San Francisco Rents Soaring…
…but developers are still converting rental units to condos and most new construction is owner occupied. In my more conspiracy minded moments I wonder if they problem is caused by the fact that decision makers in regards to development are also usually property owners who benefit from high real estate costs.
In this article the creator of CraigStats proposes that reseting ARMs and interest only loans are causing landlords to seek much higher rents. Its hard to say based on the listing if actual rents are going up, but clearly asking rents are increasing. I would also suspect that the fact that people have almost completely stopped buying non-luxury housing in the city is putting a lot of pressure on the small rental supply.
I suspect (hope) that as houses and condos don’t sell a lot of those will end up on the rental market. Hopefully this is just an aberration.
October 3rd, 2007 22:09
It’s difficult to tell how much of the real estate bubble was market driven, or driven by how outrageously easy it was to be a real estate speculator. Every city has experienced the same surge in development over the last few years as rental property has diminished. But with the bubble and rampant speculation it’s really hard to tell how much of this was driven by demand. not to mention weird city financing arrangements that created huge distortions in development. I think things will definitely cool down. there’s blocks of condos in the south side of Chicago that are largely unoccupied. my fear, though, is that the developers have already sunk in enough money that they will refuse to convert the property to rental space and try to wait out the next few years.
In the meantime, there is the larger problem of flight by the urban poor (I’m sure something similar is happening in San Fran.) This is a serious problem and local governments that neglected the impoverished for decades should not be allowed to stand by and idly watch their cities transform.
October 3rd, 2007 22:22
Condo & TIC conversion has evidently greatly reduced the rental supply in SF, fueled by speculation. The difficulty in SF is not so much the flight of the poor, which is (barely) prevented by the existence of a good amount of section 8 and housing projects, for better or worse. The real problem I think is the flight of the working middle class. Families that make very little money have the option of public housing. The blue collar middle class has been driven almost completely from the city. We are moving towards a situation where the city is filled with upper middle and wealthy people and the very poor and the people that staff the restaurants and hotels, build condos etc will be commuting in from hours away.
October 4th, 2007 13:59
Look no further than Santa Barbara for an example of where this kind of policy is headed. No single middle-class govt/service occupation (teacher, postal worker, law enforcement) can afford to actually live in SB. The chief of police has to live outside the city limits, same thing as the school district superintendent. These people make their living educating, protecting, and servicing residents of a city they themselves cannot afford to live in.
One very exclusive city has tried to level the playing field:
http://santafenm.gov/cms/kunde/rts/santafenmgov/docs/688598075-07-18-2006-15-32-24.pdf
Santa Fe insists on paying a living wage. Although there are still many people with jobs in Santa Fe that have to commute there from Albuquerque, the city realizes it has a problem on its hands and is trying to rectify things (construction of a new high-speed rail link between Santa Fe and ABQ should help as well).