Every time the UK government do something to "help first time buyers" it involves getting them into even more debt, and keeping the prices high. There are still the same number of properties around, and the same number of people competing for them. How can they honestly think this is helping in any way.
i think gov't are reluctant to introduce any policy that will cause housing prices to drop - a lot of "wealth" is locked in property, and should property prices drop, the on-paper measure of such wealth drops too (despite the fact that a house that's lived in is stable in it's "wealth" measured with utiliziation).
If you stop thinking about prices and simply count people in houses, this result becomes more obvious. If N people want to live in SF but only K < N houses exist, N-K people have a problem. (For simplicity I'm ignoring details like crowding 3 people into a 1BHK.)
The only question is which N-K people have a problem - this will be determined by economic and political processes.
Part of which is playing out here where people of privilege are working out a story that allows them to displace an older population dependent on rent control so that they can get that housing.
This is fairly obvious once you think it trough and one of the few things were majority of academic economists agree.
Houses are not build to stand empty[1]. The number of houses available and the income level determine the prices. Even if you build luxury apartments, the end result is more affordable houses available to people with low income after the chain reaction where people move up to better housing ends.
[1]: If this happens in some market conditions, raising property taxes to empty apartments works miracles.
And a lot more subsidy-rate construction helps low-income renters even more. Go figure.
If we have more market-rate construction, low-income renters would mostly have to pay market rate which would always be above subsidy rate. Because if the market rates are low there is less construction.
If there are not enough housing units in the current high price market it is not the fault of subsidies. The return of investment in other markets is apparently even better.
It's not only a problem in SF, exploding rents is a problem all over the world. But is "barriers to new construction" the problem? No one ever explains those, just blames politicians. But for a property owning corporation it is obviously a poor idea to invest in new apartments because that would reduce the value of the ones they already got. It's not much different from OPEC not wanting to flood the market with oil.
+ Mission Street between 16th and Ceasar Chavez is a rail corridor. There was a proposal to limit this area to 8 story buildings. SF counterproposed and adopted a height limit which was on a per-property basis the lower of either a) what was presently built there or b) what city staff recommended, to preserve the character of the neighborhood. (Source: http://www.slate.com/blogs/moneybox/2013/04/11/san_francisco...)
What is currently built there includes e.g. two- to three-story non-operating pornographic theatres. (Source: I periodically walked past them while doing business in SF.) Reasonable people can disagree on whether one prefers non-operating pornographic theatres or new housing. San Francisco has decided, through their elected representatives, that they affirmatively prefer the theatres.
+ San Francisco has a complex, interlocking system of permits required to approve new construction, which is designed to and has the effect of minimizing it.
SF has built an average of 1,500 new housing units per year, for the last several decades. I pulled that stat from an advocacy organization which quotes it as what is realistically possible given that SF is filled with "strong
communities, both those concerned about equity and those with more NIMBY interests, that will not allow
the radical deregulation many developers (and the growing ranks of Ayn Rand libertarian techie counterparts)
seek"
The population of SF has increased by almost 100k in ~15 years. (2001 census: 777k, 2013 census: 837k, all signs point to it accelerating) At that point, Ayn Rand libertarian techie propaganda ^H^H^H^H^H^H fourth grade math takes over.
For a property owning corporation, it might not be the best thing. However, in a free market, there wouldn't be anything they could do about it. Competition is supposed to reduce the profits of any industry over time.
Barriers to new construction is of course the problem. If you had to fill out a lot of paperwork and get government permission to build a tractor, and there was a shortage of tractors, the solution wouldn't be to give farmers more cash to procure a tractor, nor try and control the price of tractors, nor pass laws restricting use of tractors. The solution would be to build more tractors. With enough tractors, it woudotn even matter if the occasional farmer kept one in the barn unused.
I don't know how people develop this blindspot with housing - if the prices are going up too much it is because demand is exceeding supply. Everyone is reluctant to say the lack of supply is an issue, and I don't know why.
"In these areas, community resistance to housing, environmental policies, lack of fiscal incentives for local governments to approve housing, and limited land constrains new housing construction."
In other words: zoning.
I've spoken to both policy wonks and developers. IIRC, a good 70% of our land is zoned residential. Everything else is being redeveloped as fast as possible. The single biggest bottle neck is lack of available land.
Community resistant isn't simply just NIMBY. Methinks there's also self-image. Maybe like an inertia thing. Like the incumbents don't want to become "that kind of city".
Many are super reluctant to upzone residential areas (to permit greater density). And the upzones that do occur, are often via the backdoor, by introducing mass and public transit.
Resistance to redeveloping our South Lake Union area (think Amazon) was huge. A light industrial area with a smattering of hovels. A real dump. The political opposition was impressive. So a former mayor pushed thru a super silly trolley car and got the whole area upzoned. Clever.
> But for a property owning corporation it is obviously a poor idea to invest in new apartments because that would reduce the value of the ones they already got.
That doesn't seem sensible to me. One additional unit of housing will reduce prices by some very small amount, but rake in quite a bit of cash for the company owning it, in the current housing climate in SF. Closer to some kind of sane equilibrium, those numbers might start to balance out, but right now they're pretty far apart.
Ed Glaeser has done a lot of work looking at the costs of the "right to build". His research is worth looking at, but this 2007 Virginia Postrel article which relies on his data contains a good explanation of how these costs can vary between cities.
And in SF I bet most of this market rate construction would be snapped up by overseas buyers from China looking for a save haven should the Chinese economy go really pear-shaped - just like London
As a result of its high housing costs, California has the highest real poverty rate in the country.
California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning.
The constraint on housing prices in places like San Francisco is land cost. If developable land costs $500,000 per buildable dwelling unit on the open market, then $1,500,000 and up is where finished dwellings need to be priced to make development economically viable. Land supply is mostly fixed pending large investments in public infrastructure, particularly efficient extension of public transit.
> California ranks 35th in terms of poverty rate. [1]
I'm not sure how carefully you read the page you cite.
Firstly, that 35th is 35th from the bottom - which means that California has the 17th highest poverty rate amongst the 51 states and federal district of the USA.
Secondly, that rank is based on a definition of poverty based on income thresholds that do not vary across the country:
It therefore does not take into account geographical variations in the cost of living, such as housing. Since the whole point of the article is that California has a higher cost of housing, it is therefore not a useful measure in this context, or indeed at all. That's probably why, in 2010, the census bureau adopted a better metric, the Supplemental Poverty Measure:
Helpfully, the 2012-2014 average of this measure is also tabulated on the page you cite, and if you sort the states and the district by that, you can see that California does indeed have the highest poverty rate in the country - 23.8%, just pipping Washington DC's 22.7%
Can anyone point to an example of a location where rents have fallen with significant new construction and without any underlying national/regional economic weakening?
(Not interested in arguments/models as to why it would; just places where I might examine data showing where/when it has in fact worked out this way.)
[+] [-] collyw|11 years ago|reply
Every time the UK government do something to "help first time buyers" it involves getting them into even more debt, and keeping the prices high. There are still the same number of properties around, and the same number of people competing for them. How can they honestly think this is helping in any way.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] chii|11 years ago|reply
[+] [-] yummyfajitas|11 years ago|reply
The only question is which N-K people have a problem - this will be determined by economic and political processes.
[+] [-] erispoe|11 years ago|reply
[+] [-] whybroke|11 years ago|reply
Part of which is playing out here where people of privilege are working out a story that allows them to displace an older population dependent on rent control so that they can get that housing.
[+] [-] nabla9|11 years ago|reply
Houses are not build to stand empty[1]. The number of houses available and the income level determine the prices. Even if you build luxury apartments, the end result is more affordable houses available to people with low income after the chain reaction where people move up to better housing ends.
[1]: If this happens in some market conditions, raising property taxes to empty apartments works miracles.
[+] [-] realjakedoe|11 years ago|reply
If we have more market-rate construction, low-income renters would mostly have to pay market rate which would always be above subsidy rate. Because if the market rates are low there is less construction. If there are not enough housing units in the current high price market it is not the fault of subsidies. The return of investment in other markets is apparently even better.
[+] [-] bjourne|11 years ago|reply
[+] [-] patio11|11 years ago|reply
Examples:
+ Mission Street between 16th and Ceasar Chavez is a rail corridor. There was a proposal to limit this area to 8 story buildings. SF counterproposed and adopted a height limit which was on a per-property basis the lower of either a) what was presently built there or b) what city staff recommended, to preserve the character of the neighborhood. (Source: http://www.slate.com/blogs/moneybox/2013/04/11/san_francisco...)
What is currently built there includes e.g. two- to three-story non-operating pornographic theatres. (Source: I periodically walked past them while doing business in SF.) Reasonable people can disagree on whether one prefers non-operating pornographic theatres or new housing. San Francisco has decided, through their elected representatives, that they affirmatively prefer the theatres.
+ San Francisco has a complex, interlocking system of permits required to approve new construction, which is designed to and has the effect of minimizing it.
SF has built an average of 1,500 new housing units per year, for the last several decades. I pulled that stat from an advocacy organization which quotes it as what is realistically possible given that SF is filled with "strong communities, both those concerned about equity and those with more NIMBY interests, that will not allow the radical deregulation many developers (and the growing ranks of Ayn Rand libertarian techie counterparts) seek"
http://www.sfccho.org/wp-content/uploads/2014/02/Whose-Futur...
The population of SF has increased by almost 100k in ~15 years. (2001 census: 777k, 2013 census: 837k, all signs point to it accelerating) At that point, Ayn Rand libertarian techie propaganda ^H^H^H^H^H^H fourth grade math takes over.
[+] [-] brc|11 years ago|reply
Barriers to new construction is of course the problem. If you had to fill out a lot of paperwork and get government permission to build a tractor, and there was a shortage of tractors, the solution wouldn't be to give farmers more cash to procure a tractor, nor try and control the price of tractors, nor pass laws restricting use of tractors. The solution would be to build more tractors. With enough tractors, it woudotn even matter if the occasional farmer kept one in the barn unused.
I don't know how people develop this blindspot with housing - if the prices are going up too much it is because demand is exceeding supply. Everyone is reluctant to say the lack of supply is an issue, and I don't know why.
[+] [-] specialist|11 years ago|reply
"In these areas, community resistance to housing, environmental policies, lack of fiscal incentives for local governments to approve housing, and limited land constrains new housing construction."
In other words: zoning.
I've spoken to both policy wonks and developers. IIRC, a good 70% of our land is zoned residential. Everything else is being redeveloped as fast as possible. The single biggest bottle neck is lack of available land.
Community resistant isn't simply just NIMBY. Methinks there's also self-image. Maybe like an inertia thing. Like the incumbents don't want to become "that kind of city".
Many are super reluctant to upzone residential areas (to permit greater density). And the upzones that do occur, are often via the backdoor, by introducing mass and public transit.
Resistance to redeveloping our South Lake Union area (think Amazon) was huge. A light industrial area with a smattering of hovels. A real dump. The political opposition was impressive. So a former mayor pushed thru a super silly trolley car and got the whole area upzoned. Clever.
[+] [-] davidw|11 years ago|reply
That doesn't seem sensible to me. One additional unit of housing will reduce prices by some very small amount, but rake in quite a bit of cash for the company owning it, in the current housing climate in SF. Closer to some kind of sane equilibrium, those numbers might start to balance out, but right now they're pretty far apart.
[+] [-] krrrh|11 years ago|reply
http://m.theatlantic.com/magazine/archive/2007/11/a-tale-of-...
[+] [-] walshemj|11 years ago|reply
[+] [-] brudgers|11 years ago|reply
California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning.
The constraint on housing prices in places like San Francisco is land cost. If developable land costs $500,000 per buildable dwelling unit on the open market, then $1,500,000 and up is where finished dwellings need to be priced to make development economically viable. Land supply is mostly fixed pending large investments in public infrastructure, particularly efficient extension of public transit.
[1]: https://en.m.wikipedia.org/wiki/List_of_U.S._states_by_pover...
[+] [-] twic|11 years ago|reply
I'm not sure how carefully you read the page you cite.
Firstly, that 35th is 35th from the bottom - which means that California has the 17th highest poverty rate amongst the 51 states and federal district of the USA.
Secondly, that rank is based on a definition of poverty based on income thresholds that do not vary across the country:
http://www.census.gov/hhes/www/poverty/about/overview/measur...
It therefore does not take into account geographical variations in the cost of living, such as housing. Since the whole point of the article is that California has a higher cost of housing, it is therefore not a useful measure in this context, or indeed at all. That's probably why, in 2010, the census bureau adopted a better metric, the Supplemental Poverty Measure:
http://www.census.gov/hhes/povmeas/methodology/supplemental/...
Helpfully, the 2012-2014 average of this measure is also tabulated on the page you cite, and if you sort the states and the district by that, you can see that California does indeed have the highest poverty rate in the country - 23.8%, just pipping Washington DC's 22.7%
[+] [-] brc|11 years ago|reply
The static list measures by income - assuming that costs are the same across areas. Which isn't true.
[+] [-] nulltype|11 years ago|reply
[+] [-] wwweston|11 years ago|reply
(Not interested in arguments/models as to why it would; just places where I might examine data showing where/when it has in fact worked out this way.)
[+] [-] venomsnake|11 years ago|reply
[+] [-] tormeh|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] cauterized|11 years ago|reply