Housing Crisis: Can We Build Our Way to Houring Affordability in San Francisco?

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By Calvin Welch, HANC Housing and Land Use Board Member

 

The price of housing and the dramatic increase in evictions have once again propelled housing affordability into the forefront of debate in San Francisco. The “usual suspects” make the usual arguments: if we only unleash the power of the market by removing “regulations” (rent control, height limits, density requirements, traffic analysis, take your pick) from our over-regulated housing market we could have affordable housing thanks to the immutateble “law” of supply and demand.


moving average

 

The graph above (available on the SF Controllers site http://sfbarometer.weebly.com/new-building-permits.html) shows that in 41 of the last 65 quarters housing production increased in San Francisco and that with that increase in supply THERE WAS AN INCREASE IN PRICE, standing the normal “supply and demand” assumption on its head in San Francisco.

This graph is not an isolated “data point”. In fact, between 1960 and 2010 San Francisco has built nearly one and a half housing units for each new resident : our population increased by 64,000 during that period yet we have built some 92,000 homes and condo’s. No major housing development has ever been turned down in San Francisco during that period. Over the last decade alone, San Francisco has exceeded its market rate housing production goal of some 11,000 units by over 50%, building some 16,500 market rate units from 2000 to 2010.

With all of this supply of market rate housing why hasn’t prices fallen? There are three main answers:

  1. San Francisco has a land shortage with owners of land able to set any price; only 13 of San Francisco’s 47 square miles are zoned for housing and unless we want Golden Gate and Mc Laren Parks rezoned that's about all the land we have for housing;
  2. Simple speculation: some 30% of the homes sold last year were bought with cash, a sure sign of speculation. Without direct controls real estate speculation will continue to dominate the market making housing expensive.
  3. Between 2000 and 2010 new construction accounts for only about 18% of real estate sales annually in San Francisco with the sale of existing housing making up the other 82% of sales.


 

New Construction by Decade, 1967-2012

 

Decade

New Units Built

Annual Rate New Units Built

1967-76

16,272

(9,231)

1,627

1977-86

12,121

(10,649)

1,212

1987-96

13,905

(12,430)

1,390

1997-2006

16,835
(16,620)

1,683

2007-12

11,446

(12,063)

1,907

 

San Francisco Information Clearinghouse

 

Source: SF Housing Inventory

 

“New Construction” vs. “Total Homes and Condos Sold”               

Year

Sold

New

 

Year

Sold

New

2000

5,079

1,859

2007

5,095

2,197

2001

4,416

1,619

2008

4,201

3,019

2002

5,752

2,260

2009

4,055

3,366

2003

5,548

2,730

2010

4,719

1,082

2004

6,921

1,780

2011

5,039

348

2005

6,597

1,872

2012

5,305

1,434

2006

5,505

1,675

San Francisco Information Clearinghouse

Source: www.rereport.com, Housing Inventory


If endless new construction of market rate housing does not produce “affordability” what does?

Between 1980 and 2008 San Francisco passed a series of local laws from rent control to limits on condo conversions that “regulated” market price. Fully 50% of all homes in San Francisco are now covered by some sort of “price controls” either partially (non-profit owned housing and public housing) or periodically (Section 8 subsidies and rent control). These local price controls actually produce the only affordable housing left in the City and are under constant pressure to be repealed or weakened. What is significant is that during this 30 year period new construction was not limited by these controls but increased in each decade after they were passed!

These and other questions wetre the subject of a panel discssion held last month in San Francisco. A full video of the panel is available here:  http://www.youtube.com/watch?v=Ldr3lIzPJJI&;feature=youtu.be

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