In most of the country, getting a permit to build on your own property is simple, straightforward, cheap, and fast. You buy a piece of land. You propose something to build on it that conforms to applicable zoning and building requirements, and you submit that proposal for review. The city reviews it in a timely fashion for a reasonable fee, and if it conforms, you get a permit. If it doesn’t, you know exactly why, you make the necessary changes, and you resubmit.
In San Francisco, we do things a little differently.
Many people rightly wonder why developers aren’t building more badly needed cheap housing in San Francisco. Between 2007 and 2014, Bay Area local governments permitted 99% of the needed high-income units, but less than a third of needed moderate-, low-, and very low-income units.
It’s easy, and lazy, to point to “developer greed.” But the truth is that it costs $700,000 to build a single unit of affordable housing in San Francisco.
Developers can’t operate at a loss. The only thing that pencils out to build is “luxury” housing. Which is normal housing that costs a lot.
So why does it cost so much? Land is expensive due to artificial scarcity caused by luxury zoning. (More on that later.) Construction labor and building materials are also getting more expensive.
But bureaucracy is the main reason San Francisco is the world’s second most expensive city to build a home in. “The most significant and pointless factor driving up construction costs was the length of time it takes for a project to get through the city permitting and development processes,” authors of a new study from the UC Berkeley Terner Center for Housing Innovation wrote.
According to the Urban Land Institute, San Francisco has “some of the most complex land use and environmental regulations in the country.”
By some estimates, 10% of the cost of building a new home can be attributed to “excessive regulation, needless red tape, and regulatory delays.”
Examples abound. The Booker T. Washington Community Center affordable housing project endured a five-year discretionary review process which increased the cost by $10 million.
Homeowners fought one affordable housing project in the Mission for nearly ten years, which is how long it had been since any affordable housing was approved in the Mission. They claimed senior housing would bring more crime.
Now, before we go further, I regret to inform you that we need to have a little talk about language. Because SF hasn’t built enough housing, as discussed, market-rate housing is extremely expensive. Kind of like if you stopped growing apples but everyone still wanted to buy apples. The price would rise.
The only affordable housing that gets built in SF is subsidized, either by developers, government, non-profits, or all of the above. Because it’s so expensive to build here, unsubsidized housing can’t be built for profit if it’s affordable to middle- and low-income renters. So when you read the term “affordable housing” in the context of SF, know that means subsidized. And know that when you read the term “luxury” housing in the context of SF, that means market-rate, aka unsubsidized.
Next time I’ll offer a brief overview of some of the pointless bureaucratic hurdles SF has erected to building affordable housing.
This is part four of a series. See parts one, two, three, four, and five.
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