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Real Estate Reporter

City Hall changes?

Mayor Ed Lee, with possible successor Supervisor Jane Kim. Photo: Kegan Marling

SHIFT COMING IN CITY HOUSING POLICY?

We can call it the Marina Times Columnist Surprise: District 3 Supervisor Aaron Peskin masterminded the process by which acting mayor London Breed was voted out of the mayor’s office and was replaced by District 2 Supervisor Mark Farrell.

Breed’s supporters were apoplectic and made accusations of racism. But insiders say this has much more to do with the progressive wing of the board — once again led by Peskin — flexing its muscle and angling to control the mayor’s seat and get a majority on the board. It’s far from certain that will happen; Farrell appointed his own successor in District 2, and even if a left-winger gets into the mayor’s office, there’s no certainty he or she will govern from the left. As Joe Kukura noted in December (see his SF Weekly article “Remembering Ed Lee’s Radical, Left-Wing Past”), Lee’s background was very progressive. Yet he is considered by many to have been a moderate mayor (in San Francisco’s politically relative terms, that is) who was cozy with business. A simple explanation is Lee pretty much did what anyone would have done in office at that time: He reached for the golden ring being offered of a tech business boom, welcomed tech businesses to the city (and remember the “Twitter tax bill” was written by progressive Supervisor Jane Kim), and tried to deal with the housing crunch by broadly boosting housing development.

Farrell’s time as caretaker mayor is unlikely to offer any dramatic changes, unless he’s carted off to jail by the Trump administration because of its desire to criminalize sanctuary city leadership. But if Farrell is succeeded as mayor by a progressive, and district elections go the progressives’ way and they get a one-vote majority on the board, does that mean the city will significantly change its approach to housing?

It’s possible there will be tinkering on the sidelines; attempts to increase the amount of required affordable units in new developments will be dusted off and probably passed. But the left’s long-term battle against new housing will now be met by new state action, where our legislative representatives David Chiu and Scott Wiener are leaders in the “housing caucus” to use state pressure to get localities to loosen up their NIMBY opposition to development.

Hindering the development of market-rate housing doesn’t mean housing prices will drop; unless the economy takes a big dive, there will continue to be pressure for city housing, and the people with money are the ones who will always find a way to rent or buy the available units. The progressives’ best bet is probably to concentrate on tightening rules against abusive evictions — something they were starting to have success with anyway, and which should continue to be a priority.

Oh, and your humble real estate columnist has not yet been voted anything yet.

A YEAR IN RENTS

Berkeley, Fairfield, and Napa had the fastest-growing rents in the Bay Area in 2017, while San Francisco’s rents increased a relatively modest 1.5 percent, according to a report on 50 Bay Area cities by Yardi’s Rent Cafe.

Despite that moderation, San Francisco remains “the second most expensive rental market in the nation after Manhattan, [and renters here] are paying over $2,000/month more than the average U.S. renter,” Rent Cafe reports.

ANOTHER NUMBER TWO

Besides having the second-highest residential rents in the nation, San Francisco is in second place on another dubious list: the world’s second highest construction costs. That’s from the Cost of Building Housing Research Series at UC Berkeley’s Terner Center for Housing Innovation. The source of San Francisco’s high construction costs are no surprise: Terner says it’s due to “lengthy and complex city processes,” as well as “building codes and design requirements, workforce and procurement rules, and environmental regulations.”

And yes, the two number-twos are related. “In 2000, it cost approximately $265,000 per unit to build a 100-unit affordable housing building for families in the city, accounting for inflation,” according to the report. “In 2016, a similar sized family building cost closer to $425,000 per unit, not taking into account other development costs (such as fees or the costs of capital) or changes in land values over this time period. As a result of these cost increases, developers need more subsidy for every unit, at a time when public resources for affordable housing have been dwindling.”

You can learn more at ternercenter.berkeley.edu.

SAN FRANCISCO, SAN JOSE BATTLE FOR FIRST

Last month, San Francisco retook the crown from San Jose for the nation’s hottest real estate market, according to Realtor.com. In fact, 13 of the top 20 urban areas on the “hot list” are in California. The highest-ranking non-California market is Colorado Springs, Colorado, which placed fourth.

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