What's the Matter With San Francisco?


Thomas Sowell takes a look at astronomical housing prices in the Bay Area:

One of the county's middle-class communities is Foster City, a planned community built back in the 1960s. When the first homes were sold there in 1963, a three-bedroom house could be bought for as little as $22,000. If you wanted something bigger or fancier, or in a more scenic location, you could still get it for less than $50,000. Today, the average price of a home in Foster City is $1.2 million.

People who wring their hands about a need for "affordable housing" seldom consider that the way to have affordable housing is to stop making it unaffordable. Foster City housing was affordable before the restrictive land use laws made all housing astronomically expensive. Contrary to the vision of the left, the free market produced affordable housing—before government intervention made housing unaffordable.

It is the land, rather than the houses built on it, which has become astronomically expensive in places with extreme "open space" laws and other severe land use restrictions. In some places without such laws, a house can be bought for a fraction of what that same house would cost in parts of California.

Though I agree with him on principle, Sowell is mixing apples and oranges here: "Affordable housing" and restrictive land-use laws are two different things. Though they often walk hand in hand (e.g., in cases where some developer can't do anything unless he dedicates a certain number of units as "affordable" properties), affordable housing restrictions are generally easier to get around than restrictions on growth, which do operate the way Sowell says.

How much they're operating, in this case, to inflate land prices is an open question. The Bay Area offers every possible attraction in terms of climate, geography, and location, and I'm wary of any attempt to blame the whole unaffordable-homes megilla on building restrictions, nor are such restrictions as uniform throughout the peninsula as Sowell's explanation would indicate. But you can't spend much time here without noticing how little development there seems to be for a place that has such high demand for housing. (It's especially strange when you contrast it with the development of office space: Since the mid-nineties, San Francisco's downtown and South of Market have changed beyond all recognition; places that used to have literally one two-story building punctuating an entire block of vacant lots are now entirely filled with office highrises.)

What's weird is how rarely, in San Francisco media, you'll hear the above argument made at all. The "crisis" in housing prices is almost invariably described as an inexplicable force of nature (in the local TV news) or as a conspiracy by developers (in the alt.weeklies). You'd think, in a city full of progressives who can talk all day about how they wish they could afford a home, somebody might have started to wonder whether there's a connection between political decisions and the fact that the city is remarkably segregated and prohibitively expensive. It's enough to make me think Tom Frank is right: American voters really are allowing political strategists to bamboozle them with bogus lifestyle issues and voting for a corrupt political machine that acts against their own economic interests. Just not the American voters Tom Frank is thinking of.