May 8, 2013

Where Will San Francisco's Working Class Live?

Since the 2000 census, the population of San Francisco’s Excelsior district has grown by an estimated 6,300 people while construction of new homes in the area has been minimal. From the Examiner:

About 33 percent of single-family homes in the Excelsior district contain secondary rental spaces commonly known as “in-law” units, according to a survey conducted by the Asian Law Caucus.
Contrary to U.S. Census Bureau figures that indicate the neighborhood is primarily comprised of homeowners, the Excelsior is nearly 70 percent tenants – half of whom live in illegal in-law units, according to the “Our Hidden Communities” report released Tuesday.
Previous estimates suggested only 23 percent of San Francisco homes contained in-law units, said caucus staff attorney Omar Calimbas.

Characterized by the Excelsior's Supervisor John Avalos as housing of "last resort" for people squeezed out of other neighborhoods, while there might be many more in-law units than previously estimated, as tech employment in San Francisco continues to surge along with the development of market rate condos and apartments targeting the high-wage workers, will there be enough in-law units for all of San Francisco's working class to live?

San Francisco likely has tens of thousands of people living under the stairs [Examiner]

First Published: May 8, 2013 9:30 AM

Comments from "Plugged In" Readers

This is a big mismatch of housing to need in San Francisco.

My father and brother grew up in the Excelsior and at the time this was a neighborhood popular with returning WWII vets to buy a small row house and get out of the Mission with their traditional family. This is no longer the need or demographics and what is now needed is higher density housing. Otherwise you get more of the paved over driveways and the illegal dank apartments in garages

Posted by: Zig at May 8, 2013 9:51 AM

Another anecdote about SF housing, my brother is the rarest of birds, a real life local blue collar worker who worked his way up to management at an auto shop. He tells me stories of how his workers who don't live with their parents often are living in in-laws in places like Ingleside and the Excelsior but they are transitory and unreliable because they often give up and find jobs elsewhere in the Bay Area.

The other story is when I ask friends about their nephews and nieces who went to college, but who are creative type not involved in tech are now moving straight to Oakland. SF is not even considered now in many cases it seems.

It all bothers me quite a bit.

Posted by: Zig at May 8, 2013 9:57 AM

Rick: How can you close me up? On what grounds?
Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much.
[aloud]
Captain Renault: Everybody out at once!

Posted by: the_biker_elite at May 8, 2013 10:01 AM

Time to upzone the Mission. Build some affordable housing in tall towers, its done in Brooklyn, why not here?

Posted by: Sam at May 8, 2013 10:23 AM

Just to add, I say the Mission because of the BART stops. Its our only heavy rail system and can move people all around the Bay. Light Rail is cute and all, but in my opinion is generally a bad investment. Its hard to justify not building density around heavy rail however, at least in my estimation.

Posted by: Sam at May 8, 2013 10:25 AM

You could buy this for $209K and fix it:

http://www.redfin.com/CA/San-Francisco/1190-Revere-Ave-94124/home/1378646

$200K loan at 3.5% 30 year is @ $900 per month. $900 per month is 35% of $2600 gross monthly salary, or $31K gross annual salary. Add in Taxes and Insurance as you wish.

This is the how and why neighborhoods get turned around...

Posted by: savemore at May 8, 2013 10:40 AM

i actually thought about this just yesterday when i considered that my apartment may be converted and me evicted. it's sort of scary what's happening in this city right now. in other boom eras (pre-1980s), we've basically always had a laissez-faire development pattern, with various builders building for all segments of the market. these days, with how hard it is to get anything built, we have luxe and sros and very very little else. it's actually approaching crisis level, like where the state government should step in.

Posted by: david m at May 8, 2013 10:41 AM

Same place they live now: Oakland.

Posted by: formidable doer of the nasty at May 8, 2013 10:42 AM

Sam,
Large condo and apartment complexes are being built right now in the Mission and Market in the Castro along the BART lines.

You have the old Ford dealership across from Safeway on Market, the building going up on the Christmas tree hole in the ground at 16th and Market, another building going up near the Mint, several large condo and apartment complexes between Guerrero and Mission as well.

Tons of new apartments and condos on the rise along the BART and Muni rail lines.

Posted by: gribble at May 8, 2013 10:44 AM

"Same place they live now: Oakland." -formidable doer of the nasty

As always, you chime in with some inane comment. Fact: most SF residents are not wealthy. The city has 100,000 residents living under the federal poverty line, and the majority of everyone else lies somewhere on the middle class spectrum, from lower to upper. Tons of "them" (poor and middle class people) live in SF (I'm one of them, for the record, as is almost everyone I know who lives in SF), and wondering what the future holds for them is a legit concern.

Posted by: cbf at May 8, 2013 10:54 AM

A number of options:

Buy outside of SF, like Oakland or farther out

Buy in the SE neighborhoods of SF

Try to get into public or subsidized housing

Rent in a better part of SF, but learn to live with a smaller, less glam place.

These are all good, viable options, as illustrated by the "100,000 residents living under the federal poverty line" in SF. The issue is that people want a big, nice place that is also in a great neighborhood, and they want it cheap. Sorry. Either earn more money or downsize your expectations. My wife and I were just as happy in our tenderloin studio as we now are in our 4-BR castro house. If that can't be the case for you, then just get a place outside of SF, particularly prime SF. This is not rocket science.

Posted by: anon at May 8, 2013 11:16 AM

savemore,

I just checked the Street View of the very peculiar 1190 Revere (an hexagon house!). Apart from the corner retail business going on on your sidewalk, there's this poor guy laying on the street. Someone should draw an outline or something.

Posted by: lol at May 8, 2013 11:20 AM

Tons of new apartments and condos on the rise along the BART and Muni rail lines.

Yes, and they're all being built exactly to the maximum envelope allowed, meaning that they'd likely be much taller if only it were allowed.

Posted by: anon at May 8, 2013 11:20 AM

anon - I have noticed that people complaining about pricing in SF tend to ignore more moderately priced areas of the City. We know plenty of people that bemoan the pricing, and then turn around and move to the East Bay spending more than they would have in the Avenues, Excelsior, etc. Similarly the tenants-rights types focus only on displacement in fashionable neighborhoods. Why is there this sense of entitlement around here where everyone should have affordable housing in the finest neighborhood?

Posted by: rabbits at May 8, 2013 11:43 AM

"Light Rail is cute and all, but in my opinion is generally a bad investment."

Thank you Sam -- indeed.

And put that rickety T thing in Mission Bay underground so we can move quickly to MB, Dog Patch, Candlestick, other side of 101, Brisbane.

Does everything here need to feel like Mr. Roger's Neighborhood? (No offense to that fine show).

Posted by: Invented at May 8, 2013 11:55 AM

@gribble

It's my understanding that many of the projects in the Mission are 5-6 stories tall, do you have a link that says otherwise? I want a cluster of bland, low to middle income 20 story buildings, that are speckled all throughout Brooklyn, to be built in the Mission. This would allow the arts scene thats been fading there over the past many years to maybe have a resurgence.

Its simply absurd to me that SF imposes such strict height limits in this area. Of course oddly enough, I have no doubt that people would protest against bringing in this level of density even though it would lower prices and allow for more affordable housing.

Posted by: Sam at May 8, 2013 11:56 AM

@Invented

I worry that when a transit option appears along Geary, we will be build and be stuck with a light rail two to three car train for decades.

The only way to have a dense interesting Geary is with a functioning transit option consisting of a submerged heavy rail subway line down the length of it. I just can't see it ever happening, but I hope we won't waste the resources on some slow absurd light rail line, this isn't Portland.

Its also ridiculous that the BRT option, which was meant as a stopgap, is taking so long, I almost can't handle this city sometimes.

Posted by: Sam at May 8, 2013 12:01 PM

one thing to keep in mind is that the powers that be do not want more affordable housing in SF. That would mean more families, and families means kids, which also means lots of city expenses for schools, rec & park, etc. This is why you see so many 1BR condos being permitted. More property taxes per lot and fewer kids/expenses. A young adult and wealthy (private school) family playland is very good from a finances perspective. It is lousy from lots of other perspectives, but those are not driving the decisions.

Posted by: anon at May 8, 2013 12:06 PM

I am not sure there's an actual war on families with kids. The market finds a way to add density to a desirable city which in turn diminishes the amount of space available. Families are a collateral damage.

Also, there's just so much social engineering a city can do. They tried with Prop 13, rent control, renter protection, TIC conversion restrictions. It works at first but high costs always comes back in full force. It's a dam you can keep plugging but the water rises nonetheless and always ends up spilling over.

Posted by: lol at May 8, 2013 12:27 PM

Sam,

The Whole Foods project at Market and Dolores is eight stories high at the peak.

The New Mission Theatre complex looks to be at least seven as well.

The replacement for the gas station at Market and Divisadero is six.

It looks like most of the construction is five to eight stories tall.

The only residential towers I know of being planned are downtown/SOMA and the ones down in Bayview that are on hold because of the Chinese loans falling through. Oh, and the two towers going up in Mission Bay soon.


Posted by: gribble at May 8, 2013 12:30 PM

We need to increase density plain and simple.

In terms of what you do to find affordable housing, you move out of SF. That is exactly what my fiance and I will be doing. By the way, I also happen to be a business owner and job creator. Once I get tired of commuting into the city, I will move my company out of the city and then potentially out of the state. Cost-of-living is SF's and the Bay Area's achilles heel. It raises the cost of running a business, because you have to pay all of your employees and yourself an absurd wage to just live here. $100k/yr barely supports a family of 4 in the Bay Area, while it supports many other cities quite well.

Posted by: MarinaRenter at May 8, 2013 12:33 PM

"Where Will San Francisco's Working Class Live?"

Where they can afford to! Seems pretty simple to me.

Posted by: Sabatini at May 8, 2013 12:44 PM

I'm quite skeptical of Asian Law Caucus' result. The discrepancy is just too huge. From the San Francisco Socio-Economic profiles ACS 2005-2009, it states that the ratio of owner occupied unit is 73% v.s. 27% rented. Assuming nobody lies to census about their homeownership status and the discrepancy is entirely due to renters not reporting to census, your will need 143% of unreported renters to flip the ration to 70% renter v.s. 30% homeowner. This also means the population of Excelsior have to be 92368 instead of 37960 reported in census.

Given it is census bureau's mission and they have the resources available to get an accurate count, I'd think their is more credible compares to the survey using an unknown methodology done by Asian Law Caucus. I'll need lot more evidence to consider otherwise.

Posted by: Wai Yip Tung at May 8, 2013 1:37 PM

Lotsa campers in that Revere Street streetview. I wonder how much they rent for.

Posted by: ej at May 8, 2013 2:16 PM

I am watching this unfold in real time, and it's not just people living in old, undiscovered in-laws.

I live near the Excelsior, and have seen single family homes bought then renovated to include a new in-law (often illegally). Buyers know there is huge demand for either renters or extended families who are willing to live in relatively small places for lower-than-average rents. Like with many high-demand commodities, if it's undersupplied in the the legitimate marketplace, the gray- and black markets will find a way to supply it. Planning and DBI could care less, assuming the builders bother with a permit at all.

In general it's not a problem, but on my block alone we had 2 houses where the absentee landlords rented the house out by the room, with 8-10 people living in a 2br house with an illegal inlaw. That definitely has an impact on the neighborhood, with trash, parking, noise, etc.

Posted by: kddid at May 8, 2013 2:20 PM

In recent conversation from a two-income couple: "We can't afford to rent a place, so we are going to buy. Rates are so low . . . "

Yes, ultimately more housing supply... But short of that, phasing out rent control (I know it will never happen), would go a long way towards loosening up housing in the SF. A huge percentage of housing is "locked up" leading to a circularly reinforcing tight supply, accelerated rate of cost increase and an unintended consequence of aging the city.

Bullish for purchase prices for the next couple of years. Not necessarily bearish after that, but definitely uncertain once Fed distortions go away.

Posted by: gray at May 8, 2013 2:33 PM

@Wai Yip

I agree, that discrepency in ratios seems very suspect to me.

Posted by: lyqwyd at May 8, 2013 2:40 PM

"We can't afford to rent a place, so we are going to buy. Rates are so low . . . "

I'd like to know where. After bidding and losing on 5 houses in SF myself it seems low rates are priced in. Our 150K over list bids are just not cutting it. I wonder if your friends are really looking at the sale prices here or the list?

Posted by: Zig at May 8, 2013 3:44 PM

I'm with Zig. I have routinely seen 20 to 35% overbids these past 6 months in a 2-block radius around my place.

Posted by: lol at May 8, 2013 3:55 PM

It looks like these Revere st locals aren't to happy about being on google street view!

Posted by: mwsf at May 8, 2013 4:00 PM

Low rates are great for re-fi's. but if you're bidding on anything that's competitive and you have a loan contingency you will probably not get the property. Simply too much cash in the marketplace.

Posted by: Truth at May 8, 2013 4:36 PM

Has anyone done the math on how close we are to tipping away from majority-rent controlled in SF? With all the new construction and with the Ellised pre-1979 buildings, is it possible that within a reasonable number of years the electorate here would be different enough to be willing to do something about rent control? I'm with @gray on how much housing is "locked up".

Posted by: 7by7 at May 8, 2013 4:57 PM

^^ Hoodie Guy in that streetview looks to be apprenticing Sith Lord.

Posted by: jack at May 8, 2013 4:58 PM

Trying to keep prices low in the city of San Francisco can only be accomplished by raising crime and making the neighborhood so unappealing that professionals won't risk living there. The city government has succeeded with Bayview, the Tenderloin and Treasure Island, so I am sure this policy can work elsewhere if there really is such a desperate need for low-income housing.

Economic policies like rent control, Prop. 13, etc. have not been remotely as effective as social dysfunction in keeping the yuppies out.

Posted by: Jimmy (No Longer Bitter) at May 8, 2013 4:59 PM

With all this good press, they just dropped the price of the Revere House to $182K since my observation this morning.

Hexagonal like Buckminsta Fulla gone buckwild?

Now affordable at $170K mortgage = $764 per month, 30y fixed at 3.5% fully amortizing. $764 = 35% of $2,181 gross monthly salary.

4 weeks a month at 40 hours a week making $2,181 per month is $13.63 per hour.

Posted by: savemore at May 8, 2013 7:52 PM

I just read the MLS notes on this property. Apparently there are squatters with nothing but a wireless connection, and all they do all day is type angry messages about bike lanes on Polk.

Posted by: savemore at May 8, 2013 8:14 PM

That working person making $13.63 per hour is going to be outbid by someone offering all cash that will then offer to rent it to said worker for twice what it would cost them to own it.

Posted by: Rillion at May 9, 2013 9:25 AM

"Same place they live now: Oakland."

Really misinformed. Most of Oakland's desirable neighborhoods are also out of reach for a large portion of the population. Stroll through Rockridge, Lake Merritt, Montclair, JLS etc. and you will find very few working class people...

Posted by: Willow at May 9, 2013 9:39 AM

The question is where will the 'working' class live. Montclair, Rockridge, etc are not working class. Look to the flats for working class areas, plenty of which are near to BART stations and other amenities making the trek to SF easier. I am not the first to make this comparison, but Oakland should be viewed the same way that Brooklyn is viewed to NY.

Posted by: rabbits at May 9, 2013 9:55 AM

@Invented at

It's difficult to have the new T line go underground near mission bay. It has to cross Townsend above ground since the HSR/Caltrain route from 4th and King to the Transbay terminal is supposed to be cut-and-cover at this intersection. Then it has to cross mission creek on the bridge, which is also above ground. On the other side of the creek near the Bosa developments the ridership is significantly lower, as is amount of traffic.

Posted by: RobBob at May 9, 2013 12:15 PM

Agree with the Brooklyn comparison rabbits but Brooklyn is really expensive as Oakland is becoming. It's cheaper than Manhattan but still out of reach for many. Old Oakland, Uptown & Temescal which are all close to BART lines are not inexpensive and I doubt someone living in a in-law apartment in the Excelsior is going to be able to afford a real apartment in those areas. To suggest that people just move to Oakland is a little to simplistic.

Posted by: Willow at May 9, 2013 12:26 PM

I agree with anon and rabbits completely:

Too many people, and I have friends who think exactly this way, are NOT willing to move to a "rougher" or cheaper neighborhood. They want Noe or Glen Park, or Bernal or Potrero, but simply can't afford it. So they whine and complain, and do nothing.

I submit that they move to a more affordable, and less desirable neighborhood, get to know neighbors, plant trees, clean it up, put in tons of sweat equity and make it a better place to live. And no, I don't advocate kicking anyone out, but there are lots of cheaper houses for sale and there are sellers waiting.

Ingleside, Sunnyside, Bayview and Hunters Point are all neighborhoods that have great potential in the near future.

It just takes hard work, commitment and the desire to be a "pioneer".

Posted by: futurist at May 9, 2013 1:00 PM

Trying to keep prices low in the city of San Francisco can only be accomplished by raising crime and making the neighborhood so unappealing that professionals won't risk living there. The city government has succeeded with Bayview, the Tenderloin and Treasure Island, so I am sure this policy can work elsewhere if there really is such a desperate need for low-income housing.

Nice snark, but not true.

Affordable housing is not the same thing as "low-income housing". "Working class" is not the same thing as "low-income" (among other reasons, because "low-income" includes a lot of people who for a variety of reasons don't have (above-market) jobs. We're talking about people who have jobs here.

I don't know what the "The city government has succeeded with…Treasure Island" crack was supposed to refer to. The development on Treasure Island that's being proposed by the Lennar and Wilson Meany Sullivan consortium for about 8,000 new condos and town homes have a target price range between $600,000 and $900,000, only slightly less than current comparable market-level prices (read: unaffordable for the working class) in San Francisco proper.

I guess that means the developer thinks that the resulting neighborhood will be appealing enough that professionals will want to live there.

Rillion wrote:

That working person…is going to be outbid by someone offering all cash that will then offer to rent it to said worker for twice what it would cost them to own it.

Yep.

And the way you defeat speculators and amateur landlords is to do what the Mayor's Office of Housing does with it's BMR program and deed-restrict units to only being saleable to people who are going to reside in the unit as their primary residence, and furthermore restricting residents of said units to those whose names are on the mortgage for the unit. And then you hold a lottery for the units where entrants are people who agree ahead of time to abide by those terms.

Simple, really. Not 'free market', but then that's the point since 'the market' is failing to produce the desired result.

Posted by: Brahma (incensed renter) at May 9, 2013 1:33 PM

In my comment above at 1:33 PM regarding the Treasure Island development, I should have restricted my observations about the target price range of the newly built homes to condos. I don't know what the current price level for comparable market-rate town homes is.

Posted by: Brahma (incensed renter) at May 9, 2013 2:02 PM

I'm not following you Brahma: but what is the "desired result" of a free market?

I think it is working. I have said it before but we would NOT have high cost housing if this city were not VERY desirable and a place many educated and well employed people wish to live.

Would you prefer us to be a Detroit? with empty blocks and empty housing: oh, yea, the housing is cheap in Detroit. Anyone with a few dollars can afford to buy there.

There is a place, I agree for BMR housing, to help those with low/moderate incomes who want to own a home, and make a community in that particular neighborhood. But I know people who whine and complain about not being able to get into BMR housing because they make too much: say, $120k for two adults. then they complain and whine about not being able to afford Noe, or Castro, etc. but refuse to EVER move farther out than Glen Park. Out in Sunnyside? not a chance.

That's their problem.

Posted by: futurist at May 9, 2013 2:22 PM

"That working person…is going to be outbid by someone offering all cash that will then offer to rent it to said worker for twice what it would cost them to own it."

Brahma: Often it is the other way around. Renters end up living in homes/apartments in neighborhoods that they could never afford to buy. Landlords actually do provide a valuable service and are needed!

Posted by: Willow at May 9, 2013 3:09 PM

And I think that's what makes this situation strange. If you're rich, you can afford to live in the "real SF". If you're poor you can do the same with help from various assistance programs including BMR. But if those in the middle are out of luck.

So the market addresses the rich, the government helps the poor and once again the middle class bears most of the burden. Funny how American society expects the most from and returns the least to the middle class.

"It just takes hard work, commitment and the desire to be a "pioneer"

Funny story - I was chatting with a business owner who opened one of the only shops on a nearly vacant and abandoned commercial strip and told him that he was a pioneer. He turned around, pointed to his back, and said "yeah, can you see the arrows sticking out?"

Posted by: The Milkshake of Despair at May 9, 2013 3:13 PM

And those who were the real "pioneers" whether in rural homesteading 150 years ago, or those who work hard to revive and revitalize neighborhoods, are the ones who did not

whine, complain, bitch and moan and give up.

Posted by: futurist at May 9, 2013 3:28 PM

@7by7
You asked about the possibility of rent control ever ending in the future. I doubt any politician would open up that Pandora's box. If it went to referendum, I think it would have very little chance of passing. And even if by whatever miracle a rent control repeal was passed, there would absolutely be a grandfather clause built in for rent control tenants. This would probably "lock up" the rental market even tighter for a very long time.

Posted by: sjg at May 9, 2013 4:25 PM

I grew up in the Excelsior and remember the Excelsior very well as neighborhoods of single family residences. The conversion of garages into illegal in-laws really did not begin until the early 90's when the generation of homeowners who took up residence in the 50's, 60's and 70's began to leave in a very marked demographic/cultural shift. With that shift came an influx of buyers consisting of multi-generational families and extended families which necessitated the conversions of garage spaces. These conversions were not initially done for rental income but over time and changes in ownership have become just that.

I now currently live and own in the Bayview district, so when it comes to hearing people say, "where will working class people live?" it seems very much a no-brainer the answer to that question. The most obvious candidate for them to live is in fact the Southeast neighborhoods of San Francisco...(i.e. Bayview, Visitacion Valley). But the real truth of the matter is that traditional "working class" people already know this. traditional working class people have already been investing in real estate in the Bayview for a while now, following the model of buying low (foreclosure), building equity, etc. A look at the homes on the market and the number as pending sales in the Bayview tells you that. There is no sugar coating what the Bayview has been of reputation, employment, and crime, but building a neighborhood takes people working to change that, (and a good bit of gentrification doesn't hurt). The confusion about the question of working class and where they will call home becomes muddled when you are talking about a working class that anywhere else would be middle class, a working class of careers vs. jobs, but is nonetheless priced out of the areas where their specific taste level would have them be. In essence you aren't talking about blue collar workers, but are talking about white collar workers who envision themselves in the Mission, Hayes Valley, Noe, Castro, and very urban, but have a money reality that has them walled out. So with that said and looking at the available land in San Francisco, this new working class is likely going to have to wrap their heads around living in formerly unincorporated parts of San Francisco, with an eye on neighborhood development and population shifts by way of gentrification and revert back to the notion of civic development, and neighborhood character development as opposed to wishing there is some space carved out for them in a semi-luxury building in the midst an established neighborhood with a great walkability score or multiple foursquare locations at the ready to explore.

Yes it may come across as harsh but San Francisco is not going to overnight morph into New York, and the likelihood is that only very small areas of the city will be transformed into high density clusters. New York was constructed in a very specific way along its civic planning past, a way San Francisco was not, nor any other city on the West Coast. And while San Francisco is seemingly adopting to develop and redevelop areas in such a way, we are still talking about specific clusters and if there is a failing to be mentioned it is that many of these high density projects have been designed with the upper tier of buyers and luxury in mind. If it is all about the 1% vs. everyone else, San Francisco has developed much more in favor of the 1% and the other 99% while still very diverse economically still is lumped in with everyone else.

Posted by: Rob at May 9, 2013 4:28 PM

On a web site about the history of SF housing
it claims that at one point 40% of SF lived in
SRO s

Welcome back to the past SF.
I live in one and each time
i fill down i check my savings acct
And smile

Posted by: mark at May 9, 2013 4:56 PM

Your comments are great Rob. I totally agree and have been saying the same thing many times here on similar topics.

Your take on SF housing and being able to afford to buy here is not at all harsh. It's reality. and yes, it does offer many possibilities and opportunities for those who cannot afford Noe, Castro, Upper Market, etc. to become "pioneers" and assimilate and create great livable neighborhoods out in the SW corners of SF. It's all doable.

But the current generation of mostly 30-40-50 year olds, often in tech, will have to swallow hard and become creative and stop whining about being shut out of the "expensive", read "trendy" neighborhoods.

And just get real.

Posted by: futurist at May 9, 2013 5:46 PM

We need to build up and the unholy alliance of "progressive" and THD-led NIMBYs will not let us. I really don't think there is anyway that does not lead to more gentrification, at least no reasonable way politically. I wish it were not so. I have already stated my views on this one.

I agree with Rob here, we are pushing middle class people into what was formerly considered marginal neighborhoods. And this is mostly a Good Thing.

I am glad I listened to a cabbie in the original Dot Com boom and bought myself "a piece of the rock" as he referred to it. We are starting to plan the remodel on our place now. That is how we are getting our second bathroom.

Posted by: NoeValleyJim at May 9, 2013 11:53 PM

I think the remodel option is the way to go. Good choice NVJ.

Posted by: sparky*b at May 10, 2013 8:25 AM

What's fascinating about the current situation is that SF was pretty darn affordable just 2-3 years ago.

You could have purchased a decent fixer SFH in the Mission in the 400s or lower 500s. With a bit of savings this was accessible to sub-100K/y families. If you accepted to go a bit further from the center, you could save 100K or more.

A family with 130K of combined income and some savings could have purchased a 700K fixer in Noe with not too much work. Like 1532 Church which was debated on SS.

My conclusion is not so far from futurist's and Rob's.

Work hard, make some sacrifices, be creative, have your eyes open and then things usually turn out better than you thought they would be. Of course getting into bidding wars is a silly way to get into the market.

Posted by: lol at May 10, 2013 10:37 AM

I'm not following you Brahma: but what is the "desired result" of a free market?

I think it is working.
No doubt.

If I thought that wild unrestrained gentrification was a good thing and that everyone with a sub-$100,000 yearly household income should be well on their way to being priced out of the market for home ownership if they weren't already, then I'd agree with you that "it is working".

But that's not my idea of "the desired result".

If I thought that a plethora of luxury, super-luxe and Überluxury condos being built and marketed as secondary and tertiary homes for the global elite who might spend twenty days a year in them while people who have worked and lived most of their adult lives in S.F. struggle to buy a modest condo because they are consistently being outbid by investors and speculators was a good state of affairs, then I'd agree with you that "it is working".

But that's not my idea of "the desired result".

So I don't agree that "it is working".

Posted by: Brahma (incensed renter) at May 10, 2013 11:27 AM

If I thought that a plethora of luxury, super-luxe and Überluxury condos being built and marketed as secondary and tertiary homes for the global elite who might spend twenty days a year in them while people who have worked and lived most of their adult lives in S.F. struggle to buy a modest condo because they are consistently being outbid by investors and speculators was a good state of affairs, then I'd agree with you that "it is working".

Source for this, please? I see this type of thing repeated all of the time, but never any proof that this is actually happening with more than a minuscule portion of the units actually being built.

Posted by: anon at May 10, 2013 11:33 AM

I think they are lifting a paragraph from a description of parts of London that are being "internationalized" by Russian oligarchs and other foreigners, displacing British people and other anglophones. In a real sense, the center of London is not very English nowadays.

But while it may happen here some day, it clearly is not yet. The people who are buying here are mostly Americans, even if not "born and bred" San Franciscans. San Francisco has always been a city of newcomers.

Posted by: conifer at May 10, 2013 11:42 AM

"Apply Mayor's Office Of Housing type rules to investors and speculators" = sour grapes.

Posted by: Lies Tipster Told Me at May 10, 2013 12:34 PM

@Brahma:

If I thought that wild unrestrained gentrification was a good thing and that everyone with a sub-$100,000 yearly household income should be well on their way to being priced out of the market for home ownership if they weren't already

Sorry to break it to you, but $100k/year is chump change in this neighborhood. At $100k/year you would have a hard time getting a rental, let alone buying. I have tenants in San Bruno making over $100k/year ...

Posted by: Jimmy (No Longer Bitter) at May 10, 2013 3:14 PM

1532 Church sold for $850k, not $700k. The Zillow calculator (as good as any) says that with $200k down and $0 debt, you can afford a $500k mortgage and a $700k house. It is going to be next to impossible to save $200k on a $100k income, unless you get an inheritance or win the dot-com sweepstakes or something.

So saying that average income families could afford Noe a few years ago is a bit of a stretch. But only a bit of one.

Middle class people in San Francisco are renters and have been for a long time. As they start families and grow out of their rent controlled apartments, they move to the suburbs, which are still cheaper everywhere except The Peninsula. The ones that don't have kids stay put and get cheaper and cheaper rent over time until they either die or are somehow pushed out of their units. But since we aren't making any more rent controlled apartments, The City inevitably gentrifies.

Posted by: NoeValleyJim at May 10, 2013 8:44 PM

I hear you, NVJ, but you are missing a part of the story here.

1532 actually sold twice in the past 2 years.

Once for 730K on 09/19/2011 (with a tenant)
The second time on 01/11/2012 for 850K (no tenant and a paint job). Late 2011 was the last opportunity for a very decent deal anywhere in NV and you could say the whole SF.

This 730K is the purchase I am talking about. 730K with 20% down and an adjustable mortgage comes out as 3K/month all included. A bit less if you are tax-savvy. It's not very easy but not impossible neither. And this place is probably out of reach today.

In short, a ~100K/Y family was priced into a NV starter/fixer/livable SFH during the last slump just 20 months ago. Today, you're lucky if you can get into the market with 180-200K incomes. You're competing against cash-rich crazies.

Posted by: lol at May 10, 2013 10:17 PM

NVJ,

You also have to take into account the fact that with rent control, renters can actually put tons aside. Not all do. Many just take trips, go out a lot, etc...

A smart rent-controlled person would have stashed 1/3 his pay for a few years and jumped on a place in 2010/2011 that you would then rent out... at market rate with possible positive cash flow. I know a guy who did just that. Crazy rent control distortion. Get rich at the expense or your landlord!

Posted by: lol at May 10, 2013 10:25 PM

How did this mythical $100k/year family save the $175,000 required to pay downpayment, closing, and tenant relocation?

Posted by: R at May 11, 2013 6:55 AM

Actually, my first estimate at May 10, 2013 10:37 AM was for a 130K/y family and a ~700K purchase. I typed 100K and cornered myself ;)

A young couple living in their cheap rent-controlled apartment can save 1/4 to 1/3 of their income. Let's say 25-30K/year. It'll take you 5-6 years to save for a downpayment. I've done something similar and much faster (4 years).

Many first time buyer will also borrow from their family. I have a few friends who did their very first purchase that way (including me 20 years ago).

Posted by: lol at May 11, 2013 7:59 AM

^How is this young couple getting into a "cheap" rent-controlled apartment? Rent control only makes things cheap if you stay for a long time or game the system by moving into a unit already occupied as a roommate or something, since prices return to market with a new tenant.

Posted by: anon at May 11, 2013 10:05 AM

Source for this, please? I see this type of thing repeated all of the time, but never any proof that this is actually happening with more than a minuscule portion of the units actually being built
No, I don't have a statistically valid survey result to point you to.

And while conifer's right that I've read about what's going on in London (where half of London’s new-home buyers are foreigners), and it probably influenced the way I worded that 'graph, I'm more influenced by the two real estate agents I know that specialize in selling to HK and PRC clients. Of course, I'm biased in that I don't hear any counter anecdotes from people selling luxury condos to people who already live and work in S.F., that's why I didn't assert that this phenomenon is some large portion of current sales.

This doesn't take away from the real point that there are a lot of luxury, super-luxe and Überluxury condos being built and that most San Franciscans can't afford them, so the developers must be targeting some other buying pool.

Posted by: Brahma (incensed renter) at May 11, 2013 3:11 PM

anon,

Say a couple moved into a pre-1979 building in 2006. A 1-BR rented for 1400-1600 at that time. This couple makes 130K together (my original hypothesis) and by making a few sacrifices (used car, no kids yet) and assuming they have no other debt they would save 2500-3000/month for 5 years. This allowed them to save a good 150-170K, or enough for a down payment on an entry-level Noe fixer in 2011. That Church Street house would have been riiight in that sweet spot.

Believe me, I did a lot of shopping around in 2010-2011 for my own purchase. I compared my situation with the one from friends and co-workers. This is not an outlandish scenario. People who missed out are so sorry today, but buyer markets will come back.

Posted by: lol at May 11, 2013 4:42 PM

^in 2006, perhaps. But you forget that as fast as for-sale prices have risen in the past few years, rental prices have risen even faster. You would have had to be very lucky to time renting a rent controlled place at the exact bottom of the rental cycle.

Posted by: anon at May 11, 2013 5:08 PM

This doesn't take away from the real point that there are a lot of luxury, super-luxe and Überluxury condos being built and that most San Franciscans can't afford them, so the developers must be targeting some other buying pool.

There are not a "lot" being built relative to the term "most San Franciscans" - it's probably something like .1% of the overall housing stock. Even if we assume that the ultraluxe units being built might be 1% of the overall housing stock of the city (that would mean 4000 of these new ultraluxe units), that means that developers need only target the top 5% or so in order to sell. The top 5% of the city can afford these units, so I'm not sure why you're focusing on the top 49.9%.

And yes, I'm quite familiar with the situation in London, and it's nothing like what we have here. There is a situation in Vancouver which might eventually look something like we have here (where foreign buyers are massively inflating prices without actually moving here full time), but it doesn't yet (not even close).

About a year ago I asked the front desk dude at the Millennium (I have a friend who bought one of the low-rise units there) how many foreign buyers they have, and he made some remark like, "Dunno, maybe one or two?" And that's the luxest of the luxe for new buildings.

Posted by: anon at May 11, 2013 5:15 PM

@lol - just one more note. I do agree with your overall premise that someone could save enough for a down payment, but IMO that's incredibly reckless way to use money.

Save 150-170k over five years, but for the love of god, don't then sink all of your savings into one asset. That's just asking for trouble. I assume that you're talking about 150-170k in after-tax savings, as folks should be maxing out their 401k with 130k salaries, but even then I wouldn't put more than 50% of my after-tax savings into a house. Preferably something more like 30%.

Posted by: anon at May 11, 2013 5:19 PM

anon,

Yes some would consider this reckless.But it's less reckless than buying a subprime asset on neg-am and zero down...

I know it's doable because I did something very similar. I had the safety of other assets under my belt but i didn't want to touch those. What I described earlier was basically it: while posting as a the ultrabear san fronzischeme since 2007 after 1 year in SF, I stashed away 40% to 60% of my net. Then mid 2010 I became serious about buying and switched to bull before buying my own place.

My PITI today is less than 70% of the rental value of my place and the 94114 is 40+% more expensive than when I bought. It's part dumb luck and part hard work. I have the experience of another market cycle in a previous life, which always helps.

Posted by: lol at May 12, 2013 9:20 AM

Yes some would consider this reckless.But it's less reckless than buying a subprime asset on neg-am and zero down...

Sure, if that's the only other choice...

Posted by: anon at May 12, 2013 9:47 AM

I am with lol.

Concentration of assets is surely risky, but it is that same "all of your eggs in one basket with substantial equity" risk concentration that leads people (property owners) to care deeply for neighborhoods, to fight for better schools, safer streets, and a good city.

Read Peter Lynch's book 'One up on Wall Street' - from the manager who built Fidelity's Magellan Fund track record and you'll see he says no one should put money in the stock market until he owns his home...

Posted by: savemore at May 12, 2013 9:58 AM

My partner just shared with me that one of the problems with San Francisco vs. Stockholm where he is from is the large size of housing units, especially single family homes. For a city with so many single member household buyers, or childless couples, we are screwed by having to buy bedrooms and bathrooms we don't need. Working class in Stockholm CAN afford to buy in one of the world's most expensive cities, but this is because of the density and small size of many housing units available, WITHOUT the need for 50 story luxury towers. So much of San Francisco real estate is actually single family homes, which I do not desire, or think is appropriate in a city of growing population.

I would much rather have less space but more like the listings on "Fantastic Frank". Check out how many are beautiful simple larger studios, with light, balconies, and views.

http://www.fantasticfrank.se/kopa-bostad/

http://www.fantasticfrank.se/kopa-bostad/?referens=true

Posted by: anon94123 at May 12, 2013 9:59 AM

@anon: good idea. We don't need families in this city. Drive them out -- with insane school policies, astronomical housing costs and planning policies that favor single and childless couples. GET THE FAMILIES OUT NOW!

Posted by: Jimmy (No Longer Bitter) at May 12, 2013 10:24 AM

I am not anti-children or families, I was just trying to lobby for smaller units and higher density without the need for super tall luxury towers. I think many of the single family home neighborhoods of the city should be allowed to have more density, including in-law units, especially along their commercial "High Streets" above shops and restaurants.

BTW- A single family home with a 2 car garage is not required for raising a family. Most of the families we know in Stockholm and Helsingborg live in flats.

Posted by: anon94123 at May 12, 2013 10:34 AM

Yeah... but those people are European. Swedes are not well adjusted. Have you ever seen them on vacation?

Posted by: Jimmy (No Longer Bitter) at May 13, 2013 6:12 AM

"Working class" in Sweden means you earn 80% of median income and 50% of a doctor's or lawyer's salary. American "working class" couldn't afford a cup of coffee in Stockholm.

Posted by: formidable doer of the nasty at May 13, 2013 7:56 AM

anon94123 makes sense, to a point. He is correct that more, smaller places would drive down housing prices. That is simple supply and demand. And in Stockholm (and throughout Europe's big cities) 600-700 sf 2BR and 900 sf 3 BR places are common. We've rented a half dozen apartments just like that in Paris, Amsterdam, Stockholm and Geneva. They were small, efficient, and great. Problem is people in the U.S. (including in SF, and including me) don't want to live in places that small with no parking. There is very little (nb: not "none" but very little) demand so they do not get built.

Ironically, SF does have lots of great, biggish studios that should suit anon94123 just fine.

Posted by: anon at May 13, 2013 8:40 AM

lol: Yes some would consider this reckless.But it's less reckless than buying a subprime asset on neg-am and zero down...

anon: Sure, if that's the only other choice...

Good point. I wanted to put things into prospective. Saving for a few years for a down payment, then buying an entry-level place is what was considered the traditional behavior of America home buyers. Of course, you are increasing your chances at success if you do it after a very decent market correction

Now, retirement savings is another story. A traditional belief was that your mortgage payment would become more manageable as inflation starts to add up and your career evolves. That's when you have to worry about retirement savings.

When all this "normal" scenario is concerned, NV was decently affordable to a low-mid 100K income family between 2009 and 2011. The working class was priced in also in around 1/3 of the city (south of GP, some areas West of Twin Peaks).

Posted by: lol at May 13, 2013 10:18 AM

Lol, you've named one example of a house that was decently affordable to that hypothetical family. (A small family, as that was a small 2-1 house.) There are other examples of small homes that went for (relatively) reasonable prices in that time period in Noe, but not very many. Even in then, there were developers buying the little modest homes and turning them into not-so-modest modern showcases.

I don't disagree with your basic premise though. I'm definitely kicking myself for not having pulled the trigger before 2012, but like many people in that time period, our job security was nil and we wanted to stay nimble in case we wanted/needed to move.

Posted by: RenterAgain at May 13, 2013 7:52 PM

RenterAgain,

1532 had an extra room downstairs with a 1/4 bath. Maybe a place where 2 parents can live, or an in-law, etc... And a small garden.

There were not many, I agree. At that time some places were sitting for what would be considered forever today. I did buy in 2010 but was ready for another deal 18 months later.

One place I am kicking myself about is 1151-1153 Castro. 2 decent ~1000sf units, plenty of light, large corner lot, plenty of potential, even OK as is. It was the last great deal I considered. Listed in October 2011 for 949K, sold in March 2012 for 939K. That's 470K per unit and these would be appropriate for 2 young families.

Posted by: lol at May 14, 2013 9:34 AM

lol et al
It's so funny to me that everyone is using an $750K Noe Valley fixer as the benchmark for a first home. There are great fixer houses in Mission Terrace and the outer Mission for $550-650K - perfectly safe neighborhoods, close to transit, with parks and other amenities nearby. I bought 10 years ago earning ~$100K and with $80K down. Prices are only up about 10-20% since then (sucks for me), so it's still totally reasonable place to start. A family with 2 moderate incomes (e.g. nurses, IT techs, etc) could do it. And it's certainly not "urban pioneering" like some other parts of the city. Lots of working families.

Posted by: kddid at May 14, 2013 1:00 PM

kddid,

I hear you. My point was maybe lost in the technical discussion: SF was pretty darn affordable during the 2009-2011 dip. People with average incomes could afford a place in areas that are now considered very hot today.

If you follow my original post of May 10, 2013 10:37 AM, I gave 2 scenarios:

1 - The Mission was accessible to 100K/y or less buyers just 2-3 years ago
2 - NV was punctually accessible to ~130K/y buyers

Now to get similar deals today you need to go a bit further from the center, like Mission Terrace. Just 3 years ago, Mission Terrace was a steal. It hasn't caught up to the 2006-2007 top yet, but it will happen.

Posted by: lol at May 14, 2013 1:28 PM

Kind of hilarious to see salaries like 100k tossed around as "average" or "moderate" and that SF was "pretty darn affordable" a couple years ago.

Median household income in SF is ~73k.

Posted by: anon at May 14, 2013 2:12 PM

Indeed, anon.

One thing to consider: many of the lower wage earners are in rent controlled units, social housing or already own their places (retirees), otherwise they wouldn't be able to stick around.

100K is a couple with 2 clerical jobs or 2 teachers. This is the entry level of newcomers today.

Posted by: lol at May 14, 2013 2:38 PM

^Sure, not disagreeing with you there. Just saying that regardless, nearly everywhere else we don't the commonly accepted notion that "affordable" means for two earner households at a minimum of 150% of the median income.

Heck, my sister and her husband just bought a house in Austin cash (~$180k), and they're a single earner household in their early 30s at less than 150% of the median income of Austin...

Our notion of affordable is just sooooo different from other areas.

Posted by: anon at May 14, 2013 3:03 PM

This outrage is all because a county line was arbitrarily drawn over 100 years ago. SF is 7x7 miles but in reality the urban area that makes up the city is much larger and contains plenty of areas where "the working class" can afford to live. There's no reason to insist they should be able to own 3BR houses or flats in the 7x7.

Is anybody complaining about the lack of low-income people on the NW side of San Jose? No, because SJ is a huge area but still considered one "city" so people are OK with variations in demographics between neighborhoods. Well, I'm OK with the affordable neighborhoods of SF technically being in South SF, Daly City, Oakland and Albany. It's certainly better than the BoS intervening with their misguided market controls.

Posted by: formidable doer of the nasty at May 14, 2013 7:49 PM

...and to my point and in response to anon's anecdote:

Did your sister and brother-in-law actually buy a house in central Austin for $180K? Austin is more than 5 times the size of SF (with a similar population) so the density is quite a bit lower and therefore naturally the price of square footage too. Or maybe they bought somewhere else in Travis County which is 20 times the size of SF?

Granted, there's nowhere close to SF where you can buy a habitable house for $180K but if you look at Richmond (city, not district) decent-sized homes come pretty cheap. And if you ignore county lines, Richmond is just a suburb of SF.

Posted by: formidable doer of the nasty at May 14, 2013 7:55 PM

Richmond? Seriously? It's one of the most dangerous cities in the country, of course it's cheap.

Posted by: anon at May 14, 2013 10:29 PM

Richmond is only one extreme, there are still plenty of other affordable locales within the bay area within commuting distance of the Bay Area job market. The whole "make SF affordable" initiative does seem a bit misguided due to the regional issues that FDotN brings up. Homes in lesser but still quite safe neighborhoods can be had for half the price of SF prime.

Also I think that we can expect that the crime issues of the inner suburbs like Richmond and West Oakland to decrease as strong families move into there out of economic necessity. Geographically they're actually quite nice places and the majority of their current population are good people. Increase tax dollars and public "we won't take it anymore" informal surveillance and the thugs will be pushed out, leaving honest good citizens to enjoy life.

Growth in exurban cities like Discovery Bay and Tracy indicate that there's a serious problem, but not so serious that cheap gasoline and martyr breadwinners cannot work around. At least temporarily.

Posted by: The Milkshake of Despair at May 15, 2013 11:34 AM

^To clarify, I was never singling out SF as being the city that needs to make all of the changes. I was more talking that the inner Bay Area has a notion of affordability that folks from other metros just don't understand. In my mind, the problem is more that places like San Mateo County and Marin County have allowed almost no densification to take place.

Posted by: anon at May 15, 2013 11:55 AM

I totally agree that almost every city but SF has fallen down on providing housing in the core of the Bay Area. Hey Atherton: build denser housing around Fair Oaks and El Camino and you'll get your Caltrain station back. Not holding my breath though.

Posted by: The Milkshake of Despair at May 15, 2013 12:29 PM

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