Dear Chronicle: Exodus of low-income City residents caused by rent control, not SOMA development.

One Rincon Hill south building

This Chronicle article misses the mark. It gives a strong impression that development South of Market represents the reason San Francisco has become unaffordable for low income City residents.

I paraphrase the introduction of the article: “Our City is changing. Boo, hoo sob story.”

“Building all these high-rise apartments ‘Manhattanizes’ our city which raises home prices and causes all the poor people of San Francisco to move out. Waa waa.”


Low income residents are moving out of the City because there is no affordable rental housing.

Low income City residents have no chance of BUYING a house or flat. It’s just plain out of the picture. THIS CAN’T BE CHANGED. The idea of changing the market conditions to let lower income residents buy housing is silly. It can’t be done.

The real problem is that low income residents are being priced out of RENTAL HOUSING, and it’s the City’s own fault.

Notice that all the new development discussed in this article are developments with units FOR SALE. Why aren’t there any swanky new developments FOR RENT? I don’t know about you, but I sure know a lot of people in the City that are looking for rental units. It would SEEM like the demand for rental properties is high.

But, the City is encouraging developers NOT to build rental units. How? The City has a policy called ‘rent control‘, a price ceiling for rental properties which limits the amount of rent residents must pay to a landlord.

Sounds great, right? I pay cheaper rent, right? WRONG. No developer in their right mind would want to rent their properties out! They can make much more money SELLING units to high paying buyers, who pay market rates, than to LOSE MONEY by making rental units with a PRICE CEILING, also known as a restriction on the amount of money they can charge for rent.

Imagine, if you were a grocery store owner and the City said you must charge 10 cents for bottled water (but it costs you 20 cents), would you sell bottled water? No. No store in the City would sell bottled water because they would lose money on each sale. This can create a large queueing (we all know how ridiculously long it takes to find an apartment in the City), inferior quality water — say out of the sewage (look at the crap properties available for rent), or a side market for illegal water, which effectively results in HIGHER cost water than if you left it alone in the first place.

(This analogy isn’t perfect. It breaks down since rent is a recurring payment, whereas water is a one-time purchase. And, rent control is a price ceiling on rent increases, not the initial rent cost.)

Rent control effectively increases Citywide rental prices. I’ve written about the evils of rent control before.

The City should repeal rent control and replace it with a RENT ASSISTANCE program for low-income residents.

How do we start? Residences with existing tenants will be grandfathered in. But, new and existing rental units leased to new tenants will not be covered under rent control.

We could start with South of Market where opportunities for new development are ripe. Making South of Market a rent control free zone would significantly increase incentives for private developers to build rental properties.

“Wait just one second,” you say, “these South of Market rent control properties will be ridiculously expensive.” They will be fancy. They will be pricey. But they’ll increase the amount of rental properties available which starts to deflate some of the artificial citywide rental inflation we’ve seen caused by rent control. It would be a great start.

A rental assistance program, funded through increased property taxes, would be much more effective than rent control in making our City affordable for lower income residents. (Yes, take from the rich give to the poor, I’m a hippie, etc, etc.)

Let’s start now and make South of Market a rent control free zone.

Link (SFGate)

PS. The first two comments on the article strongly parallel my reactions to the article, so I thought I might as well share. Here they are:

killsprawl: Typicall SF thinking. Housing prices are too high, so lets make building housing more difficult and expensive. Economics 101 upside down. One Rincon Hill, The Infinity, and 301 mission did not tear down one existing home, created over 1000 units of market rate housing, and over 200 units of affordable housing. We need more of these developments not less!!! I’m glad SF is promoting high density housing and not more sprawl.

twocents2much: “If you had kids, would you want to live in a 2-bedroom condo?” Yes. I would want an urban lifestyle, and that means no backyard, high density and an anti-McMansion mentality. The schools, not the size of the new properties, would be the deterrent. An infusion of property taxes should help. Or wait, should we be building bigger houses, turning SF into Walnut Creek and bringing in LESS tax money? Sounds brilliant. High-density is the way of the future, and if people bail out of the city because they want 3 BRs and a backyard for the same price as a 2 BR condo, that’s their folly. They have no right complaining that they can’t afford SF. Generations of families in NY have been raised in tight spaces. People who really love cities make that choice. People who don’t whine that they can’t have a suburban lifestyle in urban territory.

This entry was posted in econ, politics and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

1 Response to Dear Chronicle: Exodus of low-income City residents caused by rent control, not SOMA development.

  1. dkzody says:

    I want so badly to live in South Beach, and we have looked at some of those new places to purchase, but alas, we will have to rent as half a mil for a studio is out of our price range. Of course, $2500 to rent same studio is a bit stiff too, but more manageable than $5000 mortgage payment. I would be willing to trade my suburban Fresno 1400 sq feet for a 500 sq foot apt in SF, but I doubt if I would have any takers.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s