from Hacker News

Abandoned stores, empty homes: why San Francisco's boom looks like a crisis

by gpresot on 1/9/20, 12:54 PM with 137 comments

• by supernova87a on 1/9/20, 3:50 PM

  Like so many things in the Bay Area, this is a self-created problem. Despite living here, I have little sympathy for the sob-stories who voted for the exact policies that put them out of business. It infects every level of policymaker thinking (at least what they choose to publicly state and run for office on). It's a fruitless desire to resist development and population growth, no matter what the cost. And we're seeing the costs obviously now.

  The political inclination of government (and the mistaken belief of voters) to "keep things the same" and prevent gentrification or any kind of development matching the demand for people to move here may play well for votes, but is causing every problem you can see.

  The constraints on housing and development trickle down to everything. The cost of hiring people, the price of retail/commercial space, the inability to police / prevent crime, the emptying out of formerly affordable neighborhoods, traffic, homelessness, etc.

  This is not a puzzle. When you make land so valuable (which pleases some), it leads to things that cannot show their value clearly to be priced out. And the very policies that are intended to protect the people who got here first (a very questionable policy), end up hurting them. The more you try to control rent, the worse the situation gets. Politicians intend well. But intentions are highly overrated. Effects are what matter.

  As long as we refuse to build up, out, and have rational transportation systems (overcoming local inertia against building them), and accept that we're growing, this will continue.

• by jseliger on 1/9/20, 1:47 PM

  At least the writer understands incentives:

  Since California passed Proposition 13 in 1978, property tax rates for those San Franciscans who owned property back then have been severely capped. Owners may pay Nixon-era property tax rates, while renting out those spaces at rates that have exploded in the last 40 years. They, too, can afford to let buildings sit empty.

  There have also been vacancy taxes proposed: https://reason.com/2019/12/10/san-francisco-ballot-measure-w..., but Prop 13 reform would seem to be the more obvious route.

• by aazaa on 1/9/20, 2:59 PM

  > Some might say this is all simply market Darwinism, just with more cold-pressed beet juice. But it’s interesting that the free market exists only on one side of the equation. Since California passed Proposition 13 in 1978, property tax rates for those San Franciscans who owned property back then have been severely capped. Owners may pay Nixon-era property tax rates, while renting out those spaces at rates that have exploded in the last 40 years. They, too, can afford to let buildings sit empty.

  Tax policies play a big role in setting up market distortions like those happening in San Francisco. It's not just the rate, but the basis. Strong Towns has a discussion of the idea that taxing land, not improvements leads to better outcomes:

  > A parking lot in a bustling downtown is the classic example of a property where nearly all of the value is in the land itself, not the asphalt on top of it. In a rising market, you can hold onto the land and watch its value go steadily up (thanks to all the things your neighbors are doing to make the place more productive and successful). You can collect enough in parking fees to cover the taxes, and cash out when you're ready to cash out. Your property tax bill will be relatively low, because it's based on the sum of land value and improvements. The land may be in a central, prized location, but the "improvements" on the property (that's tax-assessor speak for any sort of structure built on the land) are worth next to zero.

  https://www.strongtowns.org/journal/2019/3/5/whats-with-that...

  This line of thinking may also apply to empty shops in SF. As long as the overall property is covering expenses, why bother making the improvements needed to attract new tenants (and thereby adding the tax burden) when you can just sit back and watch real estate prices head to the moon.

• by hourislate on 1/9/20, 2:08 PM

  It's a problem all over in many big cities. Toronto is experiencing the same issues. Small businesses are being pushed out. You have a Deli or a Coffee shop that has been there for decades close and some kind of Boutique shop move in since they can afford the 5-10k a month in rent.

  The trend now is for small shopping plazas or outdoor malls being sold off to developers to build Condo complexes. Complete neighborhoods have no shopping anymore forcing residents to drive instead of walk to get groceries or enjoy a stroll.

  It doesn't help that these cash strapped cities (Toronto) just rubber stamp any new development since the tax haul will be several times what they got for what was there. A 20 story Condo brings in a lot more revenue then a parking lot and strip mall. I won't even start about all the green space they are selling off to developers. It's out of control.

• by dilap on 1/9/20, 1:52 PM

  I don’t get it though, as a building owner, what do I gain by kicking out a tenant and then letting a building stay empty?

• by diogenescynic on 1/9/20, 1:54 PM

  San Francisco is just a really poorly run city, but so many people are willing to look past that because there are tech jobs. There are literally people shooting heroin and smoking meth in public (across from City Hall no less), property crime is ignored, and they just keep trying to raise taxes and throw more money at the problem. It just seems like it’s obvious they are making these problems worse and not better. I don’t blame businesses for leaving. After the sky high rent and thefts, it’s probably hard to survive. We chose this though.

• by lmnt on 1/9/20, 2:15 PM

  There is an excellent documentary by Fredrik Gertten called "Push" that explores this phenomenon, definitely worth a watch if there's a screening nearby: http://www.pushthefilm.com/

• by gd2 on 1/9/20, 2:40 PM

  Seems like an important topic to discuss. Serious question, how do should I understand the concluding sentence/word,

  "But walk through parts of San Francisco today, and you get a different sense altogether: not an uncanny effectiveness, but a panicked swirl of homeless capital."

  What is meant by "homeless capital"? does it mean SF is the capital city for homeless like Washington DC, or does capital go to opposite of venture capital, like in banking/finance/Wall St?

• by fallingfrog on 1/9/20, 2:42 PM

  It’s a bubble. Get out while you can. Properties with zero income being sold and resold in a closed loop- an ourobouros of prosperity. What could go wrong?

• by logfromblammo on 1/9/20, 3:16 PM

  So what would the unintended consequences be for changing property tax to be a percentage of the actual annual rent for leased or pay-to-stay properties, assume a statutory minimum rent for vacant properties, and stay with assessed valuation times mill rate for owner-occupied properties? The property tax assessed in this way would be deducted from income, to avoid double-taxation.

  The desire to minimize the cost of owning a property should create an incentive to ensure a residence is occupied by at least one person who can pay, so the statutory minimum would probably be set such that renting at below-market rates would be slightly less costly after taxes and insurance than the tax rate for a vacancy.

• by react_burger38 on 1/9/20, 3:25 PM

  Blaming prop 13 for high housing costs ignores the real reasons - restrictive zoning codes, too many environmental reviews, and too many regulations in general. These combined make it nigh impossible to build enough housing around the Bay Area for rent to come down. Rent control makes things worse by reducing the amount of profit on each building. Then add “affordable housing requirements” which mean each new complex has to essentially lose money on 20% or so of the units to give them to low income people... and no wonder the rent is too $&@! high.

  I mean look at NYC - property taxes are really high there and the rent is almost as high as SF, and higher than LA.

• by carapace on 1/9/20, 4:48 PM

  Important subject, poor article, IMO.

  Here's a background piece that covers most of the history and issues: https://www.businessinsider.com/san-francisco-housing-crisis...

  TL;DR: It's complicated.

  Also (and especially for those of us from the Old World) remember that SF is ridiculously young as cities go, even for American cities. The continent was largely settled from East to West. The Western part of the city was sand dunes and scrub. People panned for gold next to Lake Merced.

  Here's a thing from 2016 "Employment, construction, and the cost of San Francisco apartments" : https://experimental-geography.blogspot.com/2016/05/employme...

  He got some data:

  > I set out to replicate the DataBook's methodology over a wider range of years, but quickly gave up on including just two-bedroom apartments, because ads in the early 1960s rarely referred to apartment sizes in these terms. Instead, for each first Sunday in April from 1948 through 1979, plus a few other years, I made a list of all the advertised unfurnished apartments, flats, houses, and, later, condos, regardless of size, that were advertised in the Chronicle. Mostly I used the San Francisco Public Library's page scans of the newspaper but resorted to microfilm for the few later years where no page scans are available.

  Here's the main take-away:

  > in 1956, apartments began to be listed in increasing numbers, but their prices also began to rise. Overall, they went up 6.6% every year. Today's outrageous prices are exactly in line with the 6.6% trend that began 60 years ago.

  So, big long complicated history, dead simple stable 6.6%/year increase.

  - - - -

  Solutions: Bucky Fuller mega-city Old Man River City

  https://en.wikipedia.org/wiki/Old_Man_River%27s_City_project

  https://solutions.synearth.net/2002/11/24/

  Look at the cross-section: the structure is hollow. It's built like a suspension bridge. Imagine rotating the Golden Gate bridge around a vertical axis though its midpoint. See the article for the rest of the description.

  Integrated with ecologically harmonious waste reclamation and "bioreactors" to make arcologies: https://en.wikipedia.org/wiki/Arcology

  A few of these in the CA Central Valley on the Sacramento river would take all the housing pressure off the cities.

• by lr on 1/9/20, 2:50 PM

  Government must remove the ability to claim an income loss on the balance sheets of property owners that purposely leave spaces empty. There is no reason to double (or more) the rent on a space. They are doing it because maybe someone will pay, and until then, they get to claim the loss of income as a write off on their taxes. If this is not true, then how can property owners, who claim that they need the new rental rate, afford to leave a place empty for a year or more???