If it's a problem that will follow anywhere experiencing strong economic growth, that's a problem that can affect everyone indirectly. It probably hurts young opportunity-seekers most though.
Aren’t you possibly doing the reverse with your anecdote?
The points raised: higher interests rates, higher construction costs, flat home building stats, slower price growth, and historically low homeownership rates are countrywide facts, not specific to San Fran.
But none of those indicate a lack of affordability, except home ownership rates. In most states (31 of 50), the median household income can more than afford a median mortgage.
Also, this map looks a lot like a population density map - it’s great housing is cheap in Nebraska. But there’s just not many people there. I would say Pennsylvania and Ohio might be worth looking at though.
> Indeed, only 19 states have an actual median income that tops the amount needed to buy a home: Alabama, Alaska, Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, West Virginia, Wisconsin, Wyoming.
Pennsylvania and Ohio are interesting in that they contain many rust belt towns devastated by de-industrialization. You can buy an affordable house in Erie, PA or Youngstown, OH because the populations of those towns have fallen as the jobs have left.
Doing this type of analysis state-by-state doesn't really tell the story as you can't really live in Youngstown and work in Cleveland or live in Erie and work in Pittsburgh.
FWIW, there are also plenty of affordable options that are in the Cleveland metro area, too.
> Doing this type of analysis state-by-state doesn't really tell the story
Yeah. For example, that map does an average of property taxes, which is not super great. Property taxes in some of the suburbs in Cleveland can be higher than your mortgage.
If you look at the referenced map, the affordable states aren't exactly hotbeds of opportunity. Anecdotally,I had to move from one of those to one of the not affordable ones to have a decent career (by my standards). On a less anecdotal note, they are also less populous states,so they don't represent the condition experienced by most Americans. If trading off "quality of life" for the ability to participate in a high productivity industry like tech is a common experience, what is the aggregate effect on those industries?
I would argue most cities outside of a handful of the largest metropolises. I would argue that outside of the LA, San Francisco, New York, Seattle, DC, Boston, and maybe one or two more cities, affordable housing is well within the 10 minute radius posed by the above commenter is pretty common.
Obviously that list of cities makes up a large group of Americans, but it still isn't really representative of the country as a whole.
That said, at least in my field, the vast majority of jobs are in those cities, and so it becomes problematic when from an employment perspective, it is difficult to avoid those areas, while from a livability perspective, it is financially difficult to get by (at least, without the torturous commutes).
I was curious on the actual numbers here so I summed it up based on census data. Between greater LA, the Bay Area, San Diego, NY metro, Seattle, Boston, Austin, and DC there are just under 54 million people, or somewhere between 16-17% of the total US population and significantly higher than that for working age population. Also as you said, the vast majority of high-paying jobs in many fields (excluding Oil & Gas and a few others) are going to be in one of those places.
In my metropolitan area being 10 minutes from downtown via bus is much different than being in downtown. Our public transit system is such that going from downtown to any other location serviced by the transit system is easy. But if don’t start from downtown then you first, usually, have to go downtown and then catch the bus to the location you want. This makes using the public transit system a burden for anyone who doesn’t live downtown.
The author is the Chief Economist for Moody’s Analytics, I believe he’s located in New York. Your point still stands but I’m hoping someone with such an influential position is skilled at taking a broader perspective.
I think it'd really be better if young people stopped getting student loans, and just didn't go to college, so they wouldn't have this problem. Eventually, the problem of overpriced housing will correct itself.
By the same logic, if they keep at it, eventually wages will rise to accommodate increased housing costs, and the problem corrects itself.
The problem is “eventually” has an unclear definition in both cases, and few are willing to sacrifice their potential of attaining certain careers or income in exchange for working low wage jobs waiting for a hypothetical future correction of this inequality.
It’s hard to level existing residences in many historic cities and so housing costs rise, yet people are still wanting the opportunities afforded by those cities enough to sacrifice having better housing conditions elsewhere.
>It’s hard to level existing residences in many historic cities and so housing costs rise, yet people are still wanting the opportunities afforded by those cities enough to sacrifice having better housing conditions elsewhere.
We don't have historic cities in America. At best, we have a few small historic districts, but everything else in the metro area is certainly not historic. But they don't build enough housing anyway, because too many Americans want McMansions instead of condos which are far more space-efficient.
The Bay area is particularly awful since existing homeowners have too much power (and local government has way too much power; local government should have NO power to restrict development, that should be the state's decision) and won't allow higher-density housing to be built as it affects their property values. This is a uniquely American problem.
>The problem is “eventually” has an unclear definition in both cases, and few are willing to sacrifice their potential of attaining certain careers or income in exchange for working low wage jobs waiting for a hypothetical future correction of this inequality.
My proposal is to just let the economy crash and take a couple of generations to recover, so just worry about your kids or grandkids having a better future. It's basically what's going to happen anyway, so you might as well not burden yourself with student debt. The situation we have now is totally unsustainable.
On the other hand, better education is (particularly on this board) usually recommended as the most important defense against unployment due to automation or outsourcing. How does this fit together?
This board, and other places, are wrong: better education isn't a fix. The problem is that many people just can't be productively educated to do higher-level jobs. For some reason, well-educated people frequently think that everyone is nearly as smart as them, and just lacks opportunity, but that's simply not the case. Lots of people just don't have the aptitude or interest, and nothing will change that. Even if they aren't stupid, you can't make someone interested in being educated; that's likely a product of their upbringing, and the only way to fix that is to wait a few generations while attitudes change.
The only fix for automation-based unemployment I see is a Universal Basic Income. We already have something like this with welfare and WIC/SNAP, basically paying people to sit at home and raise kids in poverty.
Anecdata, so please take with a grain of salt- in the past 5 years of my life I've spent significant time in Pittsburgh, DC, central NJ, and NYC. In each of these areas I've seen large luxury apartment projects, but not one project for affordable housing.
If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty. Developers beware.
> If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty.
if too many developers do this, that high-priced housing will have to become low-priced housing if they actually want to clear the market.
No one is ever going to make affordable housing on a scarce resources like land in a city. Developers will always build luxury housing.
When building was allowed, you got richer people moving into new luxury housing and as buildings aged, instead of fixing the luxury features, landlords would lower the rent and target a different market.
Now that many cities do not allow enough building you get richer people staying on those aging buildings or even moving into the city and competing for fairly run down housing.
If we don't allow building then two options are allocating housing by price or by lottery(like rent control), but either way people lose out because you can't put 110 families in 100 apartments. Unless more housing is allowed to be built there will be this frustration
They will build affordable housing if the government requires it as part of doing business. In NYC there are affordable housing tax incentives for developers that have resulted in small but meaningful additions to affordable housing. These programs are not at scale to impact the broad populace, but a stronger regulatory and incentive structure is possible.
That's still just a lottery based on who gets their application in first if it's not based on market pricing. If you command "affordable housing" be built and that's all that's available, then the people who would have paid for luxury housing will move into the "affordable housing" and drive up the price because that's all that's available. Additionally this will lower the efficiency of the market and makes less housing available as developers who would have built housing at X price drop out of the market when the price is mandated to be X-Y.
I am all for getting people help to get housing, but everything societies have tried to do to fix housing shortages for lower income people has failed other than building more housing. It's all just trying to paper around the fact that at the end of the day there are more people who want to live in the cities than there are apartments/condos/houses.
If you built like crazy and added 50% more housing in a year to a city, you'll find that suddenly a lot more housing is available
A lottery still drops people, it's just based on luck in the lottery and not how much you can pay. If that's what you want, then that's a position to hold. It does not, however, change the fact that there will still be the same number of people unable to get housing
No, the number of people unable to get housing will be reduced by the number of people who win the lottery and get housing. Leverage the market or direct government sponsorship or by whatever means people create, if enough housing is built then the lottery starts to make a more noticeable dent in the out of housing population.
>No, the number of people unable to get housing will be reduced by the number of people who win the lottery and get housing
That is the same number of people who currently can get housing by buying it. Until you change either the number of people attempting to move into the area or the number of housing units, any change will just change who loses and wins, not how many people lose or win
Technically affordability is peripheral to profit margins - although they are very related right now. If they could make more money and get through building tenements they would because that is where the money is and that is what they can get approved.
In order for cheaper housing to win for new construction it requires both acceptance and greater profit margins.
Granted one doesn't need /new/ affordable housing if the new luxury leaves enough vacancies that the older high end becomes the new low end. The persistent historical lack of high density housing does make things worse because of the lack of dense housing to wind up relatively downgraded creates a bottleneck in density growth for affordable housing. If they were building only new luxury high density for 70 years there would be effectively a relative affordable housing from degradation and shifting designs.
definitely this. i can already afford a house, but getting the down payment saved up without crippling my social life (which is more important to me) is difficult (not impossible, though) b/c of student loans.
There's a couple reasons it could be over priced. If it's a bubble, then we could be due for a correction. If it's a shortage, and it certainly looks more like a shortage from my vantage point in California, there wont be a huge fall in prices unless there's a large economic decline.
I can't speak for California, but in Boston rents are high and mortgages to sustain the same units are much much higher. Regardless of the existence of a housing shortage, this is bubble economics.
In a zero-speculation environment, the total cost of homeownership should be comparable to the cost of renting. Without speculation, market prices in places like Boston mean investment properties are absolutely horrid investments because they have little or no return (when you factor in the total cost of managing the property and the opportunity cost of the capital used to purchase the property). The fact that despite this most properties are rented means that landowners are banking on rents rising to meet current prices (or they aren't confident they can sell at current "market price" in a short amount of time - real estate can't be easily liquidated with a click like stocks can, plus there's tons of overhead costs involved in trying to liquidate real estate)
Or to put it in other words, the high rents in boston reflect the current housing shortage and the higher home prices in boston reflect the expected continuation of the housing shortage (backed by the reality that population here is increasing faster than housing is being built)
Actually, rents should not just be about equal to mortgages+maintenance but higher, because they are more liquid - it's easier and cheaper to finish or exit a lease than it is to sell a house, and that's worth something.
Overlay the graphs to see the relationship. IMO, one of Quantitative Easing's chief purposes was to keep the artificial housing debt taken on in the run-up to 2008 in place by having the Fed pay what the original borrowers could not. That QE money is now floating around the system, keeping all kinds of asset prices high.
The real housing crisis is the inability of cities like SF to approve redevelopment projects to tear down single story structures and build multistory structures as fast as is needed by the growth of the economy.
We might not like to admit this but part of this problem is us: people vote against putting up an apartment complex across the street from them while claiming that "affordable housing" should simultaneously exist. This leads to all sorts of bad decisions like restricting this building, but when we do build it, setting aside two apartments for "low income" occupants that is intellectually dishonest at best.
To add to this, it's not just that restricting the housing supply results in a shortage. Also, because there's systematic restrictions on construction, speculating on a continued housing shortage (and hence consistently high housing prices) is a surefire bet if the housing supply never increases.
If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.
On the other hand, going housepoor on a six figure salary seems like a reasonable choice when you see articles like this https://www.mercurynews.com/2018/06/28/map-shows-it-may-take... and think that you might not have another chance in your lifetime to afford a house in the area.
> If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.
This is absolutely the way people think, but it might actually not be true.
The person in question may be able to sell their land for a large multiple of their purchase price, if a developer were able to tear down the structure to build a multi-tenant dwelling. As it currently stands, the maximum economic value that can be derived is based on that of a single family home for the top x% of earners who can afford to buy one. But if you could house ten families on the same land, the economic value probably skyrockets.
In my particular case I was starting with the assumption that the single family home remains zoned for single family, but elsewhere in the economic region theres a huge building boom relieving the region of housing scarcity.
That said, you are absolutely correct. If building large multifamily dwellings were cheaper & always viable, you would see the cost of a single family home increase to reflect the profitability of doing so (until it is not as profitable, at which point single family homes would start decreasing)
> speculating on a continued housing shortage (and hence consistently high housing prices) is a surefire bet if the housing supply never increases.
Two important concepts about this. The first is that in places like SF, those making the speculation are also the ones that dominate the elections. Figure that SF has a high amount of renters, of the which many are foreigners that can't vote. That shows a skewed and corrupt political system.
Second, that such a ploy of decreasing housing shortage is economically inefficient, and thus makes the whole poorer. In an efficient system, the more housing, the more people, the more services and tax income and everybody wins. So how can the home-owners be benefitted more if the pie shrinks than if it grows?
Its the tax system that double punishes renters and prizes landlords.
SF spends 2,600U$S a month per household. If the city levied its taxes on land instead, it would literally eat up all the rental prices of land, and housing would be worth next to nothing: but because instaed it punishes workers coming into the city with sales taxes, and companies with corporate taxes, landlords actually get a double pay: they get paid by the renters twice.
That isn't the problem everywhere. There are places where the lack of planning or zoning results in less than equitable and ethical development. Building lowest-bidder style "luxury" apartments that just start falling apart after move in day with the developer moving to the next construction project the next week.
There's a line between freezing a city as is, and overly aggressive development where the buildings you build are blights in less than a decade.
I always see this parroted. But there is two facts that come into play that are ignored biy this bit of propaganda.
1. It's not just housing but transportation infrastructure. Of which SF has developed nothing other than the 3rd St light rail and the Central Subway. After that there is _nothing_ in the pipeline. Which means nothing will be built for the next 15-20 years.
2. They are building new multifamily. Cost is about $700-1000 a square foot. Unlike you I had a talk with my insurance agent. Guess what, _rebuilding_ costs between $600-1000 a square foot.
Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.
"Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit."
Funny that you call a realistic, economically sound criticism of NIMBY-ism "propaganda" but then go on to attack the entire problem as "techbros".
Wow, talk about intellectual dishonesty.
I'm so glad we all learned today that the only problem with SF is "techbros!" That's certainly not "propaganda"! All we have to do fix SF is kick all the techbros out! How convenient for your preferred ideology!
Imagine if housing was affordable somewhere other than Stockton. Then maybe people would live in SF and the South Bay (aka: "Silicon Valley") rather than huddling together on the BART and Caltrain. If we had housing closer to our work and commercial areas, people could walk more, too. Instead, folks travel for 1-2 hours each way because they can only afford to live far into the East Bay. I don't know for sure if this would work, but it seems logical that people want to live closer to work, if possible.
That's why SF has been forcing developers to build multi-family in the core and not Noe Valley Nob Hill, the Sunset, etc. Doesn't fix that cities in the South Bay are allowing developers to tear down single/two story office/commercial and replace it with 4-6 story office buildings and yet they won't rezone for multi-family.
I argued against your ad hominem fallacies quite sufficiently, thank you.
Seeing as I found your substantive claims to be backed by no data, evidence or anything other than low-level ad hominem attacks (propaganda, tech bros, etc) I found no reason to engage with such radicalism on the merits.
Try speaking like an intelligent person who doesn't fill their "claims" with nasty personal attacks, and you might find the replies to you do the same.
By your own admission wouldn't the answer be more transportation infrastructure to support more dense housing?
Nonetheless, I personally "agree" with your solution (in that I work in tech and don't live in SF), but hoping for the free market to do something that it is not doing has never been the solution to a question of public policy. Even if you took the most anti-tech public policy options possible in the city of SF, it wouldn't solve the fact that tech is firmly embedded in the entire metropolitan region which is outside of SF's municipal control.
If you really wanted to get "tech bros" out of your city you would need a solution on the level of the California state government, ideally something that intentionally disincentivizes business and venture capital. Good luck on that, in the mean time you're just going to have more "tech bros" moving in and voting for anyone who speaks out in favor of upzoning.
> By your own admission wouldn't the answer be more transportation infrastructure to support more dense housing?
Oh sure, SF needs a real subway and another BART tunnel between SOMA and Alameda. BART also has some choke points that need fixing at huge expense. But those projects take about 15-20 years. And currently the Republicans in congress are hostile to those projects.
> If you really wanted to get "tech bros" out of your city
I don't actually care about tech bro's really. I actually see tech workers in SF being victimized like everyone else. Lot of highly educated bright people paying through the nose to eke out a bare middle class lifestyle. Only because the money and jobs are here not some place more affordable that can more easily take the density increases.
> Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.
When the tech bro jobs leave, SF will be in dismay, it wont get better.
SF city spends 2,600U$S a month per household. If it were to lose its corporate/sales tax revenues, it would have to cut spending aggressively, and it will not make rent cheaper: it will make it unaffordable, exacerbating unemployment which could lead to rising homeless ness.
SF is in a terribly delicate position right now, its just masked by a lot of money.
People want to live in SF, NYC, DC, LA, Boston. They don't want to live in Detroit.
Amazon is creating 25,000 jobs each in DC and NYC. Google is doubling its already large presence in NYC to an additional 8,000 or so people.
The real issue is simply that of 1) zoning density restrictions that benefit wealthy landlords like President Trump, 2) overuse of historic landmark status, 3) overregulation, 4) firms such as AirBnb which effectively encourages taking apartments off the market for use for Airbnb, and 5) illegal aliens: NYC has an estimated 500,000+ illegal aliens.
Democrats claim to hate Trump, but the reality is that Trump is only as wealthy as he is because of Democratic city councils in NYC, SF, DC, Boston, LA who restrict zoning density at the behest of wealthy landlords and their campaign donations.
In 2014, NYC only built 20,000 housing units for about 90,000 for all of California, meanwhile in Tokyo alone, 140,000 housing units were built. The reason is that the Japanese federal government has laws against zoning density restrictions which benefit wealthy landlords such as President Trump.
The housing shortages in the US is a simple market issue created by politics.
Confused about what I am supposed to take away from point 2. Rebuilding costs about the same as building. Okay. So?
And how do you conclude from 1 and 2 that "Really the solution is not more housing"?
I was with you on point 1 (housing and transport go hand in hand. That makes sense).
Detroit, along with every other city in the world has been trying to create their own Silicon Valley and ignite a revolution but its just not that easy to do. Just google innovation and government and read a few books worth of text on the various theories of what the problem is. (Not enough VC, not enough tech talent, not enough money, not enough infrastructure etc etc).
The point is that it's not nimbyism that's primarily driving housing costs here. Because first off rebuilding costs which isn't effected by nimbyism. Because hey this place I'm living in burns down the neighbors can't prevent or slow down rebuilding. And no one's preventing developers from building multifamily in SOMA. And they are. In both cases you can't pencil in affordable housing due to $500-1000 sqft building costs.
A point why the city allows developers to building large multifamily SOMA and not in the Sunset is because transportation.
The reason I called out the argument as propaganda is because it has everything to do with the axe developers have to grind. And nothing to do with affordable housing. Developers hate having to work the process to get permits because that doesn't add to their bottom line.
My response to your point about Detroit and other cities wanting some of the tech bro action is that they aren't getting the love because the river of money is only being pointed towards the cities that the elites want to live in. SF, LA, New York, etc. The solution is to force them to redirect a bunch of that development money to other cities.
I guess I am unsure of the rules, but I thought the way that the nimbyism mechanism worked to reduce supply is by adding restrictions on density (can't build houses that are very tall) and cost (requiring lots of permits and old houses to look the same and so forth). It seems that nimbyism would increase the cost of building and rebuilding at about the same rate. (I don't see much of a difference between the two in the middle of a big city).
So if San Francisco were allowed to build large sky scrapers like NYC, in theory, we would see the housing prices fall.
Personally I think developers want it both ways, don't want to be bothered with building regulations and planning. And also don't want to have to factor in their share of the transportation and infrastructure costs. So they oppose both and then bitch about the result. Not sympathetic.
NYC is also relying on long term preexisting infrastructure that hasn't been upgraded to meet demand. NYC also has the problem that the replacement tunnels to NJ have been canceled by Gov Christie in 2009 and by Trump in 2016.
When I talk about the transportation stuff taking a long time I'm serious. The central subway was in early planning stages in the late 90's, ground broken 10 years later.
I’m building a house in the middle of nowhere near SF. Costs for the house itself are trending well under $400/sqft (would be closer to $300 pre-
tarrifs; maybe it’ll drop a bit).
Once you add in questionable California regulations, the price jumps up to about $$750-800 per square foot. (None of this extra money is in the house itself; it is in the surrounding site.)
I think existing homeowners have been voting through “wouldn’t it be nice if everybody else paid for X, even though I would never do that myself” NIMBY regulations which further exasperates the housing shortage.
Two concrete examples:
In my neighborhood, accessory dwelling units (ADU’s) are capped at 1200 sq ft, but primary homes are capped at 6000 sq ft. There are no colleges nearby, and per TFA, only 50,000 houses under 1400 sq ft were built next year. The ADU is too small to be rented to a family. It is only for au pairs, inlaws and airbnb. The stated purpose of the ADU rule is to increase housing supply. Heh. If this was for adding housing stock, the rule would be “two houses, not to exceed 7200 sq ft”.
We are being forced to upgrade our driveway to the point where runoff and landslides may be an issue (the existing driveway is adequate for heavy construction equipment). We will probably need to add retaining walls, and maybe an underground cistern to mitigate the environmental impact of the driveway.
There’s also a lot of corruption in low income housing. Just about a month ago, a housing program in Bellevue, WA came under fire because over 90% of the subsidized renters made $100k or more (some of which worked for the WA state social services).
I don't know about SF (I have no first hand experience there) but I can say that the market in the Boston area seems similarly overpriced and not very sustainable. Maybe for some different reasons, maybe some are the same. It's to the point where mediocre 3br suburban homes even far from the city are 500k+. It makes me very hesitant to purchase a home right now because I don't see how the value could do much anything besides decrease from here. That's my gut feeling. Would love to understand better how prices could continue to increase still.
Agreed. I recently moved from the Midwest to Boston and the housing and rent prices are giving me major sticker shock. My rent has tripled and looking at the housing prices, looks like they have too. Who's buying these 1 million dollar homes?
That's easy. Depending on the interest rate, condo fees, taxes, etc, a 1 million home is about $4500 (less when the interest rates were lower, I think).
If you have a couple of DINKs, it's 2250 per person per month, or about $27000/year. 150k/year per person, about 90-100k/year after tax, and that's well under 30% of your take home pay.
I used round numbers and I'm probably off, but even if you have to tweak the math, it's pretty easy to see where people are coming from.
When I was looking to buy in the area, a bunch of people looking at the open houses were couples with both people sporting their Amazon/Microsoft/Google/whatever backpacks or jackets.
Define "far from the city". A 3br for 500k is available (if on the low-ish end) for Whaltam, which Boston folks consider to be in the middle of nowhere, but if it wasn't for traffic/transportation problems, wouldn't be all that far (it's not very far at all if it wasn't for the traffic issues). A friend of mine just got a 1BR 50 minutes away for <150k (and it wasnt even a fixer upper, and is on the commuter rail).
50 minutes is "far", but it's far from insane...
IMO Boston has a lot of places that can be developed within 30-45 minutes before we really need to start tearing everything down. (There's 3 high density development in construction literally in my backyard, so I'm not saying that because I have anything to gain from it, either).
The biggest thing to fix about the Boston area right now is the entrance from the suburb into Cambridge...the Alewife area is ridiculous, but that's what happens when you built a ton of mid/high rise without proper planning of infrastructure.
As another Boston resident, I'm extremely hesitant to purchase because I'm fairly confident current prices aren't sustainable and I want to be there to purchase if prices do go down.
I've kept my eye on real estate prices for the past few years and we definitely hit a plateau around summer 2018. Nowadays I see a lot of properties sit on the market for months - quite the opposite of how this "red hot" market is supposed to behave.
I just don't see the fundamentals supporting current prices. A lot of properties are going for 20-50% more than they were previously sold for (in 2012-2014 usually).
On the other hand, rent has NOT increased by 20-50% in that amount of time, and (in my own experience) rent has been pretty flat for the past year or two, except for a few neighborhoods like Allston that have definitely gone up. If rent in a unit stays flat for a few years it's basically impossible for that home's price to keep going up, and since we didn't pick up amazon HQ2, and have tons of luxury development coming in to absorb any other top earners entering the state, I personally doubt there will be much room for rents to grow.
That said, we're no SF. If you work in tech there's probably properties out there you an afford. It just might not be in Somerville or Cambridge where everyone wants to live. Some suggestions: Decent single family in Wollaston neighborhood of Quincy goes around 600k, and further down towards Quincy Adams theres a whole bunch of options. There are occasionally good deals that pop up walking distance to the T in Malden. West Roxbury has good deals almost always. Roslindale isn't totally gentrified yet so you can always jump on that bandwagon and look for a property near Forest Hills. Condos are pumping out in East Boston too although I haven't checked prices lately they might already be too expensive.
Brewing? We have had a national housing crisis since the bubble around 2005 made housing unthinkable to a generation and then the crash destroyed those who did manage to wedge into an overpriced house. Since then we've reinflated to sacrifice the young to the baby boomers, and now it looks like another crash is looming. The housing market hasn't been sane in 20 years.
Brewing? Seriously? People wonder what is fueling populist rage and a desire to basically fire everyone in any position of authority or expertise...
I think there will be problems in housing, but not the problems this article describes. (Yes, I am over 40. And no, a 5% mortgage is not remotely problematic.)
With increased automation and wage stratification, there will be fewer jobs and fewer good-paying ones to allow people to buy houses. The price of housing has always marched upward, but it will get to the point where only the wealthy can afford a house.
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[ 4.2 ms ] story [ 153 ms ] threadIn my city, affordable housing isn't available downtown, but it's not more than a 10 minute bus ride away.
The points raised: higher interests rates, higher construction costs, flat home building stats, slower price growth, and historically low homeownership rates are countrywide facts, not specific to San Fran.
http://time.com/money/5355518/home-price-salary-every-state/
So I agree with the OP, the author of this article is unjustifiably projecting the SF housing crisis onto the rest of the country.
Also, this map looks a lot like a population density map - it’s great housing is cheap in Nebraska. But there’s just not many people there. I would say Pennsylvania and Ohio might be worth looking at though.
> Indeed, only 19 states have an actual median income that tops the amount needed to buy a home: Alabama, Alaska, Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, West Virginia, Wisconsin, Wyoming.
Doing this type of analysis state-by-state doesn't really tell the story as you can't really live in Youngstown and work in Cleveland or live in Erie and work in Pittsburgh.
> Doing this type of analysis state-by-state doesn't really tell the story
Yeah. For example, that map does an average of property taxes, which is not super great. Property taxes in some of the suburbs in Cleveland can be higher than your mortgage.
Obviously that list of cities makes up a large group of Americans, but it still isn't really representative of the country as a whole.
That said, at least in my field, the vast majority of jobs are in those cities, and so it becomes problematic when from an employment perspective, it is difficult to avoid those areas, while from a livability perspective, it is financially difficult to get by (at least, without the torturous commutes).
I guess I do live in a smaller city (Grand Rapids, MI). We do have housing issues downtown that's for sure, but just a little outside it seems better.
Maybe I am turning my opinion around
The problem is “eventually” has an unclear definition in both cases, and few are willing to sacrifice their potential of attaining certain careers or income in exchange for working low wage jobs waiting for a hypothetical future correction of this inequality.
It’s hard to level existing residences in many historic cities and so housing costs rise, yet people are still wanting the opportunities afforded by those cities enough to sacrifice having better housing conditions elsewhere.
We don't have historic cities in America. At best, we have a few small historic districts, but everything else in the metro area is certainly not historic. But they don't build enough housing anyway, because too many Americans want McMansions instead of condos which are far more space-efficient.
The Bay area is particularly awful since existing homeowners have too much power (and local government has way too much power; local government should have NO power to restrict development, that should be the state's decision) and won't allow higher-density housing to be built as it affects their property values. This is a uniquely American problem.
>The problem is “eventually” has an unclear definition in both cases, and few are willing to sacrifice their potential of attaining certain careers or income in exchange for working low wage jobs waiting for a hypothetical future correction of this inequality.
My proposal is to just let the economy crash and take a couple of generations to recover, so just worry about your kids or grandkids having a better future. It's basically what's going to happen anyway, so you might as well not burden yourself with student debt. The situation we have now is totally unsustainable.
The only fix for automation-based unemployment I see is a Universal Basic Income. We already have something like this with welfare and WIC/SNAP, basically paying people to sit at home and raise kids in poverty.
If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty. Developers beware.
if too many developers do this, that high-priced housing will have to become low-priced housing if they actually want to clear the market.
When building was allowed, you got richer people moving into new luxury housing and as buildings aged, instead of fixing the luxury features, landlords would lower the rent and target a different market.
Now that many cities do not allow enough building you get richer people staying on those aging buildings or even moving into the city and competing for fairly run down housing.
If we don't allow building then two options are allocating housing by price or by lottery(like rent control), but either way people lose out because you can't put 110 families in 100 apartments. Unless more housing is allowed to be built there will be this frustration
I am all for getting people help to get housing, but everything societies have tried to do to fix housing shortages for lower income people has failed other than building more housing. It's all just trying to paper around the fact that at the end of the day there are more people who want to live in the cities than there are apartments/condos/houses.
If you built like crazy and added 50% more housing in a year to a city, you'll find that suddenly a lot more housing is available
Also market efficiency is not the God that government need worship
That is the same number of people who currently can get housing by buying it. Until you change either the number of people attempting to move into the area or the number of housing units, any change will just change who loses and wins, not how many people lose or win
In order for cheaper housing to win for new construction it requires both acceptance and greater profit margins.
Granted one doesn't need /new/ affordable housing if the new luxury leaves enough vacancies that the older high end becomes the new low end. The persistent historical lack of high density housing does make things worse because of the lack of dense housing to wind up relatively downgraded creates a bottleneck in density growth for affordable housing. If they were building only new luxury high density for 70 years there would be effectively a relative affordable housing from degradation and shifting designs.
I can't speak for California, but in Boston rents are high and mortgages to sustain the same units are much much higher. Regardless of the existence of a housing shortage, this is bubble economics.
In a zero-speculation environment, the total cost of homeownership should be comparable to the cost of renting. Without speculation, market prices in places like Boston mean investment properties are absolutely horrid investments because they have little or no return (when you factor in the total cost of managing the property and the opportunity cost of the capital used to purchase the property). The fact that despite this most properties are rented means that landowners are banking on rents rising to meet current prices (or they aren't confident they can sell at current "market price" in a short amount of time - real estate can't be easily liquidated with a click like stocks can, plus there's tons of overhead costs involved in trying to liquidate real estate)
Or to put it in other words, the high rents in boston reflect the current housing shortage and the higher home prices in boston reflect the expected continuation of the housing shortage (backed by the reality that population here is increasing faster than housing is being built)
Overlay the graphs to see the relationship. IMO, one of Quantitative Easing's chief purposes was to keep the artificial housing debt taken on in the run-up to 2008 in place by having the Fed pay what the original borrowers could not. That QE money is now floating around the system, keeping all kinds of asset prices high.
And what can be done once can be done twice.
Does Moody’s stand to benefit more or less directly from the policy changes being advocated here?
We might not like to admit this but part of this problem is us: people vote against putting up an apartment complex across the street from them while claiming that "affordable housing" should simultaneously exist. This leads to all sorts of bad decisions like restricting this building, but when we do build it, setting aside two apartments for "low income" occupants that is intellectually dishonest at best.
If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.
On the other hand, going housepoor on a six figure salary seems like a reasonable choice when you see articles like this https://www.mercurynews.com/2018/06/28/map-shows-it-may-take... and think that you might not have another chance in your lifetime to afford a house in the area.
This is absolutely the way people think, but it might actually not be true.
The person in question may be able to sell their land for a large multiple of their purchase price, if a developer were able to tear down the structure to build a multi-tenant dwelling. As it currently stands, the maximum economic value that can be derived is based on that of a single family home for the top x% of earners who can afford to buy one. But if you could house ten families on the same land, the economic value probably skyrockets.
That said, you are absolutely correct. If building large multifamily dwellings were cheaper & always viable, you would see the cost of a single family home increase to reflect the profitability of doing so (until it is not as profitable, at which point single family homes would start decreasing)
Two important concepts about this. The first is that in places like SF, those making the speculation are also the ones that dominate the elections. Figure that SF has a high amount of renters, of the which many are foreigners that can't vote. That shows a skewed and corrupt political system.
Second, that such a ploy of decreasing housing shortage is economically inefficient, and thus makes the whole poorer. In an efficient system, the more housing, the more people, the more services and tax income and everybody wins. So how can the home-owners be benefitted more if the pie shrinks than if it grows? Its the tax system that double punishes renters and prizes landlords. SF spends 2,600U$S a month per household. If the city levied its taxes on land instead, it would literally eat up all the rental prices of land, and housing would be worth next to nothing: but because instaed it punishes workers coming into the city with sales taxes, and companies with corporate taxes, landlords actually get a double pay: they get paid by the renters twice.
1. It's not just housing but transportation infrastructure. Of which SF has developed nothing other than the 3rd St light rail and the Central Subway. After that there is _nothing_ in the pipeline. Which means nothing will be built for the next 15-20 years.
2. They are building new multifamily. Cost is about $700-1000 a square foot. Unlike you I had a talk with my insurance agent. Guess what, _rebuilding_ costs between $600-1000 a square foot.
Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.
Funny that you call a realistic, economically sound criticism of NIMBY-ism "propaganda" but then go on to attack the entire problem as "techbros".
Wow, talk about intellectual dishonesty.
I'm so glad we all learned today that the only problem with SF is "techbros!" That's certainly not "propaganda"! All we have to do fix SF is kick all the techbros out! How convenient for your preferred ideology!
I'm waiting.
Seeing as I found your substantive claims to be backed by no data, evidence or anything other than low-level ad hominem attacks (propaganda, tech bros, etc) I found no reason to engage with such radicalism on the merits.
Try speaking like an intelligent person who doesn't fill their "claims" with nasty personal attacks, and you might find the replies to you do the same.
Nonetheless, I personally "agree" with your solution (in that I work in tech and don't live in SF), but hoping for the free market to do something that it is not doing has never been the solution to a question of public policy. Even if you took the most anti-tech public policy options possible in the city of SF, it wouldn't solve the fact that tech is firmly embedded in the entire metropolitan region which is outside of SF's municipal control.
If you really wanted to get "tech bros" out of your city you would need a solution on the level of the California state government, ideally something that intentionally disincentivizes business and venture capital. Good luck on that, in the mean time you're just going to have more "tech bros" moving in and voting for anyone who speaks out in favor of upzoning.
Oh sure, SF needs a real subway and another BART tunnel between SOMA and Alameda. BART also has some choke points that need fixing at huge expense. But those projects take about 15-20 years. And currently the Republicans in congress are hostile to those projects.
> If you really wanted to get "tech bros" out of your city
I don't actually care about tech bro's really. I actually see tech workers in SF being victimized like everyone else. Lot of highly educated bright people paying through the nose to eke out a bare middle class lifestyle. Only because the money and jobs are here not some place more affordable that can more easily take the density increases.
When the tech bro jobs leave, SF will be in dismay, it wont get better. SF city spends 2,600U$S a month per household. If it were to lose its corporate/sales tax revenues, it would have to cut spending aggressively, and it will not make rent cheaper: it will make it unaffordable, exacerbating unemployment which could lead to rising homeless ness.
SF is in a terribly delicate position right now, its just masked by a lot of money.
Amazon is creating 25,000 jobs each in DC and NYC. Google is doubling its already large presence in NYC to an additional 8,000 or so people.
The real issue is simply that of 1) zoning density restrictions that benefit wealthy landlords like President Trump, 2) overuse of historic landmark status, 3) overregulation, 4) firms such as AirBnb which effectively encourages taking apartments off the market for use for Airbnb, and 5) illegal aliens: NYC has an estimated 500,000+ illegal aliens.
Democrats claim to hate Trump, but the reality is that Trump is only as wealthy as he is because of Democratic city councils in NYC, SF, DC, Boston, LA who restrict zoning density at the behest of wealthy landlords and their campaign donations.
In 2014, NYC only built 20,000 housing units for about 90,000 for all of California, meanwhile in Tokyo alone, 140,000 housing units were built. The reason is that the Japanese federal government has laws against zoning density restrictions which benefit wealthy landlords such as President Trump.
The housing shortages in the US is a simple market issue created by politics.
And how do you conclude from 1 and 2 that "Really the solution is not more housing"?
I was with you on point 1 (housing and transport go hand in hand. That makes sense).
Detroit, along with every other city in the world has been trying to create their own Silicon Valley and ignite a revolution but its just not that easy to do. Just google innovation and government and read a few books worth of text on the various theories of what the problem is. (Not enough VC, not enough tech talent, not enough money, not enough infrastructure etc etc).
A point why the city allows developers to building large multifamily SOMA and not in the Sunset is because transportation.
The reason I called out the argument as propaganda is because it has everything to do with the axe developers have to grind. And nothing to do with affordable housing. Developers hate having to work the process to get permits because that doesn't add to their bottom line.
My response to your point about Detroit and other cities wanting some of the tech bro action is that they aren't getting the love because the river of money is only being pointed towards the cities that the elites want to live in. SF, LA, New York, etc. The solution is to force them to redirect a bunch of that development money to other cities.
So if San Francisco were allowed to build large sky scrapers like NYC, in theory, we would see the housing prices fall.
NYC also has housing problems of course. https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...
NYC is also relying on long term preexisting infrastructure that hasn't been upgraded to meet demand. NYC also has the problem that the replacement tunnels to NJ have been canceled by Gov Christie in 2009 and by Trump in 2016.
When I talk about the transportation stuff taking a long time I'm serious. The central subway was in early planning stages in the late 90's, ground broken 10 years later.
Once you add in questionable California regulations, the price jumps up to about $$750-800 per square foot. (None of this extra money is in the house itself; it is in the surrounding site.)
I think existing homeowners have been voting through “wouldn’t it be nice if everybody else paid for X, even though I would never do that myself” NIMBY regulations which further exasperates the housing shortage.
Two concrete examples:
In my neighborhood, accessory dwelling units (ADU’s) are capped at 1200 sq ft, but primary homes are capped at 6000 sq ft. There are no colleges nearby, and per TFA, only 50,000 houses under 1400 sq ft were built next year. The ADU is too small to be rented to a family. It is only for au pairs, inlaws and airbnb. The stated purpose of the ADU rule is to increase housing supply. Heh. If this was for adding housing stock, the rule would be “two houses, not to exceed 7200 sq ft”.
We are being forced to upgrade our driveway to the point where runoff and landslides may be an issue (the existing driveway is adequate for heavy construction equipment). We will probably need to add retaining walls, and maybe an underground cistern to mitigate the environmental impact of the driveway.
This sounds backwards. If housing prices stop going up, won’t it be easier to make the jump from renter to buyer?
If you have a couple of DINKs, it's 2250 per person per month, or about $27000/year. 150k/year per person, about 90-100k/year after tax, and that's well under 30% of your take home pay.
I used round numbers and I'm probably off, but even if you have to tweak the math, it's pretty easy to see where people are coming from.
When I was looking to buy in the area, a bunch of people looking at the open houses were couples with both people sporting their Amazon/Microsoft/Google/whatever backpacks or jackets.
50 minutes is "far", but it's far from insane...
IMO Boston has a lot of places that can be developed within 30-45 minutes before we really need to start tearing everything down. (There's 3 high density development in construction literally in my backyard, so I'm not saying that because I have anything to gain from it, either).
The biggest thing to fix about the Boston area right now is the entrance from the suburb into Cambridge...the Alewife area is ridiculous, but that's what happens when you built a ton of mid/high rise without proper planning of infrastructure.
I've kept my eye on real estate prices for the past few years and we definitely hit a plateau around summer 2018. Nowadays I see a lot of properties sit on the market for months - quite the opposite of how this "red hot" market is supposed to behave.
I just don't see the fundamentals supporting current prices. A lot of properties are going for 20-50% more than they were previously sold for (in 2012-2014 usually).
On the other hand, rent has NOT increased by 20-50% in that amount of time, and (in my own experience) rent has been pretty flat for the past year or two, except for a few neighborhoods like Allston that have definitely gone up. If rent in a unit stays flat for a few years it's basically impossible for that home's price to keep going up, and since we didn't pick up amazon HQ2, and have tons of luxury development coming in to absorb any other top earners entering the state, I personally doubt there will be much room for rents to grow.
That said, we're no SF. If you work in tech there's probably properties out there you an afford. It just might not be in Somerville or Cambridge where everyone wants to live. Some suggestions: Decent single family in Wollaston neighborhood of Quincy goes around 600k, and further down towards Quincy Adams theres a whole bunch of options. There are occasionally good deals that pop up walking distance to the T in Malden. West Roxbury has good deals almost always. Roslindale isn't totally gentrified yet so you can always jump on that bandwagon and look for a property near Forest Hills. Condos are pumping out in East Boston too although I haven't checked prices lately they might already be too expensive.
Brewing? Seriously? People wonder what is fueling populist rage and a desire to basically fire everyone in any position of authority or expertise...
I buy the story about rates and mobility falling in general, although I think this a longer term trend.
Mostly, if wages stagnate, people don't buy homes. Not rocket science. Been going on for nearly 50 years now.
With increased automation and wage stratification, there will be fewer jobs and fewer good-paying ones to allow people to buy houses. The price of housing has always marched upward, but it will get to the point where only the wealthy can afford a house.
That's my guess, anyway. Time will tell.