Posts Tagged 'housing'
About eight years ago I was unemployed for almost two years. A friend of mine told me that I wasn’t unemployed, but that I made $40,000 per year. I looked at him and shook my head. That made no sense, but he pointed out that because I had been lucky and inherited my parents home I didn’t have to pay rent which [at the time] would have worked out to about $40k/year.
While that number has increased nowadays, it hit me hard. There are some things that many people don’t understand about owning a house that is different than renting and I feel that should change. While it’s a change that should happen nation wide, it’s something that makes a lot more sense in San Francisco.
If you own a house you must pay property tax. The thing that some of you might not know is that property tax is tax deductible. I met a woman who recently bought a house and is paying over $11k/year just in property tax. All of that is deductible from her tax return every year as a living expense. With rental rates at an all time high in San Francisco this is a bit of a drop in the bucket, but getting to cut $11k+ off your yearly income is still nothing to sneeze at. She can also claim her mortgage payments as a living expense and deduct them from her income.
This is why I believe that rent should be tax deductible as a living expense. I recently saw an article where an elderly couple in the Sunset District who were paying $2100/month in rent had their new landlord remove an in-law apartment from their house thereby making the home a single family dwelling. The landlord was then able to increase their rent because the home was no longer under rent control to $8900/month.
San Francisco is one of the few places in the United States where something like this could happen, but there are places where it is happening more often. Most of the Bay Area is quickly approaching the rental prices of San Francisco because when you leave San Francisco the homes are bigger thus demanding a higher price. Even the apartments are larger outside of San Francisco.
So why isn’t this happening? I can only make a guess, but let’s use San Francisco as an example. If residents were to be able to deduct their rent from their income as a living expense San Francisco would look like a very poor city. Yes that new techie family that’s paying $10k/month for a house in the Mission would suddenly have a $120k deduction from their income each year which would probably qualify them for financial aid unless they were pulling in closer to $200k/year in salary. This also probably wouldn’t help reduce rent because hey, it’s a tax deduction.
Overall, San Francisco has for a long time been difficult to live in due to the increasing rental prices and that also increases expenses in the Bay Area. To make this change so that rent was tax deductible would probably make a large number of people in the U.S. look much poorer than we realize, in California where Proposition 13 is in effect so that property tax can only increase by 1.1%/year, home ownership even with these high purchase prices currently has advantages over other parts of the country. Perhaps this is more of a state wide thing, but I believe it’s something a lot of our politicians should start talking about.
There has been a lot of talk lately about building affordable housing in San Francisco. I’m not exactly sure what the right answer is [although my suggestion is below], but so far I’m not sure it’s going in the right direction.
Out in the Sunset District there is the Sloat Garden Center. It’s currently the largest of it’s locations and now the owners are going to sell it. I can understand that since they can get a good deal of money for that, but the problem is that it has been labeled as the perfect spot for affordable housing to go in and by affordable housing they’re talking about a ten to possibly twelve story building in an area that is zoned as NC-2 which is mixed commercial/residential with a height of no more than three stories.
Here’s where it gets interesting. I can’t prove they want to build a ten to twelve story complex, but there is a height limit code of A100 which I can’t get a definition for and everyone seems to believe that means 100 feet. I can see that, but there comes another problem with what is defined as a story. Typically in the past a story was defined as twenty feet, but now through the process of downsizing a story is being redefined as ten feet. This is another part where that could mean that 100 feet could represent a five story complex or a ten story complex. The twelve story came from someone who has been pointing out the requirement of 20% low income housing to all building in San Francisco, but misses the point that that doesn’t allow them to add on.
My overall thought is that while yes, there are few buildings that somehow got past the strict coding over the years and are more than three stories they are the exception rather than the rule. To build a 100 foot building out by the beach would be ridiculous in my opinion because it just would not fit with the character of the other buildings around it. They might as well relocate Coit Tower to the Sunset District if that height is fine for a spot in San Francisco that after it was just a bit of sand had been dubbed, the suburbs of San Francisco.
So what is the answer? OK, just bear with me for a moment because this is going to sound a bit NIMBY, but it’ll make sense…Hunter’s Point.
Yes, I’m suggesting if they want to build affordable housing that they look into Hunter’s Point. They’re already planning on building a shopping center, or at least they’re seriously talking about putting one where Candlestick Park used to be so it makes sense. It especially makes sense when you look at the picture in this article. There’s is tons of open land in the Hunter’s Point area [and Bayview as well] where you can even see the former foundations of buildings.
Hunter’s Point was always considered a bit of a scary place in San Francisco, but with the influx of people to San Francisco there are a lot more people that are buying homes and new condos that are being built in the area and it’s starting to come up…albeit slowly, but it IS happening. I am more frequently having to drive in that area and I’m pretty surprised at the changes I’m seeing. San Francisco isn’t seeing how much of a clean slate and lack of opposition or at least much less opposition that they would get from a currently populated part of San Francisco.
There is no reason for our politicians to destroy the character of San Francisco’s existing neighborhoods when there is a good amount of open space in the city where they could develop a whole new neighborhood from the ground up.
Buying a house in San Francisco. That’s a whole new world now a days that is a far cry from when the houses were first built. Just to give you a little idea, my parents bought their house in 1954 when it was first built. Back then the rubric was that you earned in a week what you spent in a month and you put the excess aside to come up with a downpayment on a house. Back then a 20% downpayment was around $5-8k believe it or not. You continued on those same lines after purchasing the house so that you could use your excess money to pay off the mortgage on your home. Then when you had paid off your home and you were in your 50’s you could spend the some of the excess money on you and your wife [think back to the Cleaver family here]. When retirement came along you could sit back in your house living comfortably with a nice little nest egg to supplement your Social Security and when you died you would give your kids the house so they could sell it to get down payments on houses they would buy or if you only had one kid they would get the house.
Then in the 70’s though the market started to go through the roof and the houses that were bought in the 50’s suddenly were selling for 3-4 times the price they were bought at and the property tax started to go up. Every year you’d have to shell out more and more money to stay in your house until Proposition 13 passed. It actually wasn’t just for homeowners at the time as it is still in effect today, but since there aren’t that many people who’ve held on to their houses for 40-50 years you don’t see as much savings from it. If you buy a house today you won’t see the benefit for another 3o years unless there’s a huge housing market crash.
So let’s look at today. Houses from the time I was talking about have increased by 50%-100% depending on what part of town you’re talking about. There are a few parts of town where you can get an $800k house, that is if you aren’t going to push a $20k incentive on top and pay it all in cash like a few of the big techies can do today. 20% down would be $160k and your monthly payments would be about $4700. Add to that a property tax of $15,200/year and you’ve got to earn $71k just to pay off the mortgage and property tax. If you continue to pay it off for the next 30 years your property tax will increase a bit, but let’s say it stays at $15,200 for the sake of argument. When you retire at age 70 and you’ve put in the maximum amount possible to Social Security you’ll be getting $3,350/month. Hopefully you’ll have some set aside because more than one third of your SSI income will be going to pay off your property tax [that will probably increase a little in 30 years, but not much]. It’s not a very easy way to retire and keep your house anymore even if you’re a rich techie who bought it all in cash from day one. You still have that $15,200 every year until the tech bubble bursts and you have to find another job which may or may not be offering anywhere near the salary you’re making now. If you decided to buy one of those nice $1.5 million dollar homes you can pretty much double all the costs, but now you’ll be paying out three quarters of your SSI just to cover your property taxes. You better have a pretty huge nest egg tucked away because if you retire earlier your SSI income drops significantly.
The housing market has been artificially inflated due to the fact that there are people with more money who aren’t thinking ahead and are willing to throw it at things they thing they need now instead of looking down the road. Unless you’re planning on selling and retiring to a lesser expensive place like Costa Rica and can get a significant payback on your investment real estate isn’t a good long term investment anymore in San Francisco.
This took me awhile to put together so that’s why there’s been a delay. I’ve been talking with people over the past few weeks, many of whom have been in San Francisco for less than a year. As you all should be aware renting in San Francisco is ridiculous right now and it looks like it might only get worse over time.
I have heard people are paying anywhere from $1k-$5k for rent in this town and the difference really just depends on the number of roommates and the size of the closet you’re renting. I have to smirk when people say, I love living in Pacific Heights as they walk out of an unmarked door next to the garage that isn’t even ornate enough to be an entrance to an legal in-law or servants quarters on one of these mansions, but it’s more of a room built off of the garage that’s not fully furnished. A good deal for $2k-$3k in Pacific Heights I suppose. Many of these people have to make anywhere from $24k-$52k/year just to afford rent. That’s a pretty stiff bill when you think about it and many of them are resorting to credit cards which just brings them to a time when they run out of money after a year long spring break party where they end up owing a huge amount of money that they haven’t made since they weren’t making that to begin with.
These people are not rich. Last time I checked you didn’t move to San Francisco and move into Pacific Heights. It was a place the rich people of San Francisco earned, not bought. Most of the new renters I meet are 20 somethings with a job that might pay $25/hour that are supplementing their income from help from their parents or whoever can lend them some some money until they can get a better job. These people push up the rental prices, but don’t stay long. Most of these people aren’t even renting an apartment, but usually as mentioned above a room off a house…a very small room.
Then you have the people that have been renting for 10-20 years which due to rent control makes their landlords want to move them out. It’ll cost the landlord around $8k [or more] per person and the landlord will have to occupy the house for three years to successfully get an Ellis Act eviction to go through. That can be kind of costly in my neighborhood where a 3 bedroom house is renting for $5k, but has a fourth person living in the dining room and a fifth person living in the living room. Sometimes a couple or two will share a room pushing the price to get the renters out from $40-$56k. That’s almost a year’s rent and they have to live there for three years meaning the cost to the landlord can be in the $240k range.
If the landlord decides to flip the house and profit off the sale they better be sure they bought the house at least 10 years ago to make a decent return on their investment. Many of the landlords that I know of in my neighborhood haven’t owned the homes they purchased that long yet so they actually would do better just holding on and renting unless they’re going to pull an illegal Ellis Act eviction.
Even when renting was actually somewhat reasonable in San Francisco I always thought of it as a temporary sort of thing and I think that is part of the reason why most of the people I meet today have been in San Francisco for less than a year. San Francisco going back to the 1800’s was a happening place and if you look back on articles from the news back then you’ll see people complaining about how expensive it was to have to pay $3/month to rent a house and how San Francisco was turning into a town for only the rich.
People will always want to live here, not Daly City, not Oakland, but San Francisco proper. Sure a few might take the outlying areas and say they live in San Francisco, but they know full well that they don’t. If you’re seriously thinking of staying here longer than 10 years, renting at this point in time isn’t the best option anymore in my mind. If you’re lucky and you’ve got a landlord that likes you and isn’t trying to get rich [is there really a landlord like that anymore?] You might be able to work things out, but that’s a slim chance. For the long term you probably want to buy a house, or do you? See what I have to say tomorrow to find out what’s on my mind.
I don’t like to put down areas of the city and in this case it’s kind of a half hearted commentary, but I just read that the Mission District is the new hot place to buy in San Francisco. I’m not so sure it’s hot to buy or hot to sell. The reality is whether or not you’ll drop a million dollars on a fixer upper.
Yes, you read that right, there is a home that the owners are asking $1,000,000 and it’s a fixer upper expected to sell for more money. This house was one of the original houses and my guess from looking at the outside is that not too much has been done on the inside. I can see asking a price like that on some of the more updated homes, but a lot of the original homes were built in the 20’s and 30’s and there are possible problems that will cost you even more in the long run.
Granted, it was 20 years ago, but I lived in a 2 bedroom house in the Mission. It was my first time I had moved out of my parents house and had sort of a house of my own. This house was built in 1924. It had a living room, dining room and kitchen on one floor and a large bedroom, small bedroom and sunroom on the top floor along with the bathrooms. It was a good sturdy house, but there were also parts downstairs that no one ever walked into. There was a door next to the garage door that you couldn’t see for all the spider webs. The door out to our backyard that was overgrown with weeds and blackberry brambles was sealed shut with spiderwebs. To get into the garage you had to have a tiny car because the street was so narrow you couldn’t really get enough angle to get into the garage with a regular sized car.
I got used to parking 2-4 blocks away from the house because the house was on a private street that dead ended and you had to back up to get down the street because there wasn’t enough room to turn around. You couldn’t park on the street on my side and on the other side people would park halfway on the curb. Because I was parking 2-4 blocks away my tires were always in good shape usually because I had to replace them every 6 months because someone would slash them. I got to fall asleep to the lulling sounds of gun fire that was going on between the local gangs. I never really walked the streets unless I was going to work because there wasn’t anything to walk to really other than my car. I would have to drive to get to most places because walking wasn’t really that safe.
Let’s fast forward to today and see how it is. When you look at the paper you still see stories of people getting shot or car chases ending in crashes. There are a lot of new restaurants catering to hipsters that have had cars crash into them or people shot during dinner service. Fires caused by substandard old wiring. This is not a positive reason to live in a place. The Mission attracted hipsters because it was a cheap place to live at first. Hell, our rent on the house I was in was $800/month split between 2 [sometimes 3] of us. When we moved out the house had sold for $209k. Now the prices can be 5x that.
It’s not cheap to live there anymore, but there is still a mix of the old Mission and the new Mission which is having problems. You’ve got six figure income people living next door to welfare recipients. The crime level is still much higher than in other parts of the city. A lot of the hipsters living there are at the lower end of the income spectrum because they’re new to San Francisco and don’t understand that it takes a lot of money or luck to live here comfortably. They are the ones that will come and go that will make the Mission’s old beat up properties slide by the way side quickly.
I’m not too sure because I don’t have many homeowners to talk to, but the idea of buying a house and flipping it for a profit in a couple of years seems to yield a lesser return than it did 10-15 years ago. Owning a home is a long term thing and takes commitment. You’re tied to it for 30 years if you’re serious and a lot changes in 30 years. Oddly enough there are better places [and by better I mean less expensive, lower crime rate, better schools, etc] outside the Mission that change more slowly that are better for a long term commitment. These are parts of the city a lot of the new comers call boring. Excitement for me in owning a house isn’t asking myself when I step out the door, am I going to get shot at or just have my car broken into. In the long term, these areas have more value as they keep moving up in value just slowly. Note that the house I used to live in in the Mission could be sold today for $735k and rent for $3300 a month. While that’s quite an increase since I was there my old next door neighbor has seen the house value rise and fall radically over the years.
Overall, I don’t mind my couple of times a year visit to the Mission, but the idea of living there now would be a step down for me.
As I was spending my day surfing the web I came across a few articles about people who’ve moved to San Francisco like this one. My suggestion is don’t move here. Most of the people who were complaining about San Francisco have lived here for 3-5 years at the most, tend to be hipsters from the Mission, and shop at Whole Foods. They don’t understand that there’s more to San Francisco and I’m going to tell you some of the only reasons you should move here.
First, you’ve got an Aunt Gladys who bought her house in the pre-Prop 13 days and stayed there. Then she died and left you the house. Depending on the size of the house you’ll get stuck with paying between $800-$1500 a year in property taxes and the bit of house upkeep. Having a house handed you means that you have the equivalent of $42k/year income a year since you don’t have to pay rent. If you’re rich buy away. Once your house is paid off you’ll be paying per year less than what you’d pay per month to rent. I have a friend who bought a two bedroom house about 10 years ago and his mortgage is less than what he could get for renting the place plus it has a built in bar.
Second, if you choose to rent and now isn’t the best time you pretty much missed the boat by about 15-20 years. If you do decide to rent try to stay there. We’ve got a thing people refer to as rent control. My wife and I rented a two bedroom house 10 years ago that we payed $1200/month. Mind you we moved in there in 1997 before the dot com 1.0 pushed rental prices up to a ridiculous rate. If we stayed there we might be paying $1500/month…for a two bedroom house. When I first moved out to the Mission and that was around 1991 I split a two bedroom house with a full living room, full dining room, big kitchen, two huge bedrooms and a sun room for $400/month and that was my share. Our rent never went up while we stayed there and any fix ups the house needed we got to take off the rent.
Other than that, don’t move here. Rents are high and some of the employers are paying stupidly low wages. People who work in grocery stores and the like are here because they live with there parents, inherited their house from their parents or are section 8 disabled. Seeing guys in their 50’s who live with their aging Mom or Dad isn’t something to look down on here because they’re able to live here and go out to dinner at a nice restaurant every once in awhile while working for $17/hour. If you don’t already own and have your house paid off you need to earn about $35-$50 an hour to live like you would in other parts of the country. I don’t understand why some people move here and work long hours and then go shopping on the weekends for prepared foods because they don’t have time to cook or they go out to eat for half the week at an overpriced eatery when they could make enough food on the weekends at home for the whole week if they just made the effort, but that’s not my place to judge. I did used to shake my head when I worked with a girl who made $14/hour, lived in the upper haight with several roommates and would go to Whole Foods to buy her lunch. I would go around the corner for a $2 taco and bring a soda from home if I hadn’t brought my lunch and this was last year.
If you move here you don’t know the City well enough before you move here and don’t understand things like you can get the best and cheapest burrito outside of the mission because there aren’t those kind of hipsters where this place is located. You can get good food cheap if you know where to look [hint alley ways], but you’ll only know that once you’ve moved here and been around the City for about six months.
PBR is not what cheap San Franciscan’s drink. It’s Budweiser. PBR also tells everyone you’re a broke hipster and you’ve just labeled yourself even if you weren’t trying. While there aren’t that many born and raise in SF people left they’re the ones with the money in this city. Face it, until you’ve got 30 years under your belt here you’re going to have a rough time of it.
By all means though, come and visit us. We have a lot to offer. Great parks and museums and as others have noted great food. Affordable housing just isn’t one of those things.
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