Take the massive development in Hunters Point. 35% of the 12,500 units being built are affordable, but affordable is defined as less than 150% of area median income -- that's AMI for the entire city, not the impoverished Bayview neighborhood the development is being built in.
150% of AMI in San Francisco is $107,050 for one person, or $152,850 for a family of four. A new unit that's priced for someone making six figures a year doesn't really meet the common sense definition of affordable.
And with market rate housing, a lot of it is bought up as an investment property or vacation property for the ultra-wealthy, which means each new unit of housing is underutilized compared to a truly affordable unit bought by someone who lives and works in the city. If a developer builds 5,000 market rate units, that has less of a supply and demand effect than 5,000 truly affordable units, since they aren't even really the same kind of asset. Demand for market rate housing in major cities is largely driven by a need to shelter money, where truly affordable housing is driven by a need to shelter people.
This means that the statistics for San Francisco are even worse than they look, since the 50,000 units being built will be unaffordable and underutilized.
There's no market reason why the floor should be where it is. It's just artificial scarcity to benefit property owners.
I think that this is just a bias that is blinding people to the inherent contradiction. The reason that shithole apartments become so expensive is because there are people with the money to spend who "need" (i.e. work in the area) that apartment. It has nothing to do with construction or maintenance costs, just demand. Even the "luxury" apartments have inflated prices compared to their material values. Which means that there is a lot of room to move up.
Basically what I'm saying is that people need to stop complaining about the "type" of housing. If someone builds 50,000 cubicle apartments or 50,000 luxury flats in a high demand area, your shithole apartment's value/rent is going to change the exact same amount. Because there is plenty of room for the people generating the demand to "afford" better (in strict material/construction terms). It shouldn't matter to anyone who isn't already in the mid-range of units to begin with (i.e. people complaining about the rent on their 400sqft hole in the wall). The real issue is that these places are "only" building 50k (or whatever the number) new units, when they actually need far more.
Maybe building cheaper (and therefore smaller) units could make allocating the area for this number of units more palatable, but that is still a secondary problem. This just runs into the issue that as much as people bitch about "luxury" condos, they want crappy high density ones nearby even less.
It is certainly demand but it's not demand coming from the people working and living there. It's demand coming from millionaire investors buying up high end property as an investment.
Google for dark condos.
This isn't:
>Local housing boards have made it damn-near impossible to build new condos. After much infighting, San Francisco plans on building up to 50,000 more units. But, San Francisco’s chief economist, Ted Egan, estimates that that the city would need at least 100,000 new units to stem increasing costs, let alone bring prices down to something more affordable.
>If Rognlie is correct and we really care about inequality, it might be wiser to redirect anger towards those who get in the way of new housing, rather than rely on taxes to solve our problems.
Millionaire NIMBY homeowners in San Francisco fighting with luxury condo developers has nothing to do with the rest of us.
There's something particularly distasteful about luxury condo developers trying to position themselves as champions of equality while trying to gouge huge profits from this state of affairs.