Editor's notes

While some hustle to afford a closet to sleep in, many pricey SF pads remain empty

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tredmond@sfbg.com

EDITORS NOTES This is how dysfunctional the San Francisco housing market has become:

The Chron reported in late January that young people who are just arriving in San Francisco are paying exorbitant rents for tiny spaces — $500 for a laundry room, $600 for an upper bunk — and often living in substandard conditions.

And on Feb. 11, The New York Times reported that a significant number of high-end condos in that city were vacant almost all the time, owned by the uber-rich who used them as pieds a terre — something that's going on increasingly in San Francisco.

The Times notes:

"The higher up you go in price, the higher the concentration is likely to be of owners who spend only a few months, a few weeks or even just a few days each year in their apartments. This very costly form of desolation means that some of the city's most expensive residential buildings stand mostly dark, lonesome and empty on the inside."

I called Brad Paul, a former deputy mayor for housing and a longtime expert on development in San Francisco and read him that quote. "As my nine-year-old son would say, 'You think?'" he said. My kids would be shorter: "Duh."

The more housing you build that only multimillionaires can afford, the more likely your serving a population that has three or four other houses and just wants this one for the couple of weeks a year that they jet into San Francisco.

Planning Commission member Katherine Moore has mused about the problem in public, noting that in her Nob Hill neighborhood, there are more and more dark apartments.

Who cares? Everyone should — for a couple of reasons. For one, empty neighborhoods are no good for small businesses. They're also not as safe. And it just seems so ass-backward: A city that can't provide decent affordable housing for current residents, much less for the next generation of immigrants who keep the place lively, is giving up valuable land to build housing for people who aren't going to live here at all.

That's what the fight over the new condo projects on the waterfront, 8 Washington and 75 Howard, ought to be about.

At the very least, the city ought to get some data here. It's not that hard — just check property records against the tax documents filed for homeownership exemptions. As Sup. David Chiu told me, "It would be good for us to know if San Francisco's high-end condos are actually being used."

Maybe we should find that out before we build any more. You think?

 

Comments

It turns my stomach that one of the most beautiful cities in the world is being turned into the non-snowbound equivalent of a ski chateau town by S.F.'s current "what the market will bear" policies. There are people of more modest means (e.g. wait staff, store clerks) who want to live here 24/7 but can't because they're priced out.

So what's the solution? Why, government-assisted squatting, of course. The easy way would be that projects like 8 Washington and 75 Howard can be built...but only if homeless families get to live in the condos there when it is not occupied by the owner or their agents. The hard way would be to help identify condos in the city basically used as pied-a-terres, make the information available to homeless groups and say "Have at it."

Posted by Peter on Feb. 13, 2013 @ 9:04 am

homes that just happen to be vacant?

I'm sure the cops would be interested in your incitment to commit crimes.

Posted by Guest on Feb. 26, 2013 @ 2:43 pm

"because the first time I wrote about this on the SFBG site, I made too much sense and didnt get my a$$ handed to me"

Posted by Greg_the_diKC on Feb. 13, 2013 @ 11:24 am

I'm struck by Peter's comments above. On the one hand, he's absolutely right - we produce far too little housing that non-wealthy folks can afford. On the other hand, his solution, while appearing emotionally satisfying, would be thrown out in 30 seconds by the City Attorney.

The SFBG is correct to point out our increasingly expensive cost of housing - it goes to the question of, 'Who gets to live here?' However, an undergraduate economics student could explain that when SF's chronically inadequate housing is subjected to unrelenting demand, one outcome is possible - prices rise. And yet we have passionate people who will look you in the eye and insist that the laws of supply and demand do not apply to SF. It's completely weird.

Our City should be building vastly larger numbers of homes than it currently does and figure out ways to target them to the non-wealthy. It can be done; many other cities do it. We're a little too stuck on "neighborhood character" and having a "democratic process." As a result, for decades we have under-produced the amount of housing we actually need.

It's not really complicated.

Posted by Guest on Feb. 13, 2013 @ 2:27 pm

Not one I've met in the 30 plus years talking about SF housing issues has EVER said that supply and demand don't apply in SF. Either you're lying about hearing this statement or you're hanging out with the intellectually challenged (or whatever the PC way is to describe imbeciles.)

What "everyone" generally says is that the demand for SF housing is virtually limitless, especially over the last 20 years as Silicon Valley has boomed and now that the Far East is producing as many multi-millionaires in a month as the US produces in a year. San Francisco is a short plane ride away and is a great place to invest in real estate outside the prying eyes of the potentially arbitrary leaders of China, Malaysia, Singapore, Vietnam, Korea, Cambodia, and dozens of other booming countries that Silicon Valley and other US companies have helped enrich.

Classic mainstream economics tells us to impose high taxes when there are severe shortages, especially high taxes on the very wealthy who could otherwise control a scarce and valuable commodity such as housing. Absentee owners add little to the local economy and their ownership makes life much worse and more expensive for the local residents. A minimum tax of 75% on the sale of any housing unit that has been used by an absentee owner allows the entire community to share the windfall gains rather than letting the absentee investor and part-time residents take advantage of the shortage and receive most of the windfall profits that are caused whenever there is any shortage.

Posted by Guest on Feb. 26, 2013 @ 2:00 pm

because it says nothing about raising taxes in affluent places. In fact, many affluent places can afford to have low tax rates because of the weight of money there. The textbook example of that is the principality of Andorra, which is ridiculously wealthy, and in fact has no taxes other than a sales tax for the tourists.

High prices are not the problem here. In fact, they are part of the solution. If demand exceeds supply, then prices increase until there is balance again. That is what "mainstream economics" really tells you.

Posted by Guest on Feb. 26, 2013 @ 2:42 pm

Your idea is a pipe dream.

Posted by Guest on Feb. 26, 2013 @ 2:45 pm

housing for the rest of us. It's simply a different market. In fact, the only real effect is the BMR setaside funds which such developments create, so they are a net positive.

SF should be building lots of cheap housing, which means tower blocks. The NIMBY's do not want that, thereby frustrating the housing advocates.

But either way, a few billionaires here and there are irrelevant. Envy is not substitute for house building.

Oh, and I routinely get $150 a night for my spare bedroom on BnB. Anyone have an issue with that?

Posted by Guest on Feb. 13, 2013 @ 2:51 pm

The housing market is virtually entirely the same. Billionaires are competing with multi-millionaires, who are competing with millionaires, who are competing with more typical buyers living more modestly on two 6-figure incomes.

Not all income groups will be competing in the same neighborhoods, but income groups at each margin comete with those at slightly higher or slightly lower income levels. Thus, the entire market is really the same continuim.

Enacting a reasonable ordiance that limits the purchase of ownership zoned housing to full-time residents benefits evey San Franciscan, from the richest to those at more modest income levels, even if most families making less than 120% of AMI are excluded from the SF ownership market (aside from a teeny percent that get lucky and win the lottery for an "affordable housing" unit subsidized with governemnt funds.)

Other sensible ordinances would be, (1) absentee owners are precluded from buying a zoned ownership unit until the local residents get the first 90 days to make bids on a new house listing, and that (2) absentee owners are precluded from buying a houisng unit unless there is a 5% vacancy rate or higher.

Posted by Guest on Feb. 26, 2013 @ 1:29 pm

The only place i have seen quota's and the kind of housingdiscrimination you are suggesting is in NYC co-op's where the existing owners can reject anyone for any reason, including race, gender, religion etc.

I do not think we want to go there, nor enact the kind of invasive social engineering that you are suggesting.

Not everyone can afford to live in SF.

Posted by Guest on Feb. 26, 2013 @ 1:39 pm

Local cities are given extraordinary power over land-use and zoning. A reasonable requirement that when there is a severe housing shortage (less than 5% vacancy) buyers must meet a reasonable residency requirement, or have to wait a period of time (90 days) before bidding on a housing unit after it is first listed for sale, seem like they would be within these broad land-use powers, especially considering SF is a charter city under the state constitution.

A city also has some power over its taxing structure that can be used to encourage full-time residents and discourage part-time absentee owners. A 35% transfer tax on any housing units sold by a once-absentee owner would be a modest first step, especially if the proceeds were used by the city to build appropriate ownership housing for its residents.

If the courts strike down reasonable land-use regulations, then the pressure goes to the Governor and state legislature to change rules to give cities the power, hopefully culminating in a much needed showdown between state and federal laws that greatly reward speculators and wealthy landlords but punish lower and middle income working people.

An economic battle is coming in the US between the have-lots and have-little. San Francisco should reclaim its place where these types of long-term economic and political battles begin. Kudos to Tim, Brad Paul, and David Chiu for starting the conversation.

Posted by Guest on Feb. 26, 2013 @ 3:10 pm

unworkable, unpopular and unconstitutional "solutions" to a problem that really doesn't exist. Even left-wing whack jobs like Tim, marcos and Eddie are not advocating the nonse you spurt out, and the voters certainly are not remotely interested .

Clue - if even the usual suspect left-wing whack jobs reject your extreme idas, you know they are doomed. Any court in the land would throw them out as a "taking".

Damn that pesky Constitution, huh?

Posted by Guest on Feb. 26, 2013 @ 3:32 pm

As pointed out many times, the SFBG unfortunately allows all sorts of whack jobs, meanies, narcissists, haters, and economic exploiters to post here without any limits to their repetitive rants and degrading comments. I wish it were different, but it's their board and rules. I mostly follow the rules.

Just because ideas are unpopular with wealthy landlords and property speculators, however, doesn't mean they are unworkable or unconstitutional, unfortunately for you. With capital and offshoring jobs leaving the US for far better investment opportunities overseas, taxing rents and land transactions of non-homeowners are a couple of the smart transactions government can tax to raise much needed revenue. They are easy to tax, easy to audit, land can't be shipped overseas, and increasing these taxes allows the government to reduce regressive payroll and sales taxes, giving lower and middle income working people more disposable income which helps the local economy and helps create local jobs.

If the government can currently impose taxes on working people while giving away hundreds of billions of tax subsidies to landlords and property speculators without anyone raising a ruckus or a court striking down this blatent discrimination, I doubt the courts will be too concerned when these subsidies are repealed and replaced with high taxes on rental income, interest, dividends and capital gains in excess of a modest threshold, say $100,000 to protect small investors and mom and pop retirees. A graduated gross receipts tax ranging from 25% (over $100K) to 75% (over $1 million) on combined rent, interest, dividend and capital gain income - while reducing taxes on working people by an equal amount - will bring so many economic benefits to the main street economy I suspect the big landlords and wealthy property speculators won't be able to generate much enthusiasm for a mutiny against the government, although we'll likely hear a lot of saber rattling from this tiny, albeit powerful, group and their sycophantic supporters like Wall Street Journal writers and editors.

Posted by Guest on Feb. 26, 2013 @ 4:56 pm

supports your insane, self-defeating "tax everything that cannot move" proposal.

I'll save you the trouble. None. Ever wonder why? Every LL would Ellis their rental and only the poor would suffer.

This is the State that passed Prop 13, remember? Good luck persuading the 2/3 of CA homewoners that this is something to vote for.

Posted by Guest on Feb. 26, 2013 @ 5:32 pm

If a significant portion of tax is raised from landlords and real estate speculators, and at the same time regressive taxes such as payroll and sales tax are reduced by a similar amount, homeowners would benefit tremendously from the extra income. Most homeowners work for a living and pay very high income, sales, and payroll taxes. Homeowners would save and spend their significant tax savings, creating jobs and economic growth in the process.

A tax on gross rents and a much higher capital gains tax rate is entirely voluntary since no one asked landlords or speculators to buy up rental property and charge tenants a very high rent price, evicting them when the family can't afford the higher rent. The fewer economic players like that in society, the better for all.

And no one needs to touch Prop 13 for any of this. The state legislature can easily switch taxes, reducing taxes on working people and increasing them on large landlords (and bondholders, and capital owners, and companies that ship jobs outside CA, etc.) without needing a vote by the people. All levels of government have a fair amount of power over tax policy, including income and gross receipt taxes.

Prop 13 is a red herring, anyway. A community or state can raise equivalent taxes from gross rents and non-homeowner capital gains on property sales to get the same revenue (for the most part) as if Prop 13 were amended. And it's a lot easier to tax rent income than it is to assess the annual "value" required for an accurate property tax calculation of large residential and commerical rental properties.

Posted by Guest on Feb. 26, 2013 @ 8:25 pm

Can you name one nation, province or municipality whose major revenue source is a GRT?

Didn't think so.

Posted by Guest on Feb. 27, 2013 @ 9:54 am

open arms.

America? Not so much. You're in the wrong country for your crazy and unconstitutional ideas that, in any event, would bankrupt us.

What is it like to be this out of touch?

Posted by anon on Feb. 26, 2013 @ 5:38 pm

Having a better tax system is quite different than a confiscatory property system. Not many people - even in SF - dispute the significant benefits society has achieved from people free to own property and start businesses, hire people, make a profit, and have a home that is protected from government caprice or outright theft. Society will always continue to make improvements in how relations are governed between employer vs. employee, landlord vs. tenant, mortgagor vs. mortgagee, etc., but not many would support government abolishing these relationships altogether or the outright confiscation of business or landlord property.

Respecting private property, however, is much different than changes to a tax system that could collect a large portion of the tax needed for a functioning society from the largest landlords, speculators, and big businesses. These groups are usually able to pass along any tax collected by them onto their customers, so in some ways these are voluntary taxes (no one is forced to sell/rent and no one is forced to buy/let), unlike regressive payroll and sales taxes that are direct costs borne on the backs of lower and middle-income working people.

At any point in time an economy is similar to a tube of toothpaste. We can give more money to workers (by taking less tax from them) and take more tax from the business groups, without changing the amount of tax collected or changing the size of the economy. Even if we increase or decrease the amount of overall tax collected, the offset is usually made up by an equal increase or decrease to government services, basically a net wash to the overall economy.

After changing how taxes are collected, workers would have far more disposable income and large businesses and wealthy landlords would collect more of the tax. There's nothing radical or controversial about changes to how tax revenue is collected, especially when we're talking about decreasing taxes on most homeowners and virtually all tenants.

Posted by Guest4 on Feb. 27, 2013 @ 8:37 am

blunt instrument.

If you charge a tax on trading securities in NYC, I will trade them in Bermuda.

Hollande is trying confiscatory tax policies and many business leaders and investors are simply moving to Switzerland, Belgium, Luxemburg or London.

Easy.

Posted by Guest on Feb. 27, 2013 @ 9:56 am

Some part of San Francisco is severely underutilized. Look at Bayview. There are plenty of rentals with reasonable cost in Bayview, people just need to broaden their range.

Also there are quite some industrial space in Bayview. Those old warehouse can be torn down and new high rise can be built. I think there will be very little resistance to build high rise residential towers around Bayview. It is just that people need to be open-minded and look at possibilities.

Posted by Guest on Feb. 26, 2013 @ 10:13 am

city, creating tens of thousands of homes. Sunny, nice views and good access.

But of course the NIMBY's won't have it.

Posted by Guest on Feb. 26, 2013 @ 10:58 am

There are essentially two groups of humans currently roaming the planet: the teeming masses and the uber wealthy, who own a sizable majority of the world's rental real estate (commercial and residential), bonds, and stocks. The financial elites have "homes" in many places. They live primarily by collecting rents, interest, dividends, and capital gains, supplementing their oversized incomes with hundreds of billions dollars in tax subsidies shared among this elite group.

The vast majority of a country's population cannot compete with this growing group of financial elites who can buy "homes" in 50 of the world's top destinations and still have money left over for a steady stream of interest, dividend, and rent income. For some of these 3rd and 4th “homes” owned by the world’s elites, San Francisco based companies like Airbnb (or more traditional local real estate management companies) earn millions in fees managing these properties, often renting them out on a short-term basis for top dollar. Renting them out for over a few hundred to over a thousand dollars a NIGHT is not uncommon.

Other world-class cities that care about the housing needs of local residents impose strict limits on who can buy a home within the city limits. This sensible city ordinance helps protect the local population who would be otherwise outbid by very wealthy investors and part-time residents for whom money is no object. Establishing a minimum residency requirement would help every buyer who intends to live in the city. When scarce housing zoned for ownership is used as a pied-a-terre or as a high-end rental by the financial elites, there is less housing supply for residents who are simply looking for a roof over their head. Scarcer ownership housing supply drives up housing prices for everybody, and puts enormous pressure on rent-controlled units to be converted to TICs to fulfill the virtually limitless demand.

At a minimum, the city should ask voters to approve a 5-10% tax on the gross receipts of residential housing rentals zoned for home-ownership such as condos and pied-a- terres, using the money to build appropriate housing for at least some of the tens of thousands of local residents who desperately want to buy a tiny piece of SF real estate as a stable roof over their head. The city can use permanent deed restrictions to keep the housing affordable, relatively speaking anyway, for future generations.

Posted by Guest on Feb. 26, 2013 @ 1:16 pm

restrictions. Where I have seen that is in highly desirable principalities like Andorra, Monaco, Liechenstein, the Channel Islands and so on.

It is highly likely that any attempt to restrict residency and ownership would be rejected by the courts on the grounds that it would be a "taking", as any property so affected would be devalued significantly as a result.

You cannot micromanage and socially engineer cities in that way - they are roganic entities that constantly change. Resistance is futile.

10% gross receipts tax? In your dreams. and of course would simply be passed onto tenants via passthru's anyway, or thrown out by the courts.

Posted by Guest on Feb. 26, 2013 @ 1:49 pm

When I rent out my empty 1-bedroom apartment next month for $5,000, it is the highest rent a tenant is currently willing to pay. My prospective tenants are not concerned whether the building is paid off, or how much tax is paid on the building, or what insurance costs. All the tenants care about is that a 1-bedoom unit in this part of town rents for $5,000 a month. A tenant can either take it or leave it for another renter who will be "happy" to pay the going rent rate.

If the city imposes a 50% tax on my rent income, I could try to increase the rent to $10,000 to pay the tax and still get my expected $5,000 a month net rent. But IF I could rent it for $10,000, I would, even without the tax! Since I'm a landlord my job is to get as much rent from the unit as possible, but unfortunately for me the local rent for my unit in this neighborhood is limited to $5,000. If I try to rent it for $10,000 (or anything over $5,000), the problem I'll run into is that local tenants can only pay $5,000 for the unit based on the overall community income and the local supply and demand factors.

Darn, I guess I'll have to rent it for $5,000 and pay the $2,500 city tax after all. I wish you were right that I could just raise the rent, but the harsh truth of basic economics is a real pain sometimes. Of course, I could just sell the rental building and be done paying the rent tax altogether, so I guess the problem can be solved. There will be no doubt dozens of willing buyers bidding against one another to purchase the apartment building, excited about the the privilege of paying a 50% tax on their rent income and contributing to needed and vital city services.

Posted by Guest on Feb. 26, 2013 @ 4:12 pm

sell it as a TIC, rather than pay your 50% tax.

The result is that rentals vanish and, eventually, the rent really is 10K a month.

You cannot micromanage an economy. People are always smarter than any scheme you can dream up. Every new law has unintended consequences. If rent control really reduced rents, those SF flats would not now be 5K a month.

But anyway, I go BnB now - much more profitable.

Posted by Guest on Feb. 26, 2013 @ 4:26 pm

"I know of no "major world city" that has any kind of residency restrictions."

Moscow.

Posted by Demented, Yet Terribly, Terribly, Persistent on Feb. 26, 2013 @ 2:11 pm

a true socialist nirvana like Russia.

Posted by Guest on Feb. 26, 2013 @ 2:44 pm

You forgot Wall Street darling Singapore, one of the original "four tigers of Asia."

Besides, important world trends are accelerated when they get a foothold in SF. Once San Francisco gets serious about residency restrictions the idea will bloom in London, Paris, NY and other world-class cities that have the same issues of high housing prices that few of its local residents can afford. They too suffer the severe consequences when their limited and valuable housing stock is treated as a mere tchotchke the wealthy collect for their amusement and transitory pleasure.

Ohio is hoping to reduce its property taxes by 30% for commercial landlords so wealthy speculators will still have plenty of places to take their riches to exploit local populations. In the meantime, San Francisco can become an eviction-free zone and a place devoid of non-resident property exploiters. The world's great cities have plenty of hotel rooms for times when the wealthy get an itch to visit some place for a few weeks or a couple of months. The housing zoned for ownership in a city should be used by full-time owners and not the idle rich or corporations using them for business executive stop-overs and party places.

Posted by Guest on Feb. 26, 2013 @ 2:45 pm

There are far more trends started in London, Paris, NYC etc. than in a small, provincial city in a far western timezone.

For every SF idea that "catches on", there are 99 that do not catch on. And SF imports far more trends than it exports.

Self-important SF'ers might like to think differently, but Sf is a backwater on a global scale. Heck, the restaurants close at 9pm - sleepy as fuck.

Posted by Guest on Feb. 26, 2013 @ 2:59 pm

These ideas are some of the stupidist I have ever read...75% tax on real estate transactions? Allowing squatters in second homes? 10% tax on residential rental revenues? Restricting who is allowed to purchase property? Who are you idiots? David Campos?

Posted by Richmondman on Feb. 26, 2013 @ 3:22 pm

extreme ideas that don't even fly in Cuba or North Korea.

He's a total whack job.

Posted by Guest on Feb. 26, 2013 @ 3:35 pm

“First they ignore you, then they ridicule you, then they fight you, and then you win.”

― Nicholas Klein

Posted by Guest on Feb. 26, 2013 @ 3:36 pm
Posted by Guest on Feb. 26, 2013 @ 3:47 pm

Saves you a grand total of around $90 per year in property taxes. I owned my property here for 7 years before I even remembered to ask for that exemption because it's so minimal. I spend more than that on a daily basis.

Vacancy control is illegal under state law. That is not going to change.

Posted by Lucretia Snapples on Feb. 26, 2013 @ 6:23 pm

live in your Sf home unless:

1) You claim the homeowners petty exemption
2) You sell and claim a CGT exemption for a PPR
3) You have rent control but it is not your PPR

Otherwise, butt out. None of your beeswax.

Posted by anon on Feb. 26, 2013 @ 6:48 pm

Like that stupid $90 per year exemption makes all the difference. Who cares?

Posted by Lucretia Snapples on Feb. 26, 2013 @ 7:04 pm

is worth more than the homeowners prop tax exemption.

Posted by anon on Feb. 26, 2013 @ 7:29 pm