Instead of getting any further into that, this blog post exists to re-emphasize what his new data revealed: this chart
That, my friends, is 70 years of San Francisco housing prices. There are some ups and downs, but for the most part there is a very simple trend: 6.6 percent.
That’s the amount the rent has gone up every year, on average, since 1956. It was true before rent control; it was true after rent control. It wasn’t entirely true during the 2000 tech bubble, but it was still sort of true and it became true again afterward.
6.6 percent is 2.5 percentage points faster than inflation, which doesn’t seem like a lot but when you do it for 60 years in a row it means housing pricesquadruple compared to everything else you have to buy.
That’s bad. But that’s SF today, compared to 1956.
So what caused prices to go up? That’s the really exciting part of Fischer’s discovery. Armed with his data, he more or less answered that question.
This is as close as you’re ever likely to see to an answer to life, the universe and everything.
It’s a chart that almost perfectly predicts the San Francisco housing market using only three variables:
- The number of jobs located in San Francisco County.
- The number of places in San Francisco County for people to live.
- The total amount of money that is paid to everyone who works jobs in San Francisco County.
It’s all summarized in the formula at the top of the chart. If you gave me values for (1), (2) and (3) above, then I could predict to you with startling accuracy how much the median two-bedroom apartment in San Francisco will cost to rent in that situation.
It follows that if we could change (1), (2) or (3), then we could maybe change what it costs to rent a place in San Francisco. Here’s how Fischer summarizes a scenario in which, his formula suggests, apartment prices would drop 67 percent:
It would take a 53% increase in the housing supply (200,000 new units), or a 44% drop in CPI-adjusted salaries, or a 51% drop in employment, to cut prices by two thirds.
OK, so this would mean the way to make San Francisco as affordable as (say) Portland would be to either cut everybody’s salary in half, or fire half of them, or rapidly increase the number of homes by 50 percent, which would let the population rapidly leap to about 1.2 million. …
Rent control? This particular renter is nervous but sure, maybe try it out as long as you are working hard to ensure that it’s not going to get in the way of continuing to add homes.
A guy just transcribed 30 years of for-rent ads. Here’s what it taught us about housing prices