Economics Naturalist Assignment

Question: Why are housing prices in San Francisco constantly rising?

I chose this question because I was born and grew up in the city. I always wondered why
it wasn’t really practical to move somewhere else in the city, since it was so expensive, and it
was constantly rising. I want to find out why and what makes housing prices rise, and what
factors play in making more affordable housing in San Francisco.

Sources:

- https://www.sfchronicle.com/bayarea/article/Housing-prices-are-skyrocketing-around-the
-16304809.php
- https://www.businessinsider.com/san-francisco-residents-wealth-net-worth-four-million-c
harles-schwab-2019-5
- https://www.sfgate.com/bayarea/article/Sneak-peek-Mayor-Ed-Lee-has-a-housing-solutio
n-5151504.php
- https://missionlocal.org/2020/09/prop-c-supreme-court/
- https://www.vox.com/2018/10/27/18024196/san-francisco-prop-c-ballot-measure-tech-bil
lionaires-homelessness-corporate-responsibility

Notes:

- Tech startups being so successful is a major factor, Silicon Valley is close to San
Francisco. Workers get paid very large wages, so they can afford expensive housing.
- California became second most expensive state, with Hawaii being #1
- San Francisco median home value at $1.2 million
- Low interest rates, housing production shortfall, fewer houses on the market, and changes
in consumer spending during the pandemic are major factors to housing prices rising
- High demand along with a lack of supply. Competition with lack of supply causes
housing prices to skyrocket.
- Mayor Ed Lee’s solution to the problem back in 2014 was to build 30,000 more homes
that would be affordable and low cost
- Proposition C, with a main goal to tackle homelessness, could possibly be a solution. A
tax will be placed on businesses that earn over $50 million in gross receipts. This tax
money would then go into creating more affordable housing, which would increase the
supply.
- Big companies in San Francisco do not want to support Proposition C because they do
not want to pay the extra tax.
https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-and-a-baby
https://www.helena7x7.com/30-years-of-san-francisco-bay-area-real-estate-cycles/

https://journal.firsttuesday.us/san-francisco-housing-indicators-2/29267/

Conclusion:

Affordable housing in San Francisco is a dream that has long since disappeared. Why is it
so expensive to live in San Francisco? Why do houses cost millions upon millions of dollars? I
chose this question because as I was growing up, I constantly asked my parents why we couldn’t
move to a new house in San Francisco. Affordable housing in San Francisco has disappeared
mainly because of the multitude of huge tech startups that became so successful. Silicon Valley
isn’t very far, so a lot of people working at these companies decide to get houses in San
Francisco. Since these tech startups are so successful, their workers get paid very big wages,
allowing them to afford a lot more. The demand for housing increases, along with the amount of
money each house can be bought for. As the housing starts to get more and more scarce, their
prices start to skyrocket. One possible solution to this problem is Proposition C. Proposition C’s
main goal originally is to tackle homelessness. The Proposition would tax every business in San
Francisco that makes over $50 million in gross receipts. This tax money would then be put
forward into creating as much affordable housing as possible. Allowing housing to be less scarce
would help prices go down, because even if there’s still a demand, a lack of supply would no
longer affect prices. The problem with this Proposition is that big companies in San Francisco do
not want this tax placed upon them, so they work as hard as possible to make sure the
Proposition does not pass.