Why don't they build more houses? (Williams: real estate, apartments, big house)

[IJustLoveThis]

Good news we've discussed previously: Centerra, downtown San Jose's newest high-rise: What you need to know - Silicon Valley Business Journal

[sonarrat]

Originally Posted by IJustLoveThis

Good news we've discussed previously: Centerra, downtown San Jose's newest high-rise: What you need to know - Silicon Valley Business Journal

Apartments.. I hope we don't have to turn into a society of renters.

[thechoson]

I think also as far as new homes go, there's been a lag because of the economic downturn. When I first moved to this area in 2009, I was considering buying then (still kicking myself for not pulling the trigger, now I may be priced out forever), and I remember there were quite a bit of new condo developments. Just off the top of my head, I remember the 4 skyscrapers in downtown SJ, Plant 51, some KB development at the old cannery site, the Villa Fontanas, a development on Winchester, a SFH development in Santa Clara, a Toll Brothers development near Willow Glen, and I know I'm forgetting others. There were all new in the sense that the developers were still trying to sell units, as opposed to resell by owners.

Obviously these projects were all built during the boom times. I think developers were stung by the downturn and stopped greenlighting new projects, and it seems like the stuff being built now are rentals. I'm going to guess if the housing market continues to do well (a big IF in my opinion, esp if mortgage rates go up), then we'll see more new developments in areas that don't quite have as much of the NIMBY factor going on.

[darkeconomist]

Originally Posted by darkeconomist

The problem with SF is the absurdly skewed demand for housing vs. the supply, wherein rowhouses throughout all the outer neighborhoods still aren't enough, leaving the city crowded (relative to, say, the very large lots of suburban San Jose) AND expensive.

Some one thoughtfully disagreed with my position on the size of housing lots in San Jose, so allow me to clarify my above point.

San Jose's typical lot is above 5k, whereas a typical (ie, average) lot in San Francisco is 2500 square feet.

Literally, San Jose could have more than twice as many houses without expanding the urban growth boundary if it had SF's lot size average.

[thechoson]

Originally Posted by sonarrat

Apartments.. I hope we don't have to turn into a society of renters.

I don't know how the ownership works for apartment complexes. Do the developers sell to a management company? Or do the developers hang on to the complex and rent units out directly?

I ask because I do remember a trend back during the height of the housing boom was to start converting rentals into condos for sale.

If the housing market get really hot, I'm guessing the developers may have the option of converting the rentals into units for sale? So basically they get the best of both worlds?

[cardinal2007]

Originally Posted by thechoson

I don't know how the ownership works for apartment complexes. Do the developers sell to a management company? Or do the developers hang on to the complex and rent units out directly?

I ask because I do remember a trend back during the height of the housing boom was to start converting rentals into condos for sale.

If the housing market get really hot, I'm guessing the developers may have the option of converting the rentals into units for sale? So basically they get the best of both worlds?

I think it depends on who owns it, companies like Essex, or Avalon outright buy entire buildings and manage them. Some companies are willing to do condo conversions, and apartment conversions themselves, but those are the minority. Usually for apartments someone like Sobrato will build it and sell it so someone like Essex. Something like the 360 Residences that was built be be condos originally the buyer may look continuously at yield rates and condo prices to see if they want to do a condo conversion, or put the building in the market to companies that do condo conversions. There are or were companies whose entire job was to buy apartment buildings and convert them to condos. Usually developers will not stick with an asset in the books though and not want to rent them out, so they will sell it to another company that wants to deal with it. Even if developers rent out the units, they will outsource to a major management company.

Both Skyline and 360 Residences were originally built as condos, and some company may wish to buy them in the future and convert them. Usually apartments are priced based on how much rent they can bring in. Condos are not, the condo market can divorce itself from rents wildly so when condo prices rise a lot without rents doing the same you will see a lot of condo conversions, most often you will see this for years 1988-1990 or 2004-2006, since then units would have been valued way higher as condos than apartments in those cases.

[MediaArtist]

Because once these guys make it up the social ladder, they do everything to pull the ladder up because "they got theirs". In other circles, they call this being a NIMBY. That's why no one can build a wood hut in the Bay Area without some "conservation group" yelling at the top of their lungs that more homes are going to ruin the natural spaces of the Bay Area, unless of course it does something to improve property values, or they get paid off big time, then it's build that Walmart on that aquatic bird nesting ground!

I'm so glad I left the Bay Area (sold my Danville home in 1997). The NIMBYs really messed up that place.

[Wry_Martini]

Originally Posted by cardinal2007

Both Skyline and 360 Residences were originally built as condos, and some company may wish to buy them in the future and convert them. Usually apartments are priced based on how much rent they can bring in. Condos are not, the condo market can divorce itself from rents wildly so when condo prices rise a lot without rents doing the same you will see a lot of condo conversions, most often you will see this for years 1988-1990 or 2004-2006, since they units would be valued way higher as condos than apartments in those cases.

I used to live at 360. I once asked the leasing office if there were any plans to convert back to condos; the answer they gave me was that it was extremely likely within the next 5 years.

[thechoson]

Originally Posted by MediaArtist

Because once these guys make it up the social ladder, they do everything to pull the ladder up because "they got theirs". In other circles, they call this being a NIMBY. That's why no one can build a wood hut in the Bay Area without some "conservation group" yelling at the top of their lungs that more homes are going to ruin the natural spaces of the Bay Area, unless of course it does something to improve property values, or they get paid off big time, then it's build that Walmart on that aquatic bird nesting ground!

I'm so glad I left the Bay Area (sold my Danville home in 1997). The NIMBYs really messed up that place.

I thought OC was just as bad now?

[bentobox34]

Originally Posted by Ruth4Truth

This doesn't make sense. Prop 13 limits property tax increases on older, long-term residents. It's the new residents that pay higher taxes.

The problem is that new residents soon become long-term residents. So they don't pay their way over the long term. Just because you've been there for 20 years, it doesn't mean it costs any less to pave your street or provide police and fire protection.

Prop 13 limits property taxes to 1% of assessed value initially and limits increases to 2%/year. 1% is already lower than property taxes in many states, and as a result of limited increases, the ratio of property taxes to assessed value is actually only 0.48% on average. This ranks California as 45th out of 50 states in property tax collection - source.

Cities have responded in a number of ways:

1) Keep expanding. You can use the windfall of (temporarily) higher property taxes from all the new homes out on the fringe to pay for your deferred maintenance in the older neighborhoods that aren't paying their way anymore. Except in a few years, the "new" neighborhood will be old, and you'll have to build more sprawl even further out to pay for last decade's sprawl. This strategy has not really been available in most of the Bay Area, but was widely practiced in Sacramento and Central Valley cities.

2) Add "development fees" to make up for lost taxes. In effect this increases development costs, which get past on to potential homebuyers, and in general makes it harder for housing to "pencil." Also increases the attractiveness of strategy 1) by making new sprawl and even bigger bonanza for the general fund.

3) Avoid building housing.