The following graphs plot a now familiar curve. Rents in the Mission are continuing the upward trend that began three years ago. The number of units for rent as listed on Craigslist.org have nudged up from the tightest of times in the fall of 2011. I said to myself, “It’s about time for supply to take control and for the rate of rent increases to moderate.” So far, that hasn’t happened. I decided to check around a bit.
I looked for an example, and found Vara, a nice apartment complex at 1600 15th street, a 202-unit building with 40 below-market-rate units. The apartments are being occupied now. Two hundred new units surely should have changed the supply/demand calculus — especially when the market-rate units begin at $2,675 for a studio and $4,800 for a three-bedroom. The apartments are expensive, have clever floor plans and are filled with amenities. All that said, 200 apartments is a lot of space to rent. To my amazement I found that, as of yesterday, all of the three-bedrooms and studio apartments were “unavailable” and on “availability alert.” In fact, only 14 market-rate units remain unrented. The below-market unit lottery list had been capped at 500. So Vara is, for all practical purposes, rented and the paint is barely dry. Meanwhile, the overall availability numbers in the Mission seem to have experienced a slight uptick, that’s all.
Current logic suggests the shortage has its roots in the 2008 real estate collapse. Demand was low, financing was impossible and construction costs were increasing five to eight percent per year. The availability graph shows a lot of apartments for rent in 2009, which made 2009 a bad time to start building new apartments. Evidently, thoughtful people purchased derelict buildings or underutilized land and waited for things to improve before starting the permitting process. That time has come. So has a wave of multi-unit residential building.
According to the San Francisco Business Times, almost 8,000 new apartments will be ready for occupancy between now and 2015. An amazing 3,500 will hit the market in 2015 alone. The article argues that those numbers exceed all new apartment construction for the past 15 years combined. Planning Department requirements ensure that below-market-rate apartment construction be financed by and keep pace with new developments — and while that doesn’t happen, more will be coming.
Economists expect that this year San Francisco employment will climb to the 2007 peak. It is further expected that San Francisco will have 17,000 new households by 2017. If history is a predictor, 63 percent of those people will be renters. Dan Deibel, formerly head of Urban Housing Group, said, “There will be a small oversupply but the expanding economy should be able to absorb what is in the pipeline.”
Just when I thought logic had been found and the fog of the future was lifting, I noticed a new dynamic. On the anniversary of the 1906 earthquake, Mayor Lee signed AB094 into law. This legislation requires property owners to make mandatory seismic improvements to their buildings. This is a good thing. Making the city safe is a primary responsibility of government and “soft story” residential buildings are a proven seismic vulnerability.
The subject properties are defined as: Wood-frame structures, containing five or more residential units, having two or more stories over a “soft” or “weak” story, and permitted for construction prior to January 1, 1978. The city’s listing of potentially vulnerable structures named 6,206 buildings, throughout San Francisco. An article in the Huffington Post suggested that 3,000 buildings needed structural upgrade.
Chapter 37 of the San Francisco Administrative Code, known as The Residential Rent Stabilization and Arbitration Ordinance, applies to buildings constructed before June 13, 1979. Seems to me that the time just before 1980 must have held some cosmic inflection point for multi-unit residential structures. The buildings demanding review by AB094 are almost uniquely subject to the city’s rent control ordinance as well.
At a meeting last week, city officials told property owners that if the structural retrofit creates conditions that negatively affect health or safety, the residents must be asked to leave during construction. This eviction would be accompanied with a moving stipend from $4,500 to $13,500, depending on the status of the residents to be displaced. A significant debate on every element of this newly enacted legislation has been heard. The details have been ironed out and all of the property owners have been told to get an architect or engineer and start the process.
The city estimates that 58,000 San Francisco residents are housed in this type of building. Some buildings meet current structural requirements and will not need work. Many of the retrofits can be accomplished with minimal disruption and no displacement. The fact remains: between now and the mandatory completion date of September of 2020, there is going to be a lot of structural retrofit work undertaken in the Mission and some people will be temporarily displaced and looking for a place to live.
Then I took a walk around Mission Bay. There are lots of new buildings under construction. How many people will be needed to provide the ancillary services and where will those folks live? A strong economy is great but is always accompanied by collateral requirements.
So, I end where I started. I have no idea what is going to happen long or short term. Will the current tech/bio bubble pop and take us back to 2009? Will there be unbridled economic growth extending as far as the eye can see? What do you think? What have I misstated? What can you clarify? Your civilized comments are encouraged, including my favorite of all, conspiracy theorem.
Please remember, should you wish to use the graphs for commercial purposes, request written authorization from both missionlocal.org and craigslist.org.
And for you dot fans out there, here is my favorite graph. This puppy plots every unit that has been listed for rent since 2009. The listings were ranked first by number of bedrooms, then by monthly rent and color-coded by sample time. The resulting array shows multimodal distributions within apartment configuration. The red balls are the most recent listings — November 30, 2013. I found that if you take your glasses off the distribution looks like holiday lights.