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The Road To San Francisco Is Paved With Housing Supply Suppression

2013 October 15
by dan bertolet


If we want to actually make the city affordable for most people—a place where a young person or an immigrant can move to pursue their dreams, a place a parent can raise kids and not have to spend every minute at work—we have to fix the supply problem.

The city in question is San Francisco, but the same holds true for Seattle, except that it hasn’t played out to the same extreme—yet. The quote comes from a must-read piece by SPUR’s Gabriel Metcalf on San Francisco’s atronomical housing prices. It’s simple:

As long as this remains a desirable place to live in a region that is producing a lot of jobs—while at the same time we fail to produce enough housing to accommodate the demand—then housing prices will continue to rise.

And why has this been happening in San Francisco?

But the city did not allow its housing supply to keep up with demand. San Francisco was down-zoned (that is, the density of housing or permitted expansion of construction was reduced) to protect the “character” that people loved. It created the most byzantine planning process of any major city in the country. Many outspoken citizens did—and continue to do—everything possible to fight new high-density development or, as they saw it, protecting the city from undesirable change. Unfortunately, it worked: the city was largely “protected” from change. But in so doing, we put out fire with gasoline.

Here in Seattle the same forces have been at play suppressing the production of housing supply, albeit not to the crazy levels found in San Francisco—but all indications are we’re intent on getting there.

Seattle is a city in which it took eight years of process to implement a rezone in South Lake Union, a place where the City wants to focus growth, and where developers want to build. That kind of uncertainty and delay is the perfect recipe for suppressing supply.

When private developers figured out a way to produce relatively affordable high-density housing in the form of microhousing, Seattle’s kneejerk reaction was a cry for new regulations, nary a second thought given to the fact that regulations would make that housing both more expensive, and less likely to be produced.

In ongoing debates over fees on new development in exchange for increased capacity, Seattle’s electeds sometimes give the impression of being in a competition for who can be the hardest on “fat cat” developers by raising fees the highest. Is it possible that such fees actually do more harm than good because they suppress supply and increase the cost of market-rate housing? Never mind. The fact that some other cities might charge bigger fees is apparently all anyone needs to know.

And that brings us to another reason why we will never win the affordability battle without addressing supply: The cost of subsidized housing:

The problem is, subsidized, below-market-rate units are too expensive to build to help very many people. It costs around $250,000 in government subsidy per unit. You can get a sense of the scale of the cost based on how many people you want to help. Subsidizing affordable homes for 10,000 families comes at a price of tag of $2.5 billion.

Yep, that’s the magnitude of a financial burden we’d be placing on private developers if we enacted inclusionary zoning that requires affordable units in every market-rate housing project. Think that might have bit of an impact on the production and prices of new housing, perhaps?

For another point of reference, Seattle’s 2009 Housing Levy will bring in $145 million over seven years—enough to pay for just 580 housing units, equivalent to about 0.2% of Seattle’s 280,000 total housing units.

That doesn’t mean we shouldn’t try to subsidize what we can. But the huge expense of subsidy does make it all the more clear that increasing supply is an imperative—that is, if we want to have any hope at all of not ending up with a city in which housing is out of reach to a large swath of the populace.

The good news is that increasing housing supply is relatively easy: We mainly just have to get out of the way and let the private market respond to demand. Though some types of “getting out of the way” will take a little effort, as with upzones or streamlined permitting. And when it comes to the inevitable objections from those who oppose change, increasing supply should be given all the weight and priority of a vital social justice strategy, because that’s exactly what it is.

P.S. The other good news is that when we increase supply we’ll also get a more sustainable city, region, and planet… but you already knew that.



30 Responses leave one →
  1. Chris S. permalink
    October 15, 2013

    I’m confused. The must-read article you link to uses Seattle as a counterpoint to what’s happened in San Francisco:

    “Over the past two decades, San Francisco has produced an average of 1,500 new housing units per year. Compare this with Seattle (another 19th century industrial city that now has a tech economy), which has produced about 3,000 units per year over the same time period (and remember it’s starting from a smaller overall population base). While Seattle decided to embrace infill development as a way to save open space at the edge of its region and put more people in neighborhoods where they could walk, San Francisco decided to push regional population growth somewhere else.”

  2. dan bertolet permalink*
    October 15, 2013

    Chris S: That’s why I said “yet.” Seattle has been building more than SF, and that has helped keep our prices from rising as fast as they have there. My point is that to avoid SF’s fate, Seattle needs to carefully consider the effect that our policies and regulations will have on the production of housing supply.

    • james in the CD permalink
      October 17, 2013

      an architect – whose livelihood depends on the design and construction of new developments – can not escape from being biased in opinions regarding development regulations which might impede on the growth machine’s impetus.

      you state: “When private developers figured out a way to produce relatively affordable high-density housing in the form of microhousing, Seattle’s kneejerk reaction was a cry for new regulations, nary a second thought given to the fact that regulations would make that housing both more expensive, and less likely to be produced.”

      i ask with sincerity: as an architect – do you really believe the life lived in an apodment is any way a human being should dwell?

      • dan bertolet permalink*
        October 17, 2013

        james: First, I’m not an architect and most of my work is with public agencies. Second, your insinuation that my opinion can’t be trusted because of the work I do is bullshit, regardless of whether or not I’m an architect.

        You claim that I am biased, and then go on to make judgements about how you think other people should live? Wow.

        I think apodments are a great housing solution for some people. And that’s why they’re selling out – because people WANT to live like that. If you want to play god and tell them that it’s not okay for them to live in apodments, then you need to figure out another way for them to afford to live where they want to live. What is your solution for that?

  3. Josh Mahar permalink
    October 16, 2013

    Dan, I think you (and Roger, et al.) have made a really good argument of late that increasing housing supply is a smart thing to do for achieving more affordability. More density, is also indisputably better for the environment as you’ve done a good job to illustrate.

    But playing devil’s advocate here (which I love so much) I think these arguments have a bit of tunnel vision. SF is a great example. Is it affordable? Absolutely not. Yet, is it consider one of the greatest, most attractive, most culturally rich and dynamic cities in the United States, if not the world? I would argue it is. By many measures (outside affordability) SF is a fantastically successful place. If you’re a city leader that helped make SF what it is today, you’re probably quite proud of yourself.

    Now, sure, out of context having more density in the city shouldn’t necessarily change this. But if you’re a city leader, you’re no doubt going to want to protect the iconic character of the neighborhoods, which helps bring in lots of rich people, which in turn foster high quality businesses. A richer population probably requires less municipal funds to maintain as citizens are both less prone to damage municipal services, and also have their own disposable income to spend on raising money for a nice new community center, or donating to a parks foundation, etc. So when you’re considering adding density to increase affordability, you’ve got to weigh that against a lot of other considerations in your quest to create a great place.

    Again, I’m not arguing that taking away barriers won’t absolutely achieve more affordability. And if that’s a goal, which our city leaders have stated it is, then housing supply should be a priority. But I think it can be a hard sell to argue for uninhibitied growth when restrained growth has worked out quite well for a lot of places. If you ask nearly anyone if they want their city to look more like Houston or SF, they’re probably going to say SF. Even just reading your headline, “The Road to San Francisco is Paved with Housing Supply Suppression” I could think, oh ok, then I want to suppress supply if i want a vibrant, cool city like SF.

    • Patrick permalink
      October 22, 2013

      I think the argument that growth by way of density will affect SF’s character is a misdirection play. First off most of what we are talking about – areas designated for growth, are areas not contained within the Victorian belt. No one is tearing down “character homes” for glass high rises. We need supply at all rental and sale price levels. MOre supply. Perhaps adding within all neighborhoods incentives by way of reduced fees for the building of affordable housing as well. Yes that’s for pac hieghts, soma, mission, Noe, et al as well

  4. dan bertolet permalink*
    October 16, 2013

    Josh, thanks for the thoughtful comment. For sure, SF is wonderful if you can afford it. To me, what this makes all the more clear is that the root problem is wealth inequality. When there is so much wealth inequality, we are all pretty much beating our heads against the wall trying create equitable access to great cities like SF.

  5. John Bailo permalink
    October 17, 2013

    What we need to do is bring jobs to newer and smaller cities that have some of the amenities of San Franscisco or California. Just block-busting nice neighborhoods with apodments is not a solution. However, building up Sacramento into the type of desirable city that can attract those who “have to” live in a Seattle or San Francisco is possible…especially now that we are building high speed rail for easy access to things like art museums that cannot be as easily translated.

    • Anandakos permalink
      October 17, 2013


      It’s a good idea, but if it were possible to make Sacramento into San Francisco it would have happened. After all, they’re about the same age. And Sacramento has this huge employer named the State of California; that’s a pretty damn reliable employment base.

      But Sacramento can’t hide that’s it’s on a plain surrounded by agricultural land. True, it’s much better off than Lincoln NE, also on a plain surrounded by agricultural land, because Sacramento has the foothills of the Sierras only twenty five miles away and Tahoe! just seventy-five.

      But its’ STILL Sacramento. It takes more than street trees and sidewalk cafe’s to make a place into somewhere people want to live. Those things definitely help, no doubt about it, and a good transit system is another major boon (which Sacramento also has….).

      But it’s STILL Sacramento.

      There just aren’t that many spectacular bays in the world’s oceans beside which for beautiful cities to rise. In most cases, they’ve already risen.

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