> It’s all the newcomers, some say. They’re driving prices up and they’re pushing long-time residents out.
Well, there has been a massive influx of investment [1] in the Portland housing market, driving up overall prices. While this wouldn't be happening if people didn't want to move to Portland, simply blaming it on 'Californians' seems to be a bit naive.
The fundamentals that create an opportunity for speculative investment is a lack of supply and an excess of demand. It's very rare that investment itself, in a vacuum of demand, will result in a price surge. Sure, it can happen, but the basics is that Portland is attractive and, like San Francisco, does not build enough to support the new demand.
It sounds like you're saying that investment alone doesn't make a bubble. But investment (or speculation) is another kind of demand, and it's well known that speculation can create bubbles when investors predict future demand that turns out not to exist. So I'm not really sure what you're getting at?
Real demand for housing is here in Portland and in San Francisco. It's not created by real estate speculation. Real people, by the thousands, come to these metro areas, faster than the housing stock grows to accommodate them.
Before asking ourselves if price surges are created by the smokes and mirrors of speculation, a second-degree hypothesis, we ought to look at the simpler hypothesis first: is there a real demand for housing? Yes, there is. Is the housing stock growing fast enough to satisfy that demand? No, it is not.
The cash buyers from SF to Cupertino to Pleasanton are coming from China. Same in Vancouver, for example.
Why not do what the new Muslim mayor of London is proposing -- stop the foreign investment property buyers. They're the biggest reason the local population can't afford housing in both the Bay Area and London, even for households with two adults making tech salaries.
This seems a really messy and discriminatory solution when compared to a far more elegant one: a land-value tax, which would reduce the ability for a property to serve as an investment vehicle.
CAVEAT:
LVT could not be applied unless Prop 13 were first repealed.
"But there has been pushback on these efforts, too. Many Portlanders say they don’t want more density in their neighborhoods, that they oppose big housing complexes and in-law units in neighbors’ backyards. (There is a similar attitude evident in some San Francisco residents’ responses to that city’s housing crisis.) Some neighborhoods are actually trying to downzone to decrease density."
Good economy, affordable housing, NIMBYism: pick two.
probably not. The only real solutions are discouraging enough people from moving that population remains static over years, or making it super easy to build as many units as needed to cover the influx of new residents.
Anything else will just result in downtown portland and the nearby areas becoming unaffordable for anyone who isn't rich.
A truly odd article. The posited question is whether Portland can avoid making SF's mistakes, but then it goes on to lament that Portland isn't committed to the same "progressive" housing policies that SF is (rent control, "affordable housing" minimums, stronger lease termination regulation). In fact, I don't see anywhere that SF's mistakes are even enumerated, so maybe the headline was just written by editor who wished that the writer had explored them.
It almost leads you to suspect that these policies have been an utter failure in San Francisco. A rational person might suppose that to avoid the fate of San Francisco, that Portland should try something different. Perhaps something that recognizes that supply and demand are real, and that setting price controls at a level below the market-clearing price will lead to shortages.
They have low housing prices in Detroit. Maybe they should emulate Detroit. Seriously, high housing prices might be a sign that people really want to live somewhere. If you make more places like San Francisco, where people actually want to live, maybe prices in San Francisco would fall a little since it wouldn't be so special of a place anymore.
…what? They call it "supply and demand" for a reason, because prices are affected not only by desirability but also by availability. Maybe prices are high because San Francisco is just doing a really terrible job at building enough units to keep up with demand. Maybe it's because many people want to live there.
Or… if we want to be really crazy… we could say it's a combination of both factors.
So you want to increase availability and drive down price? Recreate what makes San Francisco so great somewhere else and have everyone who wants to live in San Francisco move there. Heck, you could start with Oakland.
The comment seems disingenuous. But many of the things people like about SF are difficult to copy. Perhaps it would be easier to build more units in SF.
Sorry about the snarky tone, but I am a little annoyed at the build more housing crowd because they are uncreative. It's kind of like the people who think education and health care will be better if we just spent more money on them. The people who, before Elon Musk, who wanted to get humans to Mars by just increasing NASA's budget and buying more 100 million dollar disposable rockets from ULA.
The problem is is that no one wants to get to the heart of the matter because it's just too hard or maybe even counter-intuitive. More money being spent on development, rising land prices and so forth is something that fills everyone's pocket and ignores whatever actual underlying problem exists in the larger system. It's a process where every additional dollar just leads to diminishing marginal returns and eventually negative marginal returns once the city gets so full that everyone's quality of life is damaged.
Yeah, just color me a little confused. I'm not sure what underlying problem you are talking about here.
The fact that people want to live in some cities more than others is not a problem in and of itself. The fashion of the times will dictate whether people want to live in suburbs, rural areas, or more densely packed urban centers. Refusing to build housing because you don't want developers to profit from it deals serious harm to the people who can't afford to live here because supply is short. Saying that we should make other cities desirable doesn't work because it takes too long by comparison—because of the high political and social complexity of urban planning.
You say that development damages quality of life, but I'd argue that denser cities have higher quality of life, subjectively speaking, and if you disagree then maybe you want to move to a less dense city. This is exactly what everyone else is doing—moving to improve their quality of life. That and voting for NIMBY policies which make it hard on people who move to your city.
I've lived in Portland since the 1980s, and the same forces that made life better for those who live here pushed out the disadvantaged, the black, the artist, the musician, the immigrant. It sucks but protesting development or throwing bricks at CATs is only going to make the problem worse.
If the amount that housing costs increase above inflation is mostly determined (in the general area at least) by a combination of the economy and available units, then yes Detroit is evidence of that relationship as well. I do feel as if Portland has generally learned from San Francisco and is more willing to allow for housing development, and to be allowed to build up.
Nobody believes or has claimed that supply and demand are "not real" and reducing the housing crisis to "Econ 101" is highly disingenuous. It ignores non-economic factors (environmental, cultural) that are contributory. Everyone wants to wave a magic wand and fix housing, but until we acknowledge that such a wand does not exist (and that the situation far exceeds Econ 101) we will continue having the same unproductive conversations.
It's very obvious that many of the people and organizations active in San Francisco politics do not understand economics 101. They say some really stupid things, and voters believe them.
There are certainly productive conversations to be had within a rational economic paradigm, but too many of the participants reject the paradigm, and therefore no productive conversation with them can occur.
Here is another paper, by the founder of the Coalition of San Francisco Neighborhoods and the Council of Community Housing Organizations, which denies that supply and demand operate in the San Francisco housing market: http://www.sfhac.org/wp-content/uploads/2014/07/calvin-welch...
It's incredible what you can conclude when you take pieces out of context. The first article says suppy and demand is not enough to explain the complexity of housing vis-a-vis the demographics that demand it. The paper you linked expands on this. It's clear that you want a solution. We all want a solution. But there isn't one solution. There are competing interests at play, and smugly declaring that anyone who denies your oversimplification is saying something "stupid" or "irrational" only highlights what little information you have to add to the discussion. I'd much rather see a point by point rebuttal to the studies done rather a simple, "it's not confirming my belief about economics so must be utter bullshit." Yawn.
> Nobody believes or has claimed that supply and demand are "not real" and reducing the housing crisis to "Econ 101" is highly disingenuous.
I responded by providing links demonstrating that there are indeed people active in SF media and politics who need an econ 101 lesson, which rebuts your assertion that "nobody" does. There are many other articles by SF activists that are similar to the links I provided.
There is nothing disingenuous about "reducing" the housing crisis to econ 101 when many of the people involved clearly need an econ 101 lesson.
That's a pretty meaningless statement. Just because you can explain something with the concepts in covered in econ 101 doesn't mean that you understand it after econ 101.
Few people who understand even basic economics are surprised that a mid-sized US city can't keep up with the demands of being a center of the most successful industry of this era. Nor that people who aspire to be the next Steve Jobs are willing to pay more than hippies who would rather not work.
The reason it is an advanced economic question isn't because that the economics is complicated, but because the real life factors are. If you think it's simple and you're convinced you're right you should go be an analyst and make a lot of money.
Those competing interests feed into the supply and demand curve. Those who don't want new development, for reasons of neighborhood character, density, whathaveyou, increase demand for not building. Those who claim they want new building, but only if it's "affordable" (whatever that actually looks like when it's built, I'm unable to determine a solid answer on) have high demand on a specific kind of housing, and low demand on another kind. People who want luxury residences would be satisfied by a different kind of supply than those who want low-income housing.
Absolutely they do. This is precisely the point I've attempted to make -- if you can find me an Econ 101 book that takes into account the particular political predilections of individual San Francisco neighborhoods, I'll donate $20 to the charity of your choice.
Until then, I contend the Econ 101 meme is totally insufficient. There is no "just build housing." There is only a complex intersection of need, desire, and will that changes by the seasons.
Let's acknowledge those and work towards a compromise instead of calling the other side stupid. That argument is lazy.
There's the opposite myth that abounds too -- that building "luxury" housing is the silver bullet that will make housing affordable.
The reality is that even loosening zoning laws to pure anarchy will not make a big enough impact on supply vs demand to make housing as affordable as the government mandated affordable housing lottery creates. And the other reality that rarely gets discussed is that the city's ancillary infrastructure: water/sewage/police/transportation/EMT/fire -- must be accounted for with every additional housing unit.
But it's all just supply and demand, right? Just add more supply and everything will be okay?
San Francisco does not want to be Hong Kong. San Francisco does not want to be Manhattan. What people actually want for their city -- that is, the desires of the people that already live there -- will always trump the demands of people who wish they could live there.
But, alas, the Econ 101 meme is too convenient not to endure in every discussion.
The econ 101 meme is convenient because it is true, and because it is very obvious that many people involved in the discussion don't understand economics.
> San Francisco does not want to be Hong Kong. San Francisco does not want to be Manhattan. What people actually want for their city -- that is, the desires of the people that already live there -- will always trump the demands of people who wish they could live there.
The people who live there are getting what they voted for -- restrictive housing policies and rent control. The voters caused this situation. They just don't understand enough about econ 101 to realize it. If they did, they would change their minds.
People want to move to SF, and bring their money and their labor power with them, and nobody can or should prevent that -- most cities would welcome that kind of investment. The city can accommodate their need for housing, or not. If the city does not accommodate the newcomers' need for housing, it is the existing residents who will suffer most, because the newcomers are generally richer than the existing residents and are better able to compete for housing.
Moreover, in the zero sum market that the SF housing market has been turned into, the newcomers have to be richer that some of the existing residents almost by definition. How else would they be able to move to San Francisco?
There is almost no evidence that rent control is the primary, secondary or even tertiary cause of San Francisco's woes. As https://medium.com/newco/a-guy-just-transcribed-30-years-of-... shows, the long-term price curves barely change in 1979 when rent control came into existence.
The three things that matter are the amount of housing, the number of jobs there are, and the total salary paid for those jobs. See the article for the formula. I am sure that a similar formula applies in San Francisco. The result is that having or not having rent control is immaterial. Being unwilling to build housing is a problem.
and ties up existing inventory. I know people here in SF who have an apartment, and own a house or two outside the city, but will never give up their apartment because its just so cheap. Rent control definitely ties up supply.
The evidence presented in the article you linked is really not strong enough to support your conclusion with reasonable certainty. It's using a massive "post hoc ergo proper hoc" fallacy to prop up a weak argument.
"Ties up supply" is also a statement that is not necessarily connected to "increases price". I'm not entirely clear on the economic theories behind rent control, but from what I understand, it affects availability more than it affects price.
I don't think you claim rent control has no impact from that data. What would rents done without rent control? We'll never know. Maybe the increases would have flattened out?
One can imagine what would have happened without rent control. Prices would have gone up for everyone and people would have left, increasing the supply. I'm not saying that's a desirable outcome, or necessarily a large impact, but artificially keeping rents low for some people would logically reduce supply and increase rents.
I agree that economic theory says that rent control should increase rents. But is it a large or small impact? This is harder to answer.
The available data suggests that the impact is relatively small compared to other factors. Small enough that the average annual increase before and after was almost unchanged.
In fact theory says that rent control should mostly matter because of reduced incentives to build more housing. But other policies (like zoning laws) more directly reduce the ability to add capacity, and so should matter more.
Supply/demand curves say that creating shortages will drive up rates. If you rent control everything, you will create black markets at much higher rates.
Other than that, you're right. Except that in the case of San Francisco, most of the city is under rent control. However the rate resets to the current market rate every time a tenant moves out and another moves in. If you assume regular renter turnover, then rent control changes the short-term path but does not necessarily change the long-term trajectory of rents much.
Reality says at least one of three things will be true. You can be undesirable to live in, build lots of housing, or have rising rents. San Francisco tries to avoid all three, and does less to prevent rents going up than the others so that is what happens.
Your modus ponens is my modus tollens. People want to avoid their rent going up over the long run, so they react to rent controls by increasing their willingness to commute instead of moving.
You can blame those policies all you want, but they were bought in for a reason. San Francisco's problem was that it grew too fast, and that is difficult for any city to handle.
Portland resident here. Ballots are due today for our local elections. Almost every single candidate for local office is making vague promises that sound a lot like the San Francisco approach. It will be interesting to see how it all plays out.
We have zoning restrictions that mean there aren't enough multi family and apartment buildings, and now the old bungalows are starting to get replaced with larger "modern" houses.
Sometimes I think about how much better the city would be, if the leaders over the 20th century hadn't been so racist.
It turns out the old redlined areas are where all the big apartment buildings are going in. This has contributed to backlash against development, as has the pace of change along main streets in other parts of town.
As a result, rents have been rising faster than income for a while here. And a lot of folks on the ground blame the new development for the rising rents. In my book if we had been developing for decades at a steady pace all along, and hadnt engaged in racist redlining and relocating policies, Portland would not be seeing the price shocks we're seeing now, and we would have a more vibrant community.
Also there is a macro thing here where Portland has joined the west coast real estate market, so long time low prices have a higher new normal in the last three years.
Sure. Places like Detroit are very affordable for "weird people" looking for a challenge. It's a shame that cities like San Francisco have decided to raise the drawbridge on future inhabitants and set their current density rate in stone.
San Francisco is more in its people than its buildings. By constricting the supply of housing, they've inadvertently pushed out the very 'weirdos' they were trying to keep; it's pretty easy for the rich to outbid the poor.
In terms of rights and law - of course it's right. If you don't own your home, then you don't have a legal right to stay there - apart from a few short term eviction restrictions.
The problem this article (and others) make is assuming that "progressive" policies are good for housing affordability. For example, the "There are limits to urban white liberalism" lament from the Community Alliance of Tenants. He's apparently upset that people don't follow through with their politics, but, as far as I can tell, there's no requirement that, in order to be liberal, you have to support specific housing policies.
Maybe some of your liberal friends are in favor of ACTUAL affordability, rather than a litmus test of policies that you need to support to get street cred, but don't actually do anything for housing?
It always takes longer than you'd think. I remember thinking housing in the SF bay area was unsustainably expensive in the late '90s, and it took another decade for the wheels to come off.
We're getting past that. Look at TWTR stock for the last year.[1] Twitter tried to pull a Myspace - the number of users started dropping [2], so they increased ad density to try to get revenue up. It's not working.
Twitter is so highly visible in SF that when they tank, it will shake up the real estate market.
I dunno... it's easy to say "someday the price will decline" but without putting a specific timestamp on it, it's a pretty meaningless thing to say. There are so many idle naysayers on the internet, I have a hard time taking seriously the predictions of anyone who isn't betting a significant amount of their own money that they're right.
That's not a productive attitude. (1) There will be another boom, (2) with more affordable housing, you could stabilize the population during pullbacks instead of people moving out.
I'm probably being dense, but I don't understand what you're saying. Portland offers a luxury apartment at a lower price than Seattle, but you don't expect well-compensated people to move to Portland for that reason?
As a long-time Portland resident I've seen how the city has grown. It's said Portland is a "hot destination", inspiring a continuing influx of new residents. In any case, we knew increased density was inevitable given state-wide stringent constraints on sprawl via urban growth boundaries. A building boom has been going on for some years now with little sign of abating.
Despite the construction happening all around, housing prices have been rising, quite a hot topic here now. There's a political problem insofar as many are convinced that elected officials didn't force developers to create the number of lower cost housing units as promised when the building projects were proposed to the city.
Furthermore many citizens believe that overall the governing bodies have also not looked after the interests of the community, for one thing, allowing real estate developers to do what they want regardless of effects on neighborhoods. There is also dissatisfaction with deterioration of infrastructure, massive increase in traffic congestion, demolition of historic structures, loss of small businesses and overall reduced quality of life.
Whether this replicates San Francisco or Seattle or not, when growth-related problems are greater than necessary there's something wrong with the process. FWIW it is an election year, I suspect the views of the electorate will be clearly rendered and overdue changes made.
The theory I keep hearing from thought leaders is: "More people equals economic growth. Economic growth solves all the problems. Bring more people. More people equals good."
How much construction is there, really? Politicians in SF talk about a "big construction boom", but 2014 was the first year since the 1960s that SF construction even kept up with the US's baseline population growth (~1% per year). So it's "booming", but only in the sense of returning to normal after a decades-long depression.
"allowing real estate developers to do what they want regardless of effects on neighborhoods"
This might not bear any relationship to reality. Many people believe this in San Francisco, even though SF is the #1 most development-hostile major city in the world.
It's different here since much of the construction is happening in areas that have been vacant. We have the Pearl district, Slabtown and others in which many new structures are going in. Even in downtown Portland, there are plans to build on street level parking lots, adding to the structure inventory. There is a real expansion going on in this region.
Population of Portland proper has actually grown substantially, >= 7% in the last 10 years or so. The entire metro area may have increased even more, I'm not sure about that. Portland State University maintains a demographic study center with the data but I didn't check there for this comment.
The necessity for constructing more housing units isn't questioned, but there's a lot of discussion about projects that the city planners allowed to exceed the originally planned height restrictions without the issue being open for community input. The lack of procedural transparency in these cases has evoked the ire of concerned citizens.
As far as neighborhoods go, close-in areas have experienced marked "gentrification", displacing lower income populations to the "high number" districts of east Portland where housing is less expensive. So indeed development has had substantial effects on some neighborhoods, whether that's "good" or "bad" can be debated, but it is a reality.
"without the issue being open for community input"
Are you sure this is an accurate description? Many neighborhood groups will ignore opportunities for input, sometimes for years, so they can later block the project and retroactively claim they "weren't given a voice".
For example, when San Francisco put bus-only lanes on Mission Street a few months ago, neighborhood activists said:
"“SFMTA’s red carpet bombing of the Mission was a surprise attack and is wholly unwelcome,” Raeleen Valle-Brenes, an activist from the Cultural Action Network told the board."
Mike Schiraldi describes what really happened:
"Actually, the MTA took out multiple ads in 8 different local papers, notified 31 neighborhood and merchant groups, 8 schools, neighborhood senior centers, posted on Twitter and Facebook, rode the 14-Mission Bus to distribute 1500 postcards, handed out 1700 flyers, and mailed out more than 25,000 more postcards.
They also had these community meetings:
Public Open House #1 (2/18/15)
Mission Merchants Association (2/18/15)
Mission Bernal Merchants (3/9/15 & 3/27/15)
Calle 24 (3/10/15)
Mission High School Principal (3/12/15)
14 Mission Rider Open House @ 24th BART Plaza (3/25/15)
MEDA (4/16/15)
Public Open House #2 (4/21/15)
Public Open House #3 (5/30/15)
Public Hearing (10/16/15)
SFMTA Board of Directors meeting, with public comment (12/1/15)
> "without the issue being open for community input"
> Are you sure this is an accurate description? Many neighborhood groups will ignore opportunities for input, sometimes for years, so they can later block the project and retroactively claim they "weren't given a voice".
I'm sure that's happened here though ATM I don't remember particular instances. What I had in mind are decisions being made by the city council or bureaucracies with little or no notice to the community. Portland has many active neighborhood associations that try to speak up on relevant issues, but their voices are often unheeded.
As an example, my neighborhood association recently succeeded in getting some attention from the city concerning traffic/safety issues. Without going into the gory details, the salient point is that the neighborhood had been trying for >15 years to work with the city to find a solution before something was done.
So that kind of history is more or less the inverse of the situation you described. IMO the lesson in both cases is that problems within a community aren't going to be solved unless all participants are willing to listen to, and work with each other.
This PSU site may be of interest to anyone who's made it this far into the thread: http://neighborhoodpulsepdx.org/. It has some charts and maps that explore some of the data relating to population growth in the Portland area.
First, look at a map. SF has Vancouver WA across the river. Portland itself can also expand more easily. SF is a Peninsula and so it's much harder to expand around the place.
Secondly, Silicon Valley is a well known global hotspot for IT. Everything else is miles behind. The pressure of all that money in the Bay Area is huge. It's worth noting that these problems were not nearly as bad during the 1980s or 1990s boom. It's only been after multiple booms that the SF real estate market broke. Portland isn't as likely to have multiple booms to the same degree.
Portland and Austin are certainly seeing the price of real estate going up substantially. But surely it's a sign of success and is largely a good thing, unlike the super pricey real estate of SF or Sydney of Melbourne AU, NYC or London.
Yeah, I don't understand how Portland will be the next SF or even the next Seattle. SF and Seattle are years ahead in economic growth. Further, SF and Seattle have solid schools and universities. Portland is quite mediocre in that respect. The local universities in Portland and in wider Oregon are eminently mediocre.
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[ 0.29 ms ] story [ 150 ms ] threadWell, there has been a massive influx of investment [1] in the Portland housing market, driving up overall prices. While this wouldn't be happening if people didn't want to move to Portland, simply blaming it on 'Californians' seems to be a bit naive.
[1] http://invw.org/2015/04/17/portland-cash-housing/
Before asking ourselves if price surges are created by the smokes and mirrors of speculation, a second-degree hypothesis, we ought to look at the simpler hypothesis first: is there a real demand for housing? Yes, there is. Is the housing stock growing fast enough to satisfy that demand? No, it is not.
Why not do what the new Muslim mayor of London is proposing -- stop the foreign investment property buyers. They're the biggest reason the local population can't afford housing in both the Bay Area and London, even for households with two adults making tech salaries.
CAVEAT:
LVT could not be applied unless Prop 13 were first repealed.
Good economy, affordable housing, NIMBYism: pick two.
Anything else will just result in downtown portland and the nearby areas becoming unaffordable for anyone who isn't rich.
Or… if we want to be really crazy… we could say it's a combination of both factors.
The problem is is that no one wants to get to the heart of the matter because it's just too hard or maybe even counter-intuitive. More money being spent on development, rising land prices and so forth is something that fills everyone's pocket and ignores whatever actual underlying problem exists in the larger system. It's a process where every additional dollar just leads to diminishing marginal returns and eventually negative marginal returns once the city gets so full that everyone's quality of life is damaged.
The fact that people want to live in some cities more than others is not a problem in and of itself. The fashion of the times will dictate whether people want to live in suburbs, rural areas, or more densely packed urban centers. Refusing to build housing because you don't want developers to profit from it deals serious harm to the people who can't afford to live here because supply is short. Saying that we should make other cities desirable doesn't work because it takes too long by comparison—because of the high political and social complexity of urban planning.
You say that development damages quality of life, but I'd argue that denser cities have higher quality of life, subjectively speaking, and if you disagree then maybe you want to move to a less dense city. This is exactly what everyone else is doing—moving to improve their quality of life. That and voting for NIMBY policies which make it hard on people who move to your city.
I've lived in Portland since the 1980s, and the same forces that made life better for those who live here pushed out the disadvantaged, the black, the artist, the musician, the immigrant. It sucks but protesting development or throwing bricks at CATs is only going to make the problem worse.
If the amount that housing costs increase above inflation is mostly determined (in the general area at least) by a combination of the economy and available units, then yes Detroit is evidence of that relationship as well. I do feel as if Portland has generally learned from San Francisco and is more willing to allow for housing development, and to be allowed to build up.
There are certainly productive conversations to be had within a rational economic paradigm, but too many of the participants reject the paradigm, and therefore no productive conversation with them can occur.
For example, here is one opinion piece from the Examiner, in which the author writes, "But supply and demand does not apply to housing": http://www.sfexaminer.com/nato-green-do-the-math-you-cant-bu...
Here is another paper, by the founder of the Coalition of San Francisco Neighborhoods and the Council of Community Housing Organizations, which denies that supply and demand operate in the San Francisco housing market: http://www.sfhac.org/wp-content/uploads/2014/07/calvin-welch...
> Nobody believes or has claimed that supply and demand are "not real" and reducing the housing crisis to "Econ 101" is highly disingenuous.
I responded by providing links demonstrating that there are indeed people active in SF media and politics who need an econ 101 lesson, which rebuts your assertion that "nobody" does. There are many other articles by SF activists that are similar to the links I provided.
There is nothing disingenuous about "reducing" the housing crisis to econ 101 when many of the people involved clearly need an econ 101 lesson.
Few people who understand even basic economics are surprised that a mid-sized US city can't keep up with the demands of being a center of the most successful industry of this era. Nor that people who aspire to be the next Steve Jobs are willing to pay more than hippies who would rather not work.
The reason it is an advanced economic question isn't because that the economics is complicated, but because the real life factors are. If you think it's simple and you're convinced you're right you should go be an analyst and make a lot of money.
Those competing interests feed into the supply and demand curve. Those who don't want new development, for reasons of neighborhood character, density, whathaveyou, increase demand for not building. Those who claim they want new building, but only if it's "affordable" (whatever that actually looks like when it's built, I'm unable to determine a solid answer on) have high demand on a specific kind of housing, and low demand on another kind. People who want luxury residences would be satisfied by a different kind of supply than those who want low-income housing.
Until then, I contend the Econ 101 meme is totally insufficient. There is no "just build housing." There is only a complex intersection of need, desire, and will that changes by the seasons.
Let's acknowledge those and work towards a compromise instead of calling the other side stupid. That argument is lazy.
Great sources, that support your point. Thanks.
Perhaps the most common is the idea that adding new "luxury" housing will drive up prices.
The reality is that even loosening zoning laws to pure anarchy will not make a big enough impact on supply vs demand to make housing as affordable as the government mandated affordable housing lottery creates. And the other reality that rarely gets discussed is that the city's ancillary infrastructure: water/sewage/police/transportation/EMT/fire -- must be accounted for with every additional housing unit.
But it's all just supply and demand, right? Just add more supply and everything will be okay?
San Francisco does not want to be Hong Kong. San Francisco does not want to be Manhattan. What people actually want for their city -- that is, the desires of the people that already live there -- will always trump the demands of people who wish they could live there.
But, alas, the Econ 101 meme is too convenient not to endure in every discussion.
> San Francisco does not want to be Hong Kong. San Francisco does not want to be Manhattan. What people actually want for their city -- that is, the desires of the people that already live there -- will always trump the demands of people who wish they could live there.
The people who live there are getting what they voted for -- restrictive housing policies and rent control. The voters caused this situation. They just don't understand enough about econ 101 to realize it. If they did, they would change their minds.
People want to move to SF, and bring their money and their labor power with them, and nobody can or should prevent that -- most cities would welcome that kind of investment. The city can accommodate their need for housing, or not. If the city does not accommodate the newcomers' need for housing, it is the existing residents who will suffer most, because the newcomers are generally richer than the existing residents and are better able to compete for housing.
The three things that matter are the amount of housing, the number of jobs there are, and the total salary paid for those jobs. See the article for the formula. I am sure that a similar formula applies in San Francisco. The result is that having or not having rent control is immaterial. Being unwilling to build housing is a problem.
http://www.wsj.com/articles/SB122126309241530485
and ties up existing inventory. I know people here in SF who have an apartment, and own a house or two outside the city, but will never give up their apartment because its just so cheap. Rent control definitely ties up supply.
In practice the effects seem to be small.
"Ties up supply" is also a statement that is not necessarily connected to "increases price". I'm not entirely clear on the economic theories behind rent control, but from what I understand, it affects availability more than it affects price.
One can imagine what would have happened without rent control. Prices would have gone up for everyone and people would have left, increasing the supply. I'm not saying that's a desirable outcome, or necessarily a large impact, but artificially keeping rents low for some people would logically reduce supply and increase rents.
The available data suggests that the impact is relatively small compared to other factors. Small enough that the average annual increase before and after was almost unchanged.
In fact theory says that rent control should mostly matter because of reduced incentives to build more housing. But other policies (like zoning laws) more directly reduce the ability to add capacity, and so should matter more.
But, since rent control is only on a few building, it increases rents in the rest of them.
The options are:
1. rent control everything, and let there be shortages, old buildings, etc
2. rent control some, and let half the city be expensive
3. build housing.
Other than that, you're right. Except that in the case of San Francisco, most of the city is under rent control. However the rate resets to the current market rate every time a tenant moves out and another moves in. If you assume regular renter turnover, then rent control changes the short-term path but does not necessarily change the long-term trajectory of rents much.
Reality says at least one of three things will be true. You can be undesirable to live in, build lots of housing, or have rising rents. San Francisco tries to avoid all three, and does less to prevent rents going up than the others so that is what happens.
Your modus ponens is my modus tollens. People want to avoid their rent going up over the long run, so they react to rent controls by increasing their willingness to commute instead of moving.
Isn't rent control being bad one of the very few things that almost all economists agree on?
Sometimes I think about how much better the city would be, if the leaders over the 20th century hadn't been so racist.
It turns out the old redlined areas are where all the big apartment buildings are going in. This has contributed to backlash against development, as has the pace of change along main streets in other parts of town.
As a result, rents have been rising faster than income for a while here. And a lot of folks on the ground blame the new development for the rising rents. In my book if we had been developing for decades at a steady pace all along, and hadnt engaged in racist redlining and relocating policies, Portland would not be seeing the price shocks we're seeing now, and we would have a more vibrant community.
Also there is a macro thing here where Portland has joined the west coast real estate market, so long time low prices have a higher new normal in the last three years.
I am sure there are up and rising places similar to the previous forms of SF and Portland that are kept off the radar?
Maybe some of your liberal friends are in favor of ACTUAL affordability, rather than a litmus test of policies that you need to support to get street cred, but don't actually do anything for housing?
people keep questioning this year after year but the writing is on the wall.
Twitter is so highly visible in SF that when they tank, it will shake up the real estate market.
[1] https://www.google.com/search?client=ubuntu&channel=fs&q=TWT... [2] http://variety.com/2016/digital/news/twitter-declining-month...
Despite the construction happening all around, housing prices have been rising, quite a hot topic here now. There's a political problem insofar as many are convinced that elected officials didn't force developers to create the number of lower cost housing units as promised when the building projects were proposed to the city.
Furthermore many citizens believe that overall the governing bodies have also not looked after the interests of the community, for one thing, allowing real estate developers to do what they want regardless of effects on neighborhoods. There is also dissatisfaction with deterioration of infrastructure, massive increase in traffic congestion, demolition of historic structures, loss of small businesses and overall reduced quality of life.
Whether this replicates San Francisco or Seattle or not, when growth-related problems are greater than necessary there's something wrong with the process. FWIW it is an election year, I suspect the views of the electorate will be clearly rendered and overdue changes made.
Edit: grammar
How much construction is there, really? Politicians in SF talk about a "big construction boom", but 2014 was the first year since the 1960s that SF construction even kept up with the US's baseline population growth (~1% per year). So it's "booming", but only in the sense of returning to normal after a decades-long depression.
"allowing real estate developers to do what they want regardless of effects on neighborhoods"
This might not bear any relationship to reality. Many people believe this in San Francisco, even though SF is the #1 most development-hostile major city in the world.
Population of Portland proper has actually grown substantially, >= 7% in the last 10 years or so. The entire metro area may have increased even more, I'm not sure about that. Portland State University maintains a demographic study center with the data but I didn't check there for this comment.
The necessity for constructing more housing units isn't questioned, but there's a lot of discussion about projects that the city planners allowed to exceed the originally planned height restrictions without the issue being open for community input. The lack of procedural transparency in these cases has evoked the ire of concerned citizens.
As far as neighborhoods go, close-in areas have experienced marked "gentrification", displacing lower income populations to the "high number" districts of east Portland where housing is less expensive. So indeed development has had substantial effects on some neighborhoods, whether that's "good" or "bad" can be debated, but it is a reality.
Are you sure this is an accurate description? Many neighborhood groups will ignore opportunities for input, sometimes for years, so they can later block the project and retroactively claim they "weren't given a voice".
For example, when San Francisco put bus-only lanes on Mission Street a few months ago, neighborhood activists said:
"“SFMTA’s red carpet bombing of the Mission was a surprise attack and is wholly unwelcome,” Raeleen Valle-Brenes, an activist from the Cultural Action Network told the board."
Mike Schiraldi describes what really happened:
"Actually, the MTA took out multiple ads in 8 different local papers, notified 31 neighborhood and merchant groups, 8 schools, neighborhood senior centers, posted on Twitter and Facebook, rode the 14-Mission Bus to distribute 1500 postcards, handed out 1700 flyers, and mailed out more than 25,000 more postcards.
They also had these community meetings:
Public Open House #1 (2/18/15)
Mission Merchants Association (2/18/15)
Mission Bernal Merchants (3/9/15 & 3/27/15)
Calle 24 (3/10/15)
Mission High School Principal (3/12/15)
14 Mission Rider Open House @ 24th BART Plaza (3/25/15)
MEDA (4/16/15)
Public Open House #2 (4/21/15)
Public Open House #3 (5/30/15)
Public Hearing (10/16/15)
SFMTA Board of Directors meeting, with public comment (12/1/15)
Prior to all that, the Chronicle wrote about it in 2014: http://www.sfchronicle.com/bayarea/article/Muni-overhaul-spe...
And before that, they wrote about it in 2012: http://www.sfgate.com/bayarea/article/S-F-transit-agency-s-p...
And that last article says they'd been trying to get this done since 2008."
(source: https://www.reddit.com/r/sanfrancisco/comments/4i5n66/critic...)
> Are you sure this is an accurate description? Many neighborhood groups will ignore opportunities for input, sometimes for years, so they can later block the project and retroactively claim they "weren't given a voice".
I'm sure that's happened here though ATM I don't remember particular instances. What I had in mind are decisions being made by the city council or bureaucracies with little or no notice to the community. Portland has many active neighborhood associations that try to speak up on relevant issues, but their voices are often unheeded.
As an example, my neighborhood association recently succeeded in getting some attention from the city concerning traffic/safety issues. Without going into the gory details, the salient point is that the neighborhood had been trying for >15 years to work with the city to find a solution before something was done.
So that kind of history is more or less the inverse of the situation you described. IMO the lesson in both cases is that problems within a community aren't going to be solved unless all participants are willing to listen to, and work with each other.
Edit: This is probably a better direct link: http://neighborhoodpulsepdx.org/portland21/growing-portland/...
First, look at a map. SF has Vancouver WA across the river. Portland itself can also expand more easily. SF is a Peninsula and so it's much harder to expand around the place.
Secondly, Silicon Valley is a well known global hotspot for IT. Everything else is miles behind. The pressure of all that money in the Bay Area is huge. It's worth noting that these problems were not nearly as bad during the 1980s or 1990s boom. It's only been after multiple booms that the SF real estate market broke. Portland isn't as likely to have multiple booms to the same degree.
Portland and Austin are certainly seeing the price of real estate going up substantially. But surely it's a sign of success and is largely a good thing, unlike the super pricey real estate of SF or Sydney of Melbourne AU, NYC or London.