When it comes to housing, the Bay Area is a pillar of market distortion. People gravitate to the metro because it is among America's top economies. But their settlement patterns are hardly organic once they arrive. Instead, various municipalities—particularly on the outskirts—commit to growing their populations and tax bases, while the ones with the most actual jobs and demand allow very little housing.
For those who are interested in urban form, this leads to the question (albeit academic) of how San Francisco would look under an open market. Based on existing indicators, it seems the metro would densify a lot, although not entirely in the way density advocates may like or suspect.
The "heat maps" on Trulia.com are instructive in answering this question. In May, I wrote about how these maps show the per-square-foot sales prices--a great indicator of market demand--for housing in metros nationwide. It turns out there is significant "spikiness" in different metros, with core city areas often being matched or exceeded by suburbs, with a lot of fragmentation in general.
San Francisco's heat map, however, provides starker takeaways than that. Much of the city proper has per-square-foot sales prices of $800 or above. So do vast swaths of the San Francisco Peninsula leading south, and parts of the northern peninsula in Marin County. Meanwhile, housing on this per-square-foot basis sells for cheaper as you move further east, south or north, away from the jobs in San Francisco and Silicon Valley. Berkeley, San Jose, and other nice nearby suburbs represent a second tier of consumer demand, and the suburbs beyond that a third tier. It's not until one reaches Stockton--a rough city 80 miles east that some workers commute in from--that housing can be found priced below the national median.
The heat map thus makes a decisive statement on consumer demand in the Bay Area; people will pay the most either to live in, or close to, San Francisco and Silicon Valley.
But, paradoxically, population growth doesn't gel with this demand, according to figures from the California Department of Finance, which charted growth by municipality between January 2016 and January 2017. While San Francisco added about 10,000 people, so too did San Jose, an area with not nearly the demand. A lot of municipalities where sales prices are as high as San Francisco—including Palo Alto, Mountain View, and other Silicon Valley cities—grew by less than 1,000. And amazingly, the swanky cities on the northern peninsula barely grow at all; Marin County in its entirety has added only about 1,000 people on average annually since 1970.
Yet various municipalities in Contra Costa and Alameda Counties, to the east, have double the growth, in net and percentage terms, as these Silicon Valley ones. In other words, the Bay Area's growth is occurring the most in the places people least want to live.
So what's going on? Followers of this column, and of other writing on urban America's housing crisis, know the answer by now. A climate of Nimbyism within the Bay Area's most desirable areas--followed by the relative permissiveness of the East Bay cities, who need economic development to pay their bills--causes the mismatch.
But the original question, again, is—how would the Bay Area look if these regulations weren’t in place, and people could live where they wanted? Between the Trulia data, and different experts I’ve spoken with, it seems much of the population growth would occur in or near San Francisco.
For example, Patrick Kennedy, whose firm Panoramic Interests develops micro units in the Bay Area, told me that if he had permits, he would build 100,000 or more of these units around transit stops in the metro's urban core (San Francisco, Oakland and Berkeley). Sonja Trauss, a local Yimby housing activist, concurred that more housing would go around transit stops, namely the BART rail system. And she agreed that San Francisco in general would be denser.
But she added that the public's appetite for cheap single-family housing would lead to more horizontal growth as well.
“The biggest noticeable difference would be [more of] what a lot of people call sprawl,” said Trauss, during an interview in her downtown San Francisco office.
But the location of the sprawl would change, she added. A lot of the so-called mega commuters driving in from exurbs like Dublin, Tracy and Stockton would locate on what is now either open space, or lightly-developed parcels, within the northern and southern peninsulas adjacent to San Francisco city proper. This might, depending on how one looks at it, defile the quasi-rural character of these areas. But it would better preserve the outlying ones, shorten commutes, and most crucially, densify the Bay Area in net terms.
Perhaps the more pertinent question than how existing settlement patterns would change is how many more people would live in the Bay Area overall, under looser regulations. Former Forbes contributor Timothy Lee had an interesting answer to this in 2012:
The Bay Area has about 7 million residents. In a free housing market, the population of the San Francisco Bay Area would have been growing rapidly over the last two decades. For example, between 1900 and 1920, the growth of the auto industry helped the population of the Detroit metro area nearly triple, from 540,000 people to 1.4 million people. If the San Francisco Bay Area had grown that fast since 1990, it would have about 16 million people today.
Of course, that was long ago and Detroit was starting from a smaller base. A more reasonable benchmark would be metro areas like Atlanta, Phoenix, or Las Vegas, all of which roughly doubled in size in the last 20 years. Growing as fast as Phoenix, the slowest-growing of the three, would have given the Bay Area a population of 11 million today.
This shows the macro problem that comes with a highly-regulated Bay Area. Beyond just crimping San Francisco's densification, regulations have distorted its broader "urbanization." Millions of people who would live in the metro can't, and a variety of built patterns that would develop region-wide are squelched. As economists Chang-Tai Hsieh and Enrico Moretti have argued, the inability for greater shares of the U.S. population to partake in this Bay Area urbanization process has shaved entire percentage points from America’s GDP. And even for the people who live here, it has caused a mismatch between where they are and where they want to be.
[This article was originally published by Forbes]
Scott Beyer owns and manages The Market Urbanism Report. He is a roving cross-country journalist who writes regular columns for Forbes, Governing Magazine and HousingOnline.com.
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Market Urbanism Report is sponsored by Panoramic Interests, a progressive developer in San Francisco. Panoramic, which is owned by Patrick Kennedy, specializes in 160 sqft micro-units (called MicroPads) that are built using modular construction materials. Panoramic has long touted these units as a cost-effective way to house San Francisco’s growing homeless population. But Panoramic also builds larger units of between 440-690 sqft. To learn more about Panoramic’s micro-unit model, read MUR’s coverage on the firm in its America’s Progressive Developers series. Or visit Panoramic’s website.
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