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Old 11-12-2011, 06:43 PM
 
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and more generally why is real estate so expensive in SF/SV?

Given (1) very high real estate prices (both to rent and buy) and (2) that there are so many blighted underused areas in SF and lots of open space and underused space in SV, why aren't developers actively putting up tons of new rental units and other housing units?

Also, in SF and SV, are there major restrictions on height and types of housing? In SF in particular, why are all condo developments usually these 4-6 story affairs; given demand and density, I'd expect more 40-60 story towers? In SV, why is there almost no high-density housing? Very 20+ unit apartments or condos despite high demand and a youthful workforce.

More generally, I haven't seen a market where supply and demand are so out of whack. In NYC, prices are high, but they've built everywhere and not much of Manhattan is blighted or underused. I get that the weather is nice, property taxes low, and incomes high; those factors may increase prices, but they don't excuse the absolute dearth of supply of housing, which in my opinion is the largest cause of elevated real estate prices in SF/SV.

Thoughts/answers/disagreement?
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Old 11-12-2011, 09:14 PM
 
Location: South Korea
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1) NIMBY people and environmentalists make it hard to build anything anywhere in the Bay Area. California seems to make it possible for local interest groups to slow down or derail any major building project more than in other states, for better or worse.

2) yes there is a lot of underused blighted industrial space in the eastern part of SF, but a lot of it has major ground pollution that is dangerous for people to live on and expensive to remove.

3) I don't know what the laws are about high-rises but about 40 years ago there was a big push to build a lot of high-rises in SF and local residents pushed back and maintained the low-rise skyline.

4) land prices and construction costs are sky-high here, and earthquake-resistant structures are more complicated and costly, so investors need to put up a lot of capital to build a big building here compared with in other states. I think over the last 10 years investors decided to build in other states like Arizona and Nevada because it was cheaper to buy land and build there and there was a lot of demand. Now that the market has gone bust in those states, investors don't have the money they need to build in SF.

5) despite all this, during just the last 5 years there have been several new high-rise condo buildings built in SF, mostly around Mission Bay and eastern SOMA, and in downtown Oakland. Not enough to push down demand though, and there's so few of them that they are able to market themselves as luxury buildings (because in SF a dishwasher and a walk-in closet and new kitchen fixtures are luxuries, seriously) and command high prices.

Really I think the environmentalist pushback and local activism and the global housing bust are the main causes. If you ride on Caltrain south out of SF you see a LOT of unused open space, some of it industrial but some of it is just open fields. The other 95% of SF is totally built up and there's no space to build on. I don't really think there's a need for there to be a lot of tearing-down and rebuilding in the developed parts of SF, you'd have to build a ton of new buildings to bring prices down to middle-class levels, and I don't think you can get past local activism and do that. You can sneak in a few condo buildings here and there (they are scattered all over SF) but there's so few of them that, again, the units go for luxury condo prices. I think SF residents don't care that someone might want to tear down an aging Victorian house in their neighborhood that needs a fresh coat of paint and replace it with a 30 story condo tower, because they know that it will only lead to 30 stories of yuppies moving in.
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Old 11-12-2011, 10:13 PM
 
Location: San Francisco, CA
506 posts, read 1,150,795 times
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Originally Posted by mayorhaggar View Post
I don't really think there's a need for there to be a lot of tearing-down and rebuilding in the developed parts of SF, you'd have to build a ton of new buildings to bring prices down to middle-class levels, and I don't think you can get past local activism and do that. You can sneak in a few condo buildings here and there (they are scattered all over SF) but there's so few of them that, again, the units go for luxury condo prices. I think SF residents don't care that someone might want to tear down an aging Victorian house in their neighborhood that needs a fresh coat of paint and replace it with a 30 story condo tower, because they know that it will only lead to 30 stories of yuppies moving in.
So instead of "yuppies" you get insane levels of gentrification as the prices skyrocket. Do the locals only want highly-paid engineers and trust fund kids moving in?

(Really, what is so wrong with yuppies? Most cities work to attract them! Denver, Chicago, San Diego, Minneapolis, and Austin are not blighted, personality-free wastelands because of all the condo-dwelling college graduates with nice jobs.)

Not arguing with you, just noting that the action of avoiding new development does not seem to achieve the intended result.

Last edited by Isebiel; 11-12-2011 at 11:42 PM..
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Old 11-12-2011, 10:53 PM
hsw
 
2,144 posts, read 7,135,612 times
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Both NYC and SF are commie towns w/various regs which drive up costs of RE to subsidize welfare housing for some ?30% of residents of either town who are too unproductive to pay market rates for own housing and lifestyle choices

But equal quality new condo towers in SF are >60% cheaper psf than stuff in Manhattan (compare 15CPW vs Millennium)

And an acre of premium land in Woodside is no more costly than similar acre in Greenwich (and in either area many houses are built on ~4acs each)...what scarce land? Diffce is ~20min Woodside commute to offices in SV is far faster and more scenic at any hr than drive from Gwich to Midtown

And top engineers in SV often earn >2x what their similar-age peers earn at NYC IB/HFs as traders

Ironically, high-end land is more costly in elite areas of Dallas or Houston than in Woodside or Greenwich, no matter CA or NYC's various commie regs or TX's relatively free-mkt RE/tax/permit/zoning ethos....
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Old 11-13-2011, 12:12 AM
 
411 posts, read 717,713 times
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Quote:
Originally Posted by mayorhaggar View Post
1) NIMBY people and environmentalists make it hard to build anything anywhere in the Bay Area. California seems to make it possible for local interest groups to slow down or derail any major building project more than in other states, for better or worse.

2) yes there is a lot of underused blighted industrial space in the eastern part of SF, but a lot of it has major ground pollution that is dangerous for people to live on and expensive to remove.

3) I don't know what the laws are about high-rises but about 40 years ago there was a big push to build a lot of high-rises in SF and local residents pushed back and maintained the low-rise skyline.

4) land prices and construction costs are sky-high here, and earthquake-resistant structures are more complicated and costly, so investors need to put up a lot of capital to build a big building here compared with in other states. I think over the last 10 years investors decided to build in other states like Arizona and Nevada because it was cheaper to buy land and build there and there was a lot of demand. Now that the market has gone bust in those states, investors don't have the money they need to build in SF.

5) despite all this, during just the last 5 years there have been several new high-rise condo buildings built in SF, mostly around Mission Bay and eastern SOMA, and in downtown Oakland. Not enough to push down demand though, and there's so few of them that they are able to market themselves as luxury buildings (because in SF a dishwasher and a walk-in closet and new kitchen fixtures are luxuries, seriously) and command high prices.

Really I think the environmentalist pushback and local activism and the global housing bust are the main causes. If you ride on Caltrain south out of SF you see a LOT of unused open space, some of it industrial but some of it is just open fields. The other 95% of SF is totally built up and there's no space to build on. I don't really think there's a need for there to be a lot of tearing-down and rebuilding in the developed parts of SF, you'd have to build a ton of new buildings to bring prices down to middle-class levels, and I don't think you can get past local activism and do that. You can sneak in a few condo buildings here and there (they are scattered all over SF) but there's so few of them that, again, the units go for luxury condo prices. I think SF residents don't care that someone might want to tear down an aging Victorian house in their neighborhood that needs a fresh coat of paint and replace it with a 30 story condo tower, because they know that it will only lead to 30 stories of yuppies moving in.

Good stuff, that more or less answers it; other points
1. I think the nationwide housing bust caused a lot of real estate projects to be canceled or paused. That would have been fine if the Bay Area hadn't suddenly recovered, but it has, so now there's this huge dearth of housing because about 2000 units or so of housing went un-built when we actually need another 10,000+.
2. The problem with the SOMA and Mission Bay developments is that they are about 1/2 as tall as they should be. Given that SV is where more and more jobs are, they should have built SOMA (a commuter area near Caltrain) into something much larger and denser than what it is.
3. They need to build actual rental housing; pure rental housing, not condos
4. Earthquake resistance, etc. will increase costs, but it still doesn't excuse the utter lack of construction. I doubt it results in 3-4X higher costs, especially if builders continue to limit themselves to 5 stories or so.
5. The biggest disgrace is how the peninsula is not building up. That's where the jobs, money, etc. are now and the demographic is pretty young; how is it that the biggest tech center of the world is mostly barren or suburban. They should be mounting *hundreds* of residential towers or 4-6 story mid-rises all across the area from Burlingame down to Cupertino, but they haven't.
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Old 11-13-2011, 12:15 AM
 
411 posts, read 717,713 times
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Quote:
Originally Posted by hsw View Post
Both NYC and SF are commie towns w/various regs which drive up costs of RE to subsidize welfare housing for some ?30% of residents of either town who are too unproductive to pay market rates for own housing and lifestyle choices

But equal quality new condo towers in SF are >60% cheaper psf than stuff in Manhattan (compare 15CPW vs Millennium)

And an acre of premium land in Woodside is no more costly than similar acre in Greenwich (and in either area many houses are built on ~4acs each)...what scarce land? Diffce is ~20min Woodside commute to offices in SV is far faster and more scenic at any hr than drive from Gwich to Midtown

And top engineers in SV often earn >2x what their similar-age peers earn at NYC IB/HFs as traders

Ironically, high-end land is more costly in elite areas of Dallas or Houston than in Woodside or Greenwich, no matter CA or NYC's various commie regs or TX's relatively free-mkt RE/tax/permit/zoning ethos....
didnt follow most of this other than what sounds wrong: "top engineers in SV often earn > 2x...". Unless by top you mean, the 1% of SV engineers who have their own startups that IPO'ed. More generally, I've seen other posts on this board suggest that 22 year old's out of undergrad make 200k+ at Google, etc.; that's BS. Take a look through glass door or ask anyone at these firms; it's not that lucrative for any junior person and 90% of non-junior engineers.
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Old 11-13-2011, 02:32 AM
 
Location: South Korea
5,242 posts, read 13,031,549 times
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Quote:
Originally Posted by Isebiel View Post
So instead of "yuppies" you get insane levels of gentrification as the prices skyrocket. Do the locals only want highly-paid engineers and trust fund kids moving in?

(Really, what is so wrong with yuppies? Most cities work to attract them! Denver, Chicago, San Diego, Minneapolis, and Austin are not blighted, personality-free wastelands because of all the condo-dwelling college graduates with nice jobs.)

Not arguing with you, just noting that the action of avoiding new development does not seem to achieve the intended result.
There are a ton of people in SF on cheap old leases or with rent control who wouldn't be able to live in the city if it wasn't for their old leases. How are you going to clear out multiple city blocks full of tenants just so you can put up some condos? This is where the local political resistance comes from, if you start trying to use eminent domain crap to kick people out of their homes for "redevelopment" then you're not going to get very far--plus some of the people getting kicked out would be wealthier people with new leases--I just don't think SF's laws allow for that kind of mass eviction at all. People are way more accepting of a slow drip of middle class people getting priced out of their neighborhood by gentrification than if big condos full of yuppies were going up all over the place. The end result is the same as old tenants die and move out and new yuppie tenants move in, but it's way slower that way.

And "yuppies" aren't the problem, it's just wealth and class--a lot of the people moving into condos in SF are wealthy empty-nesters who decided to move back into the city now that the kids are moved out. But SF's gone from being a place where when you go out to a bar the patrons are all bike messengers and baristas talking about their friends' band to being all lawyers and accountants hovering over their iphones in between gabbing about their jobs. Nothing wrong with that but for now I'll take Oakland where it's way more mixed in terms of class, pretty much like SF was about 5-6 years ago.

The whole discussion about "the creative class" being central to a vibrant city was only ever a strategy for selling condos to yuppies though.
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Old 11-13-2011, 02:41 AM
 
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To make a long story short: you can't just build high rises anywhere. You have to have land that supports a long tall structure, otherwise the dawn thing could crumble to the ground. For example, there's a reason why nothing in Richmond/Sunset is taller than four stories, because it's all sand underneath the ground which takes tall buildings out of the equation.

Mission Bay is landfill, you simply cannot build too high on that kind of soil. When an earthquake hit the landfill can potentially turns into jelly, you can picture the rest. Many parts of SOMA is in liquefaction zone, enough said. I suggest you look up a liquefaction map; any area that is red should not have a high rise, and the city will not permit a high rise there, end of discussion.

So too are many lands in SV, you may see a lot of empty spaces driving down 280 but believe it or not, many of them are unbuildable, especially those hills.

Keep in mind that Manhattan is not in an earthquake zone and the Bay Area is. The scary thing is that those high rises you see in SF, they aren't build to withstand an earthquake higher than 8. In fact, nothing in our collective knowledge allows us to build a freaking 60 stories high structure that can withstand the big one. When it hits, those high rises fall to the ground. Now you know what the planning dept has to deal with. Density vs. safety. Which one would you choose?

.

Last edited by beb0p; 11-13-2011 at 02:50 AM..
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Old 11-13-2011, 03:57 AM
 
Location: South Korea
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Also if SF had rampant condo-itis, it would be Vancouver. Vancouver has some impressive sight-lines from far off but once you get up close to the high-rises, they're pretty blah. Areas like the West End have a mix of older high-rises from the 60's which are really ugly and dated looking now and newer ones covered with glass that are really soulless looking and will look dated eventually especially if their glass isn't maintained well. There's not much architectural character there because they apparently tore down a lot of their old buildings to build all the new condos, something that would never happen in SF where you have tons of old Victorian and Edwardian buildings all over the place. And despite having so many high-rises, Vancouver still has a smaller population than SF, about 500,000 or so.
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Old 11-13-2011, 04:46 AM
 
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Here are things that I observed when I lived in the SOMA area of SF:

-Land acquisition costs are very high (real estate costs, environmental assessment, taxes & fees)
-The city requires an inordinately high percentage of these units to be low income, thus reducing the profit margin
-Developers must price these units very high in order to attain a certain profit level and appease their shareholders
-This also requires very tall units to be built as they need to be as efficient as possible with the site
-When the economy tanked and new condos were not selling/prices were dropping, developers got scared off and became very gunshy of building new units that would not be profitable (e.g., One Rincon Hill's 2nd tower among many others)

Having moved here to the Silicon Valley, I see similar trends, but on a much smaller scale:

-Residents/zoning won't typically very tall structures
-Developers tend to build very small complexes now or only build as they sell, as to not risk too much capital outlay in this troubled economy
-Developers concentrate construction primarily on my desirable areas of the west valley (better schools, more upscale, better community feel) and stay away from other areas that tend to be more industrialized and sprawly, which further constrains supply

I think that in the foreseeable future, you will see this conservative trend continue, as developers don't want to get burned again and residents won't tolerate much more aggressive growth policies. This will continue to artificially keep the real estate prices high in already expensive areas.
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