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How Did San Francisco Get So Expensive?

Author

Global Site Plans - The Grid

San Francisco is suffering from a housing affordability crisis. If you live in the Bay Area, this topic is all too familiar. The headlines are everywhere, prices keep going up and any kind of solution seems non-existent.

But how did San Francisco become America's most unaffordable city in such a short period of time? Several factors have contributed to the city's current predicament:

  1. Years of insufficient housing production coupled with a booming economy have finally caught up to the city;
  2. Stringent regulations for development make building any kind of housing difficult and time-consuming;
  3. A democratic public process that gives everyone a voice;
  4. The city has a strong anti-growth culture.

Suburban part of San Francisco, California

To address the first point, it comes down to supply and demand. There is not enough housing to meet the demand to live in San Francisco. The city has been averaging a growth rate of 1,500 net new housing units per year, while hitting a low of 269 in 2011. However, in 2012 the city added over 40,000 new jobs, which has attracted new residents.

Second, the process towards getting a project entitled is political and arduous, to say the least. On top of that, building permits are discretionary, meaning they can be appealed to the Planning Commission. It often takes up to five years to get a project entitled, but construction will only take two.

The last two points can be grouped together. San Franciscans have many opportunities to voice their opinions against a proposed project and there is a strong constituent of residents who don't want to see the city change. The presence of cranes and high-rises getting built makes them fear that the city they grew up in is becoming too dense and expensive. Projects are consistently appealed for various reasons, which slows down the overall process and drives up development costs.

Urban area of San Francisco, California

It's uncertain how long prices will continue to rise. If the city continues to restrict growth, then it will only be accessible to the wealthy. But if housing production continues to rise like it has the past two years, San Francisco will eventually be a city for all income levels.

Can you find affordable housing in your city?

Credits: Photographs by Robert Poole. Data linked to sources.