This article's position in this part strikes me as mostly rubbish:
... Housing affordability activists like to point out that most new construction is for luxury housing, meaning that supply of non-luxury units is not growing by very much. Others love to say that price declines have historically gone hand in hand with falling construction.
These arguments are both nonsense. The latter point gets causation the wrong way around; given an unexpected decline in demand due to financial crisis or other shocks prices fall and interest in new construction dries up until existing inventories are cleared. The former point misses the fundamental fungibility of housing. When new construction of luxury units lags, the very rich buy up older housing stock at exorbitant prices and pay to have them redone. You see this in London, for instance, where literally every house in the city is now being rehabilitated, including those that were rehabilitated last year. Residents have to actively shoo away the builders trying to erect scaffolding, on the assumption that the owners will be wanting an extra floor or two on their house. It is a headache. There is a team of wildcat subcontractors digging us a new wine cellar as we speak. The point is that if demand for high-end housing is not satisfied with new construction, that demand will flow to existing supply, putting upward pressure on prices right across the housing stock.
Yes the rich will buy older housing stock if they build new affordable housing rather than luxury housing but the affordable housing should be higher density producing more homes on the same land so there will still be affordable houses freed up even when the rich have displaced others into them.
Im no economist, but ive observed two things in SF; there are a ton of new, high-end high-rise apartment buildings being built in SF right now. (See all the cranes)
These will have high rents to pay for their high construction costs.
All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces.
All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces.
Don't be absurd. Owners are already well aware of the fact that there are rich Google engineers beating a path to their door, and are glad to charge said engineers as much as they think they can get away with. Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock.
History disagrees with your theory. I moved back to the bay area in 1997. There have been thousands upon thousands of new homes and apartments built since then. I have yet to see one drop in rental prices.
If there are thousands of units built, but demand increases by tens of thousands, prices are not going to go down.
NYC is building at a much faster pace than SF, but according to the census on the order of 300,000 people moved into the city between 2010 and 2013. That is exerting huge demand pressure on prices even with the new buildings going up. The only way for prices to go down would have been adding housing stock for more than that increase - which didn't happen.
EXACTLY my point. Which invalidates FennecFox's comment where he said:
"Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock."
No, that's not your point, or at least it wasn't. Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false. High rents cause construction, not the other way around. The thing that makes San Francisco more expensive is advertising revenue collected by Google and Facebook or whoever, paid to software engineers and then to landlords.
Add something making it a lot more expensive and something making it a little cheaper, and you still get "quite a bit more expensive", go figure. Apparently I need to spell that out! Truly this thread is a bastion of intellectual excellence.
"Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false."
No, it does not. Look at the actual cost of rents in SF over time.
You're arguing that adding these properties is causing competition and in addition, "google engineers" could migrate from housing in the mission to these new luxury condos, thus freeing up the mission places for (presumably lower rent/income) others...
I gaurantee you this will not happen.
Assume that some googler DOES move out from their vitorian apt in the mission to a glass tower near twitter... their new rent will be higher than what they paid in mission - and the apt they left will charge a higher rent (or possibly equal) to what they paid.
My landlord has 85 properties she owns and rents. She speak of the $3,300 single-room rents she is getting in SF with glee.
Assume that some googler DOES move out from their vitorian apt in the mission to a glass tower near twitter... their new rent will be higher than what they paid in mission
And when a thousand Google engineers move out of the Victorians into the new glass high-rise, there will be a thousand vacancies, and a thousand fewer engineers on the open-house circuit trying to outbid each other in the negotiations. (New Google engineers can also just move to the glass apartments straight away for an approximately-equivalent effect). This isn't that hard to reason about, honestly.
You ARE probably right about the place they leave charging higher rent than it used to be. On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P
On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P
I am pretty sure you are confused as to what you believe my point to be, considering you just restated what I have been saying.
Rents in SF will keep going up until another bubble bursts.
Okay. I see you technically have a point, and maybe I should be stupidly pedantic again:
You know the numbers that show up on Craigslist when you search for a given set of apartment configurations in any one particular neighborhood? New housing, even luxury housing, will cause these numbers to go down and not up. These numbers are also what most people are talking about when they talk about "the rent is too damned high" and that's also the number that everyone in the market for a rental actually cares about.
Yes, rents will almost certainly keep going up, that's true, because the new construction in San Francisco is pathetically small. But prices for a new rental of each and every extant apartment will be lower than they would if there were no new construction at all (or if there was negative construction).
A lot of that new construction is for more office space. This city generally values creating more room for jobs than housing and that only makes the problem worse since the people filling those new work spaces are going to be looking to live near work.
Comments
This article's position in this part strikes me as mostly rubbish:
... Housing affordability activists like to point out that most new construction is for luxury housing, meaning that supply of non-luxury units is not growing by very much. Others love to say that price declines have historically gone hand in hand with falling construction.
These arguments are both nonsense. The latter point gets causation the wrong way around; given an unexpected decline in demand due to financial crisis or other shocks prices fall and interest in new construction dries up until existing inventories are cleared. The former point misses the fundamental fungibility of housing. When new construction of luxury units lags, the very rich buy up older housing stock at exorbitant prices and pay to have them redone. You see this in London, for instance, where literally every house in the city is now being rehabilitated, including those that were rehabilitated last year. Residents have to actively shoo away the builders trying to erect scaffolding, on the assumption that the owners will be wanting an extra floor or two on their house. It is a headache. There is a team of wildcat subcontractors digging us a new wine cellar as we speak. The point is that if demand for high-end housing is not satisfied with new construction, that demand will flow to existing supply, putting upward pressure on prices right across the housing stock.
Yes the rich will buy older housing stock if they build new affordable housing rather than luxury housing but the affordable housing should be higher density producing more homes on the same land so there will still be affordable houses freed up even when the rich have displaced others into them.
Im no economist, but ive observed two things in SF; there are a ton of new, high-end high-rise apartment buildings being built in SF right now. (See all the cranes)
These will have high rents to pay for their high construction costs.
All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces.
The rents in SF right now are absolutely insane.
Don't be absurd. Owners are already well aware of the fact that there are rich Google engineers beating a path to their door, and are glad to charge said engineers as much as they think they can get away with. Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock.
History disagrees with your theory. I moved back to the bay area in 1997. There have been thousands upon thousands of new homes and apartments built since then. I have yet to see one drop in rental prices.
Your statement only looks good on paper.
If there are thousands of units built, but demand increases by tens of thousands, prices are not going to go down.
NYC is building at a much faster pace than SF, but according to the census on the order of 300,000 people moved into the city between 2010 and 2013. That is exerting huge demand pressure on prices even with the new buildings going up. The only way for prices to go down would have been adding housing stock for more than that increase - which didn't happen.
Maybe you missed it but rents dropped in the early 2000s when demand decreased after the first internet bubble popped and were flat in the mid-2000s.
That is because even as supply rises, demand continues to increase above supply.
EXACTLY my point. Which invalidates FennecFox's comment where he said:
"Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock."
No, that's not your point, or at least it wasn't. Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false. High rents cause construction, not the other way around. The thing that makes San Francisco more expensive is advertising revenue collected by Google and Facebook or whoever, paid to software engineers and then to landlords.
Add something making it a lot more expensive and something making it a little cheaper, and you still get "quite a bit more expensive", go figure. Apparently I need to spell that out! Truly this thread is a bastion of intellectual excellence.
"Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false."
No, it does not. Look at the actual cost of rents in SF over time.
You're arguing that adding these properties is causing competition and in addition, "google engineers" could migrate from housing in the mission to these new luxury condos, thus freeing up the mission places for (presumably lower rent/income) others...
I gaurantee you this will not happen.
Assume that some googler DOES move out from their vitorian apt in the mission to a glass tower near twitter... their new rent will be higher than what they paid in mission - and the apt they left will charge a higher rent (or possibly equal) to what they paid.
My landlord has 85 properties she owns and rents. She speak of the $3,300 single-room rents she is getting in SF with glee.
And when a thousand Google engineers move out of the Victorians into the new glass high-rise, there will be a thousand vacancies, and a thousand fewer engineers on the open-house circuit trying to outbid each other in the negotiations. (New Google engineers can also just move to the glass apartments straight away for an approximately-equivalent effect). This isn't that hard to reason about, honestly.
You ARE probably right about the place they leave charging higher rent than it used to be. On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P
On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P
I am pretty sure you are confused as to what you believe my point to be, considering you just restated what I have been saying.
Rents in SF will keep going up until another bubble bursts.
Okay. I see you technically have a point, and maybe I should be stupidly pedantic again:
You know the numbers that show up on Craigslist when you search for a given set of apartment configurations in any one particular neighborhood? New housing, even luxury housing, will cause these numbers to go down and not up. These numbers are also what most people are talking about when they talk about "the rent is too damned high" and that's also the number that everyone in the market for a rental actually cares about.
Yes, rents will almost certainly keep going up, that's true, because the new construction in San Francisco is pathetically small. But prices for a new rental of each and every extant apartment will be lower than they would if there were no new construction at all (or if there was negative construction).
A lot of that new construction is for more office space. This city generally values creating more room for jobs than housing and that only makes the problem worse since the people filling those new work spaces are going to be looking to live near work.