Having questioned the impact of San Francisco’s historic preservation polices on public policy goals last week, this week Supervisor Wiener has a question for the Mayor:

We in San Francisco do a very good job building market rate housing and, while we need to do more, we build almost 80% of our state goal for low-income housing. We do a poor job building moderate income housing, meeting only 12% of our state goal. Since middle-income housing is not reported separately from market rate housing, it is unknown how much middle- income housing we produce.

Implementing our local hiring ordinance will be very difficult if we don’t produce the needed moderate and middle income housing for these local hires. How do you propose increasing the amount of housing affordable to middle income people, so that we can house our workforce locally?

Mayor Lee is slated to answer address Supervisor Wiener’s question at the beginning of tomorrow’s Board of Supervisors meeting.
Historic Preservation Versus Public Policy Goals In San Francisco [SocketSite]
San Francisco Board of Supervisors Agenda: 5/10/11 [sfbos.org]

42 thoughts on “Wiener Wonders: What Happens If Locals Can’t Afford To Live Here?”
  1. Very impressed with Scott. Wish the rest of the supervisors were as focused on actually doing something instead of taking ideological stances.

  2. I’m not exactly sure what’s he’s fishing for here. Does he want more housing produced with government prescribed price-caps? Because that worked out so well with BMR housing. Is he suggesting that local workers NEED to BUY housing? Why? With rent control, it makes much more sense to rent indefinitely. I’d recommend building more rental housing (even w/o RC protection), but it almost never makes economic sense for a developer to do so, especially given the fluctuating costs of raw materials. Thank you China. My only thought is that the BOS and planning need to get cracking and push through developments in the S/E portion of the city. Build, build, build “market-rate” housing and increase density. Prices will obviously continue to come down.

  3. Pretty sure for those who are reader comprehension challenged, that he is making a case for “build build build” of market rate housing.

  4. What is “reader comprehension?” Are “readers” hard to understand? I often question my own “reading comprehension” level, however, when confronted with any public statement from a supervisor.

  5. In order to buy a house you need to have a good credit score. I would bet that poor credit and spotty work history is the number one factor keeping middle of the road earners from buying here.
    Whether the cost is $300k or $600k, you can’t get a bank loan without a solid financial history.

  6. Asking for lower prices to help construction workers moving in here is a catch-22. If you build massively to make prices go down for them to afford to live here, you’re removing an incentive to build once the units are delivered, and you’re destroying those very same jobs.
    High prices can seem bad for many people because they unnecessarily divert too much of their income, but they are good for one big segment of the economy which creates jobs for a part of the population that badly needs it.
    To really play the devil’s advocate for high prices:
    High prices bring in better quality, which creates its own virtuous circle. Would you spend 200K to renovate this 100-Y old victorian you bought in Stockton for 50K? Nope. What about a 700K Noe fixer? You sure bet. With better and nicer houses, an area becomes more desirable and brings in higher income people. Sure some elderly will be “bought out” of their neighborhood, but is this really a bad thing? They get to scale down and cash out at the time they need it most.

  7. He is talking about the problem. Serious problem solving separates description of the problem from possible solutions to the problem. One possibility would be to investigate why middle income units are not being produced. Another frequent suggestion is to ease up on the rules for development, or come up with some simpler options for developers. For example, in exchange for some design restrictions developers might be allowed to fast track projects or reduce the fees involved. Reducing the fees is tricky, but the fees are based on the service, so if a development process is simplified then there is less need for service from the City and the cost and thus the price of permits can be reduced.
    Solid financial histories are obviously irrelevant. Rougly speaking, average household incomes are below $100k/year, so typical affordable units must be under $300k using the usual basis for quick calculation. Average households simply cannot afford the units in the $300k-600k range.
    It is interesting how fear, uncertainty, and doubt about regulations immediately comes into this conversation. It is as if the only options for positive improvement to the market are deregulation or bureaucratic overload like BMR. Both of those ideas are in this case uninteresting nonstarters.

  8. I like Scott Wiener and think him generally to be quite smart and sensible. But this is a very poorly worded question. What in the world is “moderate income housing” or “middle-income housing”? BMR units for sale with an income cap? Rental units with an income cap (section 8)? Something else? Hard to address the issue of how to “produce the needed moderate and middle income housing” when one cannot tell what that means. But I can try to provide the general answer for Mayor Lee, based on an understanding of simple supply and demand:
    (a) Repeal rent control – then rents will fall substantially.
    (b) Build a sh**load more housing to sell – then selling prices will fall.
    (c) Build a a sh**load more housing to rent – then rents will fall.
    (d) Offer some amount of new or existing subsidized housing for rent or sale with income caps, then some small number of lottery winners will enjoy below market, subsidized housing prices while the vast majority will get nothing.

  9. The Atlantic just did a piece today about rent control in NYC vs SF, specifically regarding SF’s high rental vacancy rate:
    http://www.theatlantic.com/business/archive/2011/05/empty-apartments-stupid-laws/238608/
    @lol — “Would you spend 200K to renovate this 100-Y old victorian you bought in Stockton for 50K? Nope. What about a 700K Noe fixer? ”
    I’m not certain, but I’d guess that excess disposable income helps keep neighborhoods desirable. During the boom, anyone could borrow that 200k, but when lending returns to normal being stretched on mortgage payments can cause people to skimp on maintenance. SF has a number of decrepit homes in what in many places would be high priced neighborhoods.
    I’m skeptical that paying more money for the same house is very helpful for a neighborhood.
    Also not clear to me how much restricting development helps builders on the whole since this raised the price of land and reduces development volume.

  10. (e) allow more density generally, including allowing more lot mergers in certain areas/corridors to make more dense housing
    Supply is a problem and land use is a problem.

  11. Its going to take a while to get used to intelligent thoughts coming from the BOS.
    Weiner actually reflects on part of a larger issue which is the continued loss of the meager middle class in SF.

  12. @tc_sf – Basing your argument on an article by Megan “Gastritis Broke My Calculator” McCardle is like basing a term paper on an Onion article – you’re only going to get laughed at.
    Little Jane Galt is so wedded to the idea that rent control is responsible for all the ills in the rental market, that she can’t quite get her head around NYC having low vacancy rates and SF supposedly having high vacancy rates, but clearly, rent control in each of those cities must be the problem – even thought by her argument they are producing completely opposite results. Doesn’t matter – if the facts don’t fit the ideology, then the facsts must be wrong.
    Reminds me of brain dead Republicans who scream “tax cuts” as the solution for every single social problem, including teenage pregnancy. Which makes sense, since its those self-same John Birch Republicans who pay Miss McCardle’s salary.
    As for the repeal of rent control and prices will automatically fall line of B.S. – there is actually one real world example of a jurisdiction that ended rent control wholesale – Massachusetts.
    Unfortunately for the anti-RC crowd, median rents in the 3 cities with rent control (Boston, Cambridge, Brookline) that had RC at the time of its ending all saw rents go in one direction post-RC – Up. Nor was that a temporary fluctuation.
    Nor did it let loose a huge pent-up volume of development of new units. Building permit issuances DID go up in Massachusetts in the 3 post-RC jurisdictions – however, they were almost entirely issued for the renovation of small to medium sized properties by landlords kicking out their old RC tenants, upgrading their buildings and re-renting to higher income tenants (and higher rents.) Actual increases in net housing units constructed did not occur post-RC in Mass. at any rate different from any of the other Mass. cities and towns that didn’t have RC prior to its elimination.
    Same thing would happen in SF. There is nothing about RC in SF that is stopping the construction of new units since RC doesn’t even apply to new construction for buildings built since June 1979.
    Unless one is prepared to essentially eliminate zoning (and thus institute a right to build system), there will never be any mass construction of housing units in SF outside of re-zoned large former industrial areas like Mission Bay. And good luck getting a right to build system past the SF homeowner voting public. Or any other jurisdiction for that matter.
    We live in a “second best” world. Sup. Wiener understands that.

  13. “I’m not exactly sure what’s he’s fishing for here.”
    Wiener made comments recently about excessive NIMBY and historical preservation influence. So I’d say that he’s angling to reduce the power of those forces in order to make it easier and less expensive to construct new housing.

  14. Count me as another one that instantly recoils at seeing a Megan McArdle article cited as proof of anything . . . . and my bias is borne out as justified when I see her “argument” merely presents a single cherry picked anecdote.
    Citizens have been brainwashed into thinking that no regulation and libertarian fantasies are the answer for all our problems, when they clearly are the problem in the first place.
    Furthermore, as I have demonstrated repeatedly on this forum, the BMR program has been a demonstrable success! Those buyers did much better than market rate buyers during the Great Housing Bubble and are in better shape today.

  15. “Furthermore, as I have demonstrated repeatedly on this forum, the BMR program has been a demonstrable success! Those buyers did much better than market rate buyers during the Great Housing Bubble and are in better shape today.”
    You mean those BMR owners in the Bayview whose “below” market rate units cost more than market rate units?
    I generally disagree with McArdle and generally find her arguments poorly supported. Even on this rent control article, it doesn’t seem like she did even a minimal investigation into the differences between NYC and SF, whether in regulation, property tax, etc. She just made an unsupported statement, and then later had to print an “update.”
    In her business, it’s better to be current and thoughtless, rather than well-informed. It’s better to make a post now with very little information, even if even cursory investigation would help you form better conjectures, rather than post later and learn something first.

  16. So agree more or less with A.T. here… What I find fascinating and what I allude to in my earlier post is that Wiener is taking a pro-development stance couched in vaguely progressive language.
    The existence of rent control doesn’t really bother me… I do think though, more rental structures need to be built in the south-east. Whether or not the city and planning can provide incentives for successful rental development requires foresight that I do not have. My only real complaint about RC is the blight. There are a few former SFRs in my hood that were turned into multi-unit rentals 40 years ago… All now look slightly attractive than Osama’s place. They’re also unsellable, and the owners simply refuse to make any significant repairs. It’s ridiculous.

  17. Everyone posting thus far seems to be focusing on the “build more housing” part of the question, when I think the far more interesting portion is the “hire locally” bit. Liberal politicians love to institute “local hire” clauses into all sorts of disparate government activities. Scott may be trying to open a dialogue on that piece of City contracting, by questioning the feasibility of such a policy. After all, when any job put out to public bid has a restriction unrelated to competence it will tend to limit respondents and thus increase the final cost.
    It may be worthwhile enough to citizens of SF that they pay a 10% construction premium on government work to insure that 50% of the hires are local residents. But unless you honestly discuss the effects of such policies, the theoretical merits are just typical political puffery.

  18. Also, not a fan of Megan McCardle, but the Bay Citizen/NY Times article to which she links is quite interesting.
    Wiener is indeed addressing an important question, but in my view the key factor driving out the middle class is not high housing costs as reasonably affordable rents are available for middle class families (although there would be far more supply, and lower rents, w/o rent control). The bigger problem is the poor public schools. Add school tuition into the equation and an affordable city becomes unaffordable for those with kids.
    Someone without children can find an OK place (albeit small/shared) to rent here even on a barista wage. But people generally don’t want to sacrifice their kids’ education. I’ve seen dozens of friends move to the burbs with good public schools just because it makes so much financial sense to do so. The bigger, better house that is available there at far less cost is a bonus, but generally not the driving factor. $0 vs. $40,000/yr for two kids’ schooling is the driving factor. Fix the schools – the main, but not only problem, is the asinine assignment system – and much of the middle class problem is also fixed.

  19. @EH – No need to save up anything when you have actual facts and experience immedidately available to you.
    @Denis – I’m sympathetic to that issue. I personally wouldn’t object to a liberalization of the existing rental pass-throughs for capital improvements (esp. in the small property housing stock) to help address that type of situation – there’d need to be some criteria to weed out the “luxury finish upgrades in order to jack up rents” type stuff from the truly needed CapEx. There’s no reason for neighbors to have to bear that type of cost externality that’s a side effect of RC.

  20. Regarding Mrs. McArdle, to her credit, she didn’t draw a conclusion as some above had implied, but rather illustrated the “conundrum” of the different outcomes for SF and NYC.
    “Of course, this leaves us with a little conundrum: why would rent control have different results in two different places. On the other hand, I’m hard-pressed to explain such a high vacancy rate in a pretty desirable location.”
    I’m sure there’s some middle ground between a complete Laissez-faire housing market and one where tenants get lifetime price controls.

  21. I personally don’t subscribe to the idiotic Ayn Rand delusion neither. Our society has managed to raise beyond feudalism thanks to a more just democracy and it would be crazy to pretend that “letting the chips fall where they may” would create anything else than a return to a country of well connected robber barons vs 100-hour workweek vassals. They invented Monopoly to show that unregulated and simple market rules always lead to one winner and leaves everyone else a loser.
    But it doesn’t mean that social engineering doesn’t have its flaws. You start with good intentions, see productive things being done, but see side effects which require more fixes etc, which leads to an absurd system where the benefits are not based on how much you need them but how well placed you were to catch them at the time they were handed out.
    The system need tweaking in some places and reforming in others. Rent control doesn’t make much sense. Prop 13 neither. Tax deduction on mortgage interest is counter-productive. If the government wants to help out some people to afford rent or a mortgage, it should do so with direct tax money based on income. This would be much more efficient that benefits adjust to a person’s personal situation and not the “grand-fathered” entitlement that is creating 2 classes of citizen among the same social gene pool.

  22. “You mean those BMR owners in the Bayview whose “below” market rate units cost more than market rate units?”
    Yes. Those very units. While the BMR buyers of units at locations like Berry St. more clearly benefited from the BMR program, even the buyers in harder hit neighborhood like Bayview have done better than their market rate peers.
    Go back and look at the threads on the subject and look at the numbers. Those that bought a market rate house, let’s say in 2007, have lost a lot more money than someone that bought a BMR unit during the same period. And more importantly, they are paying less in monthly costs because their price is lower–this is the critical part of the analysis.
    So, even though the MR units are selling for slightly less than the BMR units at Candlestick Point (or at least on that one example mentioned in the previous thread), the BMR seller has a lot more equity in his unit and is simply refusing to take his small loss. So, if (or when) he lowers his selling price (so it is once again “below market”), he will lose a lot less money than those that paid market rate and his monthly cost of ownership will be much lower over the period he lived there.

  23. “Someone without children can find an OK place (albeit small/shared) to rent here even on a barista wage.”
    I don’t think it’s so easy. Someone making minimum wage would earn ~ $1,200 a month. Add in food, clothing, cell phone, and transportation and we are talking a pretty tight budget. They would probably not be able to afford anything over $500 or $600 a month.
    “Fix the schools – the main, but not only problem, is the asinine assignment system – and much of the middle class problem is also fixed.”
    This has been fixed. As someone who has recently looked into this issue, I don’t see the evidence for the “collective wisdom” that SF Schools are hellholes and that it is obviously worth spending $40,000 a year to avoid them. Plus, one can move into a neighborhood where they like they school–or even better, move into the lowest quintile and have a pick of schools.
    The best thing for the middle class is a strong public school system–not the eradication of it.

  24. This would be much more efficient that benefits adjust to a person’s personal situation and not the “grand-fathered” entitlement that is creating 2 classes of citizen among the same social gene pool.
    Right, this is the biggest problem. We should think more about larger principles that help everyone, rather than throwing money at useless programs that only help a limited number of people.

  25. Wiener is hitting on a real issue, which is the market provides little incentive for “workforce” housing. There are plenty of local, state and federal incentives for developing housing for very-low to low income people, but these dry up for people approaching median incomes. As you get up to $60-80K in income, there are few incentives for you. Market rate developers are looking to maximize return, and between the cost of land, materials, and labor in this town, it’s very difficult to profitably buil $200-300,000 units for middle income families (unless you want to live in 500 sq. ft. in Cubix!) It’s a tough nut – do we use scarce public resources to help the poorest of the poor, or to help out middle-income folks who might be able to afford rent but cannot buy? And I don’t see any way to significantly reduce market prices through a “build, baby build” approach or any regulatory “streamlining”. Maybe some public/private partnerships for limited equity development (like the coops in Western Addition)?

  26. “Those that bought a market rate house, let’s say in 2007, have lost a lot more money than someone that bought a BMR unit during the same period. And more importantly, they are paying less in monthly costs because their price is lower–this is the critical part of the analysis. ”
    That would be true if everyone performed on their loan. If you bought a condo in the Bayview for $700K, how long did you really make payments on that loan? If you only made payments for 2 years while your sucker in the BMR has made payments for 5 years, you might be far better off.
    “the BMR seller has a lot more equity in his unit and is simply refusing to take his small loss.”
    How do you have equity in your property if you are taking a loss?

  27. SFHawkguy, baristas make quite a bit more than minimum wage.
    I never said that SF public schools are hellhloes. But they are not good schools. You are right that many people do not believe it is worth $40,000/yr to avoid them. But they still want to avoid them because they are not good schools (yes, Lowell is an exception – very good school. I went there). So they move to where the schools are decent and they are still free.

  28. I was just thinking this past weekend that I need to go back and get my Master’s, and that my Thesis would be on the Diaspora of Native San Franciscans.
    I do not think that rent control has played a major role in people leaving their hometown. Inability to maintain funding for schools, playgrounds, libraries, and other ‘traditional’ amenities would.

  29. Oh dear………Pro Rent Control people on Socket Site….isn’t that precious.
    Yes….Scott Weiner is another in a long line of brilliant bureaucrats occupying a supervisors seat in San Francisco. These magic bureaucrats are able to produce utopia-like conditions thru there amazing ability to use government regulation to control markets.
    NOT
    Here is a newsflash, Rent Control is legalize theft. People that own rent controlled units for the most part would do anything to extricate themselves from this “business”, and no one is stupid enough to build rental units in this town……so they don’t get built.
    Flame away…….Libertarians are so dumb, Ayn Rand was so dumb………..
    We will have our laugh…..and it’s coming soon…..my chuckles are building chuckleheads

  30. “This would be much more efficient that benefits adjust to a person’s personal situation and not the “grand-fathered” entitlement that is creating 2 classes of citizen among the same social gene pool.”
    A tidbit in the Bay Citizen article referenced in the much maligned McArdle posting would seem to indicate that some people can belong to both classes at once!
    “This is a consensus view in many circles, as illustrated by a recent feature in The San Francisco Chronicle. “Throwing senior citizens out on the sidewalk is never a good idea, but it isn’t stopping North Beach developer Peter Iskander,” it began.
    Left unsaid was that one of the article’s featured characters, Carlo Tarrone, pays $450 a month in rent. Or, more significantly, that Tarrone in 1999 bought (half in cash) a two-unit residential building near Telegraph Hill that the real estate website Zillow values at $1.7 million. Tarrone, whom I interviewed by phone, is by no means poor or facing homelessness.
    Source: The Bay Citizen (http://s.tt/12lM2)”
    “Do we use scarce public resources to help the poorest of the poor, or to help out middle-income folks who might be able to afford rent but cannot buy? ”
    The above is one reason it makes sense to look at the aggregate ROI of owning vs renting. If owning at the current price level yields a negative ROI vs renting it is questionable what good it does to help middle income folks own.

  31. SFHawkGuy:
    regarding “Furthermore, as I have demonstrated repeatedly on this forum, the BMR program has been a demonstrable success!”.
    While that’s true in a certain sense (some people have benefited), that success is at a fairly large cost: market rate affordable housing (meaning housing that is built without subsidy targeted at the lower end of the spectrum).
    BMR is a subsidy, paid for by the middle class (particularly the lower middle class), to the benefit of the poor. There is probably a certain cost paid by developers, but it’s more in the sense of lost opportunity, rather than lower profits. Developers will not build housing that would have been marginally profitable since 20-25% of the units must now be sold at well below cost. It is a win/lose situation, in order for BMR to exist, somebody must loose. That means the type of housing that gets most impacted is just the type of housing that the middle class would be able to afford without subsidy.

  32. sfrenegade, I think what SFHawkguy is getting at, even if it’s not explicit, is that the BMR buyer isn’t as leveraged.
    And that’s because the BMR program doesn’t allow all the financial chicanery that a market-rate buyer could and probably would have taken advantage of to purchase a unit with little to nothing down.
    To wit, the BMR program does NOT allow:
    •stated-income loans
    •interest-only loans
    •negative amortizing loans
    •adjustable rate loans
    •“balloon payment” loans
    •FHA, CalHFA or VA first loans
    …and last but certainly not least:
    •loans in which the total household debt-to-income (e.g. housing, plus credit cards, plus student loans, etc) is higher than 45%
    We may deride the BMR buyer because the bubble popped recently and there are now a few foreclosure and short sale units that are available for less money, but the BMR buyer had and probably still has more skin in the game than the market-rate buyer.

  33. runnz, SF’s dysfunctional policies are not a very good example of why libertarianism is appropriate. We had libertarianism once — we now call it feudalism. It thrives quite well in Somalia.
    lyqwyd identifies very well yet another problem with BMR housing. BMR raises the cost of housing for everyone else, while only helping a very select few. It would be better to have all housing cheaper, than to selectively help a lucky group. Then again, SF is all about helping small entrenched groups get what they want.

  34. yeah, just you wait…runnz and his Objectivist landlord friends are going to show you what’s what; they’re going to go on STRIKE, STRIKE I say, and take their rent-controlled apartments and go home, bringing the world to a halt just like the great and almighty John Galt would do!
    And then all of you moochers of the world who depend upon the great and mighty landlords of San Francisco to keep a roof over your heads, you’ll WAKE UP and realize that it is the great and powerful landlords of this city, the Men who provide you with the very basis of civilization, whom you should be grateful to every month when you write that rent check. Grateful, I say, that they deign to allow you to reside in one of their warm and well-appointed apartments in exchange for your piddling little rent payment.

  35. Wiener is brainless, a 15 year bureaucrat in love with bureaucracy. The BMR “solution” is a disgrace, a high fallutin’ public project keeping more bureaucrats employed…forever….as they determine sales prices ad infinitum. Imposed socialism and social engineering are worn out concepts epitomized by the 21st Century housing boom, fueled by goals of increasing housing to a 70% level, which crashed, ingloriously, in 2007-2008. If SF is to be a rich man’s paradise, so be it. As an aside, cops get $20K free when they buy in SF, so long as they stick it out for five years. Don’t see any breaks for Starbucks baristas….oops, there’s that bureaucracy again.

  36. Inability to maintain funding for schools, playgrounds, libraries, and other ‘traditional’ amenities would [drive native SFers out].
    Can’t say I see much of that, either. The libraries are as good as they’ve ever been, as I recall. Can’t comment on playgrounds, but they seem ok. The schools have funding problems, but are they any worse than anywhere else? Compared to what I’ve read about other places around the state and the nation, SF seems to be doing alright.
    Regarding the Cubix comment: I understand that not everyone wants to live like that, but I think it would be interesting for the city to get a few more market-rate cubixes. Probably do more for affordable housing for non-lottery winners than just about any other initiative.

  37. One of the most destructive things that has happened to blue collar locals being pushed out is rent control
    It has become almost impossible for blue collar local kids to form new families here.
    Rent Control supports the childless who never change and encourages them to be space hoarders. Market rents are higher and everyone has to move out or live with mom.
    Not that this is the only cause but my brother is a local guy and know has zero friends in SF but says he runs into local SF people all the time in Fairfield (no, not Chris Daly)

  38. I would also like to think that Scott is not speaking literally in terms of BMR for moderate income people or that all local people would choose to live in SF but that we have to provide the environment where the choice can be made (we offer little now IMO)
    Point being, if you have a local jobs ordinance and the choice of some moderate income housing people (families) might stay.
    To my mind government can help this in a few ways: streamline the process greatly for family sized units in prescribed areas (affordable by design), tie this directly to the transit improvements we should be getting like the BRT on Geary, repeat it as much as possible.
    Too much process and not enough action

  39. And exempt these “middle class” units from BMR requirements all together
    I bet you would have a lot of interested developers if the rules were clear and not subject to change

  40. I don’t think you necessarily have to be childless. I thought one of the famous stories was some guy who had first rented his rent-controlled apartment in college in 1960 or something like that. I’m pretty sure he had a family in that apartment at some point, but I can’t keep track of apocryphal stories any more. 🙂

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