This is precisely why municipalities are permitted to impose exactions on a project--so that developers can't unfairly offload infrastructure costs on the public. If the additional sewage volume of a project is going to overflow pipes 5 miles away, municipalities can and regularly do exact fees as a condition of approval to cover the costs of upgrades.
Unfortunately, these days exactions are also abusively imposed to offset the supposed costs of "gentrification" and other unquantifiable social phenomena, and sometimes the dollar value of such imaginary costs conspicuously set so high as to make a development financially unviable. This is how cities like SF force developers to include below-market-rate units or to make cash contributions to low-income housing projects, even when a project is not actually displacing any pre-existing tenants.
A house in SF might cost around a million dollars. The same house in Columbus, Ohio, might cost 100k. Are you really going to argue that "roads, bridges, water, and sewer systems" are 10x as expensive in one place as in the other?
No, "what you are paying for" is the artificial scarcity created by restrictive zoning codes and NIMBYs. If the city council let me build on one of the many open fields around I-280 tomorrow, I could get it constructed for a pittance-- and then turn around and sell for hundreds of thousands of dollars.
PS: There is a completely reasonable argument that building a new house or apartment complex should pay their fair share of existing infrastructure ~10k-50+k/person in most areas. That this does not happen is simply a form of corruption as zoning becomes a quick way to massively change the value of land after purchase.
Do you understand how "the existing infrastructure" is funded? It's funded by taxes. And developers pay taxes like anyone else. What they do isn't cheap.
The problem is that developers won’t build affordable housing unless they’re heavily incentivized to do so (why take a big risk to build something if you won’t profit from it, developers usually aren’t charities) but in practice lots of development get blocked for not having enough affordable units while simultaneously not being nearly subsidized enough to incentivize it. In fact SF’s permitting process is so arcane and silly that just thinking about developing anything will cost you millions in legal fees, let alone the insanely high price of the land, so the payoff better be good.
In practice people crying for 100% affordable housing are in reality demanding that nothing gets built at all.
The zoning and permitting regulations prevent you from building reasonably on land that you already own. There are plenty of wealthy individuals and developers in San Francisco who would love to tear down two or three shabby Victorian houses to put up a five-story 20-unit condo if they could only get the project approved.
San Francisco in particular makes it extremely easy for neighborhood residents to impede projects that would be automatically approved in any other city [1, 2]. This is why nothing gets built here, it has nothing to do with the cost of land.
No developer can afford to put up with a five-year battle with neighbors who complain about the shadow that the new building will cast onto their back yard, or to pay for fifteen $X0,000 bullshit environmental studies that the city will make the developer conduct as a "compromise." And remember, these are for designs that are completely up to code and that are zoned legally.
I'll tell you who won't pay for it: existing homeowners, because they rely on new buildings' property taxes for anything to work. And in SF, they rely on payroll taxes from high income earners.
And in SF, the "dig once" policy means that anytime something substantial is done, nearly everything is redone, which is why Van Ness has been under construction for sooooo long: utilities.
The property wealth in SF appreciates at absolutely massive rates, but they rely on poorer new entrants to fund everything. And that old property wealth is the same political power that stops the city from a accommodating new people, restricting entry to ever more wealthy new entrants.
The fact that they're not able to pass 100% of the cost of whatever capital improvements they feel like on to their renters is part of a massive wealth transfer from landlords to long-established tenants.
In other circumstances I'd accuse that of deterring investment and being a contributor to the terrible housing situation in the Bay Area in general, but honestly, the zoning / planning-permit situation is the first limiting factor.
I don't know about SF, specifically. But some places already tax new developments - in order to fund existing infrastructure (because property taxes aren't high enough to actually pay for it). So it becomes a pyramid scheme, where you have to constantly build more to maintain what's already there. For the city councils, it becomes a game of hot potato - what matters is that the pyramid doesn't collapse while you're in charge...
The long term effect is that it allows for landlords who own parking spaces to charge what is currently charged for a small apartment, charge for small apartments what is currently changed for large ones, and so on. SF already has a housing problem. This would invite more people in without actually adding proper housing. How many hundreds of thousands or millions of people would do it? Have you thought about the plumbing issues associated with adding people without bathrooms? One person roughing it in a car and using public facilities is ok. Several thousand is an annoyance. Snowball that to few hundred thousand and you have a shit river.
I've dealt with SF Planning several times in the last few years. With one exception (existing illegal units) planning restrictions have only gotten worse. For example development along the Embarcadero has been banned by ballot measure. Meanwhile the key rules continue to steadily tightened with things like the Eastern Neighborhoods Plan. And it's not just the rules but the slowness of the process that makes it so painful and costly.
And that's just SF Planning. Numerous other SF Gov created problems also make development incredibly slow and costly. I'll just quickly list a few examples: SF Bulding Code does not permit plastic drain pipe; anyone can easily demand a hearing on an already issued building permit; SF Water charges $9000 for a new water meter; and rent control laws are strict and constantly changing. All of these are as strict or stricter in SF than almost anywhere in the US.
The reason for the jump in building is that office and apartment rents have become so ridiculously high it now makes sense to build in the few remaining sites despite all the costs. Even these projects had to go through tortuous approval process, such as the Transbay Transit District, and unbelievably many projects started back in the last tech boom! The building boom will likely grind to a halt in a few years as builders run out of sites.
Rant over. SF is a great place but this is in spite of it's crappy local government that has literally created many of its problems.
This would address an important element of high Bay Area housing costs: the discretionary project veto by local authorities. This is the main reason why only super-high end luxury stuff gets built in San Francisco.
In most parts of the US, there are certain local zoning laws. You apply to the local government for review of your project. This is expensive, as you must prepare detailed professional studies for the proposal.
If the project conforms to all of the zoning laws, it must receive a permit. They can only deny you a permit if your project does not comply with some specific zoning law.
In San Francisco and several other nearby cities, the local government can arbitrarily withhold a permit even when a project conforms to all local zoning laws in every respect, usually under the vague and arbitrary guise of "not fitting in with the neighborhood's character."
Since applying for a permit is an expensive and time consuming process, most developers simply don't bother to even try in San Francisco. They just go elsewhere, where their project can't be arbitrarily vetoed by local authorities despite conforming to all applicable zoning laws.
The main exception is luxury developments: since the profit margin on luxury construction is so high, it's worth the extra cost and risk associated with navigating San Francisco's permit process.
If this law passes, then municipalities will not wield the power of arbitrary veto anymore. There will still be extensive zoning regulations, of course; the difference is that development restrictions will have to be spelled out in the law, in advance, rather than made up on an ad hoc, per-project basis by local officials. This greatly reduces the risk involved in starting a development project, and makes non-luxury developments much more likely to be profitable and thus undertaken by developers.
Forgive me, I don't understand. Are you saying developers need to be forced to build housing? Developers will do anything to build more units, if you ask them to set aside units for affordable housing they will. In SF it's almost impossible for them to build anything..
In San Francisco, you actually have the new housing developments pay for the construction of Below Market Rate units. This makes new housing even more expensive and effectively prices out the middle class. The lower class can buy BMR units tho.
It's all about money -- if San Francisco suddenly started allowing a lot of new high-rise residential developments to go up, it would cause existing property values to decline (because there would be more options). This would cause a lot of people who own property to lose money, so even the new, wealthy owners in gentrifying areas have an interest in preventing new development from happening.
I'm not saying that this is the right thing to do -- only that there is a reason people resist new development when pricing is based on a limited supply of housing in desirable areas.
The issue is that the red tape, delays, and fees add a good ~350K per unit[1] in additional costs atop the land and actual construction costs. So let's say that they want to build affordable housing that they sell to someone for 300K. It will cost 750K to build. So that's a 350K subsidy. With a fund of $100 million devoted to affordable housing, that is about 285 units, added to a stock of 300,000 units in the city.
Now, who will be the lucky 285? In a city like SF, which is run by a machine, those who get these subsidies and which plots of land they are allocated involves a system of kickbacks and political connections that again makes it less likely that the housing is built in areas that need it the most. In other words, you'll need to pay a bit to get that 350K gift. And you'll need to be connected. This generally happens when cities give away something of great value, but it happens especially in a city like SF. But in either case, those extra 285 units aren't going to change prices in San Francisco very much, even at a cost of 100 million dedicated to building affordable housing. I'd wager that most politicians in SF would love the chance to give away $100 million, because they each are connected to a patronage network of donors and organizers, and these networks are sustained with gifts such as this. But it wont solve the housing issues.
The problem is that city needs to make it much easier to build there. It's a nightmare of permits, waiting, talking to multiple agencies. A huge mess.
I have a friend who owns a coffee shop there, and he wanted to paint the counter. Well, the health department came in, and the building inspection dept came in, and the health guy said the paint was too porous, and that he needed to use a different paint, and then afterwards another guy came in and said it was the wrong paint, and he should have used the one he chose originally. And between these visits is months of waiting. Each time they come, it was a few hundred bucks, then more waiting. Then another visit. When I left SF, he was still waiting for permission to reopen with the new paint.
Now imagine you are a developer building an entire apartment building. So they need to massively streamline this process, and this takes away power from administrators, which is why it will be opposed by politicians, even as the option to give away the 100 million, which wont make a difference, will be supported.
This is what the NIMBYs are up against, and I hope they are clever enough to take the machine on.
It's not that hard. A huge financial incentive exists to convert a lot of the city's low density housing stock to higher density housing. SF is full of poorly built, ugly, non "historic" residential buildings that developers would gladly convert to taller, safer, prettier buildings that housed more people if they were allowed to. The city government just needs to have the will to loosen regulations and limit neighbors' effective veto on neighborhood improvements. The negative impacts of these developments could be remedied by impact fees, to go to expanding transit and other services that would be needed to accommodate more people in the neighborhoods. Again, the cost of housing is so high that developers would gladly pay astronomical impact fees if they were allowed to build. Historic buildings can be excluded from these rules, and developers can be required to adhere to certain architectural guidelines. Hell, they could mandate that all new development be in the "painted lady" victorian style, though I personally think that would be stupid.
It's certainly going to be tougher (not just in San Francisco, but elsewhere) because it was previously standard practice to choose cheaper areas for these projects to keep taxpayer costs low. Of course, in reality this disproportionately affects marginalized communities, so it'd be a political dumpster fire nowadays to propose that.
If you can't build things in the cheaper areas, all that's left are the expensive ones.
So the fact that construction cost per square foot is ridiculously high in SF (as are planning expenses as a percentage of overall construction cost) has nothing to do it ?
A family member of mine is, in fact, a low-income housing developer in SoCal.[1][2] She has built and maintains hundreds of units housing poor and working-class families and seniors.
She has to put up with all the same crap--the community input circus, being slow-walked by the zoning board (no matter that they were literally begging her for the housing only months earlier), endless CEQA litigation, etc.
Even though she's being given money by the state (as transferable tax credits) to build housing that is wholly, perpetually BMR and which municipalities are legally obligated to push through (because of the quota system), she's pretty much in the same position as any other developer. Even though she'll have all her ducks lined up and pretty much prepared to break ground the same day she submits her full proposal, it can still take years and ridiculous amounts of money (tax payer money!) before she can break ground. She has to swim up the same sh*t creek as for-profit developers because the situation is just... that... bad.
You ever wonder why it takes an eternity for the City of San Francisco to complete a housing project by itself and with fully allocated funds? Even though the mayor, zoning board, and every other involved official sincerely wants the project to succeed and doesn't perceive any serious impediment or harm? It's because the consequence of streamlining the process for themselves would be some marginal streamlining of the process for market developers. Somehow anti-development sentiment has become so pathological that politicians and activists will literally spite themselves. Except not really, because they're not the ones getting screwed. But at least they can feel good about themselves for standing up for the guy they just kicked to the curb.
Unfortunately, these days exactions are also abusively imposed to offset the supposed costs of "gentrification" and other unquantifiable social phenomena, and sometimes the dollar value of such imaginary costs conspicuously set so high as to make a development financially unviable. This is how cities like SF force developers to include below-market-rate units or to make cash contributions to low-income housing projects, even when a project is not actually displacing any pre-existing tenants.
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