Why does San Francisco Make So Much Luxury Housing? (And Not Enough For You and Me?)

Why not more middle- and low-income housing?

Criticisms that the city of San Francisco is only providing luxury housing and not meeting the demand for middle income and affordable housing are true, but why the heck does it work this way? Grocery stores are not just full of Veuve Clicquot and caviar… What gives?

In the Fall of 2013 Robert J. Pierce gave us this gem of tweeting rage:


This is insane.

However, it gets less rage-tastic when we see that the luxury housing stock was at 118% capacity by the spring of 2015, less than two years later. It almost seems like the developers were just planning ahead and estimated about right.

Imagine you are throwing a party and you plan for 100 people to come. You prepare food for 115–120 people because you don’t want to run out of food. This is essentially what housing developers did in mid 2013; they predicted and accommodated for a doubling of people who were looking for luxury housing. Ok that’s good, but why didn’t they predict and accommodate for middle- and low-income housing demand?

Developers LOVE to build housing for everyone. They like to make as many buildings and money as they can. It doesn’t make sense. Why did they stop with the luxury housing?

The answer has to do with the way people make decisions.

Imagine you are a teenager and you can make $25/hour babysitting, $15/hour mowing lawns, and $10/hour delivering newspapers. In one case, imagine that there are lots of neighborhood kids looking for work. The babysitting jobs dry up first, then the lawn mowing, and lastly the paper routes.

But what if there were a severe shortage of teenagers? They would still do all the baby sitting, but we’d probably have to mow our own lawns and deliver our own papers.

If there was a moderate shortage of teenagers, the babysitting and lawns would be taken care of, but no one would deliver the paper.

In this metaphor, teenagers are housing development, luxury housing is the babysitting, middle-income housing is mowing lawns, and low-income housing is the newspaper routes.

San Francisco law limits the amount of housing that can be created through height restrictions and other regulations. That means we live in the neighborhood where there aren’t enough teenagers so we only get babysitters.

So how do we get more teenagers? That is how can we permit more housing to be built until developers built enough housing for everyone, while at the same time not sacrificing San Francisco’s character to those who want to build, build, build?

One solution is to make a single, flexible height restriction regulation that allows neighborhoods to grow but prevents giant mega projects that threaten to destroy San Francisco’s unique character. Here is a smart-growth solution to achieving just that using a flexible height restriction.

Why Does San Francisco Make So Much Luxury Housing?

Educator, Founder, Engineer. Interested in Evidence Based Education and Solving BIG Problems.