November 21, 2012

Micro-Units Approved For San Francisco, But Capped For Some

Supervisor Wiener's proposed legislation to reduce the minimum legal living room for a residential unit in San Francisco from 220 to 150 square feet was passed by San Francisco’s Board of Supervisors last night.

Under the ordinance, which only applies to newly built buildings, the total minimum area of a legal residential unit will be 220 square feet including closets and the bathroom.

And while the number of market rate micro-units allowed to be built in San Francisco has been capped at 375, the Planning Department has been tasked with preparing a detailed report on the impact of the first 325 units, after which the cap could be modified.

The numerical cap excludes units built for affordable, group, or student housing.

32 Percent More Or Less Efficient In San Francisco Part Two [SocketSite]
A Proposed Cap On Smaller Residential Units In San Francisco [SocketSite]

First Published: November 21, 2012 8:00 AM

Comments from "Plugged In" Readers

Why cap the number of units? If they're safe, let them be built and let the market decide.

Posted by: CH at November 21, 2012 8:53 AM

We should totally let the market decide the price and the need of these micro-apartment. Government should step in only when it cross the line public health and safety. Many supervisors and public comments are overly concern about the livability of these apartments, which I think is perfectly fine of some demographics. If people find them too small or too expensive, the demand will drop and the rent drop along, until it reach the point of fair market price (i.e. not the builder's price).

That say since this is new, I think it is prudent to set a cap for the near future. I worry if one thousand of such unit blossom overnight and they turned out to be failure and become urban blight. Slow change is good. It give us time to learn and fine tune. If it is a good idea we should have more of them in the future.

Posted by: Wai Yip Tung at November 21, 2012 9:17 AM

WOW...My bedroom is as large as the unit size and my house is more than ten times the size. I understand that my house is larger than the average in SF but I can't even imagine living in something as small as my bedroom full time.

People need to have more space or they will go crazy. Most SROs that are that small have community rooms and activities so the tenants don’t go crazy. Hopefully these building can offer something like that as well.

Posted by: MarinaBoy at November 21, 2012 9:18 AM

@marinaBoy so the mantra on micro units are that people will spend the majority of their time at work and when not at work in the cafe scene, or eating at the so progressive cafes to talk about the big picture problems facing the earth.

SRO folks kinda spend time on the streets too...but not always doing the kinds of things that the Twits do.

OK OK I'm bad.

Posted by: SRO NO at November 21, 2012 9:52 AM

These units would be excellent for a certain demographic that often ends up living under the roof of a tyrannical master tenant where they are basically stuck in their rooms.

Well designed I don't see a problem with these spaces at all.

Preferable to never being able to move to SF at all for many young people

Posted by: Zig at November 21, 2012 10:23 AM

Zig makes a good point.

Posted by: MarinaBoy at November 21, 2012 10:26 AM

Hmm. I overlooked the fact that the cap excludes "units built for affordable, group, or student housing", so I can't get too excited about the existence of the cap. I'm not a market fundamentalist.

Frankly, considering the target market for these units, having those three groups excluded from the cap pretty much makes the existence of the cap a nonissue.

Does anyone really think that developers will build more than 325 units over and above those units targeted at "affordable, group, or student housing" inside of five years? I don't.

Posted by: Brahma (incensed renter) at November 21, 2012 10:34 AM

Does anyone really think that developers will build more than 325 units over and above those units targeted at "affordable, group, or student housing" inside of five years? I don't.

If the deal with complying with those types means that they have to deed restrict to those particular groups and set up an entire rent/sale scheme specific to only those groups, then yes, I think that developers would build a LOT more than 325 units of unrestricted small units if given a chance. Even the ability to move freely between those types of tenants (without going through Ministry of Housing approval) is a question. If they can just say, "We're building this mostly for students or group housing" that's one thing, but I'm guessing that they'll need to deed restrict specifically for students who apply in some arcane way, etc.

Don't like the idea of these being deed-restricted as "affordable" where income restrictions must be met (for a variety of reasons).

Posted by: anon at November 21, 2012 10:48 AM

Some related news from Seattle: http://seattleslandusecode.wordpress.com/2012/11/21/seattle-is-ahead-of-san-francisco-on-apodments/

Those built in Seattle were smaller than what's being proposed here (with a shared kitchen), and the whole building filled up in a week!

Posted by: anon at November 21, 2012 10:55 AM

Zig does hit the nail on the head. There are a lot of folks in SF who live in group situations who would prefer not to, if there were only an affordable options. That's the reason that studios and one BR's are so much more expensive (relative to size) than larger units.

I think there is a clear market for these units, and I would prefer to let the market decide rather than place an arbitrary cap. But hopefully it is the camel nose under the tent, and the program will soon be seen as successful and the cap will be lifted.

Small units do require lifestyle adjustments. The good news is that folks do tend to spend more time in other "living rooms" like the streets, cafes, etc. This is a good dynamic for the areas of the city where these units are likely to be built.

Posted by: curmudgeon at November 21, 2012 11:02 AM

I just can't believe this whole thing is getting so much attention. There are tons of cities all over the world that have these size units and smaller. This includes NY (which has several apartments less than 100 sf), London, and many other european cities. As long as they have ample egress and ventilation it's just not an issue what the size of a place is. I don't get what the big deal is.

I don't really care that much about the cap, but it would have been better to make it an annual max so there doesn't need to be another huge debate when the limit is reached.

In general I'm glad there's progress, I only wish the minimum size was smaller.

Posted by: lyqwyd at November 21, 2012 11:06 AM

I don't have a problem with the units as others pointed out the market will likely eventually decide their fate (although I suspect the will become temporary living for new residents looking for a more permanent space, or long term living for the poor and elderly).

But let's be real, these are not the 'solution' to SF's housing problem. The solution is to phase out rent control, phase out Prop 13 (aka 'rent control' for home owners), and embrace density.

The reality of $2500-3000 one bedrooms is that even 'highly paid tech workers' are having trouble living in SF and Bay Area in general (since everything is this expensive from San Rafael to San Jose with even the East Bay becoming less and less affordable).

If the housing/cost of living problem is not addressed we will see Silicon Valley choke on it's own success (assuming the current tech boom isn't another bubble just waiting to burst)

Posted by: badlydrawnbear at November 21, 2012 11:19 AM

Posted by: badlydrawnbear at November 21, 2012 11:31 AM

Why does it take a special approval by sf's local government to approve this when it's already permitted by the california building code.

Posted by: condoshopper at November 21, 2012 12:26 PM

lyqwyd wrote:

I just can't believe this whole thing is getting so much attention. There are tons of cities all over the world that have these size units and smaller.

I can't believe people can't believe why making these units legal is worthy of so much attention. I guess I just think it's obvious, but let me take a stab at explaining it.

I wasn't at the board meeting and didn't watch it on web video, so I'll just go with this; from The Atlantic cities, Micro-Apartments So Nice You'll Wish Your Place Was This Small, second 'graph (obviously, the author of the piece, as lyqwyd seems to, thinks micro-apartments are a great idea):

The proposal has stirred some debate in recent months. Developers say it's the natural response to soaring rents and a growing single population. The average studio in San Francisco now rents for more than $2,100, and roughly two in five city residents live alone. Tenant advocates fear the new rule might displace affordable housing and set a dangerously cramped new living standard.

Emphasis mine. I haven't heard any economic arguments from the opposition, so I'm playing devil's advocate here.

If these units are substantially more profitable than traditional studios, then the folks opposed might be right to fear that the overwhelming majority of new buildings will be micro-apartment complexes. If that comes to pass, and the micro-apartments are more expensive than the market price of traditional studios (as they are, currently on a per square foot basis), then it seems reasonable to project that the cost of traditional studios will rise, rapidly, because the additional space over micro-apartments constitutes an additional amenity once micro apartments become more common.

When the new market equilibrium is reached, a lot of folks (new market entrants; all those 'highly paid tech workers' fresh out of college from elsewhere in the country) that really wanted a traditional studio and not a nicely-finished prison cell might be coerced by market forces (i.e., wages prevailing in the local labor market) to rent a micro-apartment because that's all they can afford, whereas before the micro-apartments were legalized, they would have been able to afford a traditional studio.

For neoclassical economists, that might be all well and good that the marketplace is "operating more efficiently".

But make no mistake, the standard of living went down because what was the norm of living space was reduced, newly entering market participants were forced to accept it, thus positive utility shrank.

I think that in the minds of those who oppose this change, that doesn't equate to "progress", lyqwyd.

Posted by: Brahma (incensed renter) at November 21, 2012 12:50 PM

Whatever you just said, Brahma, was so tortured that I can't even follow it.

Posted by: curmudgeon at November 21, 2012 12:53 PM

Constructing enough micro-apartments to satisfy demand won't raise prices on existing studios. Existing studios already are renting for the maximum that anyone will pay for them. Building micro-apartments means (if anything) that there will be fewer renters competing for traditional studios.

Posted by: Dan at November 21, 2012 12:59 PM

I should acknowledge however, that in the scenario described above by Zig, someone would be swapping the negative utility imposed by having to deal with a tyrannical master tenant for the negative utility of living in a smaller space. For some, that might be a worthwhile tradeoff.

When I was in college, I had that situation and the "tyrannical master tenant" was a dead ringer for Matthew McConaughey minus the tan who ran different women in and out of our shared place like it was a tokyo love hotel. I decided to move into a smaller, yet more expensive place just to avoid having to hear other people doing the wild thing at 2:30am while I was trying to get my homework done.

I found a (traditional) studio. And the second month after I moved in, a pair of newlyweds moved in next door, and apparently placed their headboard directly against the wall I shared with them and had one side of my bed against. You can guess what happened every night and morning thereafter until the end of the academic year, when I moved again.

Looks like Patrick Kennedy, who I have no doubt will make money hand over fist with these micro-apartments, took that into account. From The Atlantic Cities link above:

…also invests a great deal of money and effort into sound-proofing its units, says Kennedy. Thicker walls, acoustical mats, additional sheet rock, specially made electrical outlets. He likes to think a person can have a Primal Screaming therapy session without waking their next-door neighbor.

"High-density places need high-density sound-proofing," Kennedy says. "A small place can be quite pleasant provided you don't have to listen to your neighbors."
Quite.

Posted by: Brahma (incensed renter) at November 21, 2012 1:19 PM

So the worry is that if we build a bunch of micro-units that the presence of those micro-units will cause the price of regular studios to rise more rapidly than they otherwise would?

I can't even begin to fathom how this would happen.

Posted by: anon at November 21, 2012 1:24 PM

@Brahma

"Tenant advocates fear the new rule might displace affordable housing..."

Won't happen. Affordable housing is subsidized, these would be market rate, two completely different groups of people, both the tenants and the developers.

If affordable housing beneficiaries choose these over their subsidized housing, then first it says more about the affordable housing than the small units. Second it is their choice, how is that bad?

"... and set a dangerously cramped new living standard."

Please explain how these are dangerous.

The rest of your statement seems to be a bunch of wild hypotheticals without any supporting evidence or basis in reality.

Here's the reality, smaller units will rent for less than bigger units, all else being equal. Some people will choose the savings over the space. As long as the units are safe, there's no harm in this. The number of units built will be determined by the number of people who want them, but they will never be more expensive than a similar, but larger, unit. This only increases the supply of affordable housing.

I have no idea how your post @ 1:19pm has anything to do with the size of apartments.

Posted by: lyqwyd at November 21, 2012 1:40 PM

curmudgeon and Dan: lemme see if I can do better.

At some time in the near future, we assume that micro-apartments are available but not ubiquitous.

Now we introduce two developers, Bob and Alice, who are each completing the planning and approval process for new buildings in the same neighborhood, with almost everything else similar.

Bob is building a complex of micro-apartments. Alice is planning on traditional studios in her building.

Bob completes his building three months before Alice, and prices his micro-apartments at $1,500 per month for one tenant and like the Seattle situation described above by 'anon', the building 'rents out' within a month. Because in absolute terms, the units are more "affordable".

Alice completes her building and hears about what happened across the street with Bob's building. Is she going to price her traditional studios at $1,500? No, because then she's not being compensated for the additional space her units offer tenants over what's available across the street. She's going to set the price more than the pre-micro-apartment-featuring market-clearing price.

If Alice gets $2,750 per unit in her building, then the new equilibrium will reset higher. This situation is what militates in favor of a cap, isn't it?

Contra what Wai Yip Tung wrote above, the risk to future renters of studios is that micro-apartments are a success, not that they "turn out to be failure and become urban blight", because if they're successful, then they'll raise the overall price level. Urban blight doesn't.

Posted by: Brahma (incensed renter) at November 21, 2012 1:48 PM

Does anyone know if these authorized MicroUnits in SOMA (Mission St) are available for PURCHASE? Or are they build by Developers -- smartspace -- and rented out?

I have the money to buy, and don't want to rent 1 of these.

And yes, I am a Startup World-Problem-Solver guy like 1 of you here mentioned, and intend on using the apt to crash in, and bring girls over, that's all.

If you have info on purchasing, let me know

Posted by: Chris 'Topher at November 21, 2012 1:52 PM

@Brahma, you're latest scenario has so many assumptions, and so few of them based on reality, as to be meaningless. Things simply don't work that way.

Posted by: lyqwyd at November 21, 2012 2:02 PM

lyqwyd , I don't believe that the units proposed are "dangerous", that was a quote from the author, Eric Jaffe, at The Atlantic Cities summarizing one complaint from some people opposed.

Same goes for the mention of "affordable housing". You're of course correct that "affordable housing" per se is subsidized, so I think we're really talking about market rate units that are at the lower end of the market in terms of price.

I should have stipulated in advance that I was going to propose hypotheticals, that's all we have to deal with here, because we can't know the demand level for micro apartments, because at present there are no micro apartments. The people on the pro-development side are also proposing hypotheticals.

Posted by: Brahma (incensed renter) at November 21, 2012 2:03 PM

your hypotheticals have to be based on reality to have any value.

You also need to understand that somebody does not just get the price they set for an apartment. Alice does not get $2,750 just because she asks for it, nor because Bob gets $1,500.

You also need to address realistic alternatives, example what happens if Alice finishes first?

You also understand that demand is limited, if Bob builds his building, then demand is reduced for Alice's as the total market is finite.

All of those factors and more make your hypothetical meaningless.

Posted by: lyqwyd at November 21, 2012 2:20 PM

@Brahma - why would Alice not simply ask $2750 per unit in her building with or without Bob's building selling out? Are you assuming that she will simply be too stupid to read the market and adjust to demand without small units showing her the way? That seems profoundly unlikely. If the units will rent for $2750, she'll ask $2750. If Bob's units aren't built, they'll likely rent for even more than $2750.

Posted by: anon at November 21, 2012 2:23 PM

I'd be more open to arguments for these little hell holes if people supporting them would point to examples of them that work. Instead, we keep getting examples of group housing or rooming houses or dorms, all of which include some sort of shared living spaces.

And to say that New York or Paris or London have smaller places isn't quite the same as saying they allow new construction of such places.

Posted by: BobN at November 21, 2012 4:15 PM

How about you explain what's wrong with them.

If people want them, then why should they be banned? If nobody wants them, then there's no need for regulating them as they will not be bought or rented, and thus they will not be built.

Posted by: lyqwyd at November 21, 2012 4:27 PM

We already have this in San Francisco. They are called SRO's and they are in the Tenderloin. I've been in quite a few of them and I don't see how this could work in our city. Young tech workers will not live here, except when it first opens. Instead, the population profile will shift to reflect the same demographics of the Tenderloin - immigrant families, the elderly, the drug addicted and mentally ill, with an odd tech worker here and there.

Posted by: SFRes at November 21, 2012 4:29 PM

I disagree that young professionals will not want these places. My sister is a recent grad and currently lives with 3 other people in a 1200 sf apartment, she would definitely prefer to live in 220 sf on her own if the price was right. She can't afford a studio in a decent neighborhood, but if a smaller place was available at a few hundred less a month, that might work.

What's wrong with immigrants and the elderly living in small apartments?

Drug addicts and mentally ill are going to live somewhere, better in a tiny apartment than on the street.

Posted by: lyqwyd at November 21, 2012 4:44 PM

These micro units will be a hit. Rich Chinese cash buyers will scoop them up and rent them to students, temp housing needs, etc

Posted by: Elmo at November 22, 2012 12:12 AM

If there ends up being any upward pressure on the pricepoint for conventional studios by these setting a new floor, it could end up being netted out by the increase in the supply of available units.

Really like these units and there is only reason I wouldn't want to live in one (aside from the fact that I hope I'm done renting). That would be the proximity between the refrigerator and the bed. Just can't sleep with the compressor and fan cutting in and out all night. Sound deadening between units is a real plus but if I were designing these I'd be looking for a way to relocate and/or shield the murphy bed. The importance of quality sleep cannot be under-estimated.

Posted by: GoodBuyBadTimes at November 22, 2012 8:16 PM

What an awful idea. The city already has a shortage of reasonably priced housing stock for families, and Weiner has somehow found a way to make the problem (slightly) worse.

These awful little things are undoubtedly going to be popular with developers and landlords, are going to push up the price of slightly bigger studios, and will further contribute to the city's position as a stopover for mid twenties techies pre-family who subsequently move to the burbs.

There are perfectly legit reasons for the city to set a minimum quality standard for housing even if it means setting the price bar slightly higher. I hate these things.

Posted by: Jack at November 23, 2012 8:35 AM

@Jack,

These units will reduce demand from roommates, thus lowering the price of multiple bedroom apartments. Many people live in roommate situations because they cannot afford a studio at current prices, thus a smaller, more affordable unit will pull some people out of roommate housing situations. This will correspondingly result in less overall demand for multiple bedroom housing, keeping it more affordable than it would otherwise have been.

These apartments will only be popular with landlords and developers if they are popular with people who want to live in them.

Tech workers are here to stay, so you might as well learn how to deal with that fact, rather than bemoan the mythological transient.

If your real complaint is that housing is too expensive then it makes no sense to want to restrict it's availability.

Posted by: lyqwyd at November 24, 2012 9:30 AM

“New York City’s housing codes have not kept up with its changing population, and currently do not allow an entire building of micro-units,” declared a press release issued by Mayor Michael Bloomberg’s office in July. Not to worry; the mayor has a plan: Developers have been invited to submit proposals for new residential construction on a Manhattan parking lot owned by the city. For this particular project, the city will waive zoning regulations that require all new apartments be at least 400 square feet. The new development will consist mainly of “micro-units”—studio apartments that combine general living space, a kitchenette, and a bathroom into a total footprint of just 275 to 300 square feet.
See http://reason.com/archives/2012/10/28/bring-back-the-flophouse

Posted by: formerly%whatever at November 24, 2012 4:47 PM

Markets move, that's what we're (or at least, I'm) really talking about here. anon wrote:

why would Alice not simply ask $2750 per unit in her building with or without Bob's building selling out? Are you assuming that she will simply be too stupid to read the market and adjust to demand without small units showing her the way? That seems profoundly unlikely. If the units will rent for $2750, she'll ask $2750.

Before Bob's building is completed and rented out, Alice wouldn't have asked for $2,750 or even $2,200 because that wasn't the market price at the time. So she wouldn't think that she could get $2750 per unit. She wasn't too stupid to "read the market", the market price moved when Bob's building came to market and what happened soon thereafter.

Markets move due to changing circumstances all the time. After Bob's building rents out all of its units, then expectations change, the micro-apartments now form the low end of the market, and Alice will expect to be compensated for the extra amenities offered, in this case, floor space, in her units and ask for $2,750 for her traditional studios.

I'm not saying that rental real estate is a perfectly efficient market, but at some reasonably near point the difference in per unit pricing is going to get "priced in", and new entrants to the market on the demand side are going to pay for it.

Posted by: Brahma (incensed renter) at November 26, 2012 12:13 PM

The market price for Alice's units would go down, not up, because of Bob's building.

Adding supply lowers demand (and therefore prices), it doesn't increase it.

Posted by: lyqwyd at November 26, 2012 12:18 PM

That's a strange world you're living in Brahma. I think many folks selling things would love it if they could simply offer a lower quality product for a higher price in order to inflate the cost of their current products.

lol.

Posted by: anon at November 26, 2012 12:25 PM

lyqwyd wrote:

How about you explain what's wrong with them.
If people want them, then why should they be banned? If nobody wants them, then there's no need for regulating them as they will not be bought or rented, and thus they will not be built.

This is a brilliant little example of both rhetorical strategy and market fundamentalism and deserves to be included as an example in a first year first semester college textbook.

First, lyqwyd is asking rhetorically, "why should they be banned?", as if Scott Wiener recently introduced legislation outlawing (or "banning") micro-apartments.

When in reality what is happening here is that Scott Wiener recently introduced legislation changing the status quo to affirmatively enable a few interested developers (and presumably all future comers) to build and bring to market units that were previously illegal under the building code.

The units under discussion were previously illegal because a previous board decided that a populous city in a non-third world country should have a certain lower limit for what constitutes a decent livable unit and then enshrined that decision into law.

That's what I think BobN was aluding to when he described them as "little hell holes". Even if that's not right at all, when a governmental body makes changes to existing law lowering the standard of living (or at least enabling it to move lower), I don't think that constitutes "progress".

Next, we get "If nobody wants them, then there's no need for regulating them as they will not be bought or rented, and thus they will not be built." Left out here is the consideration for the mechanism for discerning how we find out "if nobody wants them". From the looks of things, Supervisor Wiener is not calling for a survey or a study beforehand.

Instead, developers are going to be allowed to bring the units to market, and that's how we will find out "If nobody wants them". Once they are on the market, of course, then that means the units have been built. And that means they'll affect the market. So lyqwyd's begging the question.

Just going by what was quoted in the Chron article, opponents of Supervisor Scott Wiener's micro-unit legislation believe that market action can and frequently does force people to adopt living tactics that don't "want".

Someone working as an entry-level cook in a casual dining restaurant, for example, may not "want" to live in a very small apartment, or with a "a tyrannical master tenant", but the pay they earn on their job (i.e., a labor "market" which creates and sustains jobs that pay less than the cost of living) may force them to do just that. But in lyqwyd's world, that cook was Free To Choose a la Milton Friedman, what he wanted to do, and so it follows using the ironclad market fundamentalist logic, that no regulation is required because potential tenants will "freely" decide not to rent them, and ergo, the developer will anticipate this lack of demand and never build even the first building of micro-apartments.

Um…right. There is almost no chance at all that these units won't be absorbed by the market, I agree with Elmo on that. That doesn't make them a good idea, except for the developers that, like I said above, will make lots of money on them.

And then proponents will say "see, there was no need for regulating micro-apartments, because there was all this demand, as evidenced by the fact that the building rented out."

Posted by: Brahma (incensed renter) at November 26, 2012 1:40 PM

lyqwyd, with respect to your comment at 12:18 PM, its not as simple as you're making it out to be.

When Bob's building rented out right away, what that told Alice is that, regardless of the fact that supply was added, increased demand came on the market and absorbed the supply.

ceteris paribus didn't (and doesn't) apply, and therefore prices aren't moved lower. So she thought, correctly, that she could get a higher rental price to compensate her for the increased floor space in her units.

Switching to the real world, I think we've all agreed here that there's significant latent demand, as potential tenants currently living with unwanted roommates or relatives, etc. and want their own units will take up these micro-apartments when they come available.

That's the increased (future) demand that's not currently affecting the market (or affecting prices).

Posted by: Brahma (incensed renter) at November 26, 2012 2:02 PM

anon wrote:

I think many folks selling things would love it if they could simply offer a lower quality product for a higher price in order to inflate the cost of their current products.
happens all the time, it's a known phenomenon in behavioral economics, called "price anchoring" or "anchoring effects", if I recall correctly.

And yes, they do "love it". So will Patrick Kennedy when his building of micro-units sells/rent out. lol.

Posted by: Brahma (incensed renter) at November 26, 2012 2:12 PM

That's the increased (future) demand that's not currently affecting the market (or affecting prices).

If you accept that, then I have no idea why you also don't accept the fact that if this does prove to be true, there will be demand removed from the market from wherever those folks are moving from. If folks start moving out of master tenant situations and into micro-units, the value of the extra rooms for the master tenants goes down, making roommate situations cheaper. Rooms for rent on craigslist will go down, meaning an increase in affordable housing arrangements. This is how almost all affordable housing is created by the market - it becomes old and/or new housing types make it less desirable.

Or are you simply saying that adding these units will drive all housing higher, regardless of type or place? If that's the case, then doesn't ALL new housing do that? Why not ban all new housing then, in order to keep prices down?

I'm just not following what it is that's special about these units that would cause them to operate outside of normal market conditions.

Posted by: anon at November 26, 2012 2:16 PM

Brahma,

1 - In theory, the introduction of these units would not be instantaneous. Therefore if the first attempt failed it would not be followed by others. That's the theory if SF were a functioning market of course.

2 - I agree with you that these units would be absorbed whatever the disconnect between them and the actual need. After all, not all SF denizens can live in 500 or 600sf per person (rough US standard) because each 500sf often costs 300-400K and can rent for 1800/month or more at market rate.

3 - Indeed, some wages pay less than what you see as the cost of living and yet these people still stick around. They accept sub-par living standards or they are using built-in entitlements (like a rent-controlled tenant). If some people are stuck spending more than they make in this city, common wisdom would require they reconsider their choices. But living in SF is already an irrational premise in itself (wanting to live on the San Andreas Fault).

4 - These units would affect "some" of the upper layers of the market. If you have 4 roomies sharing a 4500/month 3BR apartment, one or 2 of them would pick a 1500/month small studio just for the sake of privacy like having your own bathroom.

Posted by: lol at November 26, 2012 2:31 PM

@Brahma

This is simple supply and demand. Bob's units will reduce demand for Alice's, thus lowering prices for her.

Are suggesting this increased future demand is coming from outside the system, and will only arise due to Bob's building? If so you have a lot of explaining why these units will cause such new demand. If not, then there is no increased demand, as a supply increase will result in a decrease in demand.

regarding your comment at 1:40pm:

Change my question 'why should they be banned' to 'why should they remain banned'. Your next 5 paragraphs are now moot.

'Left out here is the consideration for the mechanism for discerning how we find out'

The only way to find this out is to end the ban. A city sponsored survey or study would only waste money and still not answer the question. As developers are in the business of making money, they would not build them if they felt there was no demand.

If your entry level cook chooses to live in this unit, it is their choice. They've chosen it over their current living conditions, thus they feel it is better. How is that bad?

'There is almost no chance at all that these units won't be absorbed by the market.'

Of course, which means there are many people who want these units. Nobody is being forced into them, as they are open market, not subsidized. If they are filled it's because people want to be in them given all their other available options. Again I ask how is this bad?

I'm for letting people choose for themselves how they want to live, you appear to be of the opinion that you know better than them what is right for them.

'And then proponents will say "see, there was no need for regulating micro-apartments, because there was all this demand, as evidenced by the fact that the building rented out."'

Yes, that's exactly what I'll say, in fact it's what I, and others, have already stated numerous times.

Posted by: lyqwyd at November 26, 2012 4:01 PM

lyqwd-

I have to agree with Brahma on this one - you are vastly oversimplifying that "supply and demand" will lead to lower prices for Alice and Bob. We have seen that there is tremendous pent up demand for (relatively) affordable housing in SF. So it is hard to calculate what level of new housing would significantly lower prices for similar housing across the board. The injection of thousands of units in live-work lofts, then in high-end condos has done little to temper prices for mid to high end housing - look at the boom in Noe Valley. So Brahma is correct that Alice (and other owners of nice studios) will raise prices for their units if they see the micro-units going for $1500. after all, they are offering a "better" product. And it is likely there is plenty of demand for that product. My guess is that it would take thousands(?) of micro-units to shift the demand curve enough to significantly lower prices across the board.

However, another economic recession a la 2000 that causes an outmigration of young highly paid workers will certainly do that. But then today's housing innovation may end up being bleak boxes of micro-poverty, because no one who still has a job will want to live in them.

That's also why I agree with a cap for now. We don't want these things popping up like mushrooms after a rain, only to find out 5 years later they are the housing equivalent of Edsels. Look at what happened with live-work lofts. Because of construction lead times, you could easily see a dozen of these developments in the works even before the "market" has demonstrated exactly what the true demand is. And some developers don't operate on a long horizon - most just want to avoid being the last one to catch the falling knife. In the end, it may be the City, and the rest of us, have to live with the negative externality of blighted micro-units.

Posted by: kddid at November 26, 2012 4:56 PM

My guess is that it would take thousands(?) of micro-units to shift the demand curve enough to significantly lower prices across the board.

I don't think anyone's talking about prices actually dropping. The point is to lower prices from where they would potentially be without new supply coming online. That may mean a drop, but in a market already as under-supplied as SF that likely just means that prices increases are slightly lower than they otherwise would be.

To many that view it without thinking that way, they simply see "OMG! Studios were $1800 last year and now with smaller studios they're $2000 this year. That must mean that these small studios increased the price by $200!" The problem with this is failing to take into account what the price would have been absent any new housing being built. I suppose it's possible (though very, very unlikely, IMO) that these new units would "lift the market to a new level", but it seems more likely that prices are simply rising rapidly across the board and likely to go higher no matter what (barring tens of thousands of new units being built per year for several years).

Posted by: anon at November 26, 2012 5:12 PM

^^^ exactly.

Posted by: lyqwyd at November 26, 2012 5:33 PM

Sups are not on my side. This should not have passed. These are horrid little hovelettes -
once they are built it will be a long time before anyone has enough cents to knock them down.

Posted by: kathleen at November 26, 2012 7:00 PM

why?

Posted by: lyqwyd at November 26, 2012 9:50 PM

Can some non free market ideologue with sense help me out on this? lyqwyd wrote:

The only way to find this out is to end the ban. A city sponsored survey or study would only waste money and still not answer the question. As developers are in the business of making money, they would not build them if they felt there was no demand.
First, there is no "ban", why the hell do you keep saying that? Are you pimping for Patrick Kennedy?

As far as I can tell, the lower limit on the size of apartments is and has been in the building code for tens of years, if not longer. What Supervisor Wiener is proposing is to affirmatively change the existing state of the law so that Patrick Kennedy and people like him can build new buildings offering units with less livable circumstances than what is currently allowed. That is not "lifting a ban", it's enabling a condition that didn't exist before.

If your entry level cook chooses to live in this unit, it is their choice. They've chosen it over their current living conditions, thus they feel it is better. How is that bad?
Flush toilets. Let's talk about that. Now that you've shown me the error of my thinking, lyqwyd, I have a modest proposal

For their next magical trick, Patrick Kennedy and developers like him should propose that Supervisor Wiener introduce legislation lifting the "ban" on apartments with no flush toilets, because, after all, if a new building goes up with no flush toilets in any units, those units will be cheaper to build and cheaper for tenants to rent, and if people freely chose to live in those units with no flush toilets, then it is their choice and of course the perfect free market will have spoken and told us there is pent-up demand for apartments with no flush toilets.

There are tons of cities all over the world
with homes that omit flush toilets. How dare the San Francisco Board of Supervisors ban the use of chamber pots when if they would just lift their senseless ban, the free market would point out that lots of San Franciscans will freely chose to use chamber pots and thus they feel it is better than a flush toilet! How is that bad?

The victorians lived for at least sixty some years emptying their chamber pots by throwing the contents out the window in the morning and nothing bad happened. Why won't the Board of Supervisors see that this is the free market way?

Posted by: Brahma (incensed renter) at November 28, 2012 3:56 AM

Brahma - Did Washington and Colorado just "end the ban" on marijuana being used for recreational use, or "affirmatively change the existing state of law". What is the difference between the two statements?

At one point in time - before the city enacted a lower limit on the size of units - developers could build something of this size. Then the law was added - banning these units from being built. Now, the law is being changed to lift the ban. I don't see what you're missing?

The flush toilets nonsense is clearly not safe. Everyone here in this thread has continually said that it would (and should) never be supported to allow the building of something unsafe.

Posted by: anon at November 28, 2012 7:27 AM

"The victorians lived for at least sixty some years emptying their chamber pots by throwing the contents out the window in the morning and nothing bad happened."

You mean like cholera?

Posted by: The Milkshake of Despair at November 28, 2012 7:30 AM

Milkshake, yes that's exactly what I was sarcastically getting at.

Posted by: Brahma (incensed renter) at November 28, 2012 12:19 PM

Brahma, your arguments are ridiculous and irrational.

Ban, limit, prevent... whatever you want to call it the meaning is the same: apartments under a certain size are not allowed. They once were, meaning at some point they were banned. Today the ban is being lifted. Hooray!

Your toilet argument is laughable. I've repeatedly stated I have no problem with regulations related to health and safety.

Posted by: lyqwyd at November 28, 2012 12:22 PM

Brahma - going back to 19th century sanitation is now equal to 50 sq ft less space to store stuff? I'm baffled at the equivalence you're drawing here, even if it is in jest (I'm not sure who you're intending to mock here? Everyone has agreed that no weakening of any safety or health-related regs should happen).

I once moved from a 3000 sq ft home to a 900 sq ft apartment. Did my living conditions go down? I certainly didn't think so because I now had other additional amenities, but I'd assume that you would say that my living conditions obviously went down?

Posted by: anon at November 28, 2012 12:24 PM

lyqwyd wrote:

I'm for letting people choose for themselves how they want to live, you appear to be of the opinion that you know better than them what is right for them.
Continuing the flush toilets (indoor plumbing, really) analogy from above.

Yes, I am against "letting people choose for themselves how they want to live" if it means that I have to endure having the contents of a chamber pot dumped on my head or close to it as I walk down a street in SOMA or Mission Bay in the morning.

I am firmly of the opinion that I know better than those that think that, if it results in a cheaper absolute value of rent on a monthly basis, they should be enabled to "decide for themselves" that they want to rent an apartment with no flush toilet and employ a chamber pot instead.

For that reason, I would oppose future efforts by Supervisor Wiener to lift the "ban" on apartments with indoor plumbing, even if it means the all-singing, all-dancing, source-of-all-that-is-good-and-true-and-beautiful "free market" can't work it's magic and provide cheaper apartments for those that "freely choose" to live life without immediate access to a flush toilet.

If that means that someone thinks I believe I (or the Board of Supervisor) "know better than they do what is best for them" (because they "freely chose" to use a chamber pot), then so be it.

Posted by: Brahma (incensed renter) at November 28, 2012 12:35 PM

Repeating the same failed toilet argument over and over will not make it relevant.

Posted by: lyqwyd at November 28, 2012 1:32 PM

lyqwyd is denying that the "free market" can force people into living conditions that they don't want, and that people "freely chose" them no matter what. That is what's ridiculous and irrational.

Even Milton Friedman didn't try to get away with that argument. Friedman was opposed on ideological level to having government choose the distribution of goods and services, and as an economist he thought markets were a more efficient mechanism for producing prosperity. But as far as I can tell he never pretended that the marketplace didn't or couldn't force people into jobs or living conditions they found undesirable.

I think that it's a reasonable approach for local government to set a floor for reasonable living conditions and have the marketplace adjust. This isn't (or at least shouldn't aspire to be) a squalid city in a third world country.

You don't like the 19th century sanitation reference, okay.

I going to go back to the example of the cook that makes less than what it takes to live in San Francisco. Recall that up until about six or seven years ago, it was incredibly common for restaurants in The City to not offer their employees health care. lyqwyd would look at that fact and just thump his copy of Free to Choose like it's the revealed truth from god and say, "see the free market is at work! People are freely choosing to work at jobs that don't pay enough to cover basic living expenses like health care coverage!

San Francisco's Board of Supervisors said, "sorry, we don't agree, and even if people are freely choosing"…, the marketplace isn't getting the job done and we're going to modify what the marketplace is doing and mandate that many restaurants pay a specific minimum amount of money toward their workers' health care.

Milton Friedman might have shifted in his grave at the time, but the Board decided, correctly, that there needed to be a floor in place. Lots of people didn't like it and still don't, but the workers who have health care are better off.

The reason that lyqwyd wants to deny, in the face of all common sense, that the wonderful, perfect and source-of-all-that-is-good-and-true-and-beautiful free market has any coercing power, is because he wants to employ circular and question-begging logic to support his contention that there is some unmet demand for currently-substandard apartments that what he calls a "ban" is preventing from being met.

Once the units are on the market and people are renting them, then he can say that provides conclusive evidence that his a priori contention was correct and that the "ban" should have been "lifted". Get it?

Posted by: Brahma (incensed renter) at November 28, 2012 2:01 PM

Brahma, putting words in people's mouths doesn't mean they said them.

Allowing these apartments gives people more choices. If they choose to live in it it is because they find it more advantageous than their other options. That is the free market. You would prefer to restrict peoples choices.

You've yet to explain why these are unreasonable living conditions.

I have no idea what any of your restaurant rant has to do with small apartments.

Posted by: lyqwyd at November 28, 2012 2:52 PM

Lyqwyd's magic free market is remarkably bad at regulating behavior that may have negative externalities. That's my concern about these apartments. Developers will rush in looking for a quick buck in the currently-tight rental market. But they are likely to overbuild (see live-work lofts), and in a less rosy future economy they will no longer own or control the units and one can easily see these places descending into the next version of SROs. City government has the responsibility - and every right - to regulate the housing stock housing sizes and location to maintain the common welfare. This is not "choosing how people live", this is regulating the marketplace for the betterment of the whole. lyqwyd agrees with regulation for health and safety sake, why should this be any different?

Posted by: kddid at November 28, 2012 3:01 PM

@kddid

You know there's a limit of 375 on the number of units that will be built right? How will developers overbuild? How is this for the betterment of the whole, you've provided no support for your concerns. Please explain how the reduction in minimum unit size will be harmful.

What's so terrible with developers overbuilding? It hurts the developers (they do not make the money they had planned) and helps renters as more units mean prices will be lower than otherwise.

In a less rosy economic future you get SROs or you get overfilled large apartments. Bad economic times will not only affect units smaller than the current minimum.

The regulations you describe are most certainly choosing how people live. And in fact the supervisors have fulfilled their responsibility by allowing the reduction in minimum size. I'm happy that people will now have more options in their housing choices.

Posted by: lyqwyd at November 28, 2012 3:23 PM

I'm also curious to know how the "overbuilding" of live-work lofts negatively affected anything? Live-work lofts are insanely expensive and not blighted at all from those that I've seen. Are there some empty live-work loft neighborhoods out there somewhere that I've missed?

Please let me know, I'd like to rent one, and would love it if they're going for cheap due to all the overbuilding.

Posted by: anon at November 28, 2012 4:48 PM

I'm confused by Brahma's continuous attempts to bring in other completely unrelated topics. No one is being a free market fetishist in this thread. I'm downright socialist compared to most folks in the US, but I'm also strongly in favor of individual liberty.

Socialized healthcare? Of course. (single payer, please)
More income redistribution to curb inequality? Yes.

No units allowed below a certain size, forcing people to either not live here at all or cram into apartments with 30 others? Um, why? What is this accomplishing other than misery? Seriously, I'm curious. I guess it's just the usual selfish reasons of folks wanting to restrict supply of housing in order for their house to be worth more? That's all that I can see.

Posted by: anon at November 28, 2012 5:09 PM

Yeah, I'm with you anon, pretty much the same in personal beliefs. I'm all for socialized healthcare, and inequality is growing in this country, which is not good.

Posted by: lyqwyd at November 28, 2012 7:01 PM

lyqwyd et. al. - I am well aware of the cap, and support it. I am not arguing against these kinds of units per se, but against the idea that there should be no limits on them, especially in the early days. This represents a new kind of housing for the city, one which may not support the housing goals articulated by the City's General Plan and most urban planners (i.e. we need more affordable units for families). I think it makes sense to go slow and see whether the demand is there for these kind of units, and see what happens with them before allowing them to proliferate. I could easily see some of these being used as transient AirBnB units.

My point about live-work lofts was not that they are blighted (though there have been a bunch of low quality ones that lost a ton of value and needed major upgrades) but that they exploded well beyond their supposedly limited niche and possibly displaced other housing types that would benefit the broader good (e.g. housing that had to meet affordable housing guidelines). In hindsight I think we could agree that the optimal housing mix in the emerging neighborhoods of SOMA and Third Street would include more traditional apartments and fewer live work lofts that use an enormous amount of space for very few people.


Posted by: kddid at November 29, 2012 9:37 AM

I suggested an annual limit rather than a fixed limit in order to avoid more time wasted debating them when the limit is reached.

Remember that lofts exist in such great numbers because of city intervention, not in spite of it. The city wanted to encourage artists, so made fees and other requirements lower for those type of buildings, which became more desirable for developers.

The city's regulations were responsible for the profusion of lofts by making them easier and cheaper, while at the same time more profitable, to build as compared to conventional apartments.

Posted by: lyqwyd at November 29, 2012 11:48 AM

lyqwyd - my point exactly. The proactive change to lower minimum square footage is similar to the changes that drove development of lofts. Developers seize on those changes to catch the next big wave, and are just as likely to overbuild as hit the demand sweet spot (given the lag time between approval and occupancy). So go slow seems right, to see how well these get integrated into the fabric of the neighborhoods. I agree with an annual limit, which slows but doesn't halt development, allowing developers and the city to see how the demand holds over time.

Posted by: kddid at November 29, 2012 12:39 PM

I'm not sure why overbuilding is seen as more negative than underbuilding? Maybe someone can explain?

Is it just because underbuilding usually just results in price increases, but no other obvious downsides?

If you set a limit, you're going to influence not only the amount that can be built, but also the number of developers who will even investigate the idea. A self-fulfilling prophecy is what I see happening - a couple developers rush to build, then others say "hmmm, we're getting close to the limit, let's not even try to step into that mess of bureaucracy to get the limit increased again." And what do you know - very little demand...

Posted by: anon at November 29, 2012 1:02 PM

@kddid

Actually the two situations are opposite. The loft issue was created by more regulation (treating lofts and conventional apartments as different), while this is reducing regulation (treating smaller apartments the same as their slightly larger cousins).

There is no regulatory advantage encouraging developers to build these apartments as compared to others.

But like I said previously, I have no problem with the cap, just wish it was annual (at a reduced number) so we don't have to have the debate again.

Posted by: lyqwyd at November 29, 2012 1:16 PM

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