Real Estate

Real Estate – John M. Lee

Addressing the Housing Crisis

By John M. Lee

According to recent surveys, the number one concern San Francisco residents have is the high cost of housing. For the first time, housing beat out previous issues such as homelessness, Muni, potholes and unemployment. But what can we do about it?

 Because of the emphasis on job creation coming out of the last recession – by reducing taxes to attract companies to San Francisco – we have reduced the unemployment rate to 4% which is considered full employment as far as most economists are concerned. With jobs come people with money who can afford to buy or rent more expensive homes, thus driving the sales and rental prices up.

 Also with jobs, there is population growth as employees naturally want to live closer to where they work to minimize commute time. Our housing growth has not kept up with population and income growth, thus creating a situation where demand far exceeds supply. Simple economic theory dictates that prices must go up – and they did.

Most of the new jobs recently created were in the high-tech industry, which means the people with that type of skill set are getting rewarded, while others are getting left behind. Thus we are creating a society of “have and have nots,” leading to more class disparity. And as a result, we are seeing demonstrations and protests against people who have done well financially.

Everyone believes that San Francisco is a better place because of its diversity, not only in terms of ethnicity, but also people from all socio-economic levels. The question facing us is how to house everyone so that we can all afford to live in the City.

 The mayor, Board of Supervisors and other community groups are all proposing different solutions to attack this problem. It is complicated as everyone has a different opinion as to what is necessary to resolve this crisis. Here are some of the ideas that are worth pursuing:

• First and foremost is to build more housing! We have made some good progress during the last five years. However, the planning and permit process is still so difficult, constantly delaying projects and adding costs to development. The sooner we can build new housing, the faster we can ease the inventory problem. In San Francisco, going through the permit process is like navigating through a field of land mines with many people and groups opposing projects. It is not uncommon to see delays as long as eight to 10 years on a project, which adds costs to the developers, ultimately resulting in higher prices to the buyers. So, if the process can be streamlined, we can have more inventory and also better pricing;

 • Put the affordable housing funds to work sooner. We just passed a $600 million housing bond in November of 2019 to finance the construction, development and acquisition of housing for low- and middle-income households. We also have other funds for affordable housing accumulating from different sources, such as the Housing Trust Fund, an increase in the transfer tax and developer inclusionary fees, which can be utilized sooner to accomplish its purpose of building more housing;

  Review city zoning plans and revise for higher density along transit corridors. As more people move into the City, their tendency is to live closer to public transit. This also alleviates parking and traffic issues. Even though laws have been passed in this area, putting them into practice has been more difficult;

 • Make it easier for property owners to legally add in-law units. The City has made some good progress on this issue. This has been controversial over the years with arguments on both sides. However, the fact is that in-law units are more affordable and provide rentals to people who can least afford to live in San Francisco. They can be a viable option for many. With the soft story retrofit on buildings with five units and up, the City has allowed more in-laws, or what they call accessory dwelling units (ADUs) into buildings. 

 I believe that these are the main areas the City should focus on to increase the housing supply. They will do wonders towards solving our housing crisis.

John M. Lee is a broker at Compass specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 465-0505 or email is sponsored in part by:

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