The dangerous fantasy of upzoning - 48 hills

"Last week I invited a market-rate developer as guest speaker in my graduate housing class at the University of San Francisco. I told him that invariably a student would ask him about the mayor's so-called "family" upzoning plan. His answer to the students was that it's essentially just political posturing, and won't have much impact on increasing supply. He's a developer, he knows: Development is all about costs and interest rates and financing."

"San Francisco's family zoning plan is politicians pretending to be doing something, gaining political points from their YIMBY and tech donor allies, and attacking their labor and tenant opponents who didn't support their campaigns, because the real things they should be focusing on - interest rates, costs, and financing, they either can't (interest rates), or don't want to (costs), or it's too hard (financing)."

"When I consulted for a housing co-op which is considering developing on their property, we brought in a development financial adviser, and, not surprisingly, they told the co-op members that basically it's going to be another ten years, if not more, before it makes financial sense to build higher than 85' anywhere outside of downtown, and even that was iffy. Look around - where are the cranes?"

"On the smaller development scale, another housing friend ran into one of the residential builder guys, the ones who build medium sized buildings in the West side, and they are pissed off about the whole thing. They already have a hard time buying land to build on-much of it is being bought up by outside investors-and the rezoning is simply making the land more valuable, making it harder for them to acquire development properties."

San Francisco's mayoral "family" upzoning plan amounts to political posturing and will not substantially increase market-rate housing supply. Development decisions hinge on costs, interest rates, and financing rather than zoning changes. Financial advisers warn that building above 85 feet outside downtown may not make financial sense for another ten years or more. Smaller residential builders face competition from outside investors who raise land prices, and rezoning can increase land values, further impeding acquisition. Construction costs in San Francisco approach $800,000 or more per unit, making financing the binding constraint rather than zoning, environmental review, or planning approvals.

Read at 48 hills