest groups are pretty good at slowing things down (whether that's new development or a purchase and re-model). Presumably there's some difference in utility to the rich of buying luxury housing and buying non-luxury housing and remodeling it (otherwise there wouldn't be much demand for luxury housing). That's leverage the poor have in extracting some kind of negotiated benefit, like better public transit, education rights, re-distributive taxes, and so forth.

Re: Housing markets: The spectre haunting San Francisco

#52

Post by wyclif »

klipt wrote: post #41
ido wrote: post #37

Earlier quoted context omitted.

But there are plenty of existing cheap (relative to SF) cities that have all that sans the tech jobs and somehow they didn't become the new SV.

For example, Philadelphia is pretty cheap compared to the Bay Area, and already has an Ivy League university! Pittsburgh is even cheaper and has Carnegie Mellon - not part of the Ivy League, but better than most Ivy League universities for Computer Science.

Philly also has a burgeoning tech scene. Not of the same size, scope, or influence as SV, to be sure. But a lot better than it was even 5 years ago.

Re: Housing markets: The spectre haunting San Francisco

#53

Post by [deleted] »

Kalium wrote: post #30
epicureanideal wrote: post #27

Earlier quoted context omitted.

Many people would probably agree with you but my personal unsubstantiated opinion is that both can be bought. Want good schools? Hire good teachers (and bring in a class of workers who care about their kids' educations and help their children succeed). Want culture? Hire musicians, artists, etc. Other natural culture will come by building the right kind of environment (see The Timeless Way of Building) and bringing i…

People can and do try to build good schools with cold hard cash. However... when was the last time you heard Olin College mentioned in the same breath as Stanford? It's much, much easier said than done. It's still the work of decades and absurd amounts of money. Every freaking city of notable size in America has tried to dump money into getting their own local startup ecosystem going, and most of them have gone a lot…

[deleted]

Re: Housing markets: The spectre haunting San Francisco

#54

Post by marincounty »

wozniacki wrote: post #8

The top-voted comment for the same piece in the Economist explores the rent-seeking behavior of SF landlords, the origins and the conditions that gave rise to Prop 13 in the first place and proposes a set of (albeit, I admit, a bit far-fetched) solutions: I am one of these SF oligarchs, and I benefit from high rents of both types. Nevertheless, I have long called for an end to the rent-seeking. To me, the problem sta…

I don't think they will ever get rid of prop. 13.

I remember my conservative/blue collar father breathed a huge sigh of relief when prop 13 was passed. Before prop 13 property taxes were kicking older/retired/sick/middle income people out of their homes--yearly.

If you are lucky and can buy a home in the Bay Area--believe me forced retirement comes pretty quick.(This goes 10 fold for non-union workers). Getting old sucks! Having to get rid of a house you maintained for years because you can't afford the property taxes is criminal.

I was a child, but state and local taxes were completely out of control. Home owners listened to every angry word Howard Jarvis spewed out. Even as a child, I knew that angry man was right.

(To be completely honest; I still think property taxes are too high. All those bonds and temporary scare tactics add up. It's almost like people don't realize just because some politician's pet project looks good in the ballot box doesn't mean you don't need to pay for it? )

I know rents suck. I don't have any respect for people who make their living off renter either--yes, I think it a horrid way to make money! If I pissed off a Landlord, all that comes to mind is a image of Eddie Murphy behind bars on SNL--repeating, "I hate my landlord!"

That said, I don't think rents would go down if they got rid of prop 13. Why--because people are greedy bastards! Rah-rah Capitalism!

Re: Housing markets: The spectre haunting San Francisco

#55

Post by absherwin »

Kalium wrote: post #30
epicureanideal wrote: post #27

Earlier quoted context omitted.

Many people would probably agree with you but my personal unsubstantiated opinion is that both can be bought. Want good schools? Hire good teachers (and bring in a class of workers who care about their kids' educations and help their children succeed). Want culture? Hire musicians, artists, etc. Other natural culture will come by building the right kind of environment (see The Timeless Way of Building) and bringing i…

People can and do try to build good schools with cold hard cash. However... when was the last time you heard Olin College mentioned in the same breath as Stanford? It's much, much easier said than done. It's still the work of decades and absurd amounts of money. Every freaking city of notable size in America has tried to dump money into getting their own local startup ecosystem going, and most of them have gone a lot…

Average starting salaries:

   Stanford engineering: $74,467[1]
   Olin: $78,074[2]
The first is from (2010-2013) while the second is (2011-2014) which explains why Olin reports slightly higher numbers.

[1]http://www.nerdwallet.com/nerdscholar/grad_surveys/top-salar... [2]http://www.olin.edu/content/results/

Re: Housing markets: The spectre haunting San Francisco

#56

Post by tobias3 »

epicureanideal wrote: post #18

Why doesn't someone raise a VC fund to build another Silicon Valley somewhere else? I personally don't think it involves that much magic. Just build a brand new giant university in a relatively cheap place where you've bought up a ridiculous amount of land. Hire a bunch of Ivy League professors to teach there and establish departments. Market heavily. Around the university, build tons of housing for students. Further…

Something like that? http://en.wikipedia.org/wiki/King_Abdullah_University_of_Sci... (have never been there)

Re: Housing markets: The spectre haunting San Francisco

#57

Post by epicureanideal »

tobias3 wrote: post #56
epicureanideal wrote: post #18

Why doesn't someone raise a VC fund to build another Silicon Valley somewhere else? I personally don't think it involves that much magic. Just build a brand new giant university in a relatively cheap place where you've bought up a ridiculous amount of land. Hire a bunch of Ivy League professors to teach there and establish departments. Market heavily. Around the university, build tons of housing for students. Further…

Something like that? http://en.wikipedia.org/wiki/King_Abdullah_University_of_Sci... (have never been there)

Fantastic. Thanks for linking. That seems like something similar, although more university centric than business-and-residences centric. But it seems like a good example of a planned development done right.

Re: Housing markets: The spectre haunting San Francisco

#58

Post by TheOtherHobbes »

BurningFrog wrote: post #42
andrewfong wrote: post #21

Earlier quoted context omitted.

> While building in SF proper would decrease rents there I'm not sure that's a given. Building lots of luxury housing in SF might actually decrease rent in Oakland and other parts of the Bay Area but not have an appreciable effect on rent in SF proper, at least in the short term. In fact, you could even argue that because of network effects and gentrification, building more luxury housing in SF would actually increas…

> you could even argue that [...] building more luxury housing in SF would actually increase rents locally You can argue a lot of things. But the relationship between supply, demand and prices is very thoroughly studied. Facts are known! I have never heard of such an effect happening in the real world, but then again I'm no expert. If anyone can provide a reference to an example, I am willing to be enlightened.

Facts are only facts if they're actually factual.

There are numerous known exceptions to simplistic supply/demand arguments, including Giffen goods, Veblen status, lack of insight on either side, information arbitrage, and so on.

It's not impossible some of them apply to city housing markets.

What annoys me about arguments about housing is that housing is clearly a systems problem, not a one-or-two-variable optimisation problem.

Availability and rental prices depend on a complex network of interacting drivers, not all of which are purely economic, and some of which aren't even local.

Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.

Re: Housing markets: The spectre haunting San Francisco

#59

Post by yummyfajitas »

mc32 wrote: post #14

By San Francisco, I suspect they mean the San Francisco Bay area. While building in SF proper would decrease rents there, we can't have everyone who wants to move to the Bay Area live in San Francisco proper. Keeping this in mind, SF proper has a natural and inherent economic rent. So there is only so much pressure more building could relieve in SF proper. That said, I don't think many people would have much issue wi…

The area of Manhattan is 90km^2. The population is 1.62 million, double that of SF. The area of SF is 600km^2. So yes, while there is some theoretical limit to the population that could be fit into SF, we are not even remotely close to it.

We could triple the population of SF if we simply increased the density to that of Pune, a city with a small town feel that fits 2.5M people into 700km^2. (I.e., it's not remotely like Manhattan.) Pune has also experienced a tech boom and huge population growth, yet has not suffered from real estate issues the way SF does.

The secret? Our underpopulated areas look like this: https://pbs.twimg.com/media/B8cMeVTIMAEMyzk.jpg:large

Re: Housing markets: The spectre haunting San Francisco

#60

Post by blfr »

yummyfajitas wrote: post #59
mc32 wrote: post #14

By San Francisco, I suspect they mean the San Francisco Bay area. While building in SF proper would decrease rents there, we can't have everyone who wants to move to the Bay Area live in San Francisco proper. Keeping this in mind, SF proper has a natural and inherent economic rent. So there is only so much pressure more building could relieve in SF proper. That said, I don't think many people would have much issue wi…

The area of Manhattan is 90km^2. The population is 1.62 million, double that of SF. The area of SF is 600km^2. So yes, while there is some theoretical limit to the population that could be fit into SF, we are not even remotely close to it. We could triple the population of SF if we simply increased the density to that of Pune, a city with a small town feel that fits 2.5M people into 700km^2. (I.e., it's not remotely…

How is transportation and other city services there?

I have been listening to Econtalk episodes on urban growth[1][2] and apparently cities in the developing world experiencing quick expansion get completely clogged with traffic. The transaction costs are too high for developments to come to some agreement on providing city-wide transport. Some places don't have a proper sewage system, or rely on diesel power because they could not build an efficient power plant.

[1] http://www.econtalk.org/archives/2015/01/alex_tabarrok_o.htm...

[2] http://www.econtalk.org/archives/2015/03/paul_romer_on_u.htm...

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