Tuesday, April 22, 2014
The Tragedy of the Bay Area Housing Market
TechCrunch has a lengthy piece on the housing fiasco in the San Francisco area:
San Francisco has a roughly thirty-five percent homeownership rate. Then 172,000 units of the city’s 376,940 housing units are under rent control. (That’s about 75 percent of the city’s rental stock.)
Homeowners have a strong economic incentive to restrict supply because it supports price appreciation of their own homes. It’s understandable. Many of them have put the bulk of their net worth into their homes and they don’t want to lose that. So they engage in NIMBYism under the name of preservationism or environmentalism, even though denying in-fill development here creates pressures for sprawl elsewhere. They do this through hundreds of politically powerful neighborhood groups throughout San Francisco like the Telegraph Hill Dwellers.
Then the rent-controlled tenants care far more about eviction protections than increasing supply. That’s because their most vulnerable constituents are paying rents that are so far below market-rate, that only an ungodly amount of construction could possibly help them. Plus, that construction wouldn’t happen fast enough — especially for elderly tenants.
So we’re looking at as much as 80 percent of the city that isn’t naturally oriented to add to the housing stock.
The piece is quite thorough and contains lots of insight into the Bay Area's history and housing politics.