The Great American Single-Family Home Problem

by on December 1, 2017 at 2:46 pm in Economics | Permalink

The NYTimes has an excellent piece on how difficult it is to build new housing in California, even in places where zoning allows such housing on paper. It includes this amazing anecdote:

Then there is Patterson + Sheridan, a national intellectual property law firm that has its headquarters in Houston and recently bought a private jet to ferry its Texas lawyers to Bay Area clients. The jet was cheaper than paying local lawyers, who expect to make enough to offset the Bay Area’s inflated housing costs.

And the gif below:

Read the whole thing.

Gif by Karl Russell | Source: BuildZoom

1 JWatts December 1, 2017 at 3:11 pm

” a national intellectual property law firm that has its headquarters in Houston and recently bought a private jet to ferry its Texas lawyers to Bay Area clients”

I was on a flight 3 or 4 years ago and was sitting beside an LA cop. He lived in Ohio and commuted. I think he was on a 10 day On 4 Day off schedule and had a bi-weekly flight.

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2 Careless December 1, 2017 at 3:22 pm

My stepmother was a lawyer in Chicago and did almost all of her business in Manhattan and California. Apparently the NYC lawyers in the same field were charging twice as much per hour.

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3 ʕ•ᴥ•ʔ December 1, 2017 at 3:46 pm

Ha. Amarillo is both much closer and much nicer if you are going to do that kind of thing.

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4 Harun December 1, 2017 at 3:46 pm

Did he sleep in his patrol car?

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5 JWatts December 1, 2017 at 3:52 pm

No, if I recall correctly, he rented a bedroom from another cop. And owned a farm in Ohio.

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6 anon December 2, 2017 at 7:29 am

“Geo bachelors” are common in the DC area – people who live outside DC who can not afford or do not want to move to DC and who rent a room in the DC area. Common among career military who are rotated in and out of Washington. Many work M-F.

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7 Adrian Ratnapala December 1, 2017 at 4:11 pm

He was getting a raw deal if he was doing 10 on 4 off. Miners here in Australia get 9 days on 5 days off.

And that’s not even counting that the miners get to be in a hole in the ground, whereas this cop has to go to LA.

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8 Dan Lavatan December 1, 2017 at 4:29 pm

That’s true but this way he gets credit for quintuple overtime from CalPERS.

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9 athEIst December 1, 2017 at 8:12 pm

Actually he lived in California and commuted to Ohio.

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10 Anon7 December 1, 2017 at 3:19 pm

Favelas are the answer to the problem!

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11 Ricardo December 1, 2017 at 4:05 pm

So that is what America has become: favelas.

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12 P Burgos December 1, 2017 at 4:20 pm

Hopefully the fake Brazilian in residence will explain to us how Brazilian favelas are superior to housing and neighborhoods in the US.

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13 A Truth Seeker December 1, 2017 at 6:18 pm

Primo, Brazilian favelas (or communities as they are being called nowadays) are not controlled by greedy slum lords. Secundo, many Brazilian favelas are as well-equipped as any middle class neighborhood, with stores, supermarkets, banks and schools. Compare and contrast with Americans saying frightening the Koreans was enough to hurt the consumption options allowed to American Black neighborhoods residents. Tertio, racism is virtually unheard of in Brazil. Compare and contrast with the Blacks’ sad situation in America, treated like aliens, deprived for centuries of their rightful civil rights.

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14 athEIst December 1, 2017 at 8:18 pm

Thago, if you’re going to live here, you must learn to say first, second and third. Doesn’t your favella yearn for your return and you to it. GO!

15 A Truth Seeker December 1, 2017 at 9:16 pm

I prefer the noble language if Virgil, Caesar and Cato, second only to the language of Camões, Fernando Pessoa and Machado de Assis.

16 aMichael December 1, 2017 at 7:46 pm

Favelas are one option. I think Tyler had high rises in mind, like Manhattan or Tokyo or Hong Kong.

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17 A Truth Seeker December 1, 2017 at 7:52 pm

So one can choose between price controls, Fascism and Red Fascism colonialism…

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18 GoneWithTheWind December 1, 2017 at 8:41 pm

End H1B and return all to their home country. End immigration, actively seek out and deport those who are here illegally and the greater San Francisco are would have excess housing overnight.

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19 A Truth Seeker December 1, 2017 at 9:42 pm

“End H1B and return all to their home country.”

Doesn’t the neutron bomb kill people without destroying the house stock?

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20 Hazel Meade December 1, 2017 at 10:02 pm

Lots of things will increase the housing supply, or rather decrease demand. A serious crime wave, war, or depression work almost as well as ethnic cleansing.

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21 OneGuy December 2, 2017 at 10:57 am

What ethnic cleansing? Are you suggesting that ethnic cleansing is a good idea?

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22 apso December 3, 2017 at 11:42 pm

Swiftian . . . ?

23 clockwork_prior December 1, 2017 at 11:29 pm

You might think you are kidding, but Prof. Cowen wasn’t when he wrote this – ‘What if someone proposed that in a few parts of the United States, in the warmer states, some city neighborhoods would be set aside for cheap living? We would build some ‘tiny homes’ there; tiny homes might be about 400 square feet and cost in the range of $20,000 to $40,000. We would build some very modest dwellings there, as we used to build in the 1920s. We also would build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro favela.’ – Average Is Over: Powering America Beyond the Age of the Great Stagnation

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24 Mulp December 2, 2017 at 11:14 am

Three single family houses on the featured lot, 40ft frontage, 150ft depth, would need to be about that size once allowing for the parking and space between houses for windows to get light.

Instead the article about problems building single family homes features the problems building a triplex on a small lot with frontage for two cars.

The only viable option I can see is setting the building back so the 20ft past the sidewalk is head in parking for four-five cars. The building could then be maybe 30 by 100ft, so 1500 sqft useful living space for two story, 1000sqft if one story. The price would be $300-500k given the land price for the lot.

Clearly providing new single family homes by building multifamily houses is not going to increase the supply of single family homes.

Unless you are a free lunch economist or conservative lawyer arguing zoning need not reflect the natural world and physics….

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25 Scott H. December 1, 2017 at 3:27 pm

No wonder flights out to Cali are so expensive.

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26 Lehrer December 1, 2017 at 3:33 pm

Berkeley is an ultra-leftist enclave in far left California — thus a very unrepresentative “sample” of the intended national housing issue.

But it may be news to some that massive government interventions in housing markets result in severe negative consequences, but leftish dogma provides thick insulation from such realities.
Of course no one in America actually “owns” any real estate — they ultimately are renting it from their local government Landlord via property taxes. Government Landlords also have many rules as to how the “tenants” may use that government real estate.

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27 Moo cow December 1, 2017 at 3:47 pm

Spooky!

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28 Dan Lavatan December 1, 2017 at 4:37 pm

I don’t think that is quite true. Samoa does not have property taxes and Nevada granted allodial title to a few people.

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29 KW2 December 1, 2017 at 7:51 pm

Samoa negates the point (?) Must be quite a few small distant places on the globe without direct property taxes.

Nevada had a very limited form of allodial titles from 1998-2005, now abolished.

All private property in US is “Fee Simple” ownership. The property is legally subject to eminent domain by federal, state and local government, and subject to the imposition of taxes by state and/or local governments. Government seizes private land for non-payment of property taxes and there is no absolute limit upon the amount of property taxes that could be assessed.
There is thus no true allodial (absolute) private land ownership in US.

(“If they can take it — you don’t own it !)

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30 Mulp December 2, 2017 at 11:27 am

Why is it leftist dogma to state “you can’t increase the supply of single family houses by tearing down a single family and building a triplex in its place”?

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31 Andre December 1, 2017 at 3:41 pm

In Hayward where I live they tore down a 20 years(!) vacant tomato jarring plant and have put 800 houses and a new elementary school up. We’ve got an old corporate head quarters for Mervyns that has been closed for years that they just turned to dust in a few months, hopefully the apartments go up soon. Sadly in San Bruno where I used to live they have a horrible site with an old Safeway and mattress store that they’ve been trying to tear down for years. I dropped by the old neighborhood after a year and a half of all the stores being closed, all they’ve managed to do is put up a fence around the complex.

East Bay doing much better than the Peninsula as far as I can tell on the ground.

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32 Affe December 1, 2017 at 7:26 pm

Walnut Creek too. You bump into construction everywhere downtown and nearby, especially near the BART stations.

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33 zacky December 6, 2017 at 1:43 am

The Bay Area is doing better than abysmally as before with new housing construction but entitlements in many cases still take years of fighting before even breaking ground and projects are downsized

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34 ʕ•ᴥ•ʔ December 1, 2017 at 3:44 pm

I just went for a bike ride through Huntington Beach. I almost took a picture of the huge oil rig, with American flag, wedged between $1.5M homes. A huge new luxe apartment block is going in across the street.

It is kind of a funny place. A huge oil field.

https://en.m.wikipedia.org/wiki/Huntington_Beach_Oil_Field

And now

https://www.udr.com/orange-county-apartments/huntington-beach/the-residences-at-pacific-city/

Those $3145 apartments are across the street from a still active 1920s oilfield. Isn’t California grand?

So anyway, the Bay Area isn’t California, it isn’t in particular Orange County.

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35 Benjamin Cole December 1, 2017 at 10:46 pm

Yeah, maybe Orange County is pinker than the Bay Area.

Have you ever tried to build anything in Newport Beach? Any project larger than 250k sf requires approval….by city voters, in a direct popular vote.

How about freeway extensions or airports? Not here!

Can you ID even one single-family detached neighborhood in OC that would welcome a condo tower?

Your comment underlines the point:

Why would a Huntington Beach apartment rent for $3k a month if supply was not very cramped?

When it comes to property zoning, everyone is pink.

Acreage minimums in Connecticut? A condo across the street from your house? With ground floor retail?

Remember: we believe in free markets except when we don’t.

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36 ʕ•ᴥ•ʔ December 2, 2017 at 8:43 am

I think you missed a point about this piece of the coast. If you can achieve as the link says “a laid back, beach house lifestyle, and a perfect life/work/play balance” while paying $3k a month, there might be a lot of money sloshing around.

The condo towers are going in all over, and the fact that they convert from low industrial does not really mean “no growth.”

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37 ʕ•ᴥ•ʔ December 2, 2017 at 9:22 am

From the condo tower link below, on the dangers of going too high when land is still relatively cheap:

“The average sale price at Marquee Park Place fell from over $1 million a unit in 2007 to $419,000 in 2010, Condos Etc.’s Hicks reported. The average price for the five condo towers fell 55 percent from 2007 to 2011.

Lenders seized at least 121 units in those five buildings from 2007 through 2013, figures from online real estate data firm PropertyRadar show. That’s one foreclosure for every five units, and doesn’t include short sales or units surrendered voluntarily to banks.

Soussé estimated that 95 percent of Marquee Park Place units were “under water,” or worth less than was owed on the mortgage.”

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38 Mr. Econotarian December 2, 2017 at 1:06 am

It was only this may that the oil well on the campus of the Beverly Hills High School was shut down.

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39 M December 1, 2017 at 3:53 pm

I live in a large mansion (just north of Palo Alto) which I and 6 other people rent and share as a co-op (although 11 people live with us now). I have lived like this since I moved to the Bay Area 7 years ago and while it was because of economic necessity at first I actually have come to like it. Our rent is 9k a month; the place is an on an acre of land it has 9 different fruit trees and a swimming pool. I share the master suite with my wife and I live with wonderful interesting people who have become my second family. We have a house cleaner come twice a month, food delivery, and use an online service called Splitwise to organize our shared house expenses. Inclusive of everything from food, and rent, to toilet paper I’m out of pocket about $1400 a month (more in winter less in summer). I think that were my wife and I to live on our own in an apartment we would need to spend around 5-6k a month for similar amenities, and we would be lonely. This is not to speak of the time savings of having 11 people to share household tasks with (managing landlord, ordering detergent on Amazon, taking time off of work to meet the handy man etc) which otherwise my wife an I would bear the full burden of.

While we are in technical violation of our lease be having so many people in residence, we are clean professionals in our 30’s who pay our rent on time do not throw crazy parties and our land lord is uninterested in looking too hard at us. Mansions are actually pretty hard to rent out.

The subset of us interested in having children are currently looking at buying via a partnership.

In other words, you can capture the economics of higher density housing if you can get along with people. Even in an area as neurotic about construction as the Bay Area. These are the economic returns to being tolerable and skilled at toleration.

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40 Moo cow December 1, 2017 at 4:01 pm

My sister in law lives with 6 and sometimes 7 people in San Jose. A little different than your set up as she and her wife own the house. But the boarders are all professionals or students, some from the sub-continent, and it works for them. When the house is paid off they can sell it for a couple million and move somewhere else. Or not.

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41 Ricardo December 1, 2017 at 4:55 pm

Of course, by then it will be fully depreciated, so they will owe $400,000 of capital gains taxes on the proceeds…..

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42 msgkings December 1, 2017 at 5:28 pm

Houses don’t depreciate, and the first $500K in cap gains is tax free for married couples. In fact their basis could increase with home improvements.

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43 Ricardo December 1, 2017 at 5:42 pm

If you’re renting out part of the house, you are allowed to depreciate a proportion, and you are *required* to adjust your basis accordingly (even if you choose not to depreciate… the language is “depreciated or depreciatable”). Basis of $500K after depreciation, sales price of $2.75M — that means a taxable gain of $2.25M. The first $500K is exempt for married couples, so taxable gain of $1.75M. Twenty-two percent of that is $385,000.

44 Mike W December 1, 2017 at 6:24 pm

And you believe they are reporting the property as a rental and not as just their personal residence because…why?

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45 Moo cow December 1, 2017 at 8:46 pm

Yeah, my guess is none of the income is reported.

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46 athEIst December 1, 2017 at 10:21 pm

There may or may not be capital gains but there will be recapture. Depreciation is recaptured upon sale of the property. It is a flat 25%. If your partner dies, you’re in luck, recapture is forgiven to the surviving partner.

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47 Average Man December 1, 2017 at 4:05 pm

What’s the turnover like? Would you continue to do communal living w/non-relatives when you have kids?

Living with 10 other people not related to me sounds like a nightmare. But hey, to each his own.

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48 JWatts December 1, 2017 at 4:11 pm

“I live in a large mansion ”

I’m curious, how many square feet constitutes a large mansion in Palo Alto?

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49 Ex-worker December 1, 2017 at 11:18 pm

As someone who worked there until recently, could be anywhere from 4 to 10,000 square feet. Probably trending towards 7-8,000.

Palo Alto has some pretty good mid-sized mansions from back in the day, and even the (rare) new construction tends more towards gated 5-6,000 square foot mansions with most of the trimmings and actual yards than midsized condo buildings.

For sure, most of the housing is smaller than that, but you’re not getting 10 people into a 900 square foot row house.

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50 jb December 1, 2017 at 4:15 pm

Aren’t professionals wonderful? So very civilized.

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51 CG December 1, 2017 at 6:37 pm

I could also reap some great economic returns if I shacked up with my mother-in-law, and I consider myself pretty skilled at toleration, but God help me if I ever have to do that.

Now if that’s your jam, great, do your thing. But other people shouldn’t have to put themselves in these types of situations when they don’t want to simply because bad local policies drive up the cost of housing.

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52 Atherton December 1, 2017 at 8:29 pm

Heh, I’ve been wondering if there are more people living in Atherton mansions like me and my 10 roommates, we should form a club or something 🙂

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53 RustySynapses December 2, 2017 at 9:07 am

You guys are killing me – we sold our house in Atherton in 2005 (moved away) and in hindsight renting it out (to you or whomever) would have been a lot smarter!

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54 Hazel Meade December 1, 2017 at 10:06 pm

While we are in technical violation of our lease be having so many people in residence,

Probably more than just the lease. Most places have occupancy limits.

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55 RustySynapses December 2, 2017 at 9:11 am

Yes – it seems like this is just a less visible (and less legal) way to increase density. But it can be very hard to prove that bezoning is being breached – as a neighbor, how do you prove that more than X unrelated people are actually living somewhere, and get the government to do something about it?

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56 Hazel Meade December 2, 2017 at 10:30 am

You don’t. Unless you’re an asshole. Occupancy limits are bullshit.

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57 JWatts December 2, 2017 at 10:56 am

Sometimes occupancy limits are bullshit, but often they are set to deal with system constraints, such as vehicular use, sewer & water system capacity, and fire safety codes. Granted, they’re often set conservatively and often used to keep the riff raff out, but they have legitimate uses.

58 RustySynapses December 3, 2017 at 8:20 am

Zoning exists. Maybe you could argue it shouldn’t, but as long as there is zoning, if something is zoned for single family, it’s not ok to turn a house into an apartment building, however the rent is collected.

59 zacky December 6, 2017 at 1:48 am

That’s nice. The flip side of this and far more common is people stacked in illegal in-law units and living in dining rooms in San Francisco and on the Peninsula or worse in vans and campers because we have a mismatch of housing stock of SFH to demand for multi-family housing

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60 rayward December 1, 2017 at 3:55 pm

Florida’s coastline is one long high-rise condominium. California’s is not; indeed, the northern California coastline has been preserved, something that amazes me each time I visit California. I get the impression that Tabarrok would prefer California’s coastline to look like Florida’s. But I could be wrong. One benefit of the limited supply of housing in northern California is that it is an incentive for companies to locate elsewhere. How about Kansas? Or Indiana? Or Alabama? Lots of inexpensive housing in those places.

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61 Moo cow December 1, 2017 at 4:03 pm

I just got back from there. It is amazing on the one hand, but on the other…if you want to make that tradeoff, at least allow for some increased density to house people. My understanding is that SF population is almost exactly the same as it was 20 or 30 years ago. They are making it a Disney Land

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62 jmcsf December 1, 2017 at 4:16 pm

SF’s population in the 1990 census was 723,959. The 2016 Census estimate put it at 870K, so up about 150K, not quite “almost exactly the same.”

With that said, there is plenty of room for more people. Without all the restrictions to build, SF’s population would certainly be over 1 million. I’ve read that the combined area of surface parking lots is about comparable to Golden Gate Park (which is larger than Central Park in case you aren’t familiar). Maybe start building housing there?

It seems the lack of housing is ultimately a political issue. The space and economic incentives to build more housing stock exist. My take is that minimal affordable housing exists in San Francisco because the voters do not want it. They do not want housing in their backyard and certainly not if it blocks the sunlight for their vegetable garden!

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63 Moo cow December 1, 2017 at 8:47 pm

I think the presidio will eventually be developed.

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64 zacky December 6, 2017 at 1:52 am

San Francisco is also a small city in a large area

We have heavy rail BART stations adjacent to malls and Costcos near to SF so if there was a will there would be a way

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65 Cooper December 1, 2017 at 4:10 pm

You don’t even need to touch the coastline, just let people build duplexes where there are already homes.

In San Francisco alone something like 30-40% of the residential land area is zoned as Single Family Homes ONLY. http://sfpublicpress.org/news/2014-06/housing-solution-backyard-cottages-could-add-one-third-more-homes-to-san-francisco

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66 zacky December 6, 2017 at 1:54 am

Yes and in the formerly working middle class areas of SF these SFH are stacked with illegal units in the garages and people live in the dinning rooms because of the market failure to provide the right sort of housing

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67 FYI December 1, 2017 at 4:11 pm

Well, we should just be clear on what the goal is. The problem is that people in California are schizophrenic about this: they want to impose all these limitations (most of the times by committee, not by law) and at the same time want to somehow force real estate to be cheaper. You got to make a choice and at least be honest enough to justify and defend it.

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68 Hazel Meade December 1, 2017 at 10:08 pm

California is built on magical thinking.

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69 jmcsf December 1, 2017 at 4:21 pm

The coastline is still preserved in the 23rd century when SF is the headquarters of Starfleet Command.

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70 cc December 1, 2017 at 6:21 pm

Part of the cali coast is preserved not because of some grand plan but because it is unstable cliffs. In some other areas in the south there is no drinking water thus no houses.

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71 hamilton December 1, 2017 at 7:41 pm

rayward,

California’s coastline has not been “preserved”–the use of it by more people has been *prevented*. It’s like saying Pompeii was preserved–yup, we can see what it was like, because nobody could make any changes after the volcano was done with it.

It does not matter what Alex would prefer. Nor does it matter what you prefer. Or what I prefer. And the real key is that it should also not matter what *all people who are not party to the transaction between the landowners and those they sell to prefer*.

That is the fundamental problem: localities have created a fake property right–the say in what my neighbor is doing. We have expanded the idea of externality far beyond what is reasonable. It has preserved the status quo. That kind of preservation is death.

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72 psmith December 1, 2017 at 10:25 pm

“California’s coastline has not been “preserved”–the use of it by more people has been *prevented*”
California’s coastline has not been “preserved”–it’s just been preserved.

“Nor does it matter what you prefer.”
It matters to me. And, after all, I can lobby and vote. Not to mention shitpost in MR comments.

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73 Art Deco December 1, 2017 at 3:57 pm

If we ever get that Wall built, here’s to hoping it extends all the way around California.

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74 gab December 1, 2017 at 8:16 pm

As long as it keeps you and your type out, I’m in favor

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75 peri December 1, 2017 at 4:06 pm

So, how small a geographic unit, before the idea that everyone has the right to live in a particular place becomes silly? Or is there no lower bound on that? And which services am I supposed to care about, that the well-to-do might have to-do without if there is no one nearby who can do them? All of them? Police? Fire? Chiropractor? Coffee? Dog massage? Eyebrow threading? Baby brain balancing?

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76 vinny December 1, 2017 at 4:25 pm

It’s not just a single-family home problem. The City of San Francisco has population density 17,000 people / sq mile, while Brooklyn, not exactly an undesirable hell-hole, has 37,000 people /sq mile.

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77 ʕ•ᴥ•ʔ December 1, 2017 at 4:39 pm

I feel like the earthquake thing has to work into that. I mean maybe technology exists, but (a) Californians might have an image fear of going high-rise, and (b) with very little coastal bedrock it has to be expensive.

I see 4 or 5 story wood frame complexes going up in SoCal. That strikes me as an earthquake strategy.

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78 Mark Thorson December 1, 2017 at 5:22 pm

The depth of the bedrock is indeed a problem in parts of SF, as the Millenneum Tower fiasco illustrates.

http://www.businessinsider.com/is-millennium-tower-safe-still-leaning-sinking-2017-9

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79 Mulp December 1, 2017 at 5:47 pm

The depth is no problem. Just free lunch economists who think zoning is the reason building a foundation to bedrock costs more than building a foundation that isn’t a stable foundation.

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80 Lewis December 1, 2017 at 8:14 pm

The bedrock is not really a binding constraint for sf’s population today. Simply building more small multi unit buildings in the vast areas zoned for single family could greatly swell the housing market. There is no reason to think of the extreme edge case where all of San Francisco is so dense that the only way to raise its density is by super tall towers. A primary reason they build such towers at all is that the rent is high enough to justify the significantly higher cost of building taller, and because zoning restricts you from building on most land outside the city center. There are horrible cases of people spending decades actually even building a single house on an empty lot.

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81 Scoop December 1, 2017 at 8:38 pm

Height is not needed to get Brooklyn density. Brooklyn has a tiny downtown and a few tower developments around Coney Island and virtually no other tall buildings. It’s about 90% rowhouse.

Paris largely tops out at 6 or 7 stories, houses about 50,000 people per square mile (about 3x SF) and also isn’t a hellhole.

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82 ʕ•ᴥ•ʔ December 2, 2017 at 8:59 am

The market has tried funny things down here:

http://www.ocregister.com/2015/05/25/are-condo-towers-making-a-comeback-in-orange-county/

Might be why, with low industrial/retail for conversion, 4-5 stories is the sweet spot.

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83 zacky December 6, 2017 at 1:59 am

The densest neighborhoods in SF are the oldest traditional ones like North Beach not the areas with high rises. What they have is small units and little parking

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84 ʕ•ᴥ•ʔ December 1, 2017 at 4:41 pm

“Innate fear”

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85 Vinny December 1, 2017 at 5:11 pm

Nah, not really. The neighborhood of Nob Hill has pop density of 65,000/sq mi. They could build the rest of the city more like it.

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86 ʕ•ᴥ•ʔ December 1, 2017 at 5:17 pm

Maybe they have some rock there, but a seismic risk map for the US

https://earthquake.usgs.gov/hazards/hazmaps/

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87 ʕ•ᴥ•ʔ December 1, 2017 at 5:19 pm
88 zacky December 6, 2017 at 2:00 am

You can’t build’em like that anymore because of cars and parking

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89 psmith December 1, 2017 at 7:50 pm

“Brooklyn, not exactly an undesirable hell-hole,”

wew

(not to say that San Francisco isn’t also pretty hellish, of course)

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90 zztop December 5, 2017 at 1:33 pm

Brook/SF not comparable in pop density, unless you take out of SF area the Presidio Park and Golden Gate Park.

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91 Viking December 1, 2017 at 4:40 pm

Re: Haskel street project, mentioned in article:

“On paper, at least, there was nothing wrong with the proposal. The city’s zoning code designates the area as “R2-A,” or a mixed-density area with apartments as well as houses.”

Zoning codes, in addition to specifying allowable density, specifies maximum height, and setbacks relative to property line. In theory, the proposed project was either in compliance or not, and there should be no discretion in whether to issue demolition and building permits.

This is showing a defect in the criminal code and criminal prosecutions, if the people that were supposed to issue permits didn’t, they committed a property crime, and should be prosecuted with the same vigor as someone stealing $100K to $1M, as this is the range of value added that is held in limbo due to illegal stalling.

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92 Dan Lavatan December 1, 2017 at 4:56 pm

I think it shows the best solution – if people really do need to be there they entire technical and professional staff should just fly in every day. Once fully depreciated, the Jet-A costs for turboprop fuel are quite reasonable and they are plenty fast, there is probably OK housing even in inland California and Death Valley is nice this time of year.

If it turns out that being there is completely pointless they should stop doing it, investing in their firms, etc.

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93 Mulp December 1, 2017 at 5:43 pm

Do lawyers and economists think it’s possible to build 5 houses per acre per every decade year after year? Ie, after 5 decades, every acre has at least 25 single family homes?

NHAB, the housing developer trade/lobbying group reports the average development is 29 acres in metro areas, but only 20 acres in suburban areas, and the housing units per acre is only 4 back in 2014, but in 2016, it was down to 3.2. Clearly, they have focused on the high end housing market where large lots, or lots of common land attract the buyers with money to spend.

Detached single family developments average 26 acres in metro areas. Multifamily projects average 69 acres.

The reasons should be obvious to economists educated before the 70s: economies or scale. Residential and commercial builders have specialized, eliminating the guy who does everything from the footings to throwing up sticks to roofing to interior finish, electrical and plumbing. Gone are the days when one guy could do it all, because gone are the days of out houses, oil lamps and candles, outside water sources, heat from a wood stove that also heats bath water and cooks the food.

Entire industries have been created with industry standards that require specialized workers to select from thousands of parts to install one kind of feature of houses, even for stick built structures. The Empire State Building marks the start of prefab, especially in metro areas. Housing has not done enough to go prefab, sort of going backward from Sears kit homes. But Sears was beat by the housing tract style by Levitt which was not exactly prefab, but very much on site manufacturing. Dozens of specialized one task crews that completed one task on each home and moved to the next one, with supplies dropped off exactly as they needed just in time.

To build a single house, increasingly factory built modules are used in dense areas, or hard to reach areas. All the specialized workers go from house to house doing a few tasks in comfort in a factory. Then each module is moved by specialists, erected by specialists, and then the interior hooked up and finished by specialists, each working only a few days per house. But this requires a huge capital investment in the logistics, huge investment in the factory system, especially in the work force, and big investments in delivering modules, erecting modules, and finishing them. Most of these workers need to be employees.

The onsite tract developers contract with specialists on terms giving the project priority without making them employees, so there is less concern about their livelihood. Except, today, all the specialist contractors, framers, plumbers, electrical, excavation, foundation, etc went bust or found other ways to make money, so tract builders can’t get the contractors because they can’t hire workers.

For reference, a square city block in the east is typically 1.6 acres, in the Midwest 2.5, and in the West, city blocks aren’t as common for various historical and cultural reasons. But that means metro housing projects require redeveloping multiple city blocks, meaning everyone using each block must move out. When it’s a factory or shopping center, that’s not hard, but if it’s an old residential part of the city, a few old owner residents can impede efficiency factory like production of replacement housing. Absent landlords are easy to buy off and out, but owner residents have stayed for long times for reasons economists consider illogical.

So, the question is why the blue hasn’t expanded out around what was blue for 1980-2000? Like the 1980-2000 blue expanded out around what was the 1960-1980 blue.

Surely it can’t be the tax cutting or tax hike obstruction to build infrastructure for development, right?

A housing developer will easily build roads, highway exits, water and sewer, schools, police, etc for almost nothing so such infrastructure will not make housing cost more, right?

In free lunch economics, privately built public infrastructure costs virtually nothing, just like Google search or Facebook pages. Right?

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94 Alan Goldhammer December 1, 2017 at 5:54 pm

Best post in the thread!!! We have a lot of tear downs and new builds in my area of Bethesda. Well organized builders can go from tear down to a house ready for sale in about 45 days (sometimes less depending on whether there was major excavation of the site required). The use of pre-build (or fab) roofing frames and house frames speeds things up a lot. They also use a lot of composite materials on the outside of the house but I wonder about the long term durability compared to brick. Roof shingles are still the traditional fiberglass/asphalt.

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95 Viking December 1, 2017 at 6:27 pm

I don’t know what you have been doing differently this morning, but your summary actually is cogent and makes some sense.

I do think in many cases, the desired economics of scale for construction is not achievable in desirable cities, because all the good land is already developed, and redevelopment is a bitch. Regarding the costs of public utility infrastructure, there seem to be cases where the city can afford to add new infrastructure due to high development fees, but cannot afford to maintain the existing one, this situation is tough for stagnating or shrinking cities.

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96 The Lunatic December 1, 2017 at 7:18 pm

So, the question is why the blue hasn’t expanded out around what was blue for 1980-2000? Like the 1980-2000 blue expanded out around what was the 1960-1980 blue.

Surely it can’t be the tax cutting or tax hike obstruction to build infrastructure for development, right?

Ah, yes, of course! The reason that California can’t build new housing while Texas can in 2017 is because California is too tax-averse compared to Texas! If only Californians would emulate Texans’ appreciation for high taxation to fund infrastructure, they could keep pace!

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97 Doug December 1, 2017 at 11:58 pm

> Surely it can’t be the tax cutting or tax hike obstruction to build infrastructure for development, right?

You see, the problem with this is that you have the causality backwards. The tax obstructionism gained movement, because US federal/state/local authorities saw a precipitous collapse in infrastructure construction productivity. For example one mile of subway in NYC now costs $2 billion, whereas in inflation adjusted terms it only cost $40 million a hundred years ago. (And even in other Western countries, like France, costs under $500 million.) A similar story holds for all the infrastructure you listed: roads, highways, water, sewer, schools, police, hospitals, etc. All cost at least twice as much in inflation adjusted terms to deliver the same product as they did 40 years ago. (See SlateStarCodex’s excellent essay on cost disease).

American voters repeatedly saw government boondoggles like Boston’s Big Dig and threw their hands up to declare “Enough!” If corrupt politicians, idiot bureaucrats, and incompetent minority-owned contractors are just going to burn piles of money, why should they be funded? Yeah maybe, we never build any new infrastructure, but at the rate projects like the Second Avenue subway finish, we barely get any new infrastructure anyway. The vast majority of anti-tax conservatives would change their tune if the government was actually capable of delivering Eisenhower era results.

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98 JWatts December 2, 2017 at 10:59 am

“The vast majority of anti-tax conservatives would change their tune if the government was actually capable of delivering Eisenhower era results.”

+1

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99 Harun December 2, 2017 at 4:19 pm

I think if the democrat party had a technocratic candidate who would cut bad spending and weak programs that would get many crossover votes, too.

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100 Will December 1, 2017 at 5:45 pm

I lived larger in Austin last year on 85k than I did 170k in SF a few years ago. Damn commies.

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101 gab December 1, 2017 at 8:20 pm

I’m pulling for the commies simce they got you to leave

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102 Doug December 1, 2017 at 11:42 pm

The problem is if you ever switch jobs, your next employer will anchor to your previous salary. Even if 85k goes further in Austin than 170k in SF, the latter will command a higher salary if they both switch jobs to Seattle.

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103 Doug December 1, 2017 at 11:41 pm

All you need to know about California NIMBY-ism can be represented in two numbers:

San Francisco in 1970: 13.4% Black
San Francisco in 2010: 6.1% Black

And you can bet that the remaining black population is disproportionately middle-class and educated. Even the most progressive white Americans, really, really don’t want send their kids to predominately black schools. Upper-middle class white families, i.e. the demographic that dominates local politics, will always accept the tradeoff of higher mortgage payments for better school districts. It’s not even a consideration, schools always trump cost of living. Period.

To most of its voters, the Bay Area’s high cost of living is a feature not a bug. People gladly pay it for the same reason that people pay exorbitant fees to join exclusive country clubs or insane drink costs at trendy nightclubs. The cost keeps out the “wrong type of people”. American culture is only becoming increasingly stratified by class. So, expect demand for this type of economic segregation to continue unabated.

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104 JWatts December 2, 2017 at 11:00 am

“San Francisco in 1970: 13.4% Black San Francisco in 2010: 6.1% Black”

Revealed preferences.

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105 Harun December 2, 2017 at 4:21 pm

That’s startling

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106 education realist December 3, 2017 at 5:16 am

Wrong about the blacks in SF being middle class. All the middle class blacks sold their houses and left. San Francisco African Americans are incredibly poor and largely non-functional. Average income, according to this piece, is $29,500. http://www.sfchronicle.com/bayarea/article/Incomes-rise-across-S-F-except-for-African-6548522.php

San Jose’s black population is pretty functional. Also about 1%. Oakland blacks are also very poor.

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107 zacky December 6, 2017 at 2:13 am

It’s little known but I grew up on the San Francisco Peninsula and there used to be small black neighborhoods in San Mateo, Menlo Park and East Palo Alto all gone now

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108 zacky December 6, 2017 at 2:09 am

Totally false. The remaining black population of SF is poor and disproportionately lives in public housing and SROs. Family formation is almost impossible now in SF for working middle class people so black people moved to outer Bay Area counties like white working middle class people did and they bought tract homes. Just an observation but people I know who grow up in SF often would rather move to the suburbs anyway.

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109 Axa December 2, 2017 at 6:06 am

What happened to telecommuting?

I’d worry that the companies that sell solutions for remote work need all their employees physically in the company building.

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110 Get into PC December 2, 2017 at 8:27 am

And you can bet that the remaining black population is disproportionately middle-class and educated. Even the most progressive white Americans, really, really don’t want send their kids to predominately black schools.

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111 zacky December 6, 2017 at 2:14 am

Lol no. SF has very poor black people living in public housing

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112 APK Mirror December 2, 2017 at 8:28 am

I’m pulling for the commies simce they got you to leave

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113 Nils Franco December 2, 2017 at 1:20 pm

Tyler, this post reminds me of the following paper, which investigates the relationship between housing availability in high-productivity areas and the reversal of area income convergence.
https://www.brookings.edu/wp-content/uploads/2016/08/wp21_ganong-shoag_final.pdf

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114 ʕ•ᴥ•ʔ December 2, 2017 at 3:24 pm

A very neat graphic with fine grained national rental rates:

https://twitter.com/gboeing/status/936655229893844992

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115 daniel December 4, 2017 at 12:55 pm

I would like to have seen more discussion of one of the big picture issues framing this: why are populations concentrating in a few coastal urban areas? Whether the housing shortage is a ‘market failure’ or a problem of over-regulation, it is caused by too many people wanting/needing to live in too small of an area.
It seems this issue of the heartland and the smaller cities being de-populated by a rush to a few big urban cores is a social ill that needs to be at least discussed.

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116 zztop December 5, 2017 at 1:35 pm

GIfs that can be paused?

Guess we have to play a wack a mole game using the snipping tool.

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