> Reducing land-use constraints in high-productivity New York, San Francisco and San Jose to the level of the median city would expand their labor forces, boosting U.S. gross domestic product by 9.5 percent, according to estimates from a new study by the University of California at Berkeley's Enrico Moretti and the University of Chicago's Chang-Tai Hsieh.
That seems so implausible. The combined population of NYC, SF, and SJ is merely 3% of the US population. I am sure that fraction bunches above its weight, and nearby residents surely contribute too. But how much more effective would NYC/SF/SJ be if they were cheaper to live in?
It's not that the current residents of those cities would become more productive; it's that people currently living elsewhere are less productive in those other places than they would be if they moved to NY, SF, or SJ.
So if those cities built lots more homes, people would rush in from elsewhere, and those newcomers would be more productive in their new locations than they were in their old ones, increasing US GDP 9.5%.
It is blatantly obvious. When you're talking about a sum almost as large as California's entire economy, I don't believe it can be anything but obvious.
Thought experiment: If alien landed on NYC and SF, then decided to abduct everyone in the two cities and wipe out the cities, how much of a reduction in US GDP it would be for the next year?
GDP affects the entire country not just these localities and cities network into and recruit huge areas around them. NYC isn't Boulder, CO. It has global reach, and actions taken in New York can affect the movement of money all over the planet.
An example, suppose somebody can suddenly afford to live in NYC, where they get a job moving commodities through an import/export business. Their contribution to NYC's GDP is minor: salary and profit on the deals they make. By getting this person into position to make these deals, American commodity producers suddenly get additional access to global markets they might not have had otherwise and suddenly corn from Stoy, Illinois is finding its way to China and Wheat from Russell, Kansas is ending up in Germany.
Moving those commodities employs truckers, truck manufacturers, ship crews, cargo container companies, shipping companies, etc. and all of those additionally network and recruit other industries: fuel, navigation, refrigeration, packaging, etc.
So while our NYC broker friend might only contribute a fraction of a fraction of a percent to NYC's economy (maybe not even a million dollars all told), his impact on the U.S. economy is vastly magnified. He may single-handedly connect enough sellers to enough buyers to keep hundreds of people fully employed and cause tens of millions of dollars of value to be created and distributed.
The alternative to him not being in place? The crops go to waste, or the farmers are simply paid to not grow them.
You're talking about a sum equal to the entire economy of New York City and SF combined.
A boost to NYC and SF through some (even a lot of) population expansion, will not exceed the total existing GDP of all of NYC + SF. It's an absurd premise.
Estimates for positive externalities per dollar of salary range from -0.5 to 2.0, depending on political assumptions on what the value of, say, banking and teaching is.
Like, it helps, but it doesn't seem like the numbers still add up.
According to some napkin math with these figures[0], the three metro areas combined account for 11.7% of US GDP in 2012.
So yeah, I'm not sure what estimate they're using for the growth multiple from liberalizing land-use constraints, but if they're predicting a near doubling of the combined metro economies, it's safe to assume it's pretty high.
I do agree that land-use restrictions are currently holding all three cities back, my Friday night napkin math (read: probably wrong, way oversimplified math) just thinks their estimates are a little optimistic.
EDIT: Another question would be what's the time frame for this addition to GDP? 9% growth in one year is insanely great. 9% growth over ten years is insanely bad.
> Another question would be what's the time frame for this addition to GDP?
The actual paper[1] simply says that "lowering regulatory constraints in New York, San Francisco, and San Jose cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%", so whatever timeframe it would take to reduce those regulatory constraints. (In SF that sounds like a project measured in decades, although maybe the imbalance in supply and demand will cause a breaking point that forces the city to engage with real solutions to the problem.)
It's not as though those contributions come for free though. If talent leaves other places to go to NYC/SF/SJ, those other places become less productive.
Not necessarily, on a per-capita basis. If Alice has incredible pineapple-farming skills and is terrible at everything else, and she moves from Alaska to Hawaii, she improves both states' per-capita GDP.
1 is true, 2 and 3 might be true, but there are many variables that could lead to other outcomes. Double the density, you might lower the desirability, driving the current high GDP producers out. Then you have a downward spiral as revenue drops, incomes drop, rents drop, vacancies rise, crimes rises. Or it could be the next Tokyo. But there is no certainty.
You're only counting those areas specific GDPs. But I bet if you look at the components of GDP they contribute to by making markets available to the rest of the country (for example) it's far higher.
For example, NYC is home to much of the publishing industry. But all those books go out to local bookstores where they are sold at a small profit, increasing the GDP of those local areas above and beyond NYC's publishing industry's contribution.
In the article: "The costs of this misfiring property market are huge, mainly because of their effects on individuals. High housing prices force workers towards cheaper but less productive places. According to one study, employment in the Bay Area around San Francisco would be about five times larger than it is but for tight limits on construction" ... "Lifting all the barriers to urban growth in America could raise the country’s GDP by between 6.5% and 13.5%, or by about $1 trillion-2 trillion."
San Francisco has bigger issues with class/job sector warfare instigated by city politicians.
"The tech industry has come like a train wreck into this neighborhood and into this city," [0]
Theres this backwards mentality purporting the idea that market-rate housing development will drive out long-time residents. In reality, its the lack of market-rate development that leads to tech workers out-bidding low-income families for apartments (especially in areas like the mission).
It takes less than five minutes to register to vote by mail in San Francisco, and doing so means you're a lot more likely to vote, and to do so while carefully reading a voter guide.
That's not the case anymore; it was changed via ballot proposition several years ago, and now the top two vote-getters face off, regardless of party. That's why last year's big David Campos vs David Chiu battle happened twice: once on primary day (registered Democrats only, and just for practice), and then once again on Election Day (all voters, and this time it counts).
Real estate everywhere is entirely backwards and will only incentive siphoning as much money as possible though such a limited supply side market.
Low income developments only happen as mandated by local municipalities, and even so developers do so reluctantly only to qualify for the tax breaks on their larger maximum market rate brand new condo in the freshly gentrified neighborhood developments.
That's only true in large cities which are effectively at 100% land usage. Meanwhile where I grew up in rural Tennessee not only are the houses cheap but the materials used to build them are lesser than anything you'll find within 50 miles of downtown Seattle (where I now live).
My view is slightly more nuanced. Developing is expensive. Luxury properties, like all luxury goods, sell at a higher margin than non-luxury. Therefore developers will build higher margin luxury apartments until demand for luxury apartments is satisfied. At that point they'll build mid-tier. Which have lower margins but it's still profitable and better than not making money. Then, once the mid-tier is finally satisfied, the low end will be built. Margins are likely crappy but hey whatever.
Once you reach full land use there's another layer of complexity. You can't build out so you have to build up. And building up is more expensive. In fact each floor is more expensive than the one below it. It doesn't take long for simply breaking even to be too expensive for even the lowest tier when land costs come into play.
Just to keep up with the national US growth rate (0.7%), San Francisco alone would need to make housing for almost 6000 new residents per year. In the first decade of this century (2000-2009) there was a total of 2,500 added per year, or roughly a half of what's needed, and that's a simplistic calculation for what's needed.
Add in a renewed popularity of cities and urban living over the suburbs, and it's no wonder then, that housing is in short supply in San Francisco.
The reality that San Francisco doesn't want to face is that housing for at least 6000 people needs to be added EVERY SINGLE YEAR, just to keep up. All the challenges related to adding housing in San Francisco (here's a hint; a 150-year old facade isn't historic) add up to one thing - very limited supply, and any Econ 101 student could tell you the result. What happens when demand rises while supply stays the same (or even goes down, relatively)? Prices skyrocket.
Seeking to maintain a balanced economy, culture, and community isn't "class warfare"; it's just city planning with a view beyond the next MVP.
You can never build enough housing in a high-demand city without destroying the city; the demand is too elastic, the incentives between neighborhoods/culture and developers too misaligned.
San Francisco's problem is in the externalities levied by the immature VC-valley monoculture; significant increases in market rate housing density bring corresponding increases in the societal/cultural problems underlying this issue.
Sorry -- define "destroying the city", please, because my understanding is that cities are made of people, not buildings, and not building any new housing tends to prioritize buildings over people.
From where I'm standing, the neighborhood groups preventing any new housing from getting built are the ones destroying the city.
Housing density is only one attribute of a city; livability, open space, affordability, diversity, culture, safety, community -- these are often just as important to the people living in a city, and development doesn't occur in isolation from those issues.
Livability, affordabilty, diversity, culture and community are all adversely impacted when the housing supply is artificially constrained the way it is in San Francisco, and the notion that, for instance, building marginally taller buildings, or legalizing the construction of backyard cottages, is going to have even the slightest impact on open space is absolute nonsense.
There was a neighborhood meeting this week about building over 1,000 units of affordable housing on what is now a parking lot, and the majority of current neighbors expressed a preference for the parking lot. Please, convince me that a massive slab of asphalt is better for San Francisco than making room for 1,000 new working class neighbors.
I think Curbed is being really hard on the narrow streets proposal. City streets in America, and especially in bike-friendly places like the Bay Area, are absurdly wide. We would have much more livable cities without them.
Those places all look to have been built way before the automobile was a thing. And while I agree with narrow streets, because they're safer and more aesthetically pleasing etc, you can't ignore that transforming to that design will be a little disruptive in the near term.
My point is that some of the great and beautiful narrow cobble stone streets in, say, Boston or Philly, to use US examples, weren't built to handle heavy street traffic. Transforming high volume automobile streets to the walkable ideal is inevitably going to cause some headaches.
"The neighborhood is mostly single family homes, and the people there are very resistant to the idea of “renters” (the code word they use for poor people) living in the neighborhood."
There is something of a difference between a neighborhood having a say in its future and a neighborhood having a dictatorial stranglehold on all changes within its bounds. Does the rest of the city have no say? The county? The state? The country?
Would you be OK with this principle if a white neighborhood wanted to enforce a "no black or brown people" rule? How about a "straight people only" rule? How about "no poor people"? This isn't a purely abstract question, but an actual question that has arisen repeatedly in the history of the US. Sunset Towns have been real things.
It's an absolutely silly question; there's a clear difference between zoning rules based on land use, and zoning rules based on discrimination against a protected class.
OK. Let's try again, without the silliness. This is a serious question that requires a serious answer.
There is a difference between a neighborhood having a say in its future and a neighborhood having a dictatorial stranglehold on all changes within its bounds. Does the rest of the city have no say? The county? The state? The country?
Do you think it's OK for a city to tell a neighborhood that they need to accept a certain set of non-discriminatory zoning rules based on land use, even if it's not what the people there want?
> Do you think it's OK for a city to tell a neighborhood that they need to accept a certain set of non-discriminatory zoning rules based on land use, even if it's not what the people there want?
Residents answer to their neighborhood, neighborhoods answer to their district, districts answer to the city, state, and so on.
How to respect individuals, communities, and a plan for the future across all of those lines of responsibility isn't answerable with a simple "yes" or "no"; however, the onus should be on the individuals requesting the change to 1) justify its necessity and value, 2) quantify its cost to existing residents, and 3) recommend mechanisms for remediation or renumeration for externalities imposed upon the local residents by whatever project is imposed upon them to the benefit of the broader populace.
In other words, you don't believe a neighborhood has an absolute dictatorial right to control all changes within its borders. Thank you for your in-principle agreement!
No, the alternative is living somewhere else. This is obvious to anyone that has watched the rental and housing market in a city across economic boom/bust cycles:
- Bust: Demand dries up from the beleaguered economic sector (e.g., tech in SF after .com crash, finance in NYC post-housing bubble crash). Prices drop. Demand rises, fast, with residents moving in from the boroughs/suburbs.
- Boom: Demand is extremely high from the booming economic sector. Prices increase to match, unmet demand drops as those outside the boom sector move out to the boroughs/suburbs.
Austin and Toronto are both desirable world class cities that allow homes to be built for people. Neither of them seem to have been "destroyed". Having affordable housing allows community and culture to be preserved and built on.
Austin and Toronto are 250 square miles. Every time I go back to Austin, everyone is whining about how expensive it is and how bad the music scene has gotten, while half of them want to turn 6th Street into a kid friendly zone.
SF is maybe 35 square miles, once you take out the parks.
Why don't we build new housing in Palo Alto? Or better yet, rezone Stanford or Atherton?
You can't get housing built in SF, Palo Alto or Atherton for the exact same reason. Using one as a reason to oppose housing in the other is a red herring.
>You can never build enough housing in a high-demand city without destroying the city;
Out of all the places and times and people who've talked of building more housing as destroying the city, most of them were just rich, white landowners who didn't want immigrants, minorities, and jobseekers ruining their views.
I'm not saying you're any such person, but your position is objectively furthering the interests of rent-seeking landowners as the expense of the marginalized and the exploited. Real equality can proceed only when housing is available as close to construction cost as possible, or better yet, cheap as free.
How does your plan address the problem that there isn't enough housing here for all the people who work here to live here? Are you assuming that if there are living wages all around, that there will be enough construction?
Or do you expect people to just live somewhere else nearby?
Supply/demand. If there's not enough housing, companies will either need to pay more, people would need to commute farther, or people will need to choose other cities.
What do you think happens when many cities adopt the same approach? Fix supply, increase incomes, and let markets take over?
Have you considered the possibility of region-wide consequences when supply and demand set in, companies pay better, people commute farther, and live in other cities too?
> You can never build enough housing in a high-demand city without destroying the city; the demand is too elastic, the incentives between neighborhoods/culture and developers too misaligned.
Come on. Say what you mean. You don't want things to change, because then things would be different and you'd have to have Those People in your wonderful inclusive life.
And that would be bad. So down with inclusiveness!
Fortunately for us all, precious few of those places are in the Bay. The vast majority of San Francisco can't even be reasonably called mid-rise neighborhoods.
But let's not get caught up in that yet. In what way would density "objectively and significantly decrease the quality of life of all existing residents"? From your phrasing, you clearly have solid evidence and objective metrics for your rather strong claim about both significance and universality.
I wouldn't call that class warfare, and it is certainly not instigated by the politicians. There have been anti-gentrification protests in SF long before David Campos was in office, and they will be happening long after.
It is the same in Stockholm, or worse even. Because of rent control, nobody builds rental apartments because it isn't profitable. Most rental apartments have been sold due to unprofitability and have been turned into owners apartments. The few rental apartments that still exist are rent controlled and you pay with a different type of capital to get those -- social capital. Or you can spend 15 years of your life in the housing queue. There literally is no rental market, rental agencies don't exist.
As a result, Sweden has the world's largest housing bubble and by some measures the highest private debt of any country.
You can not find a more segregated, class-based society in the developed world.
I recall running into a pensioner at Akkurat on my last visit. He was complaining about his 350 euro rent controlled apartment in Gamla Stan. I just shook my head - one the low rent; two he was drinking and eating at Akkurat which isn't the cheapest place.
Even if this person was not rich as measured by capital, he is somehow privileged in other ways. Like running in the right social circles and knowing the people who hand out these rental contracts. Typically, people in media, the culture sector, and politics, know each other and do each other these kind of favors. It's how corruption works in a society where power and influence have been consolidated over decades.
> Because of rent control, nobody builds rental apartments because it isn't profitable.
I'd like to understand this better.
I live in a city of a quarter-million people in a US state that no one in tech cares about. There's no rent control here. I pay $400 plus utilities for a 1000-square-foot apartment in a decent location. Clearly my landlord is making a profit off of this and similar apartments at $400 a month. But I'm often told that, if my apartment was in New York, he'd be taking a loss even at $2000 a month. Why is that?
The only difference that has occurred to me so far is the initial cost of the land in a dense city, which could potentially be enough to tie up many years of profits. But that's still just a one-time cost. What am I missing?
> But I'm often told that, if my apartment was in New York, he'd be taking a loss even at $2000 a month. Why is that
One explanation is the huge upfront investment. The median apartment goes for $900k in NYC these days [1]. According to google's mortgage calculator[2], a 30 year mortgage for $900k will mean a monthly payment of $4.2k.
That means somebody buying an apartment on mortgage will have to rent it for $4.2k a month just to break even.
Then there's also opportunity cost. If there are people willing to pay X for something, you are technically losing a lot of money by selling/renting for less than X.
A landlord has to cover several things out of your rent: interest on the underlying mortgage, property taxes, maintenance.
Note that landlords rarely buy the underlying property in cash. It's an extremely inefficient use of capital. Having a mortgage allows you to increase your leverage.
San Francisco is currently getting the overflow from massively constricted housing market of San Jose and the Peninsula. Build high rises in East Palo Alto and you satisfy the demands of the "anti-gentrifiers" and make the labor more elastic.
Harvard economist Howard Glaeser, Nobelist Paul Krugmann (citing Glaeser), FT Columnist and book author Tim Harford, and others have spoken for years about how limited land use through zoning density restrictions and overuse of historic landmark status has artificially increased the cost of housing and offices.
Here is a recent column by Glaeser regarding the issue of affordable housing in NYC:
Norway uses an alternative strategy to get housing to the poor called the "housing allowance"[1]. Instead of paying developers to build lower quality housing, money is given directly to poor people for the purpose of paying rent. The prevents having a bimodal price distribution like the one observed in New York.
sooo tax dollars go into the pockets of the land owners....and that extra money bids the price of land up more....and the land owners have a further incentive to vote against any zoning changes.
I think it would be better that the landlords were not the beneficiaries of this type of subsidy, though. I'd prefer to see them have to compete, and this doesn't attack the problem from that end.
One could certainly build a corollary statement to read, "tight housing markets limit worker options". I mean, seriously, how many people are limited by location based restraints to pursue the career of their dreams?
This is 2015. Some of us would have thought that by now, location would be a factor mitigated by technology.
> location would be a factor mitigated by technology
Do you want to be surrounded by people on the cutting edge of tech? They all congregate in one or a few places, and you have to move where they are to reap the benefits of community.
People will always seek to associate in meatspace, regardless of society's tech level.
Having lived in SF 15 years, I think that advantage is steadily declining.
When I moved here, people came here because this was the place where all the interesting technology happened. It was hard to keep up. But now, the number one reason to move here isn't the technology. It's access to capital.
Since Bubble 1.0, the Internet has become an excellent distributor of technology. But VCs still aren't interested in getting on planes.
I recently moved to SF from a large Midwestern city. I don't know what things used to be like here, but I would say number of job opportunities here compared to where I moved from are somewhere between 20x and 50x. Maybe that's confounded by the access to capital.
Not to mention living here is nice for many other reasons.
Well, the competition is higher, and a lot of the jobs available right now are not funded by revenue, they're funded by investment. So I think the current picture is misleading.
It is a swell place to live, though. But even that advantage has declined a fair bit. 20 years ago, a lot of places in the midwest were cultural deserts. Books, movies, magazine, ideas: all severely restricted. The Internet has changed that. And San Francisco is rapidly losing the diversity of culture that was a big draw for me.
Just a guess but the majority of companies in the US still depend on people showing up. Our work culture doesn't change that much (and has gotten worse in terms of some things [pensions, benefits, etc.]) even if it would make far more sense for people to work from home. Also, despite it being 2015, and the richest country in the world, our spread of broadband is pretty limited though growing. I think Google Fiber and similar companies will help alleviate this in the future.
Not everywhere is 'cutting edge', in terms of resources and managerial ideas, so it helps to think outside the SF bubble. I used to have to spend 2.5 hrs in traffic despite working for a 'tech company' just b/c the boss (late thirties) wanted it that way. And there's not much arguing with the person that cuts the check.
That is an interesting take on it. When you combine it with the article on 'mega cities' [1] it makes you wonder if the bay area is destined to either embrace it or die.
Is there some reason the assumptions in the cited paper aren't insane?
After a quick skim, they seem to be saying that if we only move a bunch of people from places Sheboygan to New York City, increasing the population of the latter from 8.4 to 15 million, then those former Sheboygan slackers will suddenly be as productive as the current New Yorkers.
There are a host of reasons I find that unpersuasive.
San Francisco's population density is 7,000 people per square kilometer. There are many beautiful, beloved cities throughout the world that manage to accommodate far greater density numbers:
Every yellow block in that picture is zoned 40-X, which means that buildings taller than four stories are not welcome. If we raised that to six stories (as is the norm, e.g., throughout most of Paris), we could easily accommodate hundreds of thousands of new residents.
The number for SF is definitely not right if you're looking at SF city proper.
According to Wikipedia, based on the 2014 estimate of ~850k people, the per square kilometer density figure for SF proper is 7,000.
Is there room for growth in SF? Definitely. You'll get no argument from me on that. And I agree with you that Parisian style density is a fantastic thing. It also goes to show you that skyscrapers aren't essential for high density urban living.
By the same token, I do think people tend to underestimate the density of 3-story tracts in SF. The zip code I'm living in in SF, for instance which is dotted with 2-4 story buildings for the most part boasts a respectable 31,000 people per sq mile (and this is on the west side of the city). Many observers, without actually looking at the actual population statistics, would probably say this is a low density neighborhood when the reality is that it is anything but.
If we can achieve those densities with a mere 3 stories, imagine how many more people we could house if we upzoned to 6.
That would make NYC 5x as dense as SF. But your numbers are wrong. San Francisco's land area is 46.9 square miles. New York's land area is 304 square miles. New York's density is about 50% higher.
But it's not clear that New York shows any a path forward. They did build up, and prices are still high. Maybe that's a sign that blindly increasing housing supply doesn't actually solve the problem.
Yes, in some parts of NYC (Manhattan, cool parts of Brooklyn) prices are indeed very high, but there are plenty of parts of NYC where you can find fairly affordable housing while still being in public transit range of the things that make NYC a major "World City". My friend is paying <1500/mo for a 1 bedroom in a good part of Astoria that's about 35 mins by foot + subway from times square. He only moved there a few years ago so it's not like he's taking advantage of some crazy rent control either.
You'd never find something equivalent in the bay area, so overall I think the "density argument" has some validity. Even more so if there would be willingness to expand the public transit infrastructure.
One guy finding a decent apartment still doesn't demonstrate that increasing density does much to solve problems. Also, I question your definition of affordable. $1500/month is 36% of the US median wage. People making less need to live somewhere too.
Wouldn't it actually encourage people to relocate outside of NYC/SF, which would be good for the economy, according to the article? The drastic difference in house prices would mean that you could sell your house here, and move to an equivalent house with many hundreds of thousands of dollars in your bank account.
I'm living in Tokyo right now and I own a home in Seattle. In terms of housing and job market, Dallas, Texas is hard to beat. In Dallas the pay was good (the average engineer will make a lot more money in Dallas than in Tokyo, and not really much difference between Seattle and Dallas) and the home prices in the Dallas area were amazing. Build a new home that's 2 to 3 times the size of a 40 year old home in Seattle and half (or more) of the price. Tokyo is out of the question - The quality of life here stinks. I'm paying $3,100 for a 700 sqft apartment in Shinjuku surrounded by an ocean of concrete (there are other good things here though). There are big downsides to Dallas which make it not ideal for living. In the end I'd pick Seattle as the best quality of life based on home pricing, pay, the natural environment, and low crime.
An interesting note between Seattle and Dallas was the speed at which things are built. I've talked to builders who built in both areas and the amount of bureaucracy in Seattle is absurd compared to Dallas. One builder who's building fast food restaurants said he'd build out a store in Dallas before he could get bast the bureaucracy in the Seattle area -- I wonder how that compares to SFO and NYC?
Read the actual paper[1], not the Bloomberg article, to see the tortured method by which they compute this. The authors claim that the problem is that excessive wages in these key cities are holding down GDP, and if the cities had more people, wages would drop and GDP would go up.
They write: "This output effect is driven to a large extent
by three cities -- New York, San Francisco and
San Jose – which experienced some of the strongest growth in labor demand over the last four decades, thanks to growth of human capital intensive industries like high tech and finance (Moretti, 2012). But most of the labor demand increase was manifested as higher nominal wages instead of higher employment. The resulting increase in overall wage dispersion negatively impacted aggregate growth. In contrast, Southern cities also experienced rapid output growth, but much of this growth showed up as employment growth and only a small amount as an increase in the nominal wage."
It's a "trickle down" paper. Wages are seen as a problem, not as the output.
I don't see what any of this has to do with trickle-down economics, which was about reducing tax rates for the rich on the premise that they'd throw nice parties and maybe hire you to serve cocktails.
The whole notion of some cities being more productive is flawed. They produce more because they are more dense, but more productive per capita is a "citation needed". (Also, I'm not quite sold on productivity being the best possible measure of quality of life either).
Having more businesses realize they can be located in diverse places is better for everyone - cheaper real estate, less congestion.
More importantly, many "high tech" companies can be distributed, allowing workers to work anywhere.
Living in the most congested, expensive area, or enforcing a long commute on yourself doesn't have to be the case. In fact, it's not the case - though it seems common for folks from these areas to assume they are so perfectly great that this must be true.
These whole reason these cities exist is because of a long term strategy of making room for newcomers, so it makes sense that moving away from that causes complications.
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[ 2.8 ms ] story [ 149 ms ] threadThat seems so implausible. The combined population of NYC, SF, and SJ is merely 3% of the US population. I am sure that fraction bunches above its weight, and nearby residents surely contribute too. But how much more effective would NYC/SF/SJ be if they were cheaper to live in?
So if those cities built lots more homes, people would rush in from elsewhere, and those newcomers would be more productive in their new locations than they were in their old ones, increasing US GDP 9.5%.
The entire GDP of all of California combined is $2 trillion.
It's blatantly obvious that 9.5% GDP boost is a fraudulent number.
Why not read the study and look for oversights?
An example, suppose somebody can suddenly afford to live in NYC, where they get a job moving commodities through an import/export business. Their contribution to NYC's GDP is minor: salary and profit on the deals they make. By getting this person into position to make these deals, American commodity producers suddenly get additional access to global markets they might not have had otherwise and suddenly corn from Stoy, Illinois is finding its way to China and Wheat from Russell, Kansas is ending up in Germany.
Moving those commodities employs truckers, truck manufacturers, ship crews, cargo container companies, shipping companies, etc. and all of those additionally network and recruit other industries: fuel, navigation, refrigeration, packaging, etc.
So while our NYC broker friend might only contribute a fraction of a fraction of a percent to NYC's economy (maybe not even a million dollars all told), his impact on the U.S. economy is vastly magnified. He may single-handedly connect enough sellers to enough buyers to keep hundreds of people fully employed and cause tens of millions of dollars of value to be created and distributed.
The alternative to him not being in place? The crops go to waste, or the farmers are simply paid to not grow them.
A boost to NYC and SF through some (even a lot of) population expansion, will not exceed the total existing GDP of all of NYC + SF. It's an absurd premise.
In other words, NYC does not exist as a closed system. You don't seem to understand that.
Like, it helps, but it doesn't seem like the numbers still add up.
So yeah, I'm not sure what estimate they're using for the growth multiple from liberalizing land-use constraints, but if they're predicting a near doubling of the combined metro economies, it's safe to assume it's pretty high.
I do agree that land-use restrictions are currently holding all three cities back, my Friday night napkin math (read: probably wrong, way oversimplified math) just thinks their estimates are a little optimistic.
EDIT: Another question would be what's the time frame for this addition to GDP? 9% growth in one year is insanely great. 9% growth over ten years is insanely bad.
[0] http://en.wikipedia.org/wiki/List_of_cities_by_GDP
The actual paper[1] simply says that "lowering regulatory constraints in New York, San Francisco, and San Jose cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%", so whatever timeframe it would take to reduce those regulatory constraints. (In SF that sounds like a project measured in decades, although maybe the imbalance in supply and demand will cause a breaking point that forces the city to engage with real solutions to the problem.)
[1] http://eml.berkeley.edu//~moretti/growth.pdf
1. If SF had typical land-use policies, it could build enough homes to accommodate twice its current population
2. If they did that, they'd be able to fill those homes with people
3. Those people, upon arriving, would have approximately the same productivity as current San Franciscans
4. SF would thus double its contribution to the US GDP
For example, NYC is home to much of the publishing industry. But all those books go out to local bookstores where they are sold at a small profit, increasing the GDP of those local areas above and beyond NYC's publishing industry's contribution.
http://www.economist.com/news/leaders/21647614-poor-land-use...
In the article: "The costs of this misfiring property market are huge, mainly because of their effects on individuals. High housing prices force workers towards cheaper but less productive places. According to one study, employment in the Bay Area around San Francisco would be about five times larger than it is but for tight limits on construction" ... "Lifting all the barriers to urban growth in America could raise the country’s GDP by between 6.5% and 13.5%, or by about $1 trillion-2 trillion."
Conclusion... not completely implausible
"The tech industry has come like a train wreck into this neighborhood and into this city," [0]
Theres this backwards mentality purporting the idea that market-rate housing development will drive out long-time residents. In reality, its the lack of market-rate development that leads to tech workers out-bidding low-income families for apartments (especially in areas like the mission).
0: http://www.sfexaminer.com/sanfrancisco/campos-to-propose-mor...
ETA: Next year, 2016, so we have about a year and a half.
http://www.sfhac.org/stop-the-mission-moratorium/
Here's how: https://www.reddit.com/r/housingforsf/comments/22xoht/help_h...
http://www.sfbarf.org/front.html
(could really use a site update, but they're doing the right work)
Low income developments only happen as mandated by local municipalities, and even so developers do so reluctantly only to qualify for the tax breaks on their larger maximum market rate brand new condo in the freshly gentrified neighborhood developments.
My view is slightly more nuanced. Developing is expensive. Luxury properties, like all luxury goods, sell at a higher margin than non-luxury. Therefore developers will build higher margin luxury apartments until demand for luxury apartments is satisfied. At that point they'll build mid-tier. Which have lower margins but it's still profitable and better than not making money. Then, once the mid-tier is finally satisfied, the low end will be built. Margins are likely crappy but hey whatever.
Once you reach full land use there's another layer of complexity. You can't build out so you have to build up. And building up is more expensive. In fact each floor is more expensive than the one below it. It doesn't take long for simply breaking even to be too expensive for even the lowest tier when land costs come into play.
Just to keep up with the national US growth rate (0.7%), San Francisco alone would need to make housing for almost 6000 new residents per year. In the first decade of this century (2000-2009) there was a total of 2,500 added per year, or roughly a half of what's needed, and that's a simplistic calculation for what's needed.
Add in a renewed popularity of cities and urban living over the suburbs, and it's no wonder then, that housing is in short supply in San Francisco.
The reality that San Francisco doesn't want to face is that housing for at least 6000 people needs to be added EVERY SINGLE YEAR, just to keep up. All the challenges related to adding housing in San Francisco (here's a hint; a 150-year old facade isn't historic) add up to one thing - very limited supply, and any Econ 101 student could tell you the result. What happens when demand rises while supply stays the same (or even goes down, relatively)? Prices skyrocket.
Eh, anything older than 1906 in SF is historic.
You can never build enough housing in a high-demand city without destroying the city; the demand is too elastic, the incentives between neighborhoods/culture and developers too misaligned.
San Francisco's problem is in the externalities levied by the immature VC-valley monoculture; significant increases in market rate housing density bring corresponding increases in the societal/cultural problems underlying this issue.
From where I'm standing, the neighborhood groups preventing any new housing from getting built are the ones destroying the city.
There was a neighborhood meeting this week about building over 1,000 units of affordable housing on what is now a parking lot, and the majority of current neighbors expressed a preference for the parking lot. Please, convince me that a massive slab of asphalt is better for San Francisco than making room for 1,000 new working class neighbors.
http://www.venere.com/blog/images/positano-streets-amalfi-co...
http://www.china-tour.cn/images/Lijiang/Lijiang-Nightlife.jp...
https://c2.staticflickr.com/6/5159/5889050432_4f8d86e07f_b.j...
My point is that some of the great and beautiful narrow cobble stone streets in, say, Boston or Philly, to use US examples, weren't built to handle heavy street traffic. Transforming high volume automobile streets to the walkable ideal is inevitably going to cause some headaches.
"The neighborhood is mostly single family homes, and the people there are very resistant to the idea of “renters” (the code word they use for poor people) living in the neighborhood."
http://sfbarf.tumblr.com/post/116593748570/balboa-reservoir-...
Would you be OK with this principle if a white neighborhood wanted to enforce a "no black or brown people" rule? How about a "straight people only" rule? How about "no poor people"? This isn't a purely abstract question, but an actual question that has arisen repeatedly in the history of the US. Sunset Towns have been real things.
There is a difference between a neighborhood having a say in its future and a neighborhood having a dictatorial stranglehold on all changes within its bounds. Does the rest of the city have no say? The county? The state? The country?
Do you think it's OK for a city to tell a neighborhood that they need to accept a certain set of non-discriminatory zoning rules based on land use, even if it's not what the people there want?
Residents answer to their neighborhood, neighborhoods answer to their district, districts answer to the city, state, and so on.
How to respect individuals, communities, and a plan for the future across all of those lines of responsibility isn't answerable with a simple "yes" or "no"; however, the onus should be on the individuals requesting the change to 1) justify its necessity and value, 2) quantify its cost to existing residents, and 3) recommend mechanisms for remediation or renumeration for externalities imposed upon the local residents by whatever project is imposed upon them to the benefit of the broader populace.
Seriously, housing is one of the least elastic markets out there. Everyone needs exactly one home, everything else is secondary.
Families and roommates are obvious examples where housing units and people are not 1:1.
- Bust: Demand dries up from the beleaguered economic sector (e.g., tech in SF after .com crash, finance in NYC post-housing bubble crash). Prices drop. Demand rises, fast, with residents moving in from the boroughs/suburbs.
- Boom: Demand is extremely high from the booming economic sector. Prices increase to match, unmet demand drops as those outside the boom sector move out to the boroughs/suburbs.
SF is maybe 35 square miles, once you take out the parks.
Why don't we build new housing in Palo Alto? Or better yet, rezone Stanford or Atherton?
I guess affluent monocultures must be protected.
Out of all the places and times and people who've talked of building more housing as destroying the city, most of them were just rich, white landowners who didn't want immigrants, minorities, and jobseekers ruining their views.
I'm not saying you're any such person, but your position is objectively furthering the interests of rent-seeking landowners as the expense of the marginalized and the exploited. Real equality can proceed only when housing is available as close to construction cost as possible, or better yet, cheap as free.
I live somewhere that's 1) expensive, 2) low-density.
The expense is because the low density makes this a nice place to live; more people want to live here than can fit here.
If we simply allowed development to meet demand, then this place wouldn't be a nice place to live anymore.
The solution is to pay a living wage such that everyone that works here can afford to live here. The solution isn't to socialize housing.
Or do you expect people to just live somewhere else nearby?
Have you considered the possibility of region-wide consequences when supply and demand set in, companies pay better, people commute farther, and live in other cities too?
Come on. Say what you mean. You don't want things to change, because then things would be different and you'd have to have Those People in your wonderful inclusive life.
And that would be bad. So down with inclusiveness!
But let's not get caught up in that yet. In what way would density "objectively and significantly decrease the quality of life of all existing residents"? From your phrasing, you clearly have solid evidence and objective metrics for your rather strong claim about both significance and universality.
As a result, Sweden has the world's largest housing bubble and by some measures the highest private debt of any country.
You can not find a more segregated, class-based society in the developed world.
Me, I moved to China.
I'd like to understand this better.
I live in a city of a quarter-million people in a US state that no one in tech cares about. There's no rent control here. I pay $400 plus utilities for a 1000-square-foot apartment in a decent location. Clearly my landlord is making a profit off of this and similar apartments at $400 a month. But I'm often told that, if my apartment was in New York, he'd be taking a loss even at $2000 a month. Why is that?
The only difference that has occurred to me so far is the initial cost of the land in a dense city, which could potentially be enough to tie up many years of profits. But that's still just a one-time cost. What am I missing?
One explanation is the huge upfront investment. The median apartment goes for $900k in NYC these days [1]. According to google's mortgage calculator[2], a 30 year mortgage for $900k will mean a monthly payment of $4.2k.
That means somebody buying an apartment on mortgage will have to rent it for $4.2k a month just to break even.
Then there's also opportunity cost. If there are people willing to pay X for something, you are technically losing a lot of money by selling/renting for less than X.
[1] http://www.nytimes.com/2015/01/18/realestate/what-750000-buy...
[2] https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...
Note that landlords rarely buy the underlying property in cash. It's an extremely inefficient use of capital. Having a mortgage allows you to increase your leverage.
San Francisco is currently getting the overflow from massively constricted housing market of San Jose and the Peninsula. Build high rises in East Palo Alto and you satisfy the demands of the "anti-gentrifiers" and make the labor more elastic.
Here is a recent column by Glaeser regarding the issue of affordable housing in NYC:
http://www.nydailynews.com/opinion/build-big-bill-article-1....
1. http://www.husbanken.no/english/what-is-housing-allowance/
This is 2015. Some of us would have thought that by now, location would be a factor mitigated by technology.
Do you want to be surrounded by people on the cutting edge of tech? They all congregate in one or a few places, and you have to move where they are to reap the benefits of community.
People will always seek to associate in meatspace, regardless of society's tech level.
When I moved here, people came here because this was the place where all the interesting technology happened. It was hard to keep up. But now, the number one reason to move here isn't the technology. It's access to capital.
Since Bubble 1.0, the Internet has become an excellent distributor of technology. But VCs still aren't interested in getting on planes.
Not to mention living here is nice for many other reasons.
It is a swell place to live, though. But even that advantage has declined a fair bit. 20 years ago, a lot of places in the midwest were cultural deserts. Books, movies, magazine, ideas: all severely restricted. The Internet has changed that. And San Francisco is rapidly losing the diversity of culture that was a big draw for me.
Not everywhere is 'cutting edge', in terms of resources and managerial ideas, so it helps to think outside the SF bubble. I used to have to spend 2.5 hrs in traffic despite working for a 'tech company' just b/c the boss (late thirties) wanted it that way. And there's not much arguing with the person that cuts the check.
[1] http://arstechnica.com/science/2015/05/megacities-demand-lot...
After a quick skim, they seem to be saying that if we only move a bunch of people from places Sheboygan to New York City, increasing the population of the latter from 8.4 to 15 million, then those former Sheboygan slackers will suddenly be as productive as the current New Yorkers.
There are a host of reasons I find that unpersuasive.
Population of NYC = 8,400,000 Size of NYC = 469 sq mi
10x the people on 2x the land.
SF looks more like a suburbs in many places than a city. The reality is, the city has two choices:
1) Build up, change the city skyline and look 2) Keep SF's "look" frozen, and watch as limited supply continues to drive prices sky high
http://www.laweekly.com/news/its-official-la-is-the-most-una...
http://projects.scpr.org/longreads/high-rent-few-options/
* Barcelona: 16,000
* Buenos Aires: 14,000
* Central London: 13,000
* Manhattan: 25,846
* New York City (overall): 10,100
* Singapore: 7,600
* Paris: 22,000
* Central Tokyo: 14,500
Here's a map of the zoning ceilings throughout San Francisco: http://i.imgur.com/Tn7CSTX.jpg
Every yellow block in that picture is zoned 40-X, which means that buildings taller than four stories are not welcome. If we raised that to six stories (as is the norm, e.g., throughout most of Paris), we could easily accommodate hundreds of thousands of new residents.
According to Wikipedia, based on the 2014 estimate of ~850k people, the per square kilometer density figure for SF proper is 7,000.
Is there room for growth in SF? Definitely. You'll get no argument from me on that. And I agree with you that Parisian style density is a fantastic thing. It also goes to show you that skyscrapers aren't essential for high density urban living.
By the same token, I do think people tend to underestimate the density of 3-story tracts in SF. The zip code I'm living in in SF, for instance which is dotted with 2-4 story buildings for the most part boasts a respectable 31,000 people per sq mile (and this is on the west side of the city). Many observers, without actually looking at the actual population statistics, would probably say this is a low density neighborhood when the reality is that it is anything but.
If we can achieve those densities with a mere 3 stories, imagine how many more people we could house if we upzoned to 6.
Btw, you can find neighborhood density figures for the 2010 US census by zip code here: http://projects.nytimes.com/census/2010/map (look under the "more maps" drop down)
EDIT: Looks like you corrected the SF numbers.
But it's not clear that New York shows any a path forward. They did build up, and prices are still high. Maybe that's a sign that blindly increasing housing supply doesn't actually solve the problem.
You'd never find something equivalent in the bay area, so overall I think the "density argument" has some validity. Even more so if there would be willingness to expand the public transit infrastructure.
It also looks like you can find equivalent things in the Bay Area: http://sfbay.craigslist.org/search/apa?maxAsk=1500&bedrooms=...
I am definitely in favor of expanding public transit, though. I think that's a much better way to increase network effects.
http://en.wikipedia.org/wiki/List_of_United_States_cities_by...
An interesting note between Seattle and Dallas was the speed at which things are built. I've talked to builders who built in both areas and the amount of bureaucracy in Seattle is absurd compared to Dallas. One builder who's building fast food restaurants said he'd build out a store in Dallas before he could get bast the bureaucracy in the Seattle area -- I wonder how that compares to SFO and NYC?
They write: "This output effect is driven to a large extent by three cities -- New York, San Francisco and San Jose – which experienced some of the strongest growth in labor demand over the last four decades, thanks to growth of human capital intensive industries like high tech and finance (Moretti, 2012). But most of the labor demand increase was manifested as higher nominal wages instead of higher employment. The resulting increase in overall wage dispersion negatively impacted aggregate growth. In contrast, Southern cities also experienced rapid output growth, but much of this growth showed up as employment growth and only a small amount as an increase in the nominal wage."
It's a "trickle down" paper. Wages are seen as a problem, not as the output.
[1] http://eml.berkeley.edu//~moretti/growth.pdf
Having more businesses realize they can be located in diverse places is better for everyone - cheaper real estate, less congestion.
More importantly, many "high tech" companies can be distributed, allowing workers to work anywhere.
Living in the most congested, expensive area, or enforcing a long commute on yourself doesn't have to be the case. In fact, it's not the case - though it seems common for folks from these areas to assume they are so perfectly great that this must be true.