The newest condo building to rise in the Mission has been unwrapped at the corner of Valencia and 19th streets. As we first reported last year, all 17 units within the 3500 19th Street development will be market rate as the developers elected to fulfill the project’s affordable housing requirement by paying an in lieu fee rather than including BMR units onsite.
As plugged-in people know, the corner parcel upon which the 3500 19th Street development was built was purchased for $1,700,000 at the end of 2011 with firm plans to develop the site having been in the works since 2006.
The development includes 3,000 square feet for retail along the street and 15 parking spaces including two (2) for car share.
It looks pretty from street level as I walk by. I don’t know how the lot line windows on Valencia will hold if the next building is ever redeveloped though.
Just out of curiosity, does anybody know the size of the fee they paid to avoid the BMR requirement?
Whatever it is, I hope more developers start to do this. BMR is unfair market-distorting socialist BS and it is much better to take the money and invest it in infrastructure improvements so people can more easily get back and forth from the areas where the market rate is naturally lower.
Replaces a parking lot that usually had folks selling crap on the chain link fence. For that alone I’m happy to see this one.
I just hope 19th Street Pizza and Pasta never goes away (kitty corner). Best place in the Mission for cheap filling food. The owners are nice folks, too.
Why are these new projects so slow to make a website available with floor plans and pricing?
The “in lieu” fee varies by unit type. For 2013: Studio=$171,558 1 BR=$236,545, 2BR=$326,086, 3BR=$372,956. But you pay the off-site %, and the actual fractional number that results from the calculation (so no rounding down to nearest full number).
“…take the money and invest it in infrastructure improvements so people can more easily get back and forth from the areas where the market rate is naturally lower.”
Okay, let’s build BART to Stockton so the human infrastructure (e.g., teachers) has somewhere to live and commute to jobs in SF. Yeah, let’s do that.
I love the fact that people are willing to spend a ton of money for matchbox-size condos just to have the claim of “owning” in SF. Time to call a therapist to work on that image issue.
Has any monies in the BMR fund been used to build BMR units?
I often hear that developers are electing to pay the fee instead of putting BMRs into their buildings, but I never hear anything about that fund being used for anything.
@formidable doer of the nasty:
The in-lieu fee goes to build affordable housing, it doesn’t go to infrastructure. That’s why it’s called “in-lieu.” It’s a payment to an affordable housing fund for the City to build it in lieu of the developer building it. It’s all strictly regulated by state laws governing impact fees and whatnot. And yes, @wc1, the money is used for that purpose. Pretty much anytime there’s a stand-alone affordable housing building being built, some of the funding is coming from that source.
Mark — your comments fail to take into account the cost of renting in SF, which is equally if not more egregious than the cost of buying. If you don’t want to live in SF, fine. But if you do, you have to either buy or rent, and sometimes buying is cheaper than renting. Because of rent control and absurdly low interest rates, buying right now is cheaper than renting in a lot of circumstances. That could always change, of course, but the market is the market.
Yes, BMR is “market-distorting”. So what of it? The market needs distorting.
“The market” is mostly focused on the “Luxe”, Luxury and Überluxury market in particular and building non-affordable housing in general, so the city is addressing that market failure by essentially taxing developers in order to build housing for the segment that isn’t having it’s needs addressed.
That’s a legitimate and necessary function of government in a democracy.
wc1, yes, the BMR fund has been and is being used to build new units. The project at 1100 Ocean Avenue, I believe, was funded in large part in this manner.
Lol at Brahma’s usual over-the-top explanation.
Most of the rental stock in SF is de-facto BMR, simply because most is pre-1979 and occupied for more than 3 years and therefore benefiting from rent control laws. That puts around 1/2 of the total SF population in the BMR category.
Now there’s the issue of new families with means under or around the median income. They just can’t rent anywhere at market price.
Is this a problem caused by developers? Heck No!
If you have a tenant hogging a 3BR 1900sf for $783/month, that’s one less unit available to a standard family. And this distorts the market in more ways than one, making everything more expensive to new families.
Now THAT’s the real “market failure”.
Brahma — your sentence used the wrong word at the end of it. Rather than “democracy”, it should have said “That’s a legitimate and necessary function of government in SOCIALISM”
Democracy (and capitalism) is about incentives. Give developers incentives to build low-end units, and low-end units they will build.
Obviously, this is not about high-end or low-end, or about “luxury” units or “blue-collar” units. This is about location, location, location. As long as property is in a good part of SF, it’s going to be expensive and not affordable for most people. How do you suggest fixing that?
brahma is clearly a longtime renter type who missed the boat on buying several times and is now permanently outpriced. but one would think he’d understand his own bread and butter as opposed to the comments he has no business weighing in on. but sadly, no. all around weakness.
anowned,
I am not going to speculate on Brahma’s financial situation. For instance I know a well off lawyer who’s been playing the “buy me out” game for 15 years now. He LOVES rent control and symbolizes everything that’s wrong with it. I think Brahma probably has a vested interest in the current system.
And as usual, lol takes any thread as an opportunity to rail on about rent control, regardless of whether or not it’s relevant. I can practically see the spittle coming out of the sides of his mouth as he gets all emotional about someone, somewhere (that’s not me) “getting away” with paying less rent than he thinks they should.
I wouldn’t call it weakness, but I would call it tiring to read.
Yes, rent control is clearly not relevant to a discussion about the prices of rental and for-sale housing.
Clearly.
A few are pointing at the fallacy of calling the building of new quality buildings as “market failure”. These buildings are being built and they target high earners simply because demand is so high. Demand is so high in great part due to market distortion caused by rent control.
You’re denouncing the effects of high prices instead of the causes. I hope you appreciate the irony.
J – do you really know so little about economics and development? Since when is democracy or capitalism about “incentives”? They are (respectively) a representative form of government which can take many guises, and an economic system based on a free market exchange. Neither exist in the purest sense. Any kind of “incentives” for developers to build cheaper housing are a result of law and policy to address failures of the pure capitalist marketplace. A true capitalist developer seeks the highest return on his investment. Given the high cost of land and labor it’s expensive to develop in SF (even if you leave out the high cost of government regulation which does push prices up). Couple that with a lot of wealthy prospective buyers, and the good capitalist will not develop 3br units and sell them for $250K when he can get $800K for luxury condos. That’s why government steps into that marketplace in many ways, including levying affordable housing fees to supply units not supplied by private capital.
And believe it or not there already are significant “incentives” for private capital. Most affordable housing is financed with Low Income Housing Tax Credits, which corporations can claim to reduce their tax liability. SF’s trust fund supplements this because the cost of developing low income housing is so much higher here.
The sad reality of current housing policy at the federal, state, and local levels is that almost no one provides funding for “workforce” or middle income households. Developers can’t access the LIHTC and similar state and local funds for that market. So it generally goes unfilled.
And really – socialism? Do you know the definition or is it just a word you throw out when government does something you don’t like?
Oops – that was me (not J) responding to J. Just to be clear!
LOL – I won’t defend rent control on a theoretical basis, but given the fact it’s the law of the land in SF, continually railing about it gets tedious. Especially since its biggest detractors never seem to pony up anything resembling actual data on the scale of price distortions it causes (to say nothing of the social or economic costs of dislocation if it wer eliminated). Do you really believe that if rent control were eliminated tomorrow housing prices would drop significantly enough to be affordable to median income earners? You admit there is high demand by high income earners, which even in a non-rent control environment would lead to high prices and developers seeking to maximize return.
Has anyone seen any academic studies on what kind of price change you might expect without rent control? From a basic perspective, to see a big price drop you would have to assume a very high rate of turnover (poor people leaving, long-timers choosing not to pay more for their pied-a-terre,etc), thereby freeing up lots of units. But how high can that turnover be, since some portion of rent control units are being rented at close-to market rates, and others are being rented by people who can afford the rate increases? Have yet to see any numbers to back up all the rhetoric here.
As discussed many times, it’s not simply rent control that distorts prices, but rent control combined with extremely low height limits in most of the city, density restrictions, excessive parking requirements (most of the city still requires 1:1 parking be built regardless of demand), etc, etc.
Eliminating rent control would likely help the middle of the market and lower asking prices slightly (or at least curb the rate of increase), but would almost definitely lead to a higher median price, since you would be tossing out tons of folks free-riding (if this disturbs you, I’d be fine with setting up a needs-based subsidy program for a few years to allow people to figure out where they need to move to match their income with their consumption).
Without fixing the barriers to building, however, the slowing in price increases or the drop would be short term, as we’d be hitting supply constraints very quickly again. We need relaxation of all rules which hinder the market from providing the correct amount of housing, not just one.
kddid, you are right, it’s hard to estimate.
I explained earlier in a recent thread: the switch would cause a geographical redistribution of tenants based on quality. High earners would get quality housing, while lower earners would go to lesser quality. Quality is being defined by location, size, amenities and state of the dwelling.
Yes the median “paid” rent would dramatically go up. But the median “market” rent would come down.
Eventually, I think you can partly boil it down to how much the median or average family is making. The median household income in SF is 71K. After taxes, if 40% of what’s left is allocated to rent, the median rent SHOULD be 1800. If this is a 2BR, that would be close to 40% less than current market rates. Emphasis on “SHOULD”
I am sure there’s a way to get all the statistical data of dwellings as well as incomes in SF, then do a match-up unit-to-family. Assuming it’s all a zero-sum-game and everyone gets something, which is very theoretical because nothing exists in the void. Some people would drop out (move out), and some people would come in (formerly priced out suburbanites). Some landlords would also decide to get out of the landlord business, and others would put their units back into the market.
A very complex but extremely interesting simulation.
J: I’m going to just ignore the ad hominem attacks, but I will try to address the small amount of substance you’ve presented @ 1:52 PM.
As far as the BMR program itself is concerned, the Mayor’s Office of Housing pools the fees collected from projects like this one and then hires a firm (or consortium) to do the construction and project management for the new units (more often than not, condos; since the project described in the post above is to produce for-sale units, and ranting and raving about what happens on the rental market for housing subject to rent control is irrelevant, anon).
If it were truly socialist, The City would have a city agency do all the work, own the resulting units, sell them and then take the proceeds and build another project with it. Of course, sometimes the firm contracted with carrying out the project is a non-profit, but that doesn’t change much.
The point is, the BMR program is addressing an unmet need, and developers in general aren’t. You can label it liberal or conservative or socialist or whatever you want, but it doesn’t change the fact. The people who have an affordable place to live after a BMR project is built and they acquire a unit don’t care about your labels.
@lol – I like looking at the median income and extrapolating a possible market rental price, but I think we’d likely see a fairly dramatic rise in the median income of SF with a repeal of rent control, as loads of folks move out of town and are replaced by folks currently priced out of the city (but still of higher income than the folks leaving).
Indeed. There will be many folks priced out. But the smart people will learn how to adjust. It you’re 80, single living in the same place where you raised a family 50 years ago (say, a 1900sf 3BR…) then you can rent out 2 rooms to make up for the increased rent.
Of course this means freeing up the space, like sending your collection of dozens of tacky Swiss clocks to Goodwill or the Salvation Army or better, putting them on eBay.
I am dead serious, I have seen a low paying renter family that had one bedroom full of “collectibles” and was hoarding stuff like dozens of cuckoo clocks in a place where HUMANS are supposed to live. And they were paying 25% of market rent with parking in the Mission (I’ll let you imagine what the parking space was full of). The extra space was virtually free, much cheaper than storage in the boonies. Why bother controlling yourself?
No one who is nice can afford to buy a house in SF anymore. Its just a fact.
its cheaper to buy than to rent currently. that wasnt the case a few years ago.
I knew I was baiting Brahma (angry loser) with my post. That wasn’t my primary objective but it’s always a nice bonus.
Well, rant on. In this post-OWS world there’s nothing original about your silly anti-capitalist delusions.
Just about everything the SF government ‘controls’ in this city distorts the market, drives up prices and has unintended consequences.
Brahma – I wasn’t directly attacking the SF BMR program. I don’t have much of a opinion on that, since it’s such an inconsequential program in the grand scheme. It’s certanly not fixing any of our problems, is it? The city could do so much better. I was commenting on your description of what govt is here to do. You apparently think it should be here to hinder housing development with archaic laws that have massive unintended consequences.
Looks like Brahma should have taken a basic economics class along the way (and who knows, (s)he might be neither incensed nor a renter). When you artificially depress prices in one part of the market, you artificially infalte them in other parts. It’s just like whack-a-mole. Asking rents on vacancies are high because of rent control on occupied units. And prices on new market-rate units are higher because of the BMR program. The only “market failure” here is the one manufactured by the SF Board of Socialists.
Wait, it costs a developer $372,956 to the BMR fund on top of all other costs to build one 3 BR unit? No wonder nothing affordable can’t get built in this city for regular people.
NoeValleyJim — I think that $372k is just in lieu of having that BMR unit in the building. So if one BMR unit is required by law, and you choose to not have it, it’s a $372k fee for only that unit, not for every unit in the building. (Not that I agree with the policy).
No one is ever going to even start building any new housing that sells for less than it costs to make.
If the city was serious about adding housing stock, they would open the floodgates to new developments, and then the older, less-desirable housing stock would open up for lower-income people as wealthier people moved up into the better, new housing. Everybody wins!
The way it is now structured, they are adding huge costs to any new development which has the opposite of the desired effect — making new developments LESS economically viable, not more.
These are decent looking apartments with an adequate amount of parking — I do worry about what Valencia St. will look like if it becomes a wall of 5 story buildings on each side, but a few are OK.
As an aside, I always laugh at Brahma and his lack of understanding of economics. There is no “market failure” when developers are building units that people buy (and I am sure these will sell quickly). Just because Brahma can’t buy a condo for $200K does not mean there is market failure, it just means that the ratio of demand to supply has increased the price above that point.
There are problems with the BMR units in that due do restrictions on the financing placed by the mayor’s office all lenders have pulled back from lending as the lender is not protected properly. The MOH need to revisit their restrictions.
No,OnceAndFutureBitteJimmy, that’s not how economics works.
Building predominantly luxury housing raises the cost of ALL housing. The “developers” and their urban property-pirate kin well understand this, and they know that 99% of the population’s eyes glaze over when “supply & demand” are cited, as if invoking this phrase automatically proves that building more luxury housing ipso facto makes housing more affordable.
The actual economics of it are that building luxury housing raises the average cost of all housing, and landlords and developers will target their prices to that new, HIGHER average.
The correction will happen (again) when these thousands of new luxury unity sit vacant (a la Florida), and the homeless break in and squat them.
The homeless will enjoy trashing your beloved marble bathrooms, and turn SOMA into a fire hazard as they start fires in the middle of their appropriated luxury lofts.
Just remember: Florida
Enjoy!
Valenchia: Brahma understands economics just fine, and he wasn’t talking about his own situation, although yes, assuming that he was makes what he writes easier to ridicule when you want to deliberately misrepresent what he says. Laugh it up, by all means.
I conceded that developers are doing a great job building new units for the luxe-desiring segment and that they are selling them. I also think that these units will sell, and I’m not necessarily calling these units luxe.
Once you get past the financing issues alluded to above by Ken (which are no small matter), the fact that there are people lined up to buy a BMR condo, to the point where the Mayor’s Office of Housing has to hold a lottery to allocate them, means by definition that there is an under or completely unserved segment that “the market” is failing to serve.
Calling this a “segment that the market is failing to serve” is a bit of a stretch, since this segment was precisely put in its current situation by market distortion.
A low rent is a great privilege to enjoy, but at the same time it makes people disconnected from the financial realities that other people have to live through [/end patronizing comment]
The market addresses the affordable housing problem its own way by creating housing where land is cheaper. In short, not in central SF. Rare things are expensive. Duh.
and landlords and developers will target their prices to that new, HIGHER average.
What in the world does this have to do with the prices that actually clear? I can “target my price” of a Kit Kat bar to $5, but no one’s going to pay that when others will sell for less. Are you claiming some kind of massive price-fixing scheme where all landlords and developers come up with the new higher prices?
And I should’ve read Brahma’s even more insane post before posting that last comment.
Is the market “failing to serve” the $7 horse market as well? Because I don’t even want a horse, but I’d line up to buy one for $7. Amazing how artificially lowering the price of something drives up demand – amazing!
And then there’s “anons” crazy analogies.
I don’t know how you’d reveal that there’s some pent-up demand for a consumer discretionary good like a horse in a city like San Francisco. A home is a basic need for anyone, anywhere.
So you’re saying that the fact that the Mayor’s Office of housing offers some below market rate housing drives up demand? I think that’s pretty easily falsifiable. The demand is and was there before the BMR program (again, for condos for purchase) was even put into place.
Nonsense.
The BMR program was put into place to respond to the need for affordable housing.
A critical mass of S.F. workers were well priced out of the market before it was put into place, so “this segment” couldn’t have been put into “its current situation” by the BMR program, if indeed that’s what you are referring to as “market distortion” (you’re so fixated on turning every conversation into an opportunity to rail on about rent control that’s it’s difficult to tell. We’re talking about condos for purchase here).
Brahma – anywhere in the country has “pent up demand” for housing that costs less than the market rate for housing. That’s the point. The “market rate” is the rate that housing is currently selling at. Of course something (anything) that costs less than what it is currently selling for will have higher demand than the same product at the market rate.
Are you claiming that SF is somehow special in that regard? If I went to Salt Lake City and opened a housing development selling units for 50% of what similar market rate units are selling for no “pent up” demand for those units would be found? That seems um, unlikely. People like paying less than other people are willing to. That’s called a “deal”.
I think there’s pent up demand for $1 burritos. Maybe we could get the mayor to work with Chipotle.
^ Yes, I’d line up for that $1 burrito too 😉 ^
People are used to the never ending gravy train with rent control. No wonder they feel entitled to BMRs.
Or more to the point, there’s a pent-up demand for $900,000 5BR/3BA houses in Pac Heights. I just contacted the MOH to put my name on that list. They said they’d get right on it.