Family Housing

Phil Ting's picture

Currently, San Francisco is at an all time low in families.  Right now, we have more dogs than kids in SF.  While we have built housing over the the last ten years, it has almost exclusively been studios and one bedroom units.  What can we do to incentivize developers to build two to three bedroom units?  If we don't build family housing, families will continue to move out of San Francisco as their kids get older.

Steve's picture

MMM, Let me think...

I've got an idea! Let's stop disin' landlords! Anyone would have to be nuts to build rental housing in this town. City government is willing to pass any rent control ordinance that comes before it. So, soon, the only people building rental housing in this town will be the government.  

I know this is a renter rich town, they vote to benefit themselves and that is understandable, but not without consequence. As you state above government now has to incentivize (BEG) developers to build units, and we all know that's because they don't think they can make money in the SF rental market. It isn't about politics it's about money. They're in the business, they study this stuff, and they ain't comin' to this town and lose money when, they can go someplace else and make money. It is after all, a free country.

Ok, lets have a show of hands: how many people think they have any right to tell anybody how much rent to charge or pay for that matter? 

Phil, would ya look at all those hands! We're gonna have to raise taxes again if we want any 3br units!

btw, didn't the Gav try to get a bunch of housing into the area north of dog patch a couple of years ago? That deal involved incentives and he was painted as stooge to big capital for his efforts. Be careful.

     

gcotter's picture

I agree with Steve

I am one of the fortunate few who owns my own home in SF, and I've been a home owner for over 30 years.  As with any first time buyer I couldn't afford my first home but through skimping and borrowing I was able to be a first time owner.  I am now in my fourth home in the city.  I am not a landlord but I have friends who have been and most of them have given up and sold their properties because it is difficult to be a landlord here.  

Steve's comments are right on target.  I don't think many renters realize the costs that a landlord has and why, therefore, the rents go up.  San Francisco is expensive.  Land is expensive and buildings are expensive.  Just being a homeowner is expensive.  For many landlords - especially those who have not owned their investment properties for more than 10 + years - the cost is high.  Let's say an owner has a five unit building that they paid $3,000,000 for.  For a mortgage of $1,000,000 at 4.5%, the owner would pay $5,000 per month.  Then there is property tax which for a $3,000,000 property runs nearly $3,000 a month.  Fire Insurance, building maintenance, etc. can run another $2,000 or more a month.  So that adds up to $10,000 a month just to break even. Each of the units would need to rent for a minimum of $2,000 just so the owner can break even.  Yes, the owner gets to deduct many expenses, but on the other hand he also needs to earn an income to live on.

So if rent control or other laws limit what can be charged for rent, why should any property owner stay in business?  Why not sell the building for $3,000,000, put the money in a CD for $2.5% and live on the $75,000 per year interest?  The only alternative is to charge tenants $4,000 per month rent if he wants to earn that $75,000 per year on his investment.  Yeah, this is just an example and all cases are different, but the only way we can encourage the development of rental property is if we can let the developers - whether individuals or large companies - have the ability to make a profit on their investment.  Otherwise they would be much smarter to invest their money elsewhere.

If we want family housing in SF we have to make the creation of that housing attractive to developers and investors.  If we have mandated rent control for some of the units, then the investor won't make a return on his investment and therefore won't build - at least not in San Francisco. The only solution for the investor is to either charge even more rent for some units, to make up the difference, or for the city to pay the investor with tax money.   When taxes go up, then we all pay more - even renters pay more because all landlords are going to raise rents to pay the higher taxes.

Paid for by Phil Ting for Assembly 2012. FPPC ID# 1343137