The question I have has several parts, but fundamentally I wonder if the housing supply could even be increased enough to materially affect housing prices.
Not saying that the housing supply isn't excessively restricted, but how much can restrictions be decreased and how much difference would it make?
An analogy is building freeways to relieve traffic congestion. What regularly happens is that additional roads or adding lanes to existing roads provides temporary respite from traffic jams. But before too long the roads are jam-packed again, the problem isn't solved, just have more cars clogging traffic.
I suspect adding more housing won't lower housing prices, just bring some more people into the area. BTW this is what's happening here in Portland OR, where a building boom has been going on for years. The area population has increased, housing prices are still out of range for many people.
> fundamentally I wonder if the housing supply could even be increased enough to materially affect housing prices.
Yes, it can; SF built 5,000 units last year, a record, and rents and owner move-in evictions finally declined. At the very least, building more housing can prevent further large price rises.
> BTW this is what's happening here in Portland OR, where a building boom has been going on for years. The area population has increased, housing prices are still out of range for many people.
The question is what would happen if you didn't build the housing. I contend that the people moving in would outbid everyone for the existing housing stock, which would drive rent increases even more than rents are currently going up. It may be that the new housing is just keeping things at a base level.
Flipped on its head the logic here doesn't really make sense; destroying existing housing stock would be disastrous for rents and prices, it makes sense that building more would help prevent increases.
In Europe and the US a lot of these were built too.
A lot of them are now being torn down.
I'm not an authority on why, but I believe they tended to be crime and drug hot spots. I have also read of various health problems being associated with them (both physical + mental).
There was also a technical issue, caused by the fact that in the US, many of the buildings had windows which could not be opened. People didn't like that.
You might be right, possibly housing prices could be higher. If in fact prices have stabilized or leveled out (it's sure hard to get up to date info of that kind), it suggests there's an equilibrium between increasing population and housing availability. The more housing the higher the population will go for any particular average housing price point. Simplistically, price = population/amount of housing.
I think an issue is building new housing attracts an influx of population up to the point that housing is not too expensive, keeping the average price point about the same. Conversely, outflux of population would cause prices to plummet, which has happened in the past during recessions and high unemployment. In effect, housing stocks then are reduced by being removed from the market, but that's not exactly healthy for the community either.
> I contend that the people moving in would outbid everyone for the existing housing stock, which would drive rent increases even more than rents are currently going up.
That's possible, but unless people moving in are much wealthier than the people already there, the price could only rise a certain amount before no one could afford it and sales would fall off. That's similar to certain (expensive) condo prices around here, but still seems there's a ceiling effect.
Your comment inspires me to talk with some real estate folks I know, it's been a while since getting their perspective on the market.
> building new housing attracts an influx of population
You got this backwards: we build housing for the influx of population. People don't move to new places just to get a new house. They move for economic reasons, like they got a $150k software dev job in SF & don't want to commute 90 minutes each way, or they got evicted so the landlord could double/triple the rent.
Regardless of whether SF builds now housing stock or not, the population influx is already happening and has been happening for the last 10 years. The issue is, new, wealthier residents are pulling the market up and forcing existing, lower-income residents out to the periphery of the Bay Area.
> forcing existing, lower-income residents out to the periphery of the Bay Area.
but this should drive those who receive low income out of state, and thus lower the amount of worker available for low-income jobs, which in turn should drive up the wage?
That assumes an underdamped system (and I'd be really interested to know if that feedback is generally considered underdamped). In the end, can't we agree that things would stabilize or nearly stabilize in the appropriate equilibrium?
On another note, I (as a visitor) always figured the most visible effect of the dearth of affordable housing was the ridiculously early time the city shuts down. Madrid is the city I've spent the most time in, and there SF shutdown time would be right in the middle of, or before, dinner! I just figured that the early closing time facilitates closing up, cleaning, and getting home before the transit shuts down since no one working in restaurants or nightlife could afford to live in the city. I'm sure I'm not the first one to suggest that: is that theory generally discounted/disproven?
I'm not sure I see the correlation. US cities in general start rolling up the sidewalks earlier than is often the case in Europe. Dinner times in particular tend to be earlier. 7pm is a fairly typical peak sitting time.
As a counter-example, Manhattan is an atypically late night city for the US [that also has very high housing prices]. You could argue that it also has 24 hour mass transit to cheaper areas. But, in general, tons of US cities that shutdown fairly early have low housing prices.
If you work in the Financial District and live in Pittsburgh, then you have to be on BART no later than 10:30pm to get home. Assuming a 45min clean-up and some slow diners keeping the floor occupied until 9:30, I would arrange for a 9pm closing time.
With the same situation, but a 30 minute commute and a 24h transport system and staff happy to get home around the same time, you could set the closing time at 10:30-11pm.
> tons of US cities that shutdown fairly early have low housing prices
Ah, are they low-density? I have lived places with very fast commutes and low property prices that would shut down by 7pm, since it was deep in the country and thus there was stuff-all foot traffic once people stopped working.
Agreed that Europe is a bad basis for comparison; it's only what I had, not what I would prefer to use.
I can't substantiate this, but it seems that there is a small number of US cities where it is difficult to have cars, and easy enough to use transit, that driving is prohibitive for people in these low-paying jobs. I say this having grown up in a rural area where having many cars around a home was a reliable sign of poverty, not wealth. In most US cities the amount of cheap or free parking is staggering.
California is big, and moving costs can trap people in places they can barely afford. Fronting up the $600 to rent a U-Haul & take it to Nebraska can be a mammoth challenge. Plus, they need a job at the other end.
It's more likely that they would move to unregulated housing or live on the streets.
Please check your comment about BART schedules. BART guarantees a ride to your destination from any point in the system if you get into a station by midnight. The last train from Embarcadero station to Pittsburg leaves Embarcadero at 12:26 AM.
That's nice, but you were commenting on workers who would potentially need BART to get home after being released from work at a late hour. We are able to do so.
Oh, I based my times assuming that people didn't live at the BART & needed to catch a bus connection… but I guess driving is relatively pleasant once you get away from the city & thus you can use a car instead.
If you consider the fact that developers have been building at near peak-Dubai paces in Seattle for salable prices that are much lower than the bay area, I'd say you're worried about nothing of consequence. If you merely let them, they'll build until they can't cover their costs.
I don't have the data at my fingertips, but IIRC Seattle housing prices were historically lower than SF, but higher than Portland OR. I think that could make it hard to assess the effects of bringing more housing on line in Seattle, at least comparing to SF would be misleading. However the history of housing costs in Seattle might be informative.
> If you merely let them, they'll build until they can't cover their costs.
The problem in the building industry is that financial commitments are made years in advance, meaning even if things are in a slump, units may be built anyway because the project was on track to happen well before the slump came about. It's also occurred that units are constructed just before a slump hits and as a result the completed units sit empty, the developer goes bankrupt, etc. Overbuilding can and does happen and it can take many years, even decades for a property to finally break even.
>The problem in the building industry is that financial commitments are made years in advance
>Overbuilding can and does happen and it can take many years, even decades for a property to finally break even.
And in that, the building industry is no different from airlines, oil refineries, auto makers, chip fabs or any other capital intensive industry. Why should we privilege the building industry over the others?
> I don't have the data at my fingertips, but IIRC Seattle housing prices were historically lower than SF, but higher than Portland OR. I think that could make it hard to assess the effects of bringing more housing on line in Seattle, at least comparing to SF would be misleading. However the history of housing costs in Seattle might be informative.
Not sure why you think historical prices matter one bit. Seattle is proof that you don't need San Francisco prices to continue building. Developers from LA and SF can and regularly do build in Seattle where prices are lower but regulation is less obtuse, and many times they end up using Californian general contractors who prefer higher utilization over higher rates with more downtime.
> The problem in the building industry is that financial commitments are made years in advance, meaning even if things are in a slump, units may be built anyway because the project was on track to happen well before the slump came about. It's also occurred that units are constructed just before a slump hits and as a result the completed units sit empty, the developer goes bankrupt, etc. Overbuilding can and does happen and it can take many years, even decades for a property to finally break even.
Overbuilding may occur, but units don't sit empty. They always end up renting out, until the rent is so low that they can't cover variable costs like maintenance. If the rents aren't high enough to cover debt servicing, they'll still rent out...the owner will go bankrupt, they'll lose the property and the lender will take a loss, but the property will be sold by the courts at a price where someone can make money off the current rents.
Despite what you may think, developers will continue developing if prices move downward. Downward price movements primarily impact landowners and lenders, not developers. If developers see downward price movements, they start bidding less on land.
Does that count as near-Dubai speed? Amsterdam is building 50,000 appartments over the next 10 years, and that's considered not enough. But there's simply no space to grow here. These are the last few empty corners of the city being filled in.
In order to increase the housing supply "significantly", you need to increase zoning limits in >10% of the relevant population-weighted land area. However balkanization makes it impossible to do this through a single political entity.
The solution IMO is a "trigger" law that will increase zoning heights in a suburb when the nearby suburbs pass similar laws. This prevents any one town from becoming gentrified if they raise their growth rate above the regional norm.
The biggest impediment to building in CA isn't zoning laws; most areas are zoned for way more density than they are built to.
As an example, Habitat for Humanity wants to build 6 stories of below-market-rate condos in Redwood City, which complies with zoning codes, but are being opposed by a lawyer who lives on the block, because it's "out of character" with the other buildings in the neighborhood.
It's a byzantine approval process that includes City Councils who are 100% responsible for local housing decisions, and are elected and responsible only to current city residents. Zealous Planning Commission boards who consider things like shadows and wind when making decisions, EIR (environmental impact report) appeals, CEQA lawsuits, a constitutional housing amendment (Prop 13) that incentivizes existing homeowners to oppose new development, and more...
(It help if more areas were upzoned, but it's not the reason by any stretch)
>Zealous Planning Commission boards who consider things like shadows and wind when making decisions, EIR (environmental impact report) appeals, CEQA lawsuits, a constitutional housing amendment (Prop 13) that incentivizes existing homeowners to oppose new development, and more...
On the other hand, you don't want to end up with this[1], so considering things like shadows and/or view obstruction has some merits.
Portland is unique among similar cities in that large tracts of undeveloped land became available for housing construction in the last several years. That means thousands of units will be available in the near future, in addition to the large number recently added to the inventory in the metro area. I'm guessing that would well exceed the 10% zoning limit increase you mention.
I haven't checked housing costs recently, but anecdotal data (from people looking for apartments, etc.) is that prices are still through the roof (so to speak). It could be prices will decline later this year or into next year, but pretty soon the supply of new housing will cease to increase so rapidly.
It remains to be seen what happens to housing costs. I could be all wrong, but I'll predict there won't be a significant decrease despite the rapid pace of development.
Portland is the cheapest city of its size on the West Coast excepting possibly Sacramento (which exports its richest people to Tahoe/Napa/SF). If you ask me the reason people there complain about costs is that the wages aren't high and it used to be even cheaper.
I had a friend a few years ago who -- unemployed -- drove across the country to Portland, took a job fixing inventory at a music store, and got a room within walking distance of the train. Try pulling that off in the Bay Area!
The argument is, if the traffic is just going to expand to fill the new roads we build, then why not build more densely instead and help people have shorter commutes. Also some arguments around vicious cycles of building more roads, leading to more traffic, leading to demand for more, bigger roads, etc, vs. supporting biking/walking/public transit
The problem with density is that it assumes that housing will be efficiently allocated so it reduces people's need to commute. Unfortunately there are a lot of other factors involved and density in some cases ends up making traffic worse.
> What regularly happens is that additional roads or adding lanes to existing roads provides temporary respite from traffic jams. But before too long the roads are jam-packed again, the problem isn't solved, just have more cars clogging traffic.
I've never seen proof of this, do you have any studies?
I know it's blah blahs law which I can't remember but outside of academia I never see a real world case.
If you just mean they fill again from growth well that makes sense. Without building them they would be even worse.
I've never see a cited case where improving infrastructure makes everyone worse off.
There are some references in the Wikipedia article on Induced Demand. Most of the cited cases deal with heavily trafficked roads being removed and demand decreasing as a result.
I find the examples on wiki a little sketchy and some are flat out anecdotal.
I do agree it will increase the total traffic as you improve the system but the concept it can ever make it worse or the same in the entire system doesn't make sense.
Peoples need to travel by car is not totally fluid. Jobs stay the same and many people catch public transport for reasons other than convenience.
I'm not sure I've heard the claim that adding capacity actually makes traffic worse other things being equal. It's more that, as you say, people will time-shift, take alternate transportation, take a different route, move, change jobs, etc. to keep a commute under a particular time.
It's sort of another version of the "work expands to fill the time allotted to it" maxim.
And if it's not commuting we're talking about, some people will just choose not to drive into a city for dinner, etc. because it's too much of a hassle.
CA has been constricting the supply for the last 30 years, so it's not going to be fixed overnight! I guess it would take 10+ years of non-stop building to get housing anywhere close to the nationwide level, just a wild guess.
US population has continued to grow so individual new roads or housing will never be enough on their own. It's the rate of new roads and housing that's important. Consider the Big dig was extremely expensive and made significant long term impact, but another one would still help.
Not saying that the housing supply isn't excessively restricted, but how much can restrictions be decreased and how much difference would it make?
An analogy is building freeways to relieve traffic congestion. What regularly happens is that additional roads or adding lanes to existing roads provides temporary respite from traffic jams. But before too long the roads are jam-packed again, the problem isn't solved, just have more cars clogging traffic.
I suspect adding more housing won't lower housing prices, just bring some more people into the area. BTW this is what's happening here in Portland OR, where a building boom has been going on for years. The area population has increased, housing prices are still out of range for many people.