Today I went to SPUR’s brown bag discussion on “Understanding the Bay Area Housing Market,” featuring presentations from Jon Haveman, Enrico Moretti, and Tim Cornwell. The tl;dr version of the talk is that both the market to rent and the market to buy residential housing are expensive due to: 1. runaway job growth (fueling the demand side) and 2. a regulatory (hello, CEQA!) and permitting process that drives up the price of developing new housing (constricting the supply side).
Professor Moretti of UC Berkeley had some good data points for why prices are rising insanely at the moment. First, even though 20,000 new jobs were created in SF last year, there were only 2,548 new housing permits issued (and this housing hasn’t come on the market yet). The western part of the Bay Area (San Francisco, San Mateo, Santa Clara Counties) are now all above peak employment, so for every new job created, there is new demand for housing. He also explained the multiplier effect of tech jobs, where for every tech job added, 5 additional jobs are created, since they create the demand for local services which employ teachers, nurses, lawyers, taxi drivers, waitress, sales clerk, etc.
Tim Cornwall, who does a lot of real estate modelling, explained where we might be in 5 years. The current 5-year pipeline for Bay Area housing has 70,000 new units to rent (9% of the existing inventory) and 56,000 new units for sale (6% of the existing inventory). He put up a chart of the 5-year forecast of supply and demand, and the SF supply seemed to be just a smidge below the demand line. However, there were huge gaps between available supply 5 years down the road in San Mateo, Santa Clara, and the urbanized East Bay. The gap for San Mateo and Santa Clara counties was particularly striking to me, because in my head that translates to more shuttles between San Francisco and the South Bay, as more people are pushed up to San Francisco. As someone else blogged (I want to give him/her credit, but I can’t remember who), Google, Facebook, and Apple have no choice but to run shuttles up to SF because Mountain View, Palo Alto, Cupertino, and the entire Peninsula have restrictive planning policies that prevent adequately dense housing for their workers down there.
In terms the East Bay, it has lagged in terms of job creation, but the prices are being run up with the housing spillover from San Francisco. Cornwall has looked at the BART station boarding / exiting data and the run up in East Bay rental prices near BART stops correlates with SF job growth. Right now, Berkeley rentals are about the same as the bottom of the SF market.
Finally, on the issue of demand side prognostication, Cornwall pointed to where Gen Y is in their life stage. Between 2006 and 2013, San Francisco has seen its share of Gen Y’ers and Boomers* go up, whereas those around age 35 leave the city. Right now, Gen Y is perfectly happy in their 20’s renting and having mobility, but as they get married and have children in the next decade, housing demand will change.
*The topic of Boomers wasn’t really discussed today, but I’m thinking these are mildly affluent, empty nester boomers, who are trading in their suburban homes for the convenience and cultural attractions of the city.
Even though I concur that Starbucks coffee tastes burnt, I’ve never been as down on Starbucks as other coffee snobs are wont to do. But my jaw drop 15 minutes ago when I learned that Starbucks is about to purchase the local La Boulange empire for $100 million. Part of me worries that Starbucks will mess with it, the same way it shuttered Torrefazione Italia, which used to make a pretty good latte. But the huge thing that jumped out at me was what this means for Starbucks’ real estate holdings in SF.
The La Boulange web is everywhere in the City, from the Crocker Galleria Farmer’s Market to the original location on Pine St. Starbucks will now own all of these. For some locations, such as Pac Heights, or the FiDi, or Laurel Village, this won’t matter much, because Starbucks already has a presence in the neighborhood. But there are bunch of locations, including Hayes Valley, Cole Valley, and the Lower Haight, that have fought a little bit harder to preserve their neighborhood character and to keep Starbucks out. In one stroke, Starbucks now has a toe-hold in these ‘hoods. I must admit that this is a huge coup for Starbucks, but it’s akin to Amazon buying out Amoeba records.
Addendum: Business people used to always cite La Boulange / Bay Bread as an example of a local business hurt by San Francisco’s anti-chain ordinance. This purchase shows how attractive a local chain can be to a major national corporation, looking to make their way into SF. There’s nothing stopping McDonald’s from purchasing the SF Soup Company.
Addendum 2: I completely forgot to list North Beach on the list above of anti-Starbucks neighborhoods, but a comment on this InsideScoop piece reminded me of this notable omission.
Today, I attended SPUR’s fantastic lunchtime forum on the Death of Redevelopment (agencies) in California. By way of background, last year, Governor Brown pushed through the legislature, AB 26, a bill that abolished the 400-plus redevelopment agencies in California to free up money for the state budget. Municipalities challenged AB 26 in the courts, but the State Supreme Court ruled in favor of the State, and the redevelopment agencies in California were abolished on February 1, 2012.
The panel focused on how San Francisco and Oakland had different approaches to dealing with the end of the redevelopment agencies, which provided a powerful funding tool for affordable housing and economic development projects through tax increment financing (where proceeds from property tax increases are funneled to a specific geographic area). Tiffany Bohee, the ED for the successor agency to the San Francisco Redevelopment Agency, and Fred Blackwell, the Assistant City Administrator for the City of Oakland spoke on the panel. A summary of their talk is organized below into 3 sections: 1. San Francisco’s approach, 2. Oakland’s approach, and 3. interesting bits on redevelopment in California as a whole.
After the abolition of SF’s Redevelopment Agency (SFRA), the Mayor’s Office of Housing absorbed all of the housing units in the SFRA’s purview, including the existing pipeline. All of the SFRA staff was transferred to the City Administrator’s office. San Francisco got the lone carve out to AB 26, a 7-person oversight board, where the Mayor’s office has 4 appointees, and the taxing entities have 3 appointees. This oversight board has 2 roles, a fiduciary role to oversee the wind down of the SFRA and a land-use authority role.
In terms of on-going projects, it will be more difficult to do the mid-Market revitalization, with loans to small businesses. For instance, the type of redevelopment agency loan that allowed Pearl’s Burgers to open on 6th and Market is no longer available.
Ms. Bohee was unsure what the future affordable housing mechanism would be, but commented that it would likely be decided at the ballot box. Funding options include bonds, transfer taxes, lease revenues, and certificates of preference and participation.
For economic development, multiple levels of financing are required. New market tax credits will provide $40 million in federal financing for distressed projects. Special tax districts and infrastructure financing districts, such as the ones used for Mission Bay and Transbay, were other financing options.
The structure of Oakland’s Redevelopment Agency (ORA) was radically different from the SFRA. In Oakland, there was no firewall between the ORA and the City, the ORA staff was integrated into the city staff, and Oakland used ORA money to fund part of the mayor’s salary and the police. When AB 26 passed, Oakland scrambled to reorganize the city financing structure in 2-3 weeks to make up for the lost funds.
Projects such as the Oakland Army base redevelopment project and affordable housing already in the pipeline will continue to go forward. Other development projects, such as facade improvement on commercial corridors in Oakland’s flatlands would go away, due to lack of funding.
Oakland also transferred $800 million in property from the ORA to the city during the short 2-3 week reorganization period. This led to speculation about the liabilities Oakland assumed along with this property.
The state redevelopment agency laws also provided a legislative framework for affordable housing in Oakland, and this framework is no longer in place. While San Francisco has inclusionary zoning for affordable housing, Oakland relied on the state laws that required 20% of the tax increment financing money to go towards affordable housing.
Before the abolition of the ORA, Oakland’s Community and Economic Development Agency had very little power. Now, the City Administrator’s office has the general fund and the Economic Development Agency is within its control. Mr. Blackwell stated that now that redevelopment money is no longer earmarked for poor areas, there may be more class and geographic in-fighting within Oakland for these general funds.
Miscellaneous Thoughts on Redevelopment Agencies in California:
- The moderator (whose full name I did not catch) introduced the talk by comparing the abolition of redevelopment agencies to the passage of Proposition 13 in 1978; city budgets were restructured overnight.
- Without redevelopment offices, city planning offices need to step up, but the moderator pointed out that “Planners plan, and redevelopment agencies do.” The entrepreneurial spirit of redevelopment agencies may be lost, but the Mayor’s economic development office may fill the role of the redevelopment agencies.
- With the abolition of the redevelopment agencies, an entire industry has gone away. “People didn’t just lose jobs, they’ve lost careers.”
- In the Q&A, Mr. Blackwell offered this 5 reason post-mortem for why California got rid of its redevelopment agencies:
- There were too many redevelopment agencies; over 400 in the state, and LA County alone had 70!
- Redevelopment agencies were created to eliminate “blight,” which in and of itself is a loaded and political term.
- There were some abuses within redevelopment agencies.
- This was a $2 billion fiscal issue for the state, where the state had to make up the shortfall to funding schools, when property taxes were allocated to redevelopment districts. (Personally, I believe this was the bullet that killed off the redevelopment agencies).
- We’ve never been able to answer the question, “Would redevelopment have happened without the redevelopment agency?” This is the “but for” causation question.
I was born and raised in SF, and with the exception of my academic exile on the East Coast, and the past 9 months down in the foggy D.C., I’ve always lived in SF.* During and after law school, I’ve toyed with the idea of moving to Brooklyn West, since it’s sunnier there and the real estate is shiny and a few hundred thousand dollars less than San Francisco. My friends there are cool and open-minded, and generally politically and socially engaged. Plus, there’s stuff going on over there, unlike the sterile strip malls and quaint small towns of the South Bay, or the sleepy homogeneity of Marin. Before this week, the three things that held me back were:
1. Fear of earthquakes. I constantly ask which is scarier, being in the Transbay Tube or on the Bay Bridge when the Big One hits, and both options terrify me equally.
2. Fear of crime / lack of policing to deter crime. I’m not sure that I feel comfortable living in a place where the Police Department doesn’t investigate property crimes. You’re house got burgled? You got mugged? Tough luck!
3. I don’t really drive, and BART doesn’t run late enough. I’d hate to constantly look at my watch at a Fillmore concert to make sure that I made my last BART train home.
But the brutality of the police response to Occupy Oakland this week has sorta sealed the deal against me moving to Oakland. When a City Administrator can issue orders for brute force to be used on peaceful protesters, something is wrong. When the Mayor, Jean Quan, can claim ignorance to the plans to raid Occupy Oakland, something is very very wrong. Between the Oscar Grant protests and now this, my dominant image of Oakland isn’t of art crawls or Children’s Fairyland, but of police in riot gear and people in wheelchairs being tear-gassed, and that’s not the type of city where I want to live. And my head has been trying to tabulate how much of the City’s budget is going to pay out settlements for police brutality related to this week’s clearance of Occupy Oakland.
A huge part of me is trying to understand how the City of Oakland, which prides itself on incorporating the language of social justice and addressing inequality, had one of the most violent reactions (that I know of) to the Occupy movement. I know part of this is rooted in the OPD’s sense of impunity and their past scandals, but until there is some progress on this front, Oakland goes onto the “places where I won’t live” list. I’m not sure how much the Planning and Police Departments talk to each other, but the image of a police department is key to attracting new residents to a city. A police department that terrorizes residents, instead of doing any actual policing, does all of your realtors a huge disservice.
*This is a total aside, but in case you didn’t know already, I’m moving back to SF next week.
I’ve come across a couple of things today that have emphasized the importance of public libraries as a space for the homeless to seek shelter, knowledge, and entertainment. From my loving mother, here’s a link to an AP piece* about how the main branch of the SFPL is the first library in the country to hire a full-time social worker to counsel its homeless visitors. The NY Times also recently published an informal chat of sorts with a homeless man who splits his time between the NYPL for the Performing Arts and nearby movie theatres (link via Kottke). This brings me back to Bradbury’s vision of the library as the ultimate refuge:
“Libraries raised me,” Mr. Bradbury said. “I don’t believe in colleges and universities. I believe in libraries because most students don’t have any money. When I graduated from high school, it was during the Depression and we had no money. I couldn’t go to college, so I went to the library three days a week for 10 years.”
*The title of the AP piece features the term “San Fran.” I don’t find this offensive, but I’m puzzled as to how “San Fran” found it’s way into the AP Stylebook.
The unsurprising announcements from Chrysler and GM that they plan to collectively shutter (or rather cut off the supply of cars) to around 2,000 dealerships has lodged this question in my head, “What can we do with this space?”
When I picture a car dealership, I picture a giant lot, sitting next to a noisy freeway (usually on an ugly strip of multiple dealerships called “Auto Row”). While it’s a substantial amount of space, it’s location doesn’t make it prime residential development, but these are still relatively big tracks of land.
Along with foreclosed McMansions, these dealerships represent ugly bits of space and are a legacy of our decade-long credit binge. They force me to wonder, “How can we prettify the land? How can we make these plots/showrooms useful?”
Perhaps like another 1990’s failed business model, the Metreon*, they can be turned into suburban farmers’ markets? Imagine if each dealership could somehow be turned into slow food show rooms in communities all across America (my memory from the Michael Pollan talk is hazy — did he propose this at his talk? My notes show that he referred to “Farmers markets as the new public square.”). If we can turn parking spaces into parks, this could be a possibility, no?
Just a thought.
Wow, in stealing a page out of the “let’s hire Blackwater, so we can have less troops in Iraq” playbook, municipalities, including our very own, near and dear, Oakland, are starting to outsource the Po Po and hire third party contractors to serve as security guards on the street. The rationale is that cops are too expensive, and given the economy, the city’s got no money.
Ms. Naomi Klein was right –> financial shock = less resources for public services = diversion of public funds to private contractors. Blech, right in our backyard.
If you grew up in San Francisco, or watched the PBS documentary, or caught Gotanda’s After the War, or decided to read up on Justin Herman’s ambitions, then you are familiar with the story of how urban “revitalization” killed the Fillmore.
Ever since, the City has been trying to atone for Mr. Herman’s mistakes, and its planners have thrown dollar after city tax dollar, at creating a historic jazz district in the Fillmore.
It’s clearly not working, however, and it has grabbed my ire. Yoshi’s SF, has already received $5.7 million in loans from the City, to be the anchor jazz club, and its proprietors are seeking another $1.5 million loan. That’s $7.2 million for one business, and it’ll probably fold. Why does the City continue to prop up failing business models that have no historic value? Rather than try to create a modern version of a neighborhood that doesn’t exist anymore, why doesn’t the the City go with what’s clearly working on this stretch of Fillmore? The Asian bites at TapEx, Jubilee, and Woon Mi (3 a.m. in the morning Korean grub) already bring life to this block. Right across Geary, Dosa’s doing the same with Indian food. And Harputs brings both sneakerheads and fashionistas together for a little bit of shopping. None of these have much to do with live jazz (live jazz, as a past time, seems to be something found on Stuff White People Like), but they bring in foot traffic to this stretch of Fillmore, all without relying on a City handout.
Really, if crime is under control, businesses in SF tend to do just fine on their own, unless there are zoning issues or NIMBY’s preventing them from opening in the first place. The market does just fine.
Back when my parents were married (and before I entered Kindergarten), they used to take me to the Pagoda Theatre to watch Chinese language double features. Their friend Hermis manned the candy counter, and one of my fondest memories is going behind the counter to pick up anything that I wanted to eat (I remember the Drumstick cones).
Now, the Pagoda represents genuine blight (not the fake “we want to steal the neighborhood” kind), and has sat empty and dilapidated for well over a decade. Yet, it’s caught up in a neighborhood squabble, instead of being turned into some sort of mixed residential/commercial use building. The Coronet was a far more important theatre in the City (from a community building, Star Wars fan loving perspective), and it was still functioning when it was razed to make way for an elderly (and I think Alzheimer’s treatment) center that’s currently under construction. I think there would be no large cultural or community loss that would accompany of bulldozing of the Pagoda, and we would be better off with a functioning structure in its place.
A surprising host, Drew Carey walks us through local government’s abuse of eminent domain for Reason TV. In both instances (National City near San Diego and Hollywood), the municipalities are using eminent domain power to make way for luxury condos.
Closer to home, the phrase “boutique city” has replaced Manhattanization as the phrase du jour to describe Ess Eff’s continuing construction boom and demographic changes. (I’ve previously blogged about this here and here.) Perhaps this is why, one of my favorite songs from LCD Soundsystem’s Sound of Silver is “New York I Love You, But You’re Bringing Me Down.” Luxury highrises, a surbanite’s idea of urban living.
Oh, yeah, and if you do venture out of the city, this is how the suburbs greet you. Oh, how I remember the boring strip on buses between Baltimore and NYC and NYC and Boston.