Wednesday, April 9, 2014

Why Housing Is So Expensive In San Francisco

Kyle Russell explains one reason, though rent controls, which keep apartments off the market is another:

San Francisco is a great place to live, if you can afford it.
The only problem is, many can't. Median rent in the city is more than $1,463 per month. That's higher than every other major city in the U.S.

Like any other economic problem, we can boil this one down to supply and demand.

With all of the recent fervor over employees at tech giants moving to the city, most of the attention has been placed on the demand side of the problem: people are upset that well-paid software engineers are driving up their rents.

But there's also a supply side to the issue that needs to be considered: Maybe there isn't enough housing in the city to go around. If people want to live in San Francisco, and they don't want rent to go up, then we need to build more units for people to live in.

Since San Francisco is located on a peninsula, there's pretty much only one way  for the city add new housing units: by growing vertically. With taller buildings, San Francisco would be able to fit more housing and thus lower rents. But as Y Combinator partner Garry Tan pointed out in a tweet this weekend, that's not even an option under current city zoning regulations.

The map below shows building height zoning for the entire city. Areas in yellow are zoned to have buildings no taller than 40 feet...

Read the rest here.


  1. I can just hear the response from the left: "But it's an earthquake zone." Sorry, Tokyo's mega high-rises seem to hold up perfectly fine against 9.0s. It's time to start building in SF.

    1. Gotta nit pick here, sorry.

      There hasn't been an earthquake greater than 7.3 and within 500 miles of Tokyo since they started building skyscrapers there.

      Although I'm sure their engineering is very aware of, and hardened against the prospect of such, a 9.0 in Tokyo would be an extremely bad day for everyone involved.

  2. Isn't it funny how the more leftist a city is the more expensive it seems to get? If you're clueless on economics all the emotional BS and "good intentions" in the world isn't going to help the poor.

    1. A big part of this is because "progressive" cities tend to have more restrictive zoning and growth regulations than moderate or conservative cities. If I recall correctly, the notion of zoning started becoming popular during the Progressive Era. Also, starting in the mid-1960s progressives became very sympathetic toward the environmental movement. Notice the shift in policy between Governor Pat Brown in California (1959-1967), an old-school progressive who heavily supported state infrastructure programs such as freeway building and the California aqueduct, things that today's progressives would cringe at, and his governor son Jerry Brown, who during his first stint as governor (1975-83) was a strong proponent of environmentalism. Among other things, he cancelled the infrastructure-building projects that his father championed.

  3. There's been a lot of focus in the media on San Francisco's zoning restrictions, which do need to be addressed. NIMBY homeowners in San Francisco should not artificially raise the price of housing for everybody with their "I got mine!" attitude. However, there hasn't been much focus on the zoning regulations of surrounding Bay Area places. Unfortunately for Silicon Valley workers wanting to live in a neighborhood that is not car dependent like much of the Silicon Valley is (I think this is the biggest reason why young software engineers want to live in San Francisco and not, say, San Jose or Cupertino, at least until they settle down and raise children, although there are plenty of young software engineers in Silicon Valley cities), most of the Peninsula cities, from Daly City all the way down to Palo Alto, are just as restrictive, if not more restrictive, when it comes to zoning. Most of the Peninsula cities are all places with small downtowns and single family homes, and the homeowners there like it that way and want to keep it that way. The Peninsula would be an otherwise perfect area to build up and take some of the housing pressure off San Francisco (the downtown areas are nice and walkable, and there's Caltrain to get to work in the Silicon Valley and to make it to evening events in San Francisco), but the Peninsula seems even less open to densification than San Francisco is; at least there are new high rises being built in the SOMA area in SF. Can you imagine San Mateo or Redwood City approving the development of tall condo complexes in their downtown areas?

    I could go at length, but zoning regulations* should not be set by self-interested NIMBYs who want to maximize their property values at the expense of everybody else.

    *Being a libertarian, I am opposed to zoning regulations, as they are an usurpation on private property rights.

  4. Looks like there's about 3 square miles of land on the western side of District 2 just ripe for large scale development. Too bad the owner is the NIMBYest of all NIMBYs.