Even renters increase housing costs. Housing is finite and some people sit on the fence about buying or renting. An inability to find a rental unit sometimes tips them into the buying territory
Speculators betting it will come roaring back afterwards, money still getting cheaper, folks with families that can’t move, inability to ‘just move’ if you own, all probably contributing.
Housing prices have been out of whack with fundamentals (cash flow) since at least ‘12-‘13.
Here's another more bleak option. Just like in 2008 when corporations bought up huge swaths of the housing market for cash while no one could get a loan. (which is part of the current issue with not enough homes to buy)
They aren't betting the market will come roaring back, they are betting that they can corner the market and housing will be a subscription just like everything else they sell.
Rent seekers aren't going anywhere, and the cost is really immaterial to them for the most part. They don't need cashflow, they need a monopoly.
As usual, the “speculators” and “out of towners” and others are convenient scapegoats, lest we have to face the underlying supply and demand and barriers to development.
You want to have a monopoly on housing in a major city? I’d be hard pressed to point out an industry where that would be harder. You have literally millions of competitors.
San Francisco is already the second most densely populated city in the USA (the first being NYC). SF is actually already slightly more densely populated than Tokyo, which many like to tout as a mecha for de-regulated zoning.
With around 6,300 people per km2, "it is similar in terms of population density to San Francisco. In Tokyo’s 23 wards, however, the density is 15,381 people per km2, making it 50% higher than New York City as a whole."
>San Francisco is already the second most densely populated city in the USA
This isn't true, even if you limit it to cities with population over 100k. New York City, Jersey City, and Paterson, NJ are all more dense than SF.[0] San Francisco is effectively tied with notoriously anti-development Cambridge, MA. Quite a few smaller cities around the country are more dense as well.[1]
The housing situation in San Francisco is nothing to be proud of, unless you think that having the highest median home prices or median rents is a laudable achievement.
Urban areas are desirable even outside of the availability of high paying jobs. There are neighborhoods in America's desirable cities filled with the adult children of wealthy people who pay their kids' insane rents while they pursue arts, fun and wait tables or bartend on the side for petty cash or to keep busy. That section of urban residents are not dependent on high paying jobs and will continue to seek out cities for the lifestyle aspect.
Sure, It's not a sure thing forever and not all areas are going to be winners, but if you have a big enough budget, you can just buy houses everywhere for a long time and probably make decent rent for a while. Heh, if not, or when it ends, they can just dump it and or the company and walk away. It's not like they are doing it with their own money.
This is a spooky narrative, but the rent seekers can't be the majority. My understanding is that many Californian real estate markets are kept artificially tight due to various forms of NIMBYism.
If renters become the majority, it's suddenly no longer viable to limit new housing through regulation. Markets are nowhere near the fundamental limits of homes per square meter of the state that's good to live in.
I don't think they are a majority and I think the main problem is lack of housing being built. But I do think that what housing is out there on the market faces stiff competition from companies not people. I'd assume there are a few people buying houses with cash but my guess is a lot of those stories you hear about people bidding 100k over ask and losing to a cash offer are mostly not people.
Theres a good number of companies that are open about increasing their housing portfolios. Even construction companies that built thousands of starter homes per year converting to rentals only.
These are long term changes, and not a quick cash grab at the bottom of the market.
Homeowners are a reliable political cohort, they tend to organize quickly as soon as any issues are on the agenda that might affect the value of their land and they will reliably push for whatever increases land values. They show up at city hall to make sure they are at least the loudest group on the issue. Homeowners are also diligent voters. You’ll need more than 50% of people to be renters to counter this, unless you can convince renters to organize as reliably and passionately as home owners.
> Homeowners are a reliable political cohort, they tend to organize quickly as soon as any issues are on the agenda that might affect the value of their land and they will reliably push for whatever increases land values.
I feel like this is a myth, do you have research to back this?
As a 20+ year home owner, I've never been asked to support anything to increase land/housing value (not that I'd want to, since that means higher taxes for me, which I'd rather not).
I don't think this homeowner cabal to increase values actually exists. If it does, nobody invited me and nobody invited any of my homeowner friends (which is all my friends) either, so it can't be a very large group.
Have you been asked to vote for/against zoning changes, or for special approvals for variances for developments?
Because I got those all the time. If I didn't show up (which I often did, as a homeowner in the area just to see what they were proposing), all the old folks in the area (90% who owned) definitely did to shoot it down or ask for crazy demands that jack up the price. Sometimes they just filibuster in the vein of 'onion on my belt'.
You'll see big boards up talking about 'Planning Commission Meeting' or 'Meeting on a Proposed Development' at the site of any proposed work, public notices in the paper, and developers in an area are usually required to send notice mailers to every address in the area too in advance.
Those are typically what you see. People generally don't propose a zoning change titled 'Plan to screw over all the poor renters and make the homeowners rich', since that's a bit too obvious and would get thrown out in court. It would be something like 'Plan to develop lot XYZ into high density residential' (which may get shot down).
Many folks (including planning commissions) are happy to ask for on the surface reasonable stuff that makes projects economically unviable, or complain about how the extra traffic from all those people will place an undue burden on them and ruins their quality of life and 'the neighborhood character'. Those complaints are also real - having more people in a small place DOES increase traffic (even with public transit), DOES change quality of life and neighborhood character (better or worse depending on who you are), etc. Adding more parking WOULD be nice for many people, even if there isn't space for it on the lot (why not do a underground parking garage then! $$$)
Which if the planning commission doesn't weigh heavily will result in a rather short tenure for them, in my experience.
All of which raises property values, and decreases the overall number of people who can have accommodation in an area by reducing density.
It never really gets on the ballot around here. But it is certainly brought up in counsel debates and people usually vote for that by proxy through the counsel positions.
There are also always hearings around higher density zoning and people turn out tooth and nail to oppose those at counsel meetings. On thing that is interesting, is people generally like the idea of more housing but when you say, 'We're going to add these 4 blocks near your house to the high density core', either people like it less or the people who like it less come out in droves and throw a fit.
But in the spirit of the question and for curiosity’s sake, if you were faced with a decision that’s beneficial to renters but decreases your property value, which way do you go?
Many of my friends who are tech workers who've worked at unicorns and tech giants for 5-10 years bought their first homes in SF during the pandemic. I would guess part of the drop in rents is a shift in demand from former renters to new homeowners. Also, there was a general increase in prices across all asset classes during the pandemic that continued to drive prices up. Finally, property prices have actually gone up less in SF than they have in the US as a whole, likely because of the general effect of people moving away - compare the change from January 2020 to today in this chart https://fred.stlouisfed.org/series/MSPUS vs this chart https://www.zillow.com/san-francisco-ca/home-values/
The loss of population is directly caused by property prices, so if they were reduced, the loss would reduce or reverse and we simply would't be talking about population loss anymore (seriously).
Yes, but probably not all. WFH has enabled those not interested in SF property to go for their property elsewhere.
It's also difficult to imagine demand increasing again and prices falling or even staying level. The issue with SF, NYC, London, etc. is sqr miles are effectively fixed and zoning limits how many residential units you can add to the market.
Maybe? Just as many people are probably staying in or moving to SF because they remote work to a job in the valley (eg San Jose) and not commute that much. They aren’t so price sensitive and value being in the big city. Until SF is undesirable, demand will keep, rents will remain high, and people are going to be priced out.
One of the items that seems to be missed in these kind of discussions is the increased demand for what otherwise would be called sprawl. You hear about people want to stay in a big city, or want to move to $tier3 city, but there is also a large cohort that wants to move to within 1.5 hours of bigcity, so I can maintain my network/family/work in the office once a month/etc ... This "sprawl" space is't a limited as the cities proper ... but with commutes was effectively limited. That limit is gone for large groups of remote/semi-remote workers.
I don't know the answer but I do know that all the attempted answers currently posted get the basics of economics spectacularly wrong.
My money is on either this census data or property value data simply being wrong. Housing is a famously inelastic market and a 6.4 % drop in demand should lead to a double-digit decrease in rents and values.
Presumably the willingness to pay a given amount from just one person’s income is lower than that of two people’s income. Add in additional temporary uncertainty in big parts of the tech market and I can see a lot of currently occupied units having a tenant not willing to renew as-was.