What If We Free San Francisco?

Someone recently alerted me to a 2017 article in Forbes in which my friend Scott Beyer, who considers himself a market urbanist, asks, “How would San Francisco develop under an open market?” His incorrect answer is that it would be even denser than today.

He bases that on the fact that in parts of the Bay Area where housing prices are highest, population growth is low. The latter, he says, is due to NIMBYism preventing construction of new housing. Get rid of NIMBYism (by getting rid of zoning), and new housing would spring up denser than ever before.

Beyers is correct that NIMBYism is a real problem. But it is not the main reason why Bay Area housing is expensive. As Bay Area developer Nicolas Arenson pointed out in a presentation to the Metropolitan Transportation Commission in May, 2015, high-density housing costs more to build per square foot than low-density housing — up to 650 percent more depending on the density. Land also costs more in areas that are already developed. As if that’s not enough, Arenson adds that dense housing “sells at a discount” to single-family homes.

This suggests that the real reason the Bay Area is expensive is because it is dense. As Arenson argues, dense housing is only feasible when housing is already expensive, and the denser it is the more expensive it is. Making the region denser won’t solve the problem; it will make it worse.

What Beyer forgets is the Bay Area’s urban-growth boundaries. He must have forgotten them because he was fully aware of urban-growth boundaries a couple of years ago, yet he never mentions them in his article about the Bay Area.

Thanks to the boundaries, only 31 percent of the Bay Area’s six core counties have been developed. About 20 percent of those counties have been permanently protected as parks and natural areas. That leaves almost half the land in the region physically but not legally available for development. In just those six counties, the amount of land available for development is 156 percent of the land that has already been urbanized.

TotalUrbanProtectedAvailable
Alameda739271106362
Contra costa716306119291
Marin52081185254
San Francisco474700
San Mateo448141111197
Santa Clara1,290331230730
Total3,7611,1767521,833
Land area in square miles. These are the six core counties in the Bay Area. The Bay Area also includes Napa, Solano, and Sonoma counties, which are individually huge but a little further away from the city of San Francisco than the core counties.

The 2010 census found that the population density of the San Francisco-Oakland urbanized area was nearly 6,300 people per square mile, while San Jose was 5,800 people per square mile. Together, they average 6,100 people per square mile. This makes it the second-densest urban area in the country. Houston, which has almost exactly the same population as San Francisco-Oakland-San Jose, has twice the land area. Atlanta, with a smaller population, has three times the land area.

To be fair, Beyer does say that elimination of land-use regulation would allow more “sprawl” to take place. But he also suggests that developers would build at least 100,000 tiny housing units along transit lines. This is unlikely; why would people pay high prices for tiny homes when they can get much larger homes for less money?

If California opens up Bay Area development to the free market, developers would have a choice of building denser housing in the already-urbanized areas or building low-density housing outside those areas. Given that both the land and the cost of construction of denser housing is higher, developers would build far more low-density housing in undeveloped areas than denser housing developed areas.

That means that most newcomers would move to the low-density areas. Plenty of people who are paying too much for housing today would also move to the more-affordable low-density areas. Housing prices in the core would decline, and eventually average housing prices in the region as a whole would be little more than those in Atlanta or Houston.

Many density advocates naively believe that high prices are an indication of high demand for high-density housing. In fact, the demand is demonstrably lower than for low-density housing, according to both surveys and to how people actually live. But high costs push the supply curve for high density upward, resulting in higher prices despite lower demand.

As the Antiplanner noted several years ago, high prices should not be mistaken for high demand. Prices are the intersection of supply and demand; given supply constraints, prices can be high for something for which there is low demand, while if those constraints are taken away, prices can be low for something for which demand is high.

Recall that the so-called pent-up demand for dense housing is largely imaginary. As recently noted here, only about 12 percent of American prefer to live in big cities, yet 20 percent do, so 8 out of 20 of the people who live in big cities would rather live somewhere else, and in fact that is where they are moving — even Millennials. This suggests that many if not most of the people living in the Bay Area are not only chafing at high housing prices but at other costs of density including congestion, crime, and depersonalization.

So I respectfully disagree with Scott Beyer. However, I don’t really care about the result: if people want to live in, and are willing to pay the costs of, density, that’s fine with me. Just don’t fool yourself into thinking that you can have a free market by eliminating single-family zoning without also abolishing urban-growth boundaries, which is what planners and some legislators in California (and elsewhere) want to do.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

13 Responses to What If We Free San Francisco?

  1. metrosucks says:

    Let’s send all San Francisco area planners to the guillotine and see how it works out afterwards, with the free market taking over.

  2. msetty says:

    This would be appropriate for putting you out of your misery, Metrosucky. BTW, go eff yourself.

    This reply is for the two reasonable people left reading this blog, not the brain-dead fuckwits like Metrosucky.

    As usual, The Antiplanner quotes bullshit numbers. Average cost per square foot in New York and San Francisco is somewhat higher than the national average, but nowhere near the bullshit chart he quotes. High rise costs do go up signficantly 4 stories or more, but not like that bullshit chart. When you add the cost of new infrastructure to the low density areas

    More to the point, The Antiplanner continues forgets that huge chunks of the Bay Area are either very hilly and prone to wildfires, as demonstrated in 2017 and with another warning in 2018 in Paradise.

    Another thing. The North Bay does have lots of flat, seemingly buildable land. However, there is severely inadequate water in these places. Places like West Marin would not only need to build more diversion from the Russian River, or even more expensive desalination. Then there would be the many billions needed to build new freeway access and greatly expand US 101, including perhaps a second Golden Gate Bridge.

    You could also in theory build near State Highway 37, but much of that area is behind dikes below sea level. And the same thing applies to water and transportation infrastructure.

    It is clear The Antiplanner is just antiurban, and thus de-facto disdains the basic conditions needed for economic growth and innovation. I guess he thinks there is lots of water, I suppose living in a burg with only a few hundred people near the very robust Metolius River, having fled the urban chaos of Bandon many years ago.

  3. msetty says:

    Yes, taller buildings start to get more costly per unit area, but not like the claim in that stupid presentation fro 2015. https://westnorth.com/2015/04/27/high-rises-land-efficient-but-not-floorspace-efficient/. Let’s say not all sources agree on the magnitude, nor at what number of floors.

    Oh yes, at low densities, when major infrastructure expansion needs are considered such as freeways and virgin sources of water, very low densities usually will greatly exceed costs at higher densities.

  4. msetty says:

    Not every dense development has to be stick built.

    https://www.multifamilyexecutive.com/design-development/construction/big-builds-prefab-affordable-housing-in-denmark_o

    This comes in much less than many single family housing projects, even in non-inflated markets like Minnesota or Texas.

  5. Everyone who comments on this site is my friend. Please be cordial to my friends. If you disagree, please explain why; don’t just call people names.

  6. Frank says:

    You forgot to delete a few non-cordial comments:

    Metrosucky. BTW, go eff yourself.

    This reply is for the two reasonable people left reading this blog, not the brain-dead fuckwits like Metrosucky.

  7. Tory says:

    “That means that most newcomers would move to the low-density areas. Plenty of people who are paying too much for housing today would also move to the more-affordable low-density areas. Housing prices in the core would decline, and eventually average housing prices in the region as a whole would be little more than those in Atlanta or Houston.”

    The assumption here is that the region would have mobility options to get to the jobs along the west peninsula, like the mega-freeways in Houston and Atlanta. I call it “affordable proximity” – not just the affordable homes but mobility options to get to the jobs. Assuming those investments would not happen (and they certainly seem unlikely to me), that limits the value of new housing in undeveloped east and south bay areas. I think you’d get a combination of both your and Scott’s answers: more periphery and more density because of congestion, kind of like what’s happening in Austin and to a lesser extent in Houston.

  8. metrosucks says:

    More reasons (as if we need any) that government planners are batsh-t crazy:

    “Council bans cheese toasties to stop motorbike gangs”

    https://metro.co.uk/2019/01/09/council-bans-cheese-toasties-stop-motorbike-gangs-8325212/?

    “Forget jail, curfews and community service, the leaders of the people of Bristol believe they have the solution for tackling crime: Ban cheese toasties.”

    Well maybe they should stop building “council housing” for African monkeys and throw some of them in jail for a good, long time instead of letting them out on specious reasons?

    But bear in mind that planners love inconveniencing the average taxpaying population in order to further their agenda or pander to a worthless interest group.

  9. CapitalistRoader says:

    More to the point, The Antiplanner continues forgets that huge chunks of the Bay Area are either very hilly and prone to wildfires.

    Much of the city of San Francisco is very hilly and, prior to becoming a city, prone to wildfire.

  10. Scott Beyer says:

    I’ll start by saying that in an open market, the Bay Area would by WAY more populated – the quote I cited estimated it at 4 million more than today. This would increase the population in all 9 counties, and surface in a variety of building styles: density, sprawl, missing middle, etc.

    With that out of the way…

    I think Randal underestimates the demand for density. Right now SF proper has 884k people, almost all of whom pay obscene purchase or rental prices for housing. Any one of them could, right now, find cheaper housing in the suburbs, but choose not to. Moreover, there’s a legion of news stories about people being involuntarily gentrified out of SF. So the number of people who want to live in the city is likely much higher than the number who now do.

    Where I agree with Randal is that there’d be more single-family housing, too. But unlike him, I think it would mostly locate in the currently under-developed peninsulas north and south of San Francisco, since SF & Silicon Valley are where the jobs are. This is why the UGBs of Alameda and Contra Costa County, while bad, are not the most important regulation. Because the demand there is far less.

    Where is my proof for this? It is in the Trulia Heat Map for the Bay Area, which clearly shows that per-square-foot housing sale & rent prices are much higher in the core urban areas. https://www.trulia.com/real_estate/San_Francisco-California/

  11. Scott Beyer says:

    Part of my assumption about free market cities is not only that housing can get built where the demand is, but that the supporting private transport can get built to serve those areas.

    Of course, that’s not how any part of the Bay Area functions now. In SF, the hyper-density leads to gridlock, because the city is served by dysfunctional public transit. Any time a private provider enters the market (Chariot, Leap, etc.) they inevitably get harassed and shuttered.

    Meanwhile, try proposing a private toll road out to the Bay Area ‘burbs, and see how far through the local and state political process that goes!

  12. prk166 says:

    msetty, compare apples to apples. manufactured housing is always cheaper per square foot than stick built. taking and staking that manufactured to create a single, multistory building is much more expensive per square foot than manufactured housing as a SFM.

    This is why the stick built SFH builders have been migrating to manufacturing more and more of the housing off site. They don’t like to brand it that way but the lines between stick-built and manufactured housing are becoming increasingly blurred.

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