> In some California cities, the average four-bedroom, two-bathroom home would set you back over $2 million, while a similar home would cost less than $100,000 in many other US cities.
This is a little but misleading. You have to scroll way down to get to any city with an average under $100k for the described home and those are in cities with vast, mostly-abandoned areas where (basically uninhabitable versions of) such homes might cost as little as $10k. (Their averages are brought way down by outliers, in other words.)
You are right, the author was extreme, but not by that much. Look at Houston, or Austin and you'll find lots of perfectly nice, new construction, 4b/2br in the $250K range. I live an hour outside Boston where there is a similar dynamic at play. My frustration is that large cities like Houston are able to build inexpensively, while relatively small ones like Boston/SF are just insane.
> My frustration is that large cities like Houston are able to build inexpensively, while relatively small ones like Boston/SF are just insane.
Houston is a large city just because it's sprawlville (to a ridiculous degree, city limits is an astounding 627 sq mi). It's not a fair comparison to an urbanized city like Boston or SF (that both have 5+ times the density).
Are there any examples of cities or states that have been able to successfully transition from expensive to affordable housing in a non-castastrophic manner?
Even at a more local level ( https://techcrunch.com/2014/04/14/sf-housing/ ), the problem is complex with many stakeholders. How do you get everyone to agree and try to reach a better solution?
> new projects with 20 percent affordable housing for tenants making no more than 80 percent of the area median income or projects with 10 percent affordable housing near transit would be exempt from most local reviews.
That sounds great, but think of it this way: a 200-unit luxury apartment complex that includes a shithole in the back with 40 units that lack parking and a separate access door would be exempt from local oversight. Does that sound like a pattern for success to you?
More stock is more stock. The guys moving into the rich condos live somewhere now, presumably somewhere worse, since they want to move. It's demonstrably effective in freeing up lower income apartments. Perhaps these lower income apartments are still going to be expensive, and available only to whatever you define as the "wrong kind of people", but you gotta start someplace.
Although this prevents city reviews for housing that meets this requirement, can cities simply rezone to prevent this?
In other words, can cities simply down zone desirable areas and force the developer to apply for exemptions on a case by case basis which is tantamount to the current city reviews?
It essentially never happens. What can happen is that you develop new neighborhoods so the city overall becomes less expensive.
Edit: If you disagree it's quite simple to simple mentioning the relevant market were this has happened instead of downvoting. This emotionalism of HN is really getting annoying these days.
Prices almost never go down organically because it actually gets harder to build as things gets more developed, stake holders would have to take real losses to the detriment of the local economy, housing in these areas are almost essentially always a sellers market etc.
The "just build more" meme on HN is BS. In essentially no popular cities where this have been done have prices gone down or necessarily stabilized including the common examples of NY, HK or Paris.
The tragedy of the anti-commons, which is part of what drives all this, necessitates government action over the desires of stakeholders, so while we could avoid "catastrophe," we're unlikely to make every stakeholder involved happy. Things like eminent domain, actual public housing (need to repeal QWHRA), and new policies that support renting (Germany, Singapore, and Austria are great examples of quite varied housing policy that manage to give renters relatively cheap housing.)
We'd need a radical cultural change to allow that kind of thing here, but considering how things are going with prices, this is a good time for a real change.
I don't get why this is surprising. The goal of nearly all of these regulations is, effectively, to prevent housing from being built. They reduce supply, while demand is increasing. This is basic economics.
Compare this to Toronto. Housing is getting more expensive here, yes, but not at nearly the same rate. Demand is increasing because of high immigration, but supply is being allowed to increase as well- and mostly in the up direction. There's a condo over on College street that just opened, 60 floors or more I believe. An 80+ twin tower condo is I think now approved by the city over on King. The main strip of North York must be averaging 25-30 stories tall, and it's 15km from downtown!
If California wants to lower their housing prices, they need to have supply match demand. To do that, they need 50 story buildings. A lot of them. And they need to start soon, because they take years to build.
Toronto had a massive building boom [1] over the last 5-7 years that far outpaced Chicago, NYC, and Huston (something like #1 Toronto had 150 buildings v the closest #2 was 40 in Chicago being built). The construction on the hundreds of condos are just starting to be completed and condo prices actually went down for the first time in forever while housing prices continue to rise.
SF housing crisis is entirely self-created. If it wasn't for zoning limitations they'd be one of the top 5 fastest growing city in North America no doubt.
I recall reading somewhere that the downtown core actually has less condos than needed. TO should have built more apparently. They built a lot of condos further away and those condos are the ones that are decreasing/not going up.
Also, since there are a lot of Toronto folks on this thread ... what are you folks doing if you don't own anything already? Prices are at an all time high but there is a general fear that if you don't buy now, you will be locked out forever. A data point there are condos in Gibson Square in North York for north of 650K. Seems insane but that is what the market is I suppose.
Renting. People with the resources borrow money from family for down payments. People without borrow money from secondary lenders. My downtown condo up $50k/15% over the past 18 months but friends outside the core are flat or down.
I'd personally invest money in businesses or building businesses. IMO real estate is for people without specialized technical talent (outside of handyman style work) or lots of extra cash needing a safe place to hold it.
Regarding my living situation it makes more sense for me to rent, everyone I know who buys a house has spent tons of time and money fixing up their place. I'd rather invest those resources into a startup or consulting.
Buying a condo might make sense at some point but I'm not really into condo living. If I go that route I'd want one with a pool and gym - which means a lot of extra condo fees, so I don't know if that ultimately makes financial sense. I'd be curious to see the numbers on that though.
What you read likely has to do with multi-individual/family focused dwellings. Toronto is currently overbuilt for single bed rooms, but under-built for units suitable for families.
Anyways, as far as what to do - Patience. Most people in Toronto who have good/great credit have mortgages w/~2.4% interest rate and 5 or less year term. What that means is that a ~1% increase in rates would increase their annual interest expense by ~50%. Considering that the average house price is $1MM in the GTA, let's say the average downpayment is 20% (it's actually lower from what I've read...), and you're looking at a situation where if rates go up just 1%, the average new home owner is going to need to come up with an additional $8K / year after tax, so ~$11-16K before tax, in order to not default on their mortgage. With wages being as stagnant as they are in Canada, and the average Canadian being more in debt than they have ever been in the history of the country(1), you can imagine that there will at least be a couple of people who will no longer be able to afford the houses they are in and need to sell it off.
> Toronto had a massive building boom [1] over the last 5-7 years that far outpaced Chicago, NYC, and Huston (something like #1 Toronto had 150 buildings v the closest #2 was 40 in Chicago being built)
South Florida gets ignored in articles like that, because the cities are so physically small[1]. As of December 2014, South Florida as a whole had built 20 new towers, started construction on 80 more, and had yet another 200 in some sort of planning or presale stage[2]. That is what you want to look at for an example of skyrocketing population density in land-constrained areas.
[1] The largest city in South Florida is Miami, which is only 36sqmi. In contrast, Toronto is 244sqmi).
I was going to reply that hey, that 244sqmi is the greater toronto area (GTA), but then I checked the wiki page, and well I'll be damned that's just the city itself. The GTA is 676 sqmi.
What's really interesting is that the 244sqmi is full. There is room for maybe one or two more subdivision of houses, and then the only option is up (or another amalgamation with the neighbours, because that went so well last time).
Yeah, I checked to make sure I had the wright number before I posted. I don't have a good number for the tri-county core of South Florida, but I'd guess it is not much larger than the GTA.
We hit the point of "no way but up" about 20 years ago. There are a few holdout family ranches, but other than that there is nowhere left to build that doesn't involve tearing down something else first. In some parts of my home county the school board has had to start cannibalizing parts of public parks in order to build new schools to support the population.
The Toronto school board got clever: you tear down the school, build a 20-story building on top but the bottom 3 floors are a school and the other 17 are condos that you sell or rent.
The board keeps their school in the area that needs it (minus a few tough years without it) and they make a profit selling or renting the condos!
> If California wants to lower their housing prices
That's the rub, after you've constrained supply and inflated prices, there's a vested interest of those who've seen their values increase and those who bought at high values to not let them drop.
This is especially important for those that bought at a high value, as if the worth of their house drops, then they can find themselves in a position where they owe much more than the house is worth. We've seen this situation before, not too long ago. It's not pretty.
AFAICT, the trick is to manage growth effectively in an area through restrictions and incentives so that you try to stabilize house prices as much as possible (like the economy), such as tracking inflation and/or some other indicators. If you enact regulations that suppress new housing when demographics call for more of it, you need to offset that with incentives.
The worst thing that can happen is that a group will wrest disproportionate control over housing policy for an extended period, and then the policies they enact through self interest spiral out of control and make the situation worse for everyone.
Why can't you just live in the house? I mean it sucks when your investment doesn't work out, but at least you have a roof over your head. Isn't that all you really need (unless you're some kind of real estate mogul, in which case it's hard to feel bad since it's just business then).
It works as long as you maintain the income you had when you qualified for the loan. The problem is that real-estate downturns are heavily correlated with economic downturns and job losses. The bloodbath isn't people with stable jobs suddenly wanting out of their homes because they're underwater (although you do sometimes get that too), it's people who buy a house they can barely afford and then lose their job.
Real estate is usually leveraged. You don't simply get to keep living in a house if you are insolvent and owe more on the property than it is worth. See also: 2008 Global Financial Crisis.
As long as you can continue to pay the mortgage each one, nobody is going to come along and kick you out of the house.
The "problem" is that you can't sell your house for a profit to exchange it for an even more expensive house. Hence, the rest of us are on the hook to ensure that your house can continue to appreciate in price.
> Real estate is usually leveraged. You don't simply get to keep living in a house if you are insolvent and owe more on the property than it is worth.
Right, but the problem there is the insolvency, not being underwater (conceptually, you have the same problem if you are insolvent but owe a nonzero amount that is less than or equal to the worth of the property, though if its less you may be able to stay off insolvency by increasing indebtedness -- though that will probably take convincing a lender that your income/expense balance will change soon enough that you won't end up insolvent and overleveraged.)
Because a significant portion of many, many peoples' savings and retirements are tied up in the value of their housing. Whether you think that's a smart choice of them or not, it's the reality we live in.
In addition to the other accurate responses, there's also the notion that these days, most people are not buying their "forever home" that they will "just live in." They are buying a ($1m+) "starter home" and then hoping to ladder their way up into what might be their "forever home." That involves selling at some point.
>The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year.
This is why you don't really want to live under a democracy (always assuming you can find a non-democracy that respects human rights). California's government-by-referendum has made it impossibly dysfunctional, because the populace consistently votes for two types of referendum: "spend money on things I like" and "don't raise my taxes."
> In California, Prop 13 has de-coupled property taxes from market value altogether
Incorrect; there are limits to annual increases in tax basis value outside of qualifying events (changes of ownership, new construction on property, etc.), but tax basis isn't divorced from market value altogether.
Because housing in California is just different than the rest of the US; there's really no other way to describe it (Illinois born and raised, now living in SF).
A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. Then there's the people with loans they might be cashflow-negative on month-to-month (paying down a sliver of principal), who are hoping to re-amortize into a new 30-year loan when their value goes up, hopefully cutting some of their payments.
I'm 31. My household income is well over 200K and I have many friends in the same boat, and none -- I really mean it -- zero -- of us own homes. The only hope is to get into a "starter home" as some other commenters describe and then hope to have enough equity that if you ever want to have a kid or live in a non-shoebox, you'll be able to afford to make a big down payment on a new place.
I hate this because it seems extremely financially imprudent, but realistically, your options are to play the game or move. There just isn't sanity in/around the Bay Area housing market.
Being able to afford a house has nothing to do with what a market-rate salary is.
Your market-rate salary is the salary the market is willing to pay for your labor. Nothing more, and nothing less. It has nothing to do with the kind of lifestyle the salary will enable you to have, or the things you will be able to afford.
>Your market-rate salary is the salary the market is willing to pay for your labor.
Yes, I understand this. I mean that people are bidding lower than they should - they get fewer goods and services than they could have gotten in cheaper locations with their Bay Area salaries.
This artificially low bid can be understood as people paying to live in the Bay Area (and therefore take a salary that buys fewer goods and services than elsewhere).
In so doing they are granting a subsidy to their employers who would otherwise pay higher wages to location-indifferent laborers.
Why they are motivated to pay to live in the Bay Area is a mystery to me.
> Why they are motivated to pay to live in the Bay Area is a mystery to me.
Owning a McMansion isn't everything. The Bay Area has more to offer in terms of job opportunities, career advancement, culture, and general quality of life than most metropolitan areas in America. Besides, successful engineers are doing just fine here, and many have no problem affording to buy houses.
I currently pay $1100 for a single room in a 4-bedroom quad. I just got engaged last week and am planning to move in with my girlfriend of five years (now fiancee) into a 1br in Oakland for 2200/month. The apartment is about 1100 square feet, which hardly qualifies as "big" for two people, in my opinion.
The issue isn't house vs. apartment; it's about being able to have a sane base of committed expenses in the face of 4-5 years of double-digit rental price growth in SF. When I first came here 5 years ago, I was paying 750/month for exactly what I live in now -- just 40% cheaper.
I have no objection to living in an apartment and in fact, have consciously chosen to live cheaply and invest aggressively outside the Bay Area. But I think you get to a point where you might be thinking about starting a family and it makes you wonder what the future holds. I suspect most Bay Area buyers would rather buy just to have some stability in their payments, as much or more than anything else.
Re: 1100 sqft hardly being big for two people - I was raised in a flat exactly half that size. I was fine (had my own room - being an only child rocked). In my country (Poland) 1100 sqft is considered a large flat for a family with 2+ kids.
In more general terms, if space is priced at insane levels, it might be smart to rethink how much you actually need to be happy (or even why stay in SF - I don't understand why people do that).
Again, I guess just a matter of perspective. My parents house was 2200 sqft (2 siblings and 2 parents) and the Zestimate on it is like 140K.
Believe me, not a day goes by where I don't think about moving. But right now, as long as you can save a bit and don't mind living in a slightly crappy apartment, you'll do just fine here. Just take all the money you would've dumped into home equity and buy stocks, real estate, invest in companies, whatever, and you'll have plenty of money.
The current environment feels very unstable though. Something has to give. Either house appreciation has to slow, or wage growth has to accelerate, or a lot more new supply has to be built. I don't think your average Google/facebook employee knows or cares much about these trends but the startups do, and they're the canaries in the coal mine. If entrepreneurs stop coming to SF, and anecdotally I think it's getting less and less attractive with the rise of angel.co and other distributed funding platforms, this place is really gonna have a huge, long-term problem because big companies don't just spring into existence, they grow up from small companies that start locally.
> The only hope is to get into a "starter home"...
This has been completely normal in many/most major world cities/regions for generations. That's why there's a term for a first home. I don't understand the consternation.
You know, it might just be a matter of perspective. Thank you for this.
I grew up in a small but nice suburban town about 20 miles outside of Chicago. Plenty of my friends are buying 3-4br houses in decent parts of Chicago for 250-350k. So maybe I just grew up in a "cheap" global city and am not used to what, say, Parisians have come to expect. I think it's just worse in the Bay Area.
It's not nearly that uniform. I live in Sonoma County (an hour north of SF), and my home cost a little over $500k a couple years ago, but that's for over 2500 sq ft and it's brand new (I bought before they built). There were smaller models in the low $400k's. There are plenty of older houses for sale for less than $400k in town that are fixers.
For obvious reasons, prices scale with proximity to population centers and higher paying jobs. CA is a big place and encompasses a few very different regions. If you want to live in say, Coalinga (which I just found through a map) in the Central Valley, I'm seeing houses on Zillow in the low $100k's and below.
But, to what's likely your point, in SF and the surrounding metro area, even starter homes are well out of the reach of most of the people that live there. Hell, starter homes here are out of the reach of a good percentage of people, and it's not nearly as bad as farther South.
Yeah, this, the problem is just interesting because everywhere within a 60-minute commute is almost a million dollars. At least in real cities with high density (e.g. not San Jose), the rent makes sense because it's close to things you want. In the suburbs of SJ and the greater Bay Area, the difference in rent between the "downtown" area, or even downtown SF proper, seems like way less of a difference between the rent in Manhattan vs the suburbs. My point is that the suburbs here are terribly over-priced and over-valued, but I guess we could argue based on the logic that got us to this point: "it's worth what people will pay for it".
Rent, and home prices, in downtown San Jose are lower than they are in the surrounding suburbs such as Cupertino, Sunnyvale, and Santa Clara. It's the reverse of the situation near San Francisco.
The bay area housing market is deranged of late because the huge fire hose of money that's pointed at it because of the 'tech industry'. Also there isn't a lot of turn over in housing in the bay area, partly due to rent control, prop 13, and I think some places just an older population.
Its not that recent since we've been able to fairl effectively code from anywhere. Investors/Managers/ et. al. are having a hard time keeping up with the times. IMO a team should be able to 100% remote from anywhere within a timezone restriction (ie, ET to PT ? )
To be fair, it's significantly more difficult to manage and maintain a remote team than a local team. Some people thrive under those circumstances, of course, but I think that many more benefit from working with their team in "meatspace."
You can code from anywhere, but typing out code isn't the only part of software engineering. Understanding exactly what code the business needs, and how it interacts with the rest of your company's environment, can be more difficult if communication flows less freely.
If engineers are purely sitting at their computers and not talking to each other at all (except during scheduled meetings), the team could probably be converted to remote without downside, but plenty of organizations have an implicit dependency on unstructured conversation, and while there are ways to facilitate that in a remote work environment, it's not obvious.
A combination of historical factors (the concentration of major tech companies here, the resultant concentration of venture capital, even the very idea of "Silicon Valley"), the presence of large feeder populations (Berkeley, Stanford, etc.), a generally high quality of life, and so forth -- there are legitimate reasons why so many tech companies, and so many tech workers, want to be in the Bay Area.
Historical reasons and network affects. Consider that even more than ever there is a small group of people at the top of the pyramid. And they and other hangers on want to be close to the action.
And seriously that zone along the coast range up the peninsula is a really sweet spot[1]. If you and your associates have to be somewhere it's really hard to beat. (not so nice for the middle class couple trying to buy a house where the schools are still good, or the guy commuting from Tracy)
[1] Los Gatos all the way up to Woodside. Also check out Danville CA on the other side of the Oakland Hills.
There's an excellent video on him around, I'll see if I can't turn that up. Here: "The Secret History of Silicon Valley", tech talk at Google: https://m.youtube.com/watch?v=hFSPHfZQpIQ
Briefly:
UC Berkely and Stanford, each of which had (and have) excellent engineering deparments. Other colleges, universities, junior colleges, and public schools were from the 1950s through 1970s excellent. Most have been faltering since the 1980s.
Moffet Airfield. Already established by WWI and home to airship activity.
World War II. An immense industrial capacity built up, many defense industries, and a nascent technology cluster.
Amazing weather. There's little else in the US, or anywhere in the world, which can compete.
(For all the specific local boosters out there: I didn't say no places, I said "little else".)
Cheap housing. Up through the 1970s, California had ample room to grow, and things didn't start getting particularly nuts until the 1980s and 1990s. Since 1995, it's simply been insane.
Freeways. For a time it was possible to get around. That's no longer particularly the case. BART helps. Caltrain doesn't hurt too much. Both are entirely inadequate.
The ability to work from anywhere is only about 10 years old. The need for tech industry is closer to 50-60 years old, and local efficiencies, economies of scale, job-mobility, etc., all happen and matter.
You can work on a solo project from anywhere in the world. To work effectively in a team you need to understand the code your code is interacting with, the production environment, and how this all interacts with business needs. Being in the same room (or at least building) as the people who know these things is the most obvious way to get everyone that understanding.
Why the Bay Area? Because it has a huge collection of both jobs and employees. As an employee you have lots of options should things fall through with your current employer, and as an employer there is lots of talent you could potentially hire (though for a high price). No reason it had to be the Bay Area in particular, but it had to be somewhere.
If it moves somewhere else, it's likely that place's real estate market would be similarly inflated by an influx of professionals.
Some people (pretty much everyone who is vocal about this on HN) see remote work as the solution. I'm skeptical - it takes a lot to make your issue tracker, documentation, mailing lists etc. thorough enough that they're the only communication developers need. In my experience (and I expect at many companies) developers come across crucial bits of information through serendipitously overheard conversations, or by wandering over to people's desks, etc. such that if structured (i.e. either async or scheduled) communication were the only communication, things wouldn't get done as well or as quickly.
I don't think remote work is the solution. However; every college in the country has a computer science program and many people are quite talented. Salaries are lower due to cost of living. Code doesn't have to be shipped to a port. It makes some sense to build more outside the valley.
Are you advocating for more dispersion of companies around the country, or a different tech hub?
I'm not sure the former is good for me as an engineer. It'd be nice to afford a decent house, but less so if I have to sell it and move cross country to advance my career or flee an employer going the way of Yahoo. Barriers like geography, moving costs, social ties in different cities keeping the best employer-employee pairs from finding each other are a form of inefficiency that I'm not sure we should seek to introduce.
I'd like the latter - we could build it somewhere more development-friendly, which would make it less insane than the Bay Area housing market, but putting a huge industry of well-paid professionals somewhere isn't compatible with low cost of living (see: Manhattan, DC).
More tech hubs. I'll admit that I don't know enough about housing, but the bay area and Manhattan are both water-restricted in terms of room for housing development and DC has political restrictions on land developmentment as well.
No one can. The government chooses not to track it, and it's difficult to do without major resources.
I know that in Toronto there's a lot of casual evidence of empty condos. Multiple buildings are springing up without any need for sewer system upgrades. The lights never seem to be on in most of the units. Keep in mind it gets dark before 5 in the winter. New condo developments don't seem to have grocery stores or supporting businesses.
But again, there's evidence but no one can get any real numbers.
Also owners have an incentive to lie to the government. Getting Canadian citizenship requires spending most of your time in the country for multiple years, but that's hard to track if you come and go on different passports.
I have no doubt there are a lot of chinese condo owners in Toronto but I don't believe they are leaving the units empty as commonly claimed.
>Multiple buildings are springing up without any need for sewer system upgrades.
How would you know? Do you think most people ask the guys digging up the streets what they are doing? Or what kind of capacity exists in Toronto already(was it future proofed?)
>The lights never seem to be on in most of the units.
Can you give any examples of buildings that are over a year old that are like this? I moved into 33 bay st on the first day residents were allowed in and my floor was empty for 3 months other an me. Most of the building was empty but that was largely because a) there were a lot of units for rent that took time to fill out. b) the sales office was open for 2 years after the building was complete as a lot of units weren't sold straight away.
>New condo developments don't seem to have grocery stores or supporting businesses.
Have you got any examples of this? 33 bay doesn't have a grocery store in it but everyone in those 4 buildings went to the Longos under Mapleleaf square or the Loblaws the other direction. Cityplace has a grocery store and pretty active bars/restaurants now. The ones on King/Queen have the Loblaws on Queen in walking distance and the ones on Yonge between bloor/king have the MLG Loblaws.
>Getting Canadian citizenship requires spending most of your time in the country for multiple years, but that's hard to track if you come and go on different passports.
Most of the people aren't looking for citizenship though only PR status which doesn't require that.
I can provide an anecdote. When my parents where shopping for their first house ~5 years ago it was a common occurrence for a house to go on the market to be immediately purchased in cash. By circumventing the usual mortgage process with the bank the houses could be snatched up before regular buyers even have a chance.
This is why I don't understand (at a practical/economic level) the allure in the tech world of moving to the Bay Area.
In NYC we complain like crazy about housing, but it's honestly fine compared to what you describe. In NYC you can't have it all but you do get to pick any two of: spacious, cheap, or short commute.
Apparently in the Bay Area it's pick any zero? Why do people keep going there?
No, its not. You can find spacious, reasonably cheap places within tolerable -- though not short -- commutes of most Bay Area jobs.
I suspect that young, high-income tech workers very often (1) want short commutes, and (2) want other aspects of the urban lifestyle of the core of the Bay Area whether or not it comes with a short commute, which makes the peripheral, long-commute places with such housing unattractive. (Plenty of families where the adults work in the core areas of the Bay Area do live in those peripheries, though.)
> Why do people keep going there?
Because that's where the (tech, for instance) jobs are?
Because the Bay Area has the best job market in the world for software engineers, by a huge margin. It is home to the headquarters of most of the major tech companies people can name, and contains major satellite campuses for major out-of-state tech companies such as Microsoft and Amazon. The scale of the tech industry here is simply unparalleled anywhere else.
Jobs. Tons of them, in many areas of software and hardware engineering. Plus, the network effects cannot be underestimated -- opportunities for career networking, meetups, conferences, etc. are enormous. After a few years here, you will have former coworkers at other tech companies who can help you advance in your career.
If you lose your job, or your company fails, you won't have to move to find another job -- there will be plenty of other companies to work for. Taking a job at a startup is therefore not a huge risk. Buying a home here, and thereby tying yourself down to this area, is unlikely to hold you back in your career, as it might elsewhere -- you will probably never need to move in order to achieve advancement in your field.
There is also the presence of venture capital. The VC world is very Silicon Valley-centric, although that might be changing. If you want funding, you'll have to come here for it. If you want to take advantage of your investors' professional networks to find other investors and build your team, you'll have to hire people who live here and don't want to leave.
As a result of these network effects, many of the world's best software engineers choose to live here, and companies want to be here to hire them. There is now a saying in the startup world that you can start your company anywhere, but Silicon Valley is the best place to grow it, because the pool of engineering talent here is larger than it is anywhere else.
Plus, this is a very nice place to live, if you can afford it.
Despite some of the exaggerations many people are making in this thread, I know quite a few people who have purchased homes and condos in the past few years, including someone who bought one this week on a salary well under $200k -- without any help from his parents or anyone else. I think the highest price any of them paid was about $700k, which is well under some of the numbers people are quoting here. It's doable for a single person who has a high income, and it is easily doable for married couples who work in tech or are successful in other fields. The main barrier to ownership is the down payment, not the mortgage payments.
Renting is also not as bad as people say it is, unless you live in downtown San Francisco. I pay less than $2k per month for a decent apartment in a very good location near a train station and major freeways, and I could spend less if I wanted to. My commute is quite pleasant. My rent probably sounds high to people from other cities, but on an average software engineer's salary, it is not burdensome in any way.
So to summarize: people are willing to pay higher rents and get lower salaries (relative to prices) for "career security" (instead of job security), nice weather, the amenity of living near people who fund startups, and the company of those who would choose the same.
Asking why software engineers would want to live in the Bay Area is like asking why investment bankers would want to live in New York City or London. There is just such a critical mass of activity and connections that one would miss out on anywhere else.
Those "big advantages" also come at a steep cost - somewhere between $10-100k per year for a family compared to similar conditions available elsewhere.
Glassdoor reports salary and not full comp. Facebook and Google are a lot of stock-based comp. $150k salary at Google is often combined with $200k/year in Google RSUs for a senior engineer who has been there for 5 years.
I find it amusing that every time I bring these numbers up, I get people telling me I'm wrong. I'm not making these up. There are people I know making those salaries. There have been countless people here who have talked about how they make that much. This isn't a secret.
Living on $35k and making $135k doesn't mean you'll bank $100k/yr. Taxes cut into it. Living on $150k and making $350k does. And if you're smart you can live on $80k/yr in the bay area. I even know people living on $35k/yr out here.
Not everyone gets the high paying Google job. Not everyone wants it. But it exists and it pays extremely well.
And in those cities, your housing is a smaller percentage of your disposable income than it is in Silicon Valley, but everything else, e.g. cars, phones, laptops, furniture, food, is a larger percentage.
You also neglect stock purchase plans and RSUs, which are the majority of many engineers' compensation. You could make $160k per year at Apple or Google and get $200k of stock every year as well.
Because new grads keep getting six-figure offers at prestigious companies offering more money, autonomy, and interesting work than what they'd get at Fortune 500 cost center IT departments (those that haven't outsourced to India yet) in their hometowns.
"A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. "
And where do they move then? To an equally expensive (per sq.ft.) but smaller apartment?
Where I live (not california) I know literally zero parents who have moved out of the house they raised their children after retirement.
It seems that only people who inherit their parents houses stand to benefit from rising prices in any way.
Many young-ish people live in 1 bedroom apartments they own, while planning to sell it eventually for a multiple room place they can raise a family in. If there is a permanent downturn, it screws them.
The price of housing is over-inflated. You don't want that price to be normal.
It could be argued that the valuation on their property being out of whack is an issue of mismanagement by the local government. In that case a better approach might be to allow for a majority of that improper pricing to be written off over a number of years as a tax credit.
> The price of housing is over-inflated. You don't want that price to be normal.
Yes. The problem is when it's already become normal, what do you do?
> It could be argued that the valuation on their property being out of whack is an issue of mismanagement by the local government.
Yes, that's exactly what I was arguing.
> In that case a better approach might be to allow for a majority of that improper pricing to be written off over a number of years as a tax credit.
Which is another way of saying that we, as the entire constituency of that tax base (be it local, state or federal), have decided to subsidize the poor planning (to give the benefit of a doubt) of those local governments and try to correct the issue. While probably the most likely to actually work, I'm not holding my breath, as if the pain isn't spread over a significantly larger population than the original problem, it will be hard to survive for the tax payers, and if is is spread, you run into the problem of people not wanting to pay to fix the problems of others (as short sighted as it is, as it stabilizes things overall).
You're already feeling that pain, in housing or not. The dysfunction is systemic and it's influence spreads. It's like not having universal healthcare; the problem manifests to a point where too expensive to ignore any longer cases show up in the ER. Then it gets built in to the prices everyone that can pay pays.
Yes, we're in agreement on that. I just don't think we've developed good enough structures of governance nor a good enough culture of rational thinking to believe there's much hope for the overall problem in the near-to-medium term future.
We might hack away at some of the symptoms, but the human psyche is inherently ill suited for rationally weighing the needs of disparate peoples and how they effect us in complex systems like this, being as our neurology evolved for smaller groups/tribes. At least that's my pseudo-psychology take on it.
The problem is that there's never been a point where government got involved in economic formulas (in my lifetime at least) that it hasn't been mismanaged.
That's the reason why so many people are anti-regulation and pro free market for just about anything not dealing with actual risks to public safety.
Artificially control supply, prices skyrocket. Let the free market work and as demand increases so will supply as people keep building to accommodate. Also creates lots of construction jobs.
There's also the issue that people who already own homes won't vote for anything that would make living in the bay area cheaper because then their homes would be under water financially.
If there's no market for them, they won't get built. But people want to live in places like NY and San Fran for the economic opportunities they provide, not just for "the character of the neighborhood".
When the economic opportunities overrun the "character of the neighborhood", neighborhoods get destroyed and people get priced out of their own homes. It's called gentrification.
Uh, if you have been following along, you may have noticed that most people cannot afford the bay area as it is. Adding some supply might help things, rather than make them worse.
Your home can be seized by eminent domain as was done by the town of New London a few years back. They did so in order for a private developer to build more expensive housing on that property and generate higher property taxes for the city. https://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
How would more affordable housing (by replacing single family homes with high-rise complexes) increase gentrification? If anything, people are getting 'priced out' because of the absurdly high housing prices right now.
Wrong. Adding supply lowers prices, not increases them.
The fact that wealthy rentiers in the Bay Area have somehow convinced activists that they should oppose new development is farcical. Liberal activists are literally protesting to enrich capitalists.
> If there's no market for them, they won't get built.
That's something else, isn't it? The people who already live there might not want 50-story buildings, even if there are other people who would move into them if they were built.
That's the crux of the matter, isn't it? How much right should I have to control what other people do because it might bother me? I think that currently, we err way too much on the side of letting people block things, here in the US.
> How much right should I have to control what other people do because it might bother me?
That's a valid question for every law or other governmental decision. But we can think of an idealized case, where an entire town, or state, or country, agree that they don't want 50-story buildings, even if there exists outsiders who would like to move into such buildings. In this case, we need only recognize the right of the local people to decide what happens in their area, even if it is against the will of people from elsewhere.
Why do the rights of the local people trump the rights of people from "elsewhere"? The major question is what harm is being done to the local people by the existence of 50 story buildings, vs the harm to people that find an ideal job in SF but can't afford to take it?
> Why do the rights of the local people trump the rights of people from "elsewhere"?
On at least some level, I find it reasonable that the people who live in a certain place decide over that place. In any case, that is rather conventional, isn't it? It's particularly clear on the level of countries, which is why I mentioned it in my comment. Only citizens or residents of a country, not the rest of the world, get to vote in elections.
> The major question is what harm is being done to the local people by the existence of 50 story buildings
That's really a matter of their personal opinion. Some of us find such buildings repulsive.
> That's really a matter of their personal opinion. Some of us find such buildings repulsive.
I find lip piercings repulsive. I wouldn't want them made illegal. The country would be in a better place if people hadn't decided that there's a 0th amendment saying they had the right to never be offended by anything.
> What if an entire town decides they don't want to allow minorities to live there?
Yes, what if they do? Should they not get to decide because they might haver the wrong opinion? Who should decide instead? What if they have the wrong opinion?
> Why is xenophobia and NIMBYism acceptable in one case and not the other?
What two cases are you referring to?
Also, it's not obvious that NIMBY, as in "yes, do thing X, but not in my backyard", is relevant here, because it's not necessarily so that anyone is saying "yes, do thing X". For "NIMBY" to be a meaningful concept at all, it really needs to be about a situation when someone is pushing X onto someone else, while refusing to accept X in their own lives. If "NIMBY" used simply to describe a position of "no X, please", or even "no X, please, at least not in my backyard where I might have a say in it", then it's not useful, because those are perfectly reasonable positions to have about things.
> Most people would think an entire town deciding to exclude minorities is morally repugnant
What? I'm not saying I don't. It's just irrelevant to the issue.
> shouldn't be allowed.
That's like saying that "these people over here cannot be allowed to decide over their own neighborhood, because they might decide things that I find repugnant". Well, who are you going to trust with the power?
Another issue is water: the more people, the more water. No one in California wants that. so the farm lobby can paradoxically be incentivized to vote for housing regulation as long as it doesn't affect their labor costs inland.
Labor is the biggest cost in almost any enterprise and your labor's housing is their biggest expense. But that doesn't mean the farmer actually has to eat that burden. And, geographically, farm areas surely have less population pressure for housing space.
If you don't want to live in a place with 50-story buildings, don't do things that create demand for them. For example, you can discourage business investment in the area. Funny how no municipality ever does so.
No, you can just let home prices inflate, or force everyone to commute from 2 hours away. The parent's point is that increased density often follows increased demand; and increased demand often follows a productive economy.
Before you say that, read up on "really narrow streets" -- it's quite possible to make a place that's both very dense and very liveable. Of course, there are very few such places in the US...
I'm not convinced that the price of existing houses would drop that much. We're talking comparing comparatively large single family homes to probably tallish apartment buildings. They don't compete for quite the same market, and since you'd have to knock over a few SFHs, they might even go up in price, since yards, space and privacy would become rarer.
Of course good luck convincing J. Random Householder of that
Sure, that's a given. But we're not exactly talking interchangeable widgets. Are you telling me that new towers in Manhattan really damage the value of the remaining single family houses on the island?
I see this in Chicago. Graph price of single family 3 bedroom home and 3 bedroom condo. The prices track. The SFH is worth about double... When condo prices fell in 2008, SFH prices fell too.
Hasn't everything fell in 2008?
Correlation doesn't not mean causation. It's like saying that building 2000 affordable apartments in London would bring down the price of the multimillion luxury apartments.
I don't think that a 200k apartment and a 5 million dollar luxury apartment are substitutes.
In Chicago, a 300k condo and a 600k single family home ARE substitutes. I know many people that could afford either. As the delta shifts one way or another, more of them will opt for the other choice.
If I could buy a 3BR apartment at $1.5M or a 3BR single story 2000 sq ft hut for $3M, guess where my money's going.
But it doesn't matter. The Bay Area region is going to see serious emigration over the next 5 yrs and it'll be primarily the people that SV wants to keep around: younger people who can't afford to lay down roots in SV and furthermore understand it would be stupid to do so at these prices. Especially with engineers, I refuse to believe most under 30 aren't already well aware that the economics favor living cheap, saving up, and then getting out.
Tech is very compatible with remote work (even at a low level when you think in terms of microservices and PaaS), and moving operations or starting fresh is relatively easy. Even the networking argument is thin: there are already concentrations of talented engineers in a bunch of major cities. Not to mention I've self-learned almost everything relevant anyway. Conferences and assorted other BS are largely pointless.
So what's left? Investors and existing companies. I believe this is why we haven't seen a substantial exodus thus far. I think the argument about career advancement issues being in a non-HQ office doesn't really hold as much water for the large companies. I also think tech companies look at good engineers located outside the expensive SV bubble as a kind of subsidy: revenue isn't nearly as sensitive to geographical distribution of employees as is cost.
With investors the story may be different. They want to keep a close eye on their companies and finding good engineers to take a chance on your startup is much easier in a high-density tech zone. But why would entrepreneurs want to suffer the incumbent costs? Assuming the same size of investment round, wise founders would choose to minimize their burn rate by locating somewhere closer to the midpoint on the spectrum of tradeoffs (e.g. Boulder/Denver, Austin, NYC outside Manhattan, Seattle, LA, etc).
TLDR: It seems like the status quo is far too tenuous to continue to hold indefinitely.
Yeah, it kind of sucks. If I had to pay $1.5M for just an apartment I would go elsewhere. But unfortunately, all the decent jobs are in the bay area. I tried looking for remote work but couldn't find anything decent that seemed like a good job that paid decent. As soon as I gave up and decided to widen my search to a job that required me to be in the office every day I had a huge abundance of companies I could work at.
Agreed remote could be a lot better. I think it's improving though and probably more so for some positions than others. I would gladly hire a remote DevOps engineer, for instance.
I'm kind of surprised that public companies with heavy presence in the Bay Area aren't coming under pressure from investors to relocate their operations to cheaper locations.
But then I realize that most Bay Area salaries do not compensate for the living expenses, so companies aren't bearing the full brunt of the living costs on their payroll.
It really depends alot on the details and what the zoning allows for. A big trend lately in Melbourne has been knocking down older SFHs and putting up a pair of townhomes then having the owners renting out the other and living in the first. It's one way the owners have managed to increase their income from the property while also benefiting from alot of regulations and tax benefits made for homeowners.
However, that makes less sense in a cul-de-sac suburb + highway situation than it does in a city with more public transit options and fewer highways. You basically have to rezone and buy out several lots and put up apartments and the entire neighborhood changes. So if your house gets bought up, you may benefit but it may drop if you live near it but don't sell to the developer.
They don't really need 50 story buildings, at least not a lot.
What they DO need is to replace a lot of the single resident housing units with multiple-dwelling-units. Nice condos probably wouldn't be too bad. Better would be high-density mixed commercial / residential areas ringed by parks and with good transit connections.
Yes, much of Europe provides an adequate supply of housing. It's not done via massive skyscrapers, but lots of 2/3/4 story buildings that make effective use of space.
The unsurprising problem is that the bay area isn't one of the European cities that grew dense and people therefore like to take as an example. It's very like that if the bay area want to grow significantly it has to do so with a business district on mostly vacant land.
I'd love if Toronto had more 5-story apartment buildings. I don't want to live in a giant condo having to take long elevators and pay expensive condo fees. But I hear it's nearly impossible to get regulatory approval to have those built here, it's either big high rise condos or nothing.
Montreal's plateau has a nice arrangement. Plenty of 3-5 story houses built in the 1950-60s broken up into multiple apartments making it the highest density area in Canada. Rent is super cheap ($450/m got me a large bachelor unit a few years back that would have been around >$1000 in Toronto).
Toronto is trying to quickly deal with it's increase in demand for housing. It can either try to build 1000 5-story buildings, or 100 50-story buildings. Which do you think is easier to do (financially, politically, everything else...).
It's all well and good to say "neighbourhoods with thousands of medium density buildings would be better", but we have to deal with what we currently have.
Now, long term I'm 100% in agreement with you. We need to modify regulations to say that new things must be of a certain density minimum, to gradually increase density everywhere. Consider taxing property in part based on density maybe? But in the short-term, towers have to go up or no one will be able to afford to live here next year.
As for comparing Montreal prices to Toronto prices: again that goes back to supply and demand. If Montreal had the immigration rates Toronto does (5,000 new people per month is the estimate I heard, and that's just from abroad), you wouldn't have cheap rentals. If Toronto hadn't worked hard to build towers, prices would look like the Bay Area.
One problem with mid-rise apartment buildings in North America is that they're of wood/plywood. It's one thing to live in a plywood SFH by yourself, but quality of life decreases (at least for me) rapidly in a mid-rise arrangement due to noise.
Anything over 7-8 stories has to be concrete, which makes for a much better condo experience.
It's not too hard to build a wood-framed condo that is noise-resistant. You just need separate frames for each condo. That adds to the cost, so it's not typically done.
> If California wants to lower their housing prices, they need to have supply match demand. To do that, they need 50 story buildings. A lot of them. And they need to start soon, because they take years to build.
Or lots and lots of 3-6 story apartment buildings. IIRC, New York has achieved its very high population density that way.
>If California wants to lower their housing prices, they need to have supply match demand. To do that, they need 50 story buildings. A lot of them. And they need to start soon, because they take years to build.
The thing about California is that people who live in the nicer parts of California are not trying to get anywhere. They are not trying to get richer, they are not trying to work hard to get somewhere else, they've made it. They don't need opportunity that comes with growth. They like their lifestyle, their open spaces and their prop 13 and they're going to keep it that way. Right now, there are huge amounts of very valuable land that are owned by open space trusts that will never be developed even though they are collectively worth billions. The point I'm trying to make is that, especially for people who live well in Northern and Southern California, there are some things that are more important than making another hundred million dollars and limiting development is one of them.
I look for you, or someone like you, in ever thread about California housing.
It's the person who refuses to let the 'it's simple supply and demand' meme go unchecked.
This is not about supply and demand. The politicians who deal with land-use regulation didn't "fail econ 101" as the assertion usually goes.
The fact is, we are dealing with many different groups of people whose interests cannot be sufficiently explained by economics. It's more abstract than that.
So let's please stop repeat "it's just simple supply and demand" like it somehow illuminates the issue to a degree not previously seen.
Economically, it's absolutely still just "supply and demand."
'narrator provides a solid explanation of why there's not political interest in balancing supply and demand at a lower price. Even if the politics is complicated, it's still a textbook case of government regulation limiting supply.
But if we're going to get a picture of the situation and possibly solve it, we have to go beyond economics. We have to go beyond treating anyone who doesn't reduce the complexity of the situation to 'econ 101' as someone who just 'doesn't get it'. That's plainly disingenuous and makes the discussion downright boring.
There is no one on this board that doesn't understand that more people with more money wanting a thing that there are few of drives up the price.
Some of us would rather move on to the complex interlocking and ever changing conditions - political, sometimes, and sometimes just strange human weaknesses or predilections -- instead of rehashing old arguments that conveniently skirt the hard stuff just to score points.
>There is no one on this board that doesn't understand that more people with more money wanting a thing that there are few of drives up the price.
Based on your previous comment, you seemed to be doing exactly what you say nobody on this board does.
>Some of us would rather move on to the complex interlocking and ever changing conditions - political, sometimes, and sometimes just strange human weaknesses or predilections -- instead of rehashing old arguments that conveniently skirt the hard stuff just to score points.
And narrator went into those political/human conditions, yet you reduced his comment to a "supply demand checkbox." Though you found his comment disingenuous, it seems that you are not bothering to read his comment; and the only thing you've provided to the conversation is: it's supply/demand plus other interlocking conditions.
> There is no one on this board that doesn't understand that more people with more money wanting a thing that there are few of drives up the price.
Look in this very thread and you will find people who insist that allowing development would somehow cause prices to rise and for people to be forced out of their homes.
It's not that allowing development is then reason that prices go up and cause people to be forced from their homes. It's that the developments themselves won't sufficiently increase the supply to the point that it would prevent the rise in housing costs, so they'd rather that development not get built at all because they have other, aesthetic or cultural objections in addition to that.
Again, complex interlocking factors. Not denial of economics.
You will find plenty of people who insist that replacing an old house with a new 8-story apartment building will somehow increase the price of housing.
> It's the person who refuses to let the 'it's simple supply and demand' meme go unchecked.
So the parent poster wants to debunk the 'it's simple supply and demand' meme?
> This is not about supply and demand.
So you're disagreeing with the parent poster, and saying that it's not about supply and demand, and thus implying that the parent poster said it's about supply and demand?
It's not that they don't want to share it, it's that they don't want it to change. If you live in a peaceful, quiet neighborhood, you don't want huge buildings going up, ruining your landscape, bringing more traffic, and basically changing everything you liked about the area when you moved there.
There is an island beach town near where I live. It has a very nice beach and a nice little main street with good, fun restaurants. It used to be a great place to spend the day. Every house on the island is $1M+. Now the residents have gotten the town to remove parking from the island to the point where it is impossible the visit. They literally have a drawbridge, and would love to only let owners onto the island.
Then they can do something that will make everyone happy: tax the crap out of the companies that bring in the flood of money, and make them leave. Limited development and lower prices. Everyone wins!
a lot of those who 'made it' are actually cashing out of their real estate and moving north, or east. they end up with a bigger house, less taxes, more cash in the bank.
with climate change, oregon and colorado will be just like california in 10 years anyway! as for texas and its droughts and carpetbaggers... well, it'll be even more california than california.
They're already moving to Oregon. And it's having a ripple effect in places like Portland and even here in Bend. Some of it's good in that there are more people to work here, and more people interested in investing, and so on. But in terms of housing, it's problematic.
This does not follow. Regulating what types of building can be built does not inherently limit the total volume of buildings that can be built. Barcelona and Paris are mostly under ten stories and house a very large population with considerable efficiency. Currently most buildings in San Francisco are one or two stories tall. The real problem with regulations is much more difficult to characterize. How much money and expertise does it take to negotiate building regulations? How much time does it take or might it take? The article calls out limits to how much residential or office space can be built over a specified time as particularly damaging. Many developers highlight the ability for NIMBYs to draw out environmental hearings until projects get stressed and fail.
Towers might be helpful in some cases, but are absolutely not needed. Indeed, research into the Bay Area suggests that the entire area functions as a unit. Because of the distribution of the population this means that the long hindered expansion of suburban downtowns is more relevant and critical to regional housing demand than what is going on in urban cores. Suburban cores do not need big towers, just the usual expansion. Large developments brought about by economic forces tend to be boxy and incrementally larger than existing buildings. Tall towers get built to house egos, not families or business operations.
I don't disagree with you that tall towers aren't the only way, but the overall point is the same: density must increase. There's very a fixed amount of land, and a growing population so homes / sqmi must increase to meet demand.
Paris had hundreds of years of wanting high density because it pre-dates the age of cars. America (and Canada) were built assuming everyone would drive everywhere, low-density. If you say "Well, we'll slowly allow slightly taller buildings", you won't solve the problem quickly enough- that will take decades.
Someone needs to have the willpower to tell the NIMBY's "sorry, yes in your back yard" and designate some area of town that is allowed to grow. Make a 5-10 year plan to add 50,000-100,000 residents to a 10x10 block area. Plan it to be a nice area you'd want to live in- the lower 2-3 floors of all buildings must be commercial. The owners who live there now will suddenly find they have good offers from developers who want to buy their homes and tear them down.
And then repeat process until housing prices reflect sanity.
I can sympathize with the families in Palo Alto/Menlo Park/etc. who have spent $$$ settling down, but I would be in favor of building tall apartment buildings around SF and SJ.
IMO, the nuance here is to allow large apartment buildings in the cities, while enforcing stricter building requirements in the family oriented suburbs.
I don't get why this is surprising. The goal of nearly all of these regulations is, effectively, to prevent housing from being built
People don't understand basic economics and like blaming everyone from transplants to foreigners to "greedy" developers to the rich to the poor to outsider corporations. The power of denial and ignorance is real. It leads people like me to write pieces like this: http://jakeseliger.com/2015/09/24/do-millennials-have-a-futu..., but education is slow and always a step behind instinct.
People who already own property are also incentivized to prevent more units from being developed.
> If California wants to lower their housing prices, they need to have supply match demand. To do that, they need 50 story buildings. A lot of them. And they need to start soon, because they take years to build.
Develop all that open space on the peninsula, the east bay hills and the Marin headlands. Not only will it increase housing supply, but by removing all that space used for recreation, the bay area will become a less desirable place to live, and demand will also go down. According to basic economics, it's a win-win!
So I'm from Winnipeg. Not exactly a big city, and a very very sprawling one at that. There's maybe 15 or 20 high rise buildings downtown and the tallest one is (iirc) 32 storeys.
I live in SF now. I consider this a 'large metro area'.
Last year I spent a week in Vancouver and my mind was blown. There were condo towers _everywhere_ downtown. Meanwhile, the city population of Vancouver is SMALLER than Winnipeg, and the metro area hosts half the population of SF over a 5x larger land area (according to wikipedia). Yet there's condo towers all over the place there, and relatively few here. WTF.
That's a kind of result that you only get with 40+ years of anti-growth politics
I think this is true of everything in the Developed world, not just housing.
Healthcare, education, taxis, hotels, small engines. They're all insanely expensive because of the massive amount of regulation that's been added to them in the last 50 or so years. Of course, those regulations add safety and control and structure, so I'm not saying they're all bad.
Just look at the houses or air quality or safety record in undeveloped countries to see what happens without all those regulations.
I find it fascinating that apps like uber and air bnb are basically just getting around all of the regulations and are in a sense going back in time to the way things were (and still are in the undeveloped world.) i.e. if you want to sleep somewhere, you just pay someone for a room in their house - never mind if they have a "permit" - same goes for an informal taxi in most of the world.
It will be interesting to see what happens when people make apps/websites for all the other areas of our world that have an enormous markup because of regulations.
There are also tons of things you can do without regulation like picking people up in your car/van or letting people sleep in a room in your house or cooking them a meal.
Because we understand the problems of monoculture and non-diverse communities? Because we know where income inequality leads? Because we'd rather see fellow humans have a place to live in, instead of seeing our bank account grow?
Because for some of us, social responsibilities matter too, not just money?
I lost 50% on my house, and I'm still saying this, so no, I probably wouldn't.
I get that this is a huge burden. I don't suggest that's the magic fix, or that this should happen across the board at such staggering numbers. I'd prefer if it didn't happen to such an extent again to me, either.
I was merely answering the OPs question why anybody owning a house would want them to go down at all.
We are currently on an unsustainable trajectory. They need to come down, and they will, sooner or later. The only question is if we want to handle this in a controlled way, or as a collapse, like last time 'round.
> "Because we know where income inequality leads?"
- income inequality is not the real problem. The real problem is that lower end of the spectrum is too low and has been stagnating for too long. Whether fixing the real problem will lead to lowering income inequality or not is irrelevant. For case studies on "take money from rich and give to poor" visit any of the post-communist countries (I am actually from one).
> "We are currently on an unsustainable trajectory."
- Why? Which trajectory is sustainable?
> "The only question is if we want to handle this in a controlled way, or as a collapse, like last time 'round."
- Lol, there is no question about that. The real question is how?
That's what "income inequality" is a shortcut for. I apologize, I of course meant "the disturbing increase in income inequality". I didn't intend to advocate for absolute income equality :)
Which trajectory is sustainable? One where housing prices don't significantly outperform income growth, where the price range allows people of all ends of the spectrum to find housing, and where the inventory isn't constrained as much by regulations that only serve the purpose of "ensuring property values".
> Lol, there is no question about that. The real question is how?
I'm curious - if there's no question about that, your "why would they want housing prices to go down" doesn't make sense. What do I miss?
I want them to go down now & controlled because I'd like a controlled descent. It seems you agree on that :)
"How" is a surprisingly tricky question that, among other things, depends on local economics. The solution for LA will look different than the solution for SF. (And SF is in a deep pickle. I'm glad the LA problems are not quite as bad yet)
Affordable housing projects (and financing them) will play a key role. But they're far from the only part - we'll also need to talk about densification, fixing blighted neighborhoods, simplifying the permitting process.
There will need to be changes to the rent control system, meaningful fixes to minimum wage, improved public transit, fixes to the nonsensical zoning system... And Prop 13 needs to die a fiery death.
Many of these changes are going to be somewhat painful for existing homeowners, but the inevitable collapse if we don't address this will be more painful.
Because prices are artificially high, and allowing the market to adjust supply will prevent a flight of demand. You can't sell your $2.5 million dollar ranch home for $2.5 million if Google and Facebook move to Seattle and prices crash due to lack of demand.
*edit I'm being a bit hyperbolic by suggesting that Google would move anytime soon outside of extraordinary circumstances. My point is that is prices rise too high as a result of supply that is constricted by regulation, then demand will no longer exist at some price point. And due to the nature of real estate as a vehicle for retirement savings, when the price adjusts down, people are likely to try to sell off fast to mitigate risk. This in turn can cause rapidly plummeting prices, which would be bad for almost everyone.
Google and Facebook already have Seattle offices. Big-G and FB are going to close down offices in the single largest talent pool in the world? Not hardly.
Clearly not any time soon, but if housing prices rise to the point that their workers can't afford to live within a few hours commute of their main campus, they'll have to pay significantly more or move more of their workforce elsewhere. They probably won't keep raising wages forever, but demand will raise as long as the do, and with it prices. It isn't hard to imagine a tipping point where it simply becomes a better economic move to locate elsewhere. I guarantee if several big tech-cos move, so will the talent.
Considering that most folks' life savings is in their house I think your going to be hard pressed to find support for your argument amongst property owners. I doubt anyone who has invested there wants to think about Silicon Valley ceasing to be Silicon Valley.
I don't disagree. The fact that retirement savings are intertwined with one's housing is an issue that is key to this problem, and there don't seem to be any solutions that aren't bad for someone. However, if nothing happens, prices will eventually reach a point that will reduce demand drastically down. Then what happens to people home values and savings?
Regulation does not come out of thin air--it comes in response to abuses. It's intellectual twaddle to complain about the resulting regulation without acknowledging its source--which is abuse of the commons.
What if Californians just decided they want their communities to look the way they do now?
Switzerland could make everything less expensive if they imported cheap labor and cut the minimum wage. But they elect not to.
I guarantee that if you made California cheaper you'd attract more people and then it'd just become more expensive again. There's not enough space there to accommodate all the people in the country that would live there if they could afford it.
Well .. maybe the CS industry needs to all agree to jointly move away to a state that has a better attitude to the problems faced by young people. As someone in their mid-30s, I'll never be able to afford a house in Mountain View (despite earning an income there, spending money there, renting there, etc.).
It starts with employees demanding higher wages. That'll get their attention and they'll move offices to cheaper cities. My partner just rejected a job offer because housing is too expensive. This is a six figure salary and management level but after taxes and rent on a one bedroom apartment there's not much left over to make working worth it.
But you see the spiral that leads to, don't you? Wages increase -> local economy adjusts to absorb higher incomes (i.e. everything, including housing, becomes more expensive) -> "we need to demand higher wages" -> wages increase -> ...
That's only a spiral if you expect organizations to stay in Mtn. View no matter what. At some point your spiral reaches a point where Mtn. View based companies are beaten out by companies in sane cities with sane costs of living, and then Mtn. View reaches an equilibrium.
No, they won't. The VC money is still firmly in SV, and it doesn't appear to be going anywhere. As long as the meme that you have to be in the Valley in order to get access to VCs is mostly true, then the companies will stay there. Get PG and YCombinator to start moving out of the Valley, and then you'll see companies more willing to do so.
Of course, those states will have to enact things similar to California when it comes to employee rights, like refusing to enforce most non-compete agreements.
That is almost what happened. During the 1970s and 1980s, Californians collectively decided they didn't like the changes that were going on and that they wanted their state to be frozen as it was circa 1965 forever, in both physical and economic senses, so they enacted a bunch of regulations designed to achieve that -- Prop 13 that froze property taxes, rent control in San Francisco, stricter zoning laws that prevented almost any medium or high density development in both the suburbs and in the urban cores.
These regulations had numerous unintended and unforeseen consequences, however, which collectively had the effect of exacerbating rather than curing all of the economic problems that were changing society in the 1970s.
If that were true I'd expect to see something of a continuous spectrum of suck extending from the 1970's to today. But instead it's not like that at all - the bay area is hugely prosperous and happy until the late 2000s when a confluence of factors led incredibly rapidly to where we are today.
There is some truth to what you're claiming, but I'm tired of this "California just wanted to freeze itself in the 1960s and look how wrong they were." In truth everything was going pretty good for everyone until the last decade or two.
The various land regulations such as Prop 13 and rent control were overtly billed as "ways to stave off all the social change that's been happening" when they were debated and passed in the 70s and 80s. It's not a guess or some sort of conspiracy theory. Review the newspaper polemics of the time. It was quite openly the goal.
You can see exactly that continuous spectrum of decay in California in many places. The state has become ever more polarized into rich and poor, with less and less middle, during that entire time. This is partially a process that was going on everywhere in the US, but all the extra regulation in California that was designed to halt that process actually made it worse.
The California middle class has been massively eroding since the '70s. Before that, you could drop out of high school and still get a job that would lead to you owning a house within a few years. Now, owning a house is impossible for almost everyone.
Huge tracts of formerly middle class suburbs near San Francisco and LA have become massive ghettoes -- where you still have to pay half a million dollars or more to buy a house next to thugs who openly sell crack 24 hours a day, where people are shot a couple of times a month. Where else in the US do you pay half a million dollars for a house in the ghetto?
The middle class jobs have mostly evaporated -- other than sinecures in California's vast bureaucratic and public employee apparatus, in which case you get a job for life with a powerful, politically-connected union to keep you from ever being fired for any reason. Good luck getting one of those unless you have a friend or relative who's already there.
Yes, things are great if you happen to be a high skilled tech worker in San Francisco during the late 90s or from circa 2010 to present, but this is a very small fraction of the population. Most Californians who don't have advanced computer programming skills only got squeezed harder by that influx of new money pushing up real estate prices still further.
Soon, very soon, robots will be picking all the produce in the Central Valley, and there will be millions of newly unemployed low-skilled workers flooding into San Francisco and LA looking for work.
While factually partly correct, your explanation of causality is mostly BS.
Rent control in SF was a direct response to Prop 13 and certain landlords enacting disproportionate rent increases. Strict zoning had been happening before prop13 (1978) and still continues to this day based on the desires of each community and how each would like its city planned.
"Supply and demand" is not an optional element of city planning that individual communities can choose to use or not use based on their particular local planning desires; it is an objective emergent property of scarcity. The desires of the community to not have the forces of supply and demand at work are irrelevant. All historic attempts to regulate away supply and demand have only made the exact problem they were trying to solve worse, including rent control.
Yes, rent control was intended to alleviate the problem of large rent increases. In practice it has only made large rent increases even worse -- by shifting them from long term tenants onto "people who have moved recently," which does not necessarily correlate with "people who are not long term residents a community." This is precisely the sort of unintended and unforeseen consequence I referred to in my post above. New tenants paying market rate rent are forced to subsidize the long-term tenants' rent. (Besides, it is inherently xenophobic, which is a seperate issue.)
It is a wealth transfer from "people who have moved recently" to "people who have not moved recently." It incentivizes residents to never move, so that they can keep their rent control, and it incentivizes landlords to raise the rents as high as possible when a unit is released back to market rate.
The perverse and unintended effect is insanely high market rate rents, which eventually leads inevitably to the disintegration of the same lower income communities that rent control was designed to preserve, as rental units are inevitably slowly released back to market rate. Poor people sometimes move, too, or die. Young adults moving out of their parents' place can't afford to live in the neighborhood where they grew up. Only much richer people can afford to move in.
Californians (I am one) can certainly decide this. Many actively hold this view. If we decide this, we have to live with the consequences, which I believe are indefensible from a moral standpoint. We're making it untenable for lower income families to live and work here.
As far as your second point, I don't think you know that demand for housing is so inelastic that the clearing price for $/square foot would remain static regardless of supply. I have a feeling it would retreat if more supply came on the market.
Demand =/= quantity demanded. If people demand a certain quantity at a certain price, they will demand more at a lower price. That "more" isn't going to make the object's price go up.
> What if Californians just decided they want their communities to look the way they do now?
If that, rather than selfishly increasing their property values at public expense, is their true motivation, they can do this in a way that satisfies everyone. Drive out all the businesses that bring in the money chasing after housing.
When regulation is short-sighted and disproportionately helps one group to the detriment of all others, then it is abuse of the commons.
Sometimes the cure proposed is as bad as or worse than the disease. We need to be sure we pay attention to the effects of our decisions, and reverse, augment or change them as needed.
Be careful about buying into the unassailable legitimacy of governmental/regulatory force. As often as not, regulations are the abuses. Winning a popularity contest (or achieving regulatory power through even less optimal means) does not automatically confer unwavering devotion to the commons or the general welfare. "If men were angels, no government [of likewise non-angelic men] would be necessary".
Regulation does not come out of thin air--it comes in response to abuses.
You're half-right, insofar as you say that regulation doesn't come out of thin air, but you're neglecting the role of philosophical ideas in history.
Regulation comes as a result of certain philosophical perspectives gaining sway. Namely, there was an era before German philosophy swept into America and gave rise to the Progressive movement (which, by all accounts, fought tirelessly for regulation.)
I don't have enough time to go into how Kant, Hegel, Marx and others influenced American intellectuals, and influenced/led to the utilitarians and pragmatists, and how this led to the Progressive movement, but it did, and this is not even a controversial point.
Your comment seems to presuppose that all regulations are responses to abuses of the commons. Even if one were to grant that notion -- and I don't -- it is still possible that the treatment is worse than the disease.
Are you just reflexively defending the concept of regulation generally, or do you have a specific defense for the regulations maligned?
To my ears, the only "intellectual twaddle" is the shallow implication that the author hasn't considered that sometimes regulations are there for a reason. The author surveys relevant research, highlights some key effects, and recommends specific reforms. You quote "the commons" as if the author didn't also have Hardin as required reading in undergraduate economics.
Regulation does not come out of thin air--it comes in response to abuses. It's intellectual twaddle to complain about the resulting regulation without acknowledging its source--which is abuse of the commons.
If this is ever to be solved, it has to be on the state level. Individual cities or counties are not going to nobly go against their interests and start building more than they have to.
But a lot of people have gotten very rich off of this, so I don't know if there is any political strength behind this. What happens to the Jerry Brown proposal will be a good indicator.
But building more housing isn't against any city's interests, more housing means more tax revenue. The people who are likely to block this are the people who have made "fortunes" by seeing the value of their homes rise. I would argue that those people have more power statewide than they do in the denser cities where few people own their own homes.
I completely agree that there is way too much regulation. But, the other part of the equation is people are still willing to pay the resulting price in the end. In the more "prime" communities like Palo Alto, Menlo Park, and Mountain View they still seem happy to pay the extra cost to get permits to tear down a 60 year ranch style home and then petition a city council to put a custom build in its place. Contractors advertise that they know the regulations and how to work with officials to get their permits through and charge a premium. The funny part is once construction is complete the new residence want to prevent new construction in order to "preserve the neighborhood" they moved into.
Using 'California' as a unit, and then selecting housing prices from the Bay Area to illustrate. Okay. Because houses in Stockton are $2mil?
I don't dispute that there are some really stupid land-use regulations in certain cities, but to hand-wave all of California as suffering from the yoke of regulation is to show a biased and superficial hand.
Housing prices are driven by average income, interest rates and population growth. Period.
In a stable metro, the minimum price is a floor driven by the prevailing rent as defined by social services for section 8. The median is driven by the median two earner income. You can validate this by looking at small cities with dominant employers like a state Capitol.
Everything else just changes the size, form and fitting of the housing unit.
It depends on your market. We're seeing a lot of Chinese capital (cash) being dumped into real-estate since it's seen as a cheap investment that produces good returns.
In this bubble that house is appreciating at 17% per year or more. If you're leveraged you can get higher returns, but finding someone to loan you the money may be difficult. If you've got cash, just dump it on properties and let it appreciate.
The last California housing crash was in 2008. The next one may be starting. There were lots of empty houses only 6 years ago.
Outside the coastal zone, there's not much state level regulation. The coastal zone is regulated because there's a general consensus that California doesn't want a wall of high-rises at the coast like Honolulu or Singapore.
San Francisco has substantial opposition to "Manhattanization", even though things are going that way. Different communities on the SF peninsula are going in different directions. Redwood City is building vertically - 8 to 15 stories, not skyscrapers, but many buildings are going up.
It's not clear that the Silicon Valley boom will continue much longer. Web has been done. Apps have been done. IoT, if it happens, will come from places where "things" are made. The Next Big Thing hasn't appeared yet.
Housing is also expensive because of the California building codes. These include things like double pane windows, copper pipes and energy efficient appliances. These raise the cost of new construction compared to other states, but lead to long term lower home ownership costs and reduced energy consumption. If we are serious about climate change we need to create such regulations. Buyers will chose cheaper houses if given the choice.
There are plenty of places in California where you could buy a home for $100K. The article does a very poor job of demonstrating a causal relationship between "regulation"--he doesn't even cite any specific ones--and basic supply/demand dynamics that are common to major metro areas throughout the world.
All he's got is a very hand-wavy argument and a chart that abruptly cuts off circa 1994.
There were plenty of problems in the 19th century, but the ideas of the era did not lead them to suppose that the first answer to any problems was red tape.
The effects of this difference are huge. I know this isn't quite apples-to-apples, but a rather stark comparison comes to mind: Using the comparatively primitive technology of the 1880s, James J. Hill was able to build a transcontinental railroad in a decade (using private finance). Here in Seattle, the public transit authority says it's going to take two or three decades to build a train that goes just six miles.
We aren't living in the 1880s anymore. For one, we value life, health, and safety much more than they did back then, with things like OSHA, much more stringent labor laws (overtime, child labor), more types of insurance required for employers including unemployment and various disability coverage, environmental laws like CEQA/Clean Air Act, and tons of other stuff.
But I think the biggest change is ultimately cultural. We just don't value growth today like we did back then. We want safe workplaces, and a clean environment.
I also think there's a much greater tolerance for government bureaucracy today then there was in the 1880s, including all kinds of permits that take weeks to issue, multiple agencies overseeing everything at the state, local, and federal level, and just in general a huge expansion in the size of government. If you told someone from the 1880s that US government spending would rise to some 40% of GDP over 120 years, they'd think you were totally insane.
I go back and forth on whether it's good or bad. It's a complicated question. It takes forever to get anything done, and yet, young Chinese nationals are coming to the US because their parents have utterly ruined their environment, they don't trust the safety of their food supply, and factories with hundreds of people in them burn down, killing everyone inside. I used to think the US and Europe were radically different places, but I'm coming to see they're more alike vs. different. It's really the US and China that are worlds apart.
I think (but am not completely certain) that we needed a high-growth environment to be rich enough to invent the technologies that give us safe workplaces and a clean environment.
If that's true, I also wonder what safety and and living standard improvements we might be giving up because we don't have high growth today.
>we might be giving up because we don't have high growth today
If by this you mean our descendents. It would be fair to note that life for most was quite brutish and short in the "high-growth" period you're lauding. Would you have been a collier or among the more fortunate, I wonder?
It was brutish and short for most people because there wasn't much wealth of any kind. How far would the combined fortunes of the industrialists gone in raising the standard of living had they been confiscated and distributed to everyone else? Not far at all, it turns out. 50 million people lived in the US in 1880, and Vanderbilt's $232 million fortune would have netted each of the the other 50,189,208 Americans around $4.62 each (around $114 in 2015 dollars). What they got in exchange from these captains of industry (steel, rail, oil, and a future where their children went on to live better than they did) was worth a heck of a lot more to their lives and livelihoods than a few fistfuls of coins.
Even if you were Andrew Carnegie, you'd have no Xbox, no CT scanner, no supercomputer in your pocket, no access to the Internet, no way to jump between cities by air...
Back then, all people were so poor, not just in material goods or safety technologies, but in knowledge. In the 19th century, they didn't know a damn thing about what actually caused cancer, so people routinely did incredibly stupid things (stupid to us, that is, with the knowledge we have today) when making dyes and many other chemical processes.
Incredibly, the alternatives to all that were even worse. If you just sat at home and did nothing, what would you have to do? Play cards and starve to death? Books were still expensive, and remember what I said about all the things that even Carnegie wouldn't have access to in his time?
Given all that, I'd rather start as a poor person today than be a rich person in 1830.
As an example of changing values (though not 19th C), the Hoover Dam claimed 100-ish lives during its construction. That would be a scandalous number today.
Here's just one example of my point: we have TBMs (tunnel boring machines) today, which were made possible by 19th and 20th-century industrial development. During the construction of the Hoover Dam, the original bypass tunnels were created by drilling and blasting, which resulted in a number of those deaths. If they had TBMs back then, many people would been spared exposure to dangerous rock dust, explosives, falling rocks, etc.
We might have too much red tape right now, but to say that 19th century problems didn't create red tape is not quite correct. The Jungle was published in 1906, and was about 19th century problems. It lead to red tape regarding food safety. Taft used the Sherman Act (red tape from 1890) to deal with competition problems.
With regard to railroads, there was no minimum wage to consider, no worker safety to consider, no environmental impact to consider and no zoning to consider. The only challenges were logistics, money and buying enough land in a straight line. Sure, there are costs to that approach, but the railroad builders don't have to bear them
It is a mistake to neglect the influx of German philosophical ideas (Kant, Hegel, Marx) in the latter part of the 19th century. This led to a very sharp shift in views in all aspects of thought, including ethics and politics, and culminated in the Progressive movement.
So this isn't nearly as simple as "people saw there were problems, and regulation was the natural development from there."
I'm not really familiar with the changing landscape of philosophy in the 19th century, or how that pertains to political development.
I'm also not saying that regulations are a natural development. I am saying that regulations were the development from the problems. Perhaps in another country, or across the multiverse, there were different reactions.
My point is that the 19th century was not a regulation free paradise and that regulations did not arise in a vacuum. There were substantial externalities associated with the 19th century regulatory environment.
As for today, we can talk overreach and rent seeking and all the other problems with excessive regulations - those are big components of our modern woes.
SF et. al. aren't an oil boom town that'll crash in the next cycle. SF is the Manhattan of tech and tech is where most economic growth will come from for the foreseeable future.
Regulations don't help. NIMBYism doesn't help. But if you ended both I still don't see how it would ever be as cheap as somewhere like Houston.
Anecdotally, a lot of people I know are leaving SF. I imagine the next 20-30 years will look like any other industry, where a clear center emerged, but then it diffused outward into the broader economy as more and more industries assimilated the new tech.
Now, you could make the argument that SF's core competence isn't so much a technology as the process of innovation itself, but I'm not sure that's the argument you're making. And I don't see any reason why a cheaper place with a lot of smart people and money (to reference pg) couldn't be the next SV, like say, Pittsburgh, or Seattle. Though I guess the social network, which is really what holds this entire place together, does have some staying power...maybe finance is the best example to prove your point?
We have yet to see a new SV emerge in another city. The capital from VCs is still here. Unless something drastic changes, SV will remain firmly planted as the world's tech hub.
By definition those leaving SF are those who didn't "make it". The whole point of being a center that you have the most power over something that people need, controlling access to markets. It's already very apparent for successful startups from outside SV that has to sell through app stores etc.
It has nothing to do with the fucking weather. In fact for many, maybe even most people, the weather in california is SHIT. I like rain and snow, so -- by definition -- california has BAD weather -- for me.
It also hasn't helped that the Fed has held the interest rate so low for so long in order to prop up the property bubble.
If the interest rate went up a couple of points, nobody could afford the mortgage on a million dollar home. At that point, the market would start moving in a different direction.
Housing is expensive because demand is high while supply is low. Perhaps a portion of the the difference in housing costs between certain areas in California and certain areas in other states (i.e., the 4 br/2 bathroom example) can be attributed to regulation, but the the vast majority of the difference is attributed to the fact that there is high demand for that $2 million home whileas that $100k home is in Podunk, Fly-Over State, USA where no wants to live.
In addition, at $100k, there has to be something wrong with that home. My old house's insurance bill claimed that it would cost in the mid-$200k range to rebuild that exact same, 4 bedroom, 3.5 bathroom, ~4,000 sq. ft. home.
The natural way that markets behave is when prices are high, the price is an incentive to create more supply, which then reduces the supply/demand mismatch.
With reduced regulation, there would be much more housing supply in SF. E.g. the city's footprint is slightly larger than Paris proper, which has 2.5x the population thanks to a consistent building height of ~6 floors. Paris is hardly a free-market bastion, or a place known for low quality of life, but SF out-regulates Paris with its tyranny of the vocal minority and regulation by bodies driven by perverse incentives.
Apart from directly adding supply, building up increases tax revenues and local population which enables / justifies transit expansion, which then increases the practically accessible pool of housing for anyone desiring to live in the city.
So, in trying to understand your point: do you not believe that housing costs would be lower if there was 3x the supply of housing, ala Paris, and a faster, more comprehensive farther-reaching transit system?
Case in point. I've a remodel project last year. The city has a regulation to require home owner to plant tree in front of the house for any permit based remodel work. When asked how to the tree planted, they said asked the state park service to get the permit and ttee requirement. But, but, I can pay a fee to substitute the tree planting. wtf.
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[ 5.7 ms ] story [ 137 ms ] threadThis is a little but misleading. You have to scroll way down to get to any city with an average under $100k for the described home and those are in cities with vast, mostly-abandoned areas where (basically uninhabitable versions of) such homes might cost as little as $10k. (Their averages are brought way down by outliers, in other words.)
Houston is a large city just because it's sprawlville (to a ridiculous degree, city limits is an astounding 627 sq mi). It's not a fair comparison to an urbanized city like Boston or SF (that both have 5+ times the density).
Even at a more local level ( https://techcrunch.com/2014/04/14/sf-housing/ ), the problem is complex with many stakeholders. How do you get everyone to agree and try to reach a better solution?
That sounds great, but think of it this way: a 200-unit luxury apartment complex that includes a shithole in the back with 40 units that lack parking and a separate access door would be exempt from local oversight. Does that sound like a pattern for success to you?
In other words, can cities simply down zone desirable areas and force the developer to apply for exemptions on a case by case basis which is tantamount to the current city reviews?
Edit: If you disagree it's quite simple to simple mentioning the relevant market were this has happened instead of downvoting. This emotionalism of HN is really getting annoying these days.
Prices almost never go down organically because it actually gets harder to build as things gets more developed, stake holders would have to take real losses to the detriment of the local economy, housing in these areas are almost essentially always a sellers market etc.
The "just build more" meme on HN is BS. In essentially no popular cities where this have been done have prices gone down or necessarily stabilized including the common examples of NY, HK or Paris.
Check out the Vienna system:
http://www.governing.com/topics/economic-dev/gov-affordable-...
We'd need a radical cultural change to allow that kind of thing here, but considering how things are going with prices, this is a good time for a real change.
Compare this to Toronto. Housing is getting more expensive here, yes, but not at nearly the same rate. Demand is increasing because of high immigration, but supply is being allowed to increase as well- and mostly in the up direction. There's a condo over on College street that just opened, 60 floors or more I believe. An 80+ twin tower condo is I think now approved by the city over on King. The main strip of North York must be averaging 25-30 stories tall, and it's 15km from downtown!
If California wants to lower their housing prices, they need to have supply match demand. To do that, they need 50 story buildings. A lot of them. And they need to start soon, because they take years to build.
SF housing crisis is entirely self-created. If it wasn't for zoning limitations they'd be one of the top 5 fastest growing city in North America no doubt.
[1] http://www.cbc.ca/news/business/130-highrise-building-projec...
Also, since there are a lot of Toronto folks on this thread ... what are you folks doing if you don't own anything already? Prices are at an all time high but there is a general fear that if you don't buy now, you will be locked out forever. A data point there are condos in Gibson Square in North York for north of 650K. Seems insane but that is what the market is I suppose.
Regarding my living situation it makes more sense for me to rent, everyone I know who buys a house has spent tons of time and money fixing up their place. I'd rather invest those resources into a startup or consulting.
Buying a condo might make sense at some point but I'm not really into condo living. If I go that route I'd want one with a pool and gym - which means a lot of extra condo fees, so I don't know if that ultimately makes financial sense. I'd be curious to see the numbers on that though.
Anyways, as far as what to do - Patience. Most people in Toronto who have good/great credit have mortgages w/~2.4% interest rate and 5 or less year term. What that means is that a ~1% increase in rates would increase their annual interest expense by ~50%. Considering that the average house price is $1MM in the GTA, let's say the average downpayment is 20% (it's actually lower from what I've read...), and you're looking at a situation where if rates go up just 1%, the average new home owner is going to need to come up with an additional $8K / year after tax, so ~$11-16K before tax, in order to not default on their mortgage. With wages being as stagnant as they are in Canada, and the average Canadian being more in debt than they have ever been in the history of the country(1), you can imagine that there will at least be a couple of people who will no longer be able to afford the houses they are in and need to sell it off.
1)http://www.theglobeandmail.com/report-on-business/economy/ca...
South Florida gets ignored in articles like that, because the cities are so physically small[1]. As of December 2014, South Florida as a whole had built 20 new towers, started construction on 80 more, and had yet another 200 in some sort of planning or presale stage[2]. That is what you want to look at for an example of skyrocketing population density in land-constrained areas.
[1] The largest city in South Florida is Miami, which is only 36sqmi. In contrast, Toronto is 244sqmi).
[2] http://www.miamiherald.com/news/business/biz-monday/article4...
What's really interesting is that the 244sqmi is full. There is room for maybe one or two more subdivision of houses, and then the only option is up (or another amalgamation with the neighbours, because that went so well last time).
We hit the point of "no way but up" about 20 years ago. There are a few holdout family ranches, but other than that there is nowhere left to build that doesn't involve tearing down something else first. In some parts of my home county the school board has had to start cannibalizing parts of public parks in order to build new schools to support the population.
The board keeps their school in the area that needs it (minus a few tough years without it) and they make a profit selling or renting the condos!
That's the rub, after you've constrained supply and inflated prices, there's a vested interest of those who've seen their values increase and those who bought at high values to not let them drop.
This is especially important for those that bought at a high value, as if the worth of their house drops, then they can find themselves in a position where they owe much more than the house is worth. We've seen this situation before, not too long ago. It's not pretty.
AFAICT, the trick is to manage growth effectively in an area through restrictions and incentives so that you try to stabilize house prices as much as possible (like the economy), such as tracking inflation and/or some other indicators. If you enact regulations that suppress new housing when demographics call for more of it, you need to offset that with incentives.
The worst thing that can happen is that a group will wrest disproportionate control over housing policy for an extended period, and then the policies they enact through self interest spiral out of control and make the situation worse for everyone.
As long as you can continue to pay the mortgage each one, nobody is going to come along and kick you out of the house.
The "problem" is that you can't sell your house for a profit to exchange it for an even more expensive house. Hence, the rest of us are on the hook to ensure that your house can continue to appreciate in price.
That being said, insolvency by itself sufficient to lose your house—even if you're not underwater.
Right, but the problem there is the insolvency, not being underwater (conceptually, you have the same problem if you are insolvent but owe a nonzero amount that is less than or equal to the worth of the property, though if its less you may be able to stay off insolvency by increasing indebtedness -- though that will probably take convincing a lender that your income/expense balance will change soon enough that you won't end up insolvent and overleveraged.)
Sounds pretty insane.
Incorrect; there are limits to annual increases in tax basis value outside of qualifying events (changes of ownership, new construction on property, etc.), but tax basis isn't divorced from market value altogether.
A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. Then there's the people with loans they might be cashflow-negative on month-to-month (paying down a sliver of principal), who are hoping to re-amortize into a new 30-year loan when their value goes up, hopefully cutting some of their payments.
I'm 31. My household income is well over 200K and I have many friends in the same boat, and none -- I really mean it -- zero -- of us own homes. The only hope is to get into a "starter home" as some other commenters describe and then hope to have enough equity that if you ever want to have a kid or live in a non-shoebox, you'll be able to afford to make a big down payment on a new place.
I hate this because it seems extremely financially imprudent, but realistically, your options are to play the game or move. There just isn't sanity in/around the Bay Area housing market.
Your market-rate salary is the salary the market is willing to pay for your labor. Nothing more, and nothing less. It has nothing to do with the kind of lifestyle the salary will enable you to have, or the things you will be able to afford.
Yes, I understand this. I mean that people are bidding lower than they should - they get fewer goods and services than they could have gotten in cheaper locations with their Bay Area salaries.
This artificially low bid can be understood as people paying to live in the Bay Area (and therefore take a salary that buys fewer goods and services than elsewhere).
In so doing they are granting a subsidy to their employers who would otherwise pay higher wages to location-indifferent laborers.
Why they are motivated to pay to live in the Bay Area is a mystery to me.
Owning a McMansion isn't everything. The Bay Area has more to offer in terms of job opportunities, career advancement, culture, and general quality of life than most metropolitan areas in America. Besides, successful engineers are doing just fine here, and many have no problem affording to buy houses.
The issue isn't house vs. apartment; it's about being able to have a sane base of committed expenses in the face of 4-5 years of double-digit rental price growth in SF. When I first came here 5 years ago, I was paying 750/month for exactly what I live in now -- just 40% cheaper.
I have no objection to living in an apartment and in fact, have consciously chosen to live cheaply and invest aggressively outside the Bay Area. But I think you get to a point where you might be thinking about starting a family and it makes you wonder what the future holds. I suspect most Bay Area buyers would rather buy just to have some stability in their payments, as much or more than anything else.
In more general terms, if space is priced at insane levels, it might be smart to rethink how much you actually need to be happy (or even why stay in SF - I don't understand why people do that).
Believe me, not a day goes by where I don't think about moving. But right now, as long as you can save a bit and don't mind living in a slightly crappy apartment, you'll do just fine here. Just take all the money you would've dumped into home equity and buy stocks, real estate, invest in companies, whatever, and you'll have plenty of money.
The current environment feels very unstable though. Something has to give. Either house appreciation has to slow, or wage growth has to accelerate, or a lot more new supply has to be built. I don't think your average Google/facebook employee knows or cares much about these trends but the startups do, and they're the canaries in the coal mine. If entrepreneurs stop coming to SF, and anecdotally I think it's getting less and less attractive with the rise of angel.co and other distributed funding platforms, this place is really gonna have a huge, long-term problem because big companies don't just spring into existence, they grow up from small companies that start locally.
This has been completely normal in many/most major world cities/regions for generations. That's why there's a term for a first home. I don't understand the consternation.
I grew up in a small but nice suburban town about 20 miles outside of Chicago. Plenty of my friends are buying 3-4br houses in decent parts of Chicago for 250-350k. So maybe I just grew up in a "cheap" global city and am not used to what, say, Parisians have come to expect. I think it's just worse in the Bay Area.
For obvious reasons, prices scale with proximity to population centers and higher paying jobs. CA is a big place and encompasses a few very different regions. If you want to live in say, Coalinga (which I just found through a map) in the Central Valley, I'm seeing houses on Zillow in the low $100k's and below.
But, to what's likely your point, in SF and the surrounding metro area, even starter homes are well out of the reach of most of the people that live there. Hell, starter homes here are out of the reach of a good percentage of people, and it's not nearly as bad as farther South.
If engineers are purely sitting at their computers and not talking to each other at all (except during scheduled meetings), the team could probably be converted to remote without downside, but plenty of organizations have an implicit dependency on unstructured conversation, and while there are ways to facilitate that in a remote work environment, it's not obvious.
And seriously that zone along the coast range up the peninsula is a really sweet spot[1]. If you and your associates have to be somewhere it's really hard to beat. (not so nice for the middle class couple trying to buy a house where the schools are still good, or the guy commuting from Tracy)
[1] Los Gatos all the way up to Woodside. Also check out Danville CA on the other side of the Oakland Hills.
There's an excellent video on him around, I'll see if I can't turn that up. Here: "The Secret History of Silicon Valley", tech talk at Google: https://m.youtube.com/watch?v=hFSPHfZQpIQ
Briefly:
UC Berkely and Stanford, each of which had (and have) excellent engineering deparments. Other colleges, universities, junior colleges, and public schools were from the 1950s through 1970s excellent. Most have been faltering since the 1980s.
Moffet Airfield. Already established by WWI and home to airship activity.
World War II. An immense industrial capacity built up, many defense industries, and a nascent technology cluster.
Amazing weather. There's little else in the US, or anywhere in the world, which can compete.
(For all the specific local boosters out there: I didn't say no places, I said "little else".)
Cheap housing. Up through the 1970s, California had ample room to grow, and things didn't start getting particularly nuts until the 1980s and 1990s. Since 1995, it's simply been insane.
Freeways. For a time it was possible to get around. That's no longer particularly the case. BART helps. Caltrain doesn't hurt too much. Both are entirely inadequate.
The ability to work from anywhere is only about 10 years old. The need for tech industry is closer to 50-60 years old, and local efficiencies, economies of scale, job-mobility, etc., all happen and matter.
Why the Bay Area? Because it has a huge collection of both jobs and employees. As an employee you have lots of options should things fall through with your current employer, and as an employer there is lots of talent you could potentially hire (though for a high price). No reason it had to be the Bay Area in particular, but it had to be somewhere.
If it moves somewhere else, it's likely that place's real estate market would be similarly inflated by an influx of professionals.
Some people (pretty much everyone who is vocal about this on HN) see remote work as the solution. I'm skeptical - it takes a lot to make your issue tracker, documentation, mailing lists etc. thorough enough that they're the only communication developers need. In my experience (and I expect at many companies) developers come across crucial bits of information through serendipitously overheard conversations, or by wandering over to people's desks, etc. such that if structured (i.e. either async or scheduled) communication were the only communication, things wouldn't get done as well or as quickly.
I'm not sure the former is good for me as an engineer. It'd be nice to afford a decent house, but less so if I have to sell it and move cross country to advance my career or flee an employer going the way of Yahoo. Barriers like geography, moving costs, social ties in different cities keeping the best employer-employee pairs from finding each other are a form of inefficiency that I'm not sure we should seek to introduce.
I'd like the latter - we could build it somewhere more development-friendly, which would make it less insane than the Bay Area housing market, but putting a huge industry of well-paid professionals somewhere isn't compatible with low cost of living (see: Manhattan, DC).
Tldr; early internet infrastructure
I know that in Toronto there's a lot of casual evidence of empty condos. Multiple buildings are springing up without any need for sewer system upgrades. The lights never seem to be on in most of the units. Keep in mind it gets dark before 5 in the winter. New condo developments don't seem to have grocery stores or supporting businesses.
But again, there's evidence but no one can get any real numbers.
Also owners have an incentive to lie to the government. Getting Canadian citizenship requires spending most of your time in the country for multiple years, but that's hard to track if you come and go on different passports.
>Multiple buildings are springing up without any need for sewer system upgrades.
How would you know? Do you think most people ask the guys digging up the streets what they are doing? Or what kind of capacity exists in Toronto already(was it future proofed?)
>The lights never seem to be on in most of the units.
Can you give any examples of buildings that are over a year old that are like this? I moved into 33 bay st on the first day residents were allowed in and my floor was empty for 3 months other an me. Most of the building was empty but that was largely because a) there were a lot of units for rent that took time to fill out. b) the sales office was open for 2 years after the building was complete as a lot of units weren't sold straight away.
>New condo developments don't seem to have grocery stores or supporting businesses.
Have you got any examples of this? 33 bay doesn't have a grocery store in it but everyone in those 4 buildings went to the Longos under Mapleleaf square or the Loblaws the other direction. Cityplace has a grocery store and pretty active bars/restaurants now. The ones on King/Queen have the Loblaws on Queen in walking distance and the ones on Yonge between bloor/king have the MLG Loblaws.
>Getting Canadian citizenship requires spending most of your time in the country for multiple years, but that's hard to track if you come and go on different passports.
Most of the people aren't looking for citizenship though only PR status which doesn't require that.
In NYC we complain like crazy about housing, but it's honestly fine compared to what you describe. In NYC you can't have it all but you do get to pick any two of: spacious, cheap, or short commute.
Apparently in the Bay Area it's pick any zero? Why do people keep going there?
No, its not. You can find spacious, reasonably cheap places within tolerable -- though not short -- commutes of most Bay Area jobs.
I suspect that young, high-income tech workers very often (1) want short commutes, and (2) want other aspects of the urban lifestyle of the core of the Bay Area whether or not it comes with a short commute, which makes the peripheral, long-commute places with such housing unattractive. (Plenty of families where the adults work in the core areas of the Bay Area do live in those peripheries, though.)
> Why do people keep going there?
Because that's where the (tech, for instance) jobs are?
Because the Bay Area has the best job market in the world for software engineers, by a huge margin. It is home to the headquarters of most of the major tech companies people can name, and contains major satellite campuses for major out-of-state tech companies such as Microsoft and Amazon. The scale of the tech industry here is simply unparalleled anywhere else.
Besides, you can pick 1, not 0.
A margin in what quantity exactly? I doubt that Bay Area salaries are high enough to compensate for the insane housing costs.
If you lose your job, or your company fails, you won't have to move to find another job -- there will be plenty of other companies to work for. Taking a job at a startup is therefore not a huge risk. Buying a home here, and thereby tying yourself down to this area, is unlikely to hold you back in your career, as it might elsewhere -- you will probably never need to move in order to achieve advancement in your field.
There is also the presence of venture capital. The VC world is very Silicon Valley-centric, although that might be changing. If you want funding, you'll have to come here for it. If you want to take advantage of your investors' professional networks to find other investors and build your team, you'll have to hire people who live here and don't want to leave.
As a result of these network effects, many of the world's best software engineers choose to live here, and companies want to be here to hire them. There is now a saying in the startup world that you can start your company anywhere, but Silicon Valley is the best place to grow it, because the pool of engineering talent here is larger than it is anywhere else.
Plus, this is a very nice place to live, if you can afford it.
Despite some of the exaggerations many people are making in this thread, I know quite a few people who have purchased homes and condos in the past few years, including someone who bought one this week on a salary well under $200k -- without any help from his parents or anyone else. I think the highest price any of them paid was about $700k, which is well under some of the numbers people are quoting here. It's doable for a single person who has a high income, and it is easily doable for married couples who work in tech or are successful in other fields. The main barrier to ownership is the down payment, not the mortgage payments.
Renting is also not as bad as people say it is, unless you live in downtown San Francisco. I pay less than $2k per month for a decent apartment in a very good location near a train station and major freeways, and I could spend less if I wanted to. My commute is quite pleasant. My rent probably sounds high to people from other cities, but on an average software engineer's salary, it is not burdensome in any way.
Asking why software engineers would want to live in the Bay Area is like asking why investment bankers would want to live in New York City or London. There is just such a critical mass of activity and connections that one would miss out on anywhere else.
While you may not be able to afford housing, you can bank $100k/yr if you live frugally. I'm not sure where else in the US that's a possibility.
There are many cities in the US where you could comfortably live on $35k and get paid $135k as an engineer.
I find it amusing that every time I bring these numbers up, I get people telling me I'm wrong. I'm not making these up. There are people I know making those salaries. There have been countless people here who have talked about how they make that much. This isn't a secret.
Living on $35k and making $135k doesn't mean you'll bank $100k/yr. Taxes cut into it. Living on $150k and making $350k does. And if you're smart you can live on $80k/yr in the bay area. I even know people living on $35k/yr out here.
Not everyone gets the high paying Google job. Not everyone wants it. But it exists and it pays extremely well.
You also neglect stock purchase plans and RSUs, which are the majority of many engineers' compensation. You could make $160k per year at Apple or Google and get $200k of stock every year as well.
Because new grads keep getting six-figure offers at prestigious companies offering more money, autonomy, and interesting work than what they'd get at Fortune 500 cost center IT departments (those that haven't outsourced to India yet) in their hometowns.
And where do they move then? To an equally expensive (per sq.ft.) but smaller apartment? Where I live (not california) I know literally zero parents who have moved out of the house they raised their children after retirement.
It seems that only people who inherit their parents houses stand to benefit from rising prices in any way.
It could be argued that the valuation on their property being out of whack is an issue of mismanagement by the local government. In that case a better approach might be to allow for a majority of that improper pricing to be written off over a number of years as a tax credit.
Yes. The problem is when it's already become normal, what do you do?
> It could be argued that the valuation on their property being out of whack is an issue of mismanagement by the local government.
Yes, that's exactly what I was arguing.
> In that case a better approach might be to allow for a majority of that improper pricing to be written off over a number of years as a tax credit.
Which is another way of saying that we, as the entire constituency of that tax base (be it local, state or federal), have decided to subsidize the poor planning (to give the benefit of a doubt) of those local governments and try to correct the issue. While probably the most likely to actually work, I'm not holding my breath, as if the pain isn't spread over a significantly larger population than the original problem, it will be hard to survive for the tax payers, and if is is spread, you run into the problem of people not wanting to pay to fix the problems of others (as short sighted as it is, as it stabilizes things overall).
We might hack away at some of the symptoms, but the human psyche is inherently ill suited for rationally weighing the needs of disparate peoples and how they effect us in complex systems like this, being as our neurology evolved for smaller groups/tribes. At least that's my pseudo-psychology take on it.
That's the reason why so many people are anti-regulation and pro free market for just about anything not dealing with actual risks to public safety.
Artificially control supply, prices skyrocket. Let the free market work and as demand increases so will supply as people keep building to accommodate. Also creates lots of construction jobs.
That might be part of it, but it's not exactly obvious that you'd want to live in a place with 50-story buildings either.
Wrong. Adding supply lowers prices, not increases them.
The fact that wealthy rentiers in the Bay Area have somehow convinced activists that they should oppose new development is farcical. Liberal activists are literally protesting to enrich capitalists.
That's something else, isn't it? The people who already live there might not want 50-story buildings, even if there are other people who would move into them if they were built.
That's a valid question for every law or other governmental decision. But we can think of an idealized case, where an entire town, or state, or country, agree that they don't want 50-story buildings, even if there exists outsiders who would like to move into such buildings. In this case, we need only recognize the right of the local people to decide what happens in their area, even if it is against the will of people from elsewhere.
On at least some level, I find it reasonable that the people who live in a certain place decide over that place. In any case, that is rather conventional, isn't it? It's particularly clear on the level of countries, which is why I mentioned it in my comment. Only citizens or residents of a country, not the rest of the world, get to vote in elections.
> The major question is what harm is being done to the local people by the existence of 50 story buildings
That's really a matter of their personal opinion. Some of us find such buildings repulsive.
I find lip piercings repulsive. I wouldn't want them made illegal. The country would be in a better place if people hadn't decided that there's a 0th amendment saying they had the right to never be offended by anything.
http://reason.com/archives/2014/04/02/zonings-racist-roots-s...
Why is xenophobia and NIMBYism acceptable in one case and not the other?
Yes, what if they do? Should they not get to decide because they might haver the wrong opinion? Who should decide instead? What if they have the wrong opinion?
> Why is xenophobia and NIMBYism acceptable in one case and not the other?
What two cases are you referring to?
Also, it's not obvious that NIMBY, as in "yes, do thing X, but not in my backyard", is relevant here, because it's not necessarily so that anyone is saying "yes, do thing X". For "NIMBY" to be a meaningful concept at all, it really needs to be about a situation when someone is pushing X onto someone else, while refusing to accept X in their own lives. If "NIMBY" used simply to describe a position of "no X, please", or even "no X, please, at least not in my backyard where I might have a say in it", then it's not useful, because those are perfectly reasonable positions to have about things.
Most people would think an entire town deciding to exclude minorities is morally repugnant and shouldn't be allowed.
What? I'm not saying I don't. It's just irrelevant to the issue.
> shouldn't be allowed.
That's like saying that "these people over here cannot be allowed to decide over their own neighborhood, because they might decide things that I find repugnant". Well, who are you going to trust with the power?
Why is it paradoxical? Because they could otherwise have more buyers of their products?
Of course good luck convincing J. Random Householder of that
I see this in Chicago. Graph price of single family 3 bedroom home and 3 bedroom condo. The prices track. The SFH is worth about double... When condo prices fell in 2008, SFH prices fell too.
In Chicago, a 300k condo and a 600k single family home ARE substitutes. I know many people that could afford either. As the delta shifts one way or another, more of them will opt for the other choice.
But it doesn't matter. The Bay Area region is going to see serious emigration over the next 5 yrs and it'll be primarily the people that SV wants to keep around: younger people who can't afford to lay down roots in SV and furthermore understand it would be stupid to do so at these prices. Especially with engineers, I refuse to believe most under 30 aren't already well aware that the economics favor living cheap, saving up, and then getting out.
Tech is very compatible with remote work (even at a low level when you think in terms of microservices and PaaS), and moving operations or starting fresh is relatively easy. Even the networking argument is thin: there are already concentrations of talented engineers in a bunch of major cities. Not to mention I've self-learned almost everything relevant anyway. Conferences and assorted other BS are largely pointless.
So what's left? Investors and existing companies. I believe this is why we haven't seen a substantial exodus thus far. I think the argument about career advancement issues being in a non-HQ office doesn't really hold as much water for the large companies. I also think tech companies look at good engineers located outside the expensive SV bubble as a kind of subsidy: revenue isn't nearly as sensitive to geographical distribution of employees as is cost.
With investors the story may be different. They want to keep a close eye on their companies and finding good engineers to take a chance on your startup is much easier in a high-density tech zone. But why would entrepreneurs want to suffer the incumbent costs? Assuming the same size of investment round, wise founders would choose to minimize their burn rate by locating somewhere closer to the midpoint on the spectrum of tradeoffs (e.g. Boulder/Denver, Austin, NYC outside Manhattan, Seattle, LA, etc).
TLDR: It seems like the status quo is far too tenuous to continue to hold indefinitely.
I'm kind of surprised that public companies with heavy presence in the Bay Area aren't coming under pressure from investors to relocate their operations to cheaper locations.
But then I realize that most Bay Area salaries do not compensate for the living expenses, so companies aren't bearing the full brunt of the living costs on their payroll.
However, that makes less sense in a cul-de-sac suburb + highway situation than it does in a city with more public transit options and fewer highways. You basically have to rezone and buy out several lots and put up apartments and the entire neighborhood changes. So if your house gets bought up, you may benefit but it may drop if you live near it but don't sell to the developer.
What they DO need is to replace a lot of the single resident housing units with multiple-dwelling-units. Nice condos probably wouldn't be too bad. Better would be high-density mixed commercial / residential areas ringed by parks and with good transit connections.
In the end, skyscrapers, while having problems, allow for bigger units (on average) in comparison to Europe
Montreal's plateau has a nice arrangement. Plenty of 3-5 story houses built in the 1950-60s broken up into multiple apartments making it the highest density area in Canada. Rent is super cheap ($450/m got me a large bachelor unit a few years back that would have been around >$1000 in Toronto).
Toronto is trying to quickly deal with it's increase in demand for housing. It can either try to build 1000 5-story buildings, or 100 50-story buildings. Which do you think is easier to do (financially, politically, everything else...).
It's all well and good to say "neighbourhoods with thousands of medium density buildings would be better", but we have to deal with what we currently have.
Now, long term I'm 100% in agreement with you. We need to modify regulations to say that new things must be of a certain density minimum, to gradually increase density everywhere. Consider taxing property in part based on density maybe? But in the short-term, towers have to go up or no one will be able to afford to live here next year.
As for comparing Montreal prices to Toronto prices: again that goes back to supply and demand. If Montreal had the immigration rates Toronto does (5,000 new people per month is the estimate I heard, and that's just from abroad), you wouldn't have cheap rentals. If Toronto hadn't worked hard to build towers, prices would look like the Bay Area.
Anything over 7-8 stories has to be concrete, which makes for a much better condo experience.
Or lots and lots of 3-6 story apartment buildings. IIRC, New York has achieved its very high population density that way.
The thing about California is that people who live in the nicer parts of California are not trying to get anywhere. They are not trying to get richer, they are not trying to work hard to get somewhere else, they've made it. They don't need opportunity that comes with growth. They like their lifestyle, their open spaces and their prop 13 and they're going to keep it that way. Right now, there are huge amounts of very valuable land that are owned by open space trusts that will never be developed even though they are collectively worth billions. The point I'm trying to make is that, especially for people who live well in Northern and Southern California, there are some things that are more important than making another hundred million dollars and limiting development is one of them.
It's the person who refuses to let the 'it's simple supply and demand' meme go unchecked.
This is not about supply and demand. The politicians who deal with land-use regulation didn't "fail econ 101" as the assertion usually goes.
The fact is, we are dealing with many different groups of people whose interests cannot be sufficiently explained by economics. It's more abstract than that.
So let's please stop repeat "it's just simple supply and demand" like it somehow illuminates the issue to a degree not previously seen.
'narrator provides a solid explanation of why there's not political interest in balancing supply and demand at a lower price. Even if the politics is complicated, it's still a textbook case of government regulation limiting supply.
There is no one on this board that doesn't understand that more people with more money wanting a thing that there are few of drives up the price.
Some of us would rather move on to the complex interlocking and ever changing conditions - political, sometimes, and sometimes just strange human weaknesses or predilections -- instead of rehashing old arguments that conveniently skirt the hard stuff just to score points.
Based on your previous comment, you seemed to be doing exactly what you say nobody on this board does.
>Some of us would rather move on to the complex interlocking and ever changing conditions - political, sometimes, and sometimes just strange human weaknesses or predilections -- instead of rehashing old arguments that conveniently skirt the hard stuff just to score points.
And narrator went into those political/human conditions, yet you reduced his comment to a "supply demand checkbox." Though you found his comment disingenuous, it seems that you are not bothering to read his comment; and the only thing you've provided to the conversation is: it's supply/demand plus other interlocking conditions.
Look in this very thread and you will find people who insist that allowing development would somehow cause prices to rise and for people to be forced out of their homes.
Again, complex interlocking factors. Not denial of economics.
> It's the person who refuses to let the 'it's simple supply and demand' meme go unchecked.
So the parent poster wants to debunk the 'it's simple supply and demand' meme?
> This is not about supply and demand.
So you're disagreeing with the parent poster, and saying that it's not about supply and demand, and thus implying that the parent poster said it's about supply and demand?
Well, which one is it?
http://cityobservatory.org/the-immaculate-conception-theory-...
This is exactly what "drawbridge mentality" means.
Then they can do something that will make everyone happy: tax the crap out of the companies that bring in the flood of money, and make them leave. Limited development and lower prices. Everyone wins!
with climate change, oregon and colorado will be just like california in 10 years anyway! as for texas and its droughts and carpetbaggers... well, it'll be even more california than california.
Towers might be helpful in some cases, but are absolutely not needed. Indeed, research into the Bay Area suggests that the entire area functions as a unit. Because of the distribution of the population this means that the long hindered expansion of suburban downtowns is more relevant and critical to regional housing demand than what is going on in urban cores. Suburban cores do not need big towers, just the usual expansion. Large developments brought about by economic forces tend to be boxy and incrementally larger than existing buildings. Tall towers get built to house egos, not families or business operations.
Paris had hundreds of years of wanting high density because it pre-dates the age of cars. America (and Canada) were built assuming everyone would drive everywhere, low-density. If you say "Well, we'll slowly allow slightly taller buildings", you won't solve the problem quickly enough- that will take decades.
Someone needs to have the willpower to tell the NIMBY's "sorry, yes in your back yard" and designate some area of town that is allowed to grow. Make a 5-10 year plan to add 50,000-100,000 residents to a 10x10 block area. Plan it to be a nice area you'd want to live in- the lower 2-3 floors of all buildings must be commercial. The owners who live there now will suddenly find they have good offers from developers who want to buy their homes and tear them down.
And then repeat process until housing prices reflect sanity.
IMO, the nuance here is to allow large apartment buildings in the cities, while enforcing stricter building requirements in the family oriented suburbs.
People don't understand basic economics and like blaming everyone from transplants to foreigners to "greedy" developers to the rich to the poor to outsider corporations. The power of denial and ignorance is real. It leads people like me to write pieces like this: http://jakeseliger.com/2015/09/24/do-millennials-have-a-futu..., but education is slow and always a step behind instinct.
People who already own property are also incentivized to prevent more units from being developed.
Develop all that open space on the peninsula, the east bay hills and the Marin headlands. Not only will it increase housing supply, but by removing all that space used for recreation, the bay area will become a less desirable place to live, and demand will also go down. According to basic economics, it's a win-win!
I live in SF now. I consider this a 'large metro area'.
Last year I spent a week in Vancouver and my mind was blown. There were condo towers _everywhere_ downtown. Meanwhile, the city population of Vancouver is SMALLER than Winnipeg, and the metro area hosts half the population of SF over a 5x larger land area (according to wikipedia). Yet there's condo towers all over the place there, and relatively few here. WTF.
That's a kind of result that you only get with 40+ years of anti-growth politics
Healthcare, education, taxis, hotels, small engines. They're all insanely expensive because of the massive amount of regulation that's been added to them in the last 50 or so years. Of course, those regulations add safety and control and structure, so I'm not saying they're all bad.
Just look at the houses or air quality or safety record in undeveloped countries to see what happens without all those regulations.
I find it fascinating that apps like uber and air bnb are basically just getting around all of the regulations and are in a sense going back in time to the way things were (and still are in the undeveloped world.) i.e. if you want to sleep somewhere, you just pay someone for a room in their house - never mind if they have a "permit" - same goes for an informal taxi in most of the world.
It will be interesting to see what happens when people make apps/websites for all the other areas of our world that have an enormous markup because of regulations.
There are also tons of things you can do without regulation like picking people up in your car/van or letting people sleep in a room in your house or cooking them a meal.
Because for some of us, social responsibilities matter too, not just money?
You'd be changing your tune if the $1M+ house you bought suddenly went underwater to the tune of several hundred thousand dollars.
I get that this is a huge burden. I don't suggest that's the magic fix, or that this should happen across the board at such staggering numbers. I'd prefer if it didn't happen to such an extent again to me, either.
I was merely answering the OPs question why anybody owning a house would want them to go down at all.
We are currently on an unsustainable trajectory. They need to come down, and they will, sooner or later. The only question is if we want to handle this in a controlled way, or as a collapse, like last time 'round.
> "We are currently on an unsustainable trajectory." - Why? Which trajectory is sustainable?
> "The only question is if we want to handle this in a controlled way, or as a collapse, like last time 'round." - Lol, there is no question about that. The real question is how?
It's just that the chosen amount being "everything" is a ridiculous idea. People seem unable to think about politics without turning into extremists.
Which trajectory is sustainable? One where housing prices don't significantly outperform income growth, where the price range allows people of all ends of the spectrum to find housing, and where the inventory isn't constrained as much by regulations that only serve the purpose of "ensuring property values".
> Lol, there is no question about that. The real question is how?
I'm curious - if there's no question about that, your "why would they want housing prices to go down" doesn't make sense. What do I miss?
I want them to go down now & controlled because I'd like a controlled descent. It seems you agree on that :)
"How" is a surprisingly tricky question that, among other things, depends on local economics. The solution for LA will look different than the solution for SF. (And SF is in a deep pickle. I'm glad the LA problems are not quite as bad yet)
Affordable housing projects (and financing them) will play a key role. But they're far from the only part - we'll also need to talk about densification, fixing blighted neighborhoods, simplifying the permitting process.
There will need to be changes to the rent control system, meaningful fixes to minimum wage, improved public transit, fixes to the nonsensical zoning system... And Prop 13 needs to die a fiery death.
Many of these changes are going to be somewhat painful for existing homeowners, but the inevitable collapse if we don't address this will be more painful.
Now, if, as prices went down, the loans went down as well, that'd be another story.
*edit I'm being a bit hyperbolic by suggesting that Google would move anytime soon outside of extraordinary circumstances. My point is that is prices rise too high as a result of supply that is constricted by regulation, then demand will no longer exist at some price point. And due to the nature of real estate as a vehicle for retirement savings, when the price adjusts down, people are likely to try to sell off fast to mitigate risk. This in turn can cause rapidly plummeting prices, which would be bad for almost everyone.
Switzerland could make everything less expensive if they imported cheap labor and cut the minimum wage. But they elect not to.
I guarantee that if you made California cheaper you'd attract more people and then it'd just become more expensive again. There's not enough space there to accommodate all the people in the country that would live there if they could afford it.
Of course, those states will have to enact things similar to California when it comes to employee rights, like refusing to enforce most non-compete agreements.
These regulations had numerous unintended and unforeseen consequences, however, which collectively had the effect of exacerbating rather than curing all of the economic problems that were changing society in the 1970s.
There is some truth to what you're claiming, but I'm tired of this "California just wanted to freeze itself in the 1960s and look how wrong they were." In truth everything was going pretty good for everyone until the last decade or two.
You can see exactly that continuous spectrum of decay in California in many places. The state has become ever more polarized into rich and poor, with less and less middle, during that entire time. This is partially a process that was going on everywhere in the US, but all the extra regulation in California that was designed to halt that process actually made it worse.
The California middle class has been massively eroding since the '70s. Before that, you could drop out of high school and still get a job that would lead to you owning a house within a few years. Now, owning a house is impossible for almost everyone.
The land regulations that restricted supply have made long term housing prices grow far faster than the national average: http://www.doctorhousingbubble.com/wp-content/uploads/2015/0...
Huge tracts of formerly middle class suburbs near San Francisco and LA have become massive ghettoes -- where you still have to pay half a million dollars or more to buy a house next to thugs who openly sell crack 24 hours a day, where people are shot a couple of times a month. Where else in the US do you pay half a million dollars for a house in the ghetto?
The middle class jobs have mostly evaporated -- other than sinecures in California's vast bureaucratic and public employee apparatus, in which case you get a job for life with a powerful, politically-connected union to keep you from ever being fired for any reason. Good luck getting one of those unless you have a friend or relative who's already there.
Yes, things are great if you happen to be a high skilled tech worker in San Francisco during the late 90s or from circa 2010 to present, but this is a very small fraction of the population. Most Californians who don't have advanced computer programming skills only got squeezed harder by that influx of new money pushing up real estate prices still further.
And we haven't seen anything yet. Just wait till the "smart farm" trend really kicks in: http://www.economist.com/technology-quarterly/2016-06-09/fac...
Soon, very soon, robots will be picking all the produce in the Central Valley, and there will be millions of newly unemployed low-skilled workers flooding into San Francisco and LA looking for work.
Rent control in SF was a direct response to Prop 13 and certain landlords enacting disproportionate rent increases. Strict zoning had been happening before prop13 (1978) and still continues to this day based on the desires of each community and how each would like its city planned.
Yes, rent control was intended to alleviate the problem of large rent increases. In practice it has only made large rent increases even worse -- by shifting them from long term tenants onto "people who have moved recently," which does not necessarily correlate with "people who are not long term residents a community." This is precisely the sort of unintended and unforeseen consequence I referred to in my post above. New tenants paying market rate rent are forced to subsidize the long-term tenants' rent. (Besides, it is inherently xenophobic, which is a seperate issue.)
It is a wealth transfer from "people who have moved recently" to "people who have not moved recently." It incentivizes residents to never move, so that they can keep their rent control, and it incentivizes landlords to raise the rents as high as possible when a unit is released back to market rate.
The perverse and unintended effect is insanely high market rate rents, which eventually leads inevitably to the disintegration of the same lower income communities that rent control was designed to preserve, as rental units are inevitably slowly released back to market rate. Poor people sometimes move, too, or die. Young adults moving out of their parents' place can't afford to live in the neighborhood where they grew up. Only much richer people can afford to move in.
As far as your second point, I don't think you know that demand for housing is so inelastic that the clearing price for $/square foot would remain static regardless of supply. I have a feeling it would retreat if more supply came on the market.
> What if Californians just decided they want their communities to look the way they do now?
If that, rather than selfishly increasing their property values at public expense, is their true motivation, they can do this in a way that satisfies everyone. Drive out all the businesses that bring in the money chasing after housing.
Sometimes the cure proposed is as bad as or worse than the disease. We need to be sure we pay attention to the effects of our decisions, and reverse, augment or change them as needed.
You're half-right, insofar as you say that regulation doesn't come out of thin air, but you're neglecting the role of philosophical ideas in history.
Regulation comes as a result of certain philosophical perspectives gaining sway. Namely, there was an era before German philosophy swept into America and gave rise to the Progressive movement (which, by all accounts, fought tirelessly for regulation.)
I don't have enough time to go into how Kant, Hegel, Marx and others influenced American intellectuals, and influenced/led to the utilitarians and pragmatists, and how this led to the Progressive movement, but it did, and this is not even a controversial point.
Are you just reflexively defending the concept of regulation generally, or do you have a specific defense for the regulations maligned?
To my ears, the only "intellectual twaddle" is the shallow implication that the author hasn't considered that sometimes regulations are there for a reason. The author surveys relevant research, highlights some key effects, and recommends specific reforms. You quote "the commons" as if the author didn't also have Hardin as required reading in undergraduate economics.
But a lot of people have gotten very rich off of this, so I don't know if there is any political strength behind this. What happens to the Jerry Brown proposal will be a good indicator.
I think it's more of a NIMBY thing. People can agree that California needs more housing, but fight to the death against it near their house.
I don't dispute that there are some really stupid land-use regulations in certain cities, but to hand-wave all of California as suffering from the yoke of regulation is to show a biased and superficial hand.
This is why I think that statewide factors are the dominant force here.
In a stable metro, the minimum price is a floor driven by the prevailing rent as defined by social services for section 8. The median is driven by the median two earner income. You can validate this by looking at small cities with dominant employers like a state Capitol.
Everything else just changes the size, form and fitting of the housing unit.
In this bubble that house is appreciating at 17% per year or more. If you're leveraged you can get higher returns, but finding someone to loan you the money may be difficult. If you've got cash, just dump it on properties and let it appreciate.
Outside the coastal zone, there's not much state level regulation. The coastal zone is regulated because there's a general consensus that California doesn't want a wall of high-rises at the coast like Honolulu or Singapore.
San Francisco has substantial opposition to "Manhattanization", even though things are going that way. Different communities on the SF peninsula are going in different directions. Redwood City is building vertically - 8 to 15 stories, not skyscrapers, but many buildings are going up.
It's not clear that the Silicon Valley boom will continue much longer. Web has been done. Apps have been done. IoT, if it happens, will come from places where "things" are made. The Next Big Thing hasn't appeared yet.
All he's got is a very hand-wavy argument and a chart that abruptly cuts off circa 1994.
There were plenty of problems in the 19th century, but the ideas of the era did not lead them to suppose that the first answer to any problems was red tape.
The effects of this difference are huge. I know this isn't quite apples-to-apples, but a rather stark comparison comes to mind: Using the comparatively primitive technology of the 1880s, James J. Hill was able to build a transcontinental railroad in a decade (using private finance). Here in Seattle, the public transit authority says it's going to take two or three decades to build a train that goes just six miles.
We aren't living in the 1880s anymore. For one, we value life, health, and safety much more than they did back then, with things like OSHA, much more stringent labor laws (overtime, child labor), more types of insurance required for employers including unemployment and various disability coverage, environmental laws like CEQA/Clean Air Act, and tons of other stuff.
But I think the biggest change is ultimately cultural. We just don't value growth today like we did back then. We want safe workplaces, and a clean environment.
I also think there's a much greater tolerance for government bureaucracy today then there was in the 1880s, including all kinds of permits that take weeks to issue, multiple agencies overseeing everything at the state, local, and federal level, and just in general a huge expansion in the size of government. If you told someone from the 1880s that US government spending would rise to some 40% of GDP over 120 years, they'd think you were totally insane.
I go back and forth on whether it's good or bad. It's a complicated question. It takes forever to get anything done, and yet, young Chinese nationals are coming to the US because their parents have utterly ruined their environment, they don't trust the safety of their food supply, and factories with hundreds of people in them burn down, killing everyone inside. I used to think the US and Europe were radically different places, but I'm coming to see they're more alike vs. different. It's really the US and China that are worlds apart.
If that's true, I also wonder what safety and and living standard improvements we might be giving up because we don't have high growth today.
If by this you mean our descendents. It would be fair to note that life for most was quite brutish and short in the "high-growth" period you're lauding. Would you have been a collier or among the more fortunate, I wonder?
Even if you were Andrew Carnegie, you'd have no Xbox, no CT scanner, no supercomputer in your pocket, no access to the Internet, no way to jump between cities by air...
Back then, all people were so poor, not just in material goods or safety technologies, but in knowledge. In the 19th century, they didn't know a damn thing about what actually caused cancer, so people routinely did incredibly stupid things (stupid to us, that is, with the knowledge we have today) when making dyes and many other chemical processes.
Incredibly, the alternatives to all that were even worse. If you just sat at home and did nothing, what would you have to do? Play cards and starve to death? Books were still expensive, and remember what I said about all the things that even Carnegie wouldn't have access to in his time?
Given all that, I'd rather start as a poor person today than be a rich person in 1830.
With regard to railroads, there was no minimum wage to consider, no worker safety to consider, no environmental impact to consider and no zoning to consider. The only challenges were logistics, money and buying enough land in a straight line. Sure, there are costs to that approach, but the railroad builders don't have to bear them
So this isn't nearly as simple as "people saw there were problems, and regulation was the natural development from there."
I'm also not saying that regulations are a natural development. I am saying that regulations were the development from the problems. Perhaps in another country, or across the multiverse, there were different reactions.
My point is that the 19th century was not a regulation free paradise and that regulations did not arise in a vacuum. There were substantial externalities associated with the 19th century regulatory environment.
As for today, we can talk overreach and rent seeking and all the other problems with excessive regulations - those are big components of our modern woes.
Regulations don't help. NIMBYism doesn't help. But if you ended both I still don't see how it would ever be as cheap as somewhere like Houston.
Anecdotally, a lot of people I know are leaving SF. I imagine the next 20-30 years will look like any other industry, where a clear center emerged, but then it diffused outward into the broader economy as more and more industries assimilated the new tech.
Now, you could make the argument that SF's core competence isn't so much a technology as the process of innovation itself, but I'm not sure that's the argument you're making. And I don't see any reason why a cheaper place with a lot of smart people and money (to reference pg) couldn't be the next SV, like say, Pittsburgh, or Seattle. Though I guess the social network, which is really what holds this entire place together, does have some staying power...maybe finance is the best example to prove your point?
If the interest rate went up a couple of points, nobody could afford the mortgage on a million dollar home. At that point, the market would start moving in a different direction.
In addition, at $100k, there has to be something wrong with that home. My old house's insurance bill claimed that it would cost in the mid-$200k range to rebuild that exact same, 4 bedroom, 3.5 bathroom, ~4,000 sq. ft. home.
With reduced regulation, there would be much more housing supply in SF. E.g. the city's footprint is slightly larger than Paris proper, which has 2.5x the population thanks to a consistent building height of ~6 floors. Paris is hardly a free-market bastion, or a place known for low quality of life, but SF out-regulates Paris with its tyranny of the vocal minority and regulation by bodies driven by perverse incentives.
Apart from directly adding supply, building up increases tax revenues and local population which enables / justifies transit expansion, which then increases the practically accessible pool of housing for anyone desiring to live in the city.
So, in trying to understand your point: do you not believe that housing costs would be lower if there was 3x the supply of housing, ala Paris, and a faster, more comprehensive farther-reaching transit system?
They're just so progressive there.
Maybe that's why everybody's moving to Austin.