From SFGate.com comes this note that housing developers are being "encouraged" to offer more "affordable" housing:
Housing developers in San Francisco will be required to sell or rent more new units at below-market rates or pay higher fees to the city to comply with a new law expected to win approval from the Board of Supervisors today.
The new so-called inclusionary housing rules are meant to generate housing that is within the reach of more San Franciscans and is not segregated into lower-income neighborhoods.
Though inclusionary housing requirements already on the books account for just a fraction of the below-market units in the city -- with most existing as a result of local rent-control laws -- the new measure will ensure more are made available as San Francisco continues to experience a building boom.
Sarah Karlinsky, policy director at the San Francisco Planning and Urban Research Association, said the proposal strikes a good balance by encouraging private developers to expand market-rate housing while simultaneously tackling the city's affordable housing problem.
I'd argue that "encouragement" would be more like subsidization. This is more like a threat.
San Francisco has long suffered from a shortage of affordable housing, and the deficit continues despite the biggest housing construction boom in two decades. A July 2005 Planning Department study showed that the median price paid for a San Francisco single-family home was $800,000, compared with the median Bay Area price of $644,000. Just 22,835 housing units were defined as affordable, putting the city thousands of units short of targets set by state law.
Is it true that there's a shortage - that the quantity offered falls way short of the quantity sought? Or does "shortage" in this context mean "not enough" from the central planner's point of view? And what is "affordable" and what is not?
Like most businesspeople out there, housing developers do what they do to earn maximum profits and any economist will tell you that the way to make housing less expensive is to get more units built. When development becomes more profitable*, more units get built. But requiring developers to sell a proportion of their units at below market rates takes some of the profit out of the business, encouraging less development.
One consequence of the SF planners' actions is that development will be shifted to one of the many other Bay Area cities, such as Oakland, driving up rates in SF in the long term and driving down rates elsewhere in neighboring communities (all else equal). Perhaps proponents need to read "Roofs or Ceilings" to get a better handle on what happens when planners try to control housing markets.
HT to Fark.
*Not that government officials would be better at directing housing
resources than the fluctuation of prices and profits even if they did
try "encouragement."