San Francisco is the place for lovers, diversity, tech hackers, real estate investors and people just like you and I. We have great weather, talent, opportunity and the main offices for Uber, Pinterest, Airbnb, Yahoo, and more.
But we can all attest that housing in San Francisco is challenging and without the proper knowledge and assistance you can find yourself in a worse of a predicament than you started.
San Francisco’s housing crisis started in 2007.
Since then housing prices have been going up as well as housing and it is continuing to grow. In a 7 by 7 city, there are gains and losses to be had in such a rapid growth. So here is 5 Ways San Francisco’s Housing Crisis” Will Affect You.
1) The new housing structure
“New housing” in the form of single-family homes (SFH), condominiums and rental units are not being built yet according to Ted Egan, San Francisco’s chief economist is lagging. Mr. Egan estimates housing stock needs to grow at a steady rate of 1.2% per year or 4,600 housing units per year. 2014 was a strong year for San Francisco housing adding 3,514 units. In much weaker years including 2011, only 269 new units were accounted for. So housing demands continue to exceed its supply impacting those of us in the market. Median rents increased by 17% 2014-2015 and housing sales prices median increase was 14%. In 2016, we are enjoying the stability of a good economy in an election year, yet housing projections for 2016 are 2,900 units, 1,700 units behind current projected demand.
Therefore, we are confident existing SFH and condominiums continue to hold and increase in value. We are seeing occasional concessions in the rental market such as a free month rent here and there as an incentive to sign a lease and new evidence the rental market is softening with as much as a 10% adjustment in 2016.
2) Construction Costs
The City Building Department has a tremendous backlog of construction projects in pipeline likely because they are understaffed. This backlog to permitting new construction contributes to additional soft and carrying costs adding to the higher price of quality housing and delay in the inventory of new product. Developers who submitted projects 2 or 3 years ago have had to add about a third to their projected building costs and carry the project longer while competing for skilled builders and tradesmen.
3) Housing Location
Homeowners and renters who can afford to move up to better neighborhoods offering more services are making the move. Financing has eased but underwriting commercial and residential home loans remain cumbersome.
4) Housing Selection
San Francisco’s housing is going vertical because our natives and recent transplants are demanding a more urban experience. Take a look at the Market-Octavia plan. Building heights have been rezoned in the area up to 400 feet at the intersection of Market and Van Ness. Parking requirements have been reduced to .25 per unit for new housing with parking credits for bicycle parking. Away from the urban core homeowners and developers are adding square footage by digging out partial basements and converting attics to living space.
We are in an international real estate market with new buyers entering our market. Visibly the tech industry is absorbing more housing units with the new wealthy setting neighborhood price records. The evidence the San Francisco housing market has been undervalued is confirmed by international demand. San Francisco welcomes out of town employees who require a smaller housing footprint want to be close to their employment. We enjoy a high standard of living here, have created a strong employment base, have great weather and amenities to boot. It is time to act and align your real estate with your lifestyle.
5) San Francisco’s Asthetics
As much as housing is in demand, new houses are being pursued even before they come to market. To play devils advocate, how will a couple 1000 more houses affect San Francisco. We’ve been feeling the housing pinch for years, have adapted and will continue to make it work. San Francisco is a great place to work and a challenging place to live. As we contribute to the quality of daily life, our immediate opportunity is to continue to be nice to one another daily as we find solutions to our housing issues.