Tag: san jose

• Housing follows money

  One argument that you might be able to make is that home prices follow urban density. New York City, for example, is dense. And homes in New York City tend to be more expensive than those in, oh I don’t know, rural Canada. So with this, you might conclude that development and density are bad — it makes housing more expensive. But then there’s places like San Jose, California. It’s not very dense, and yet it has some of if not the most expensive housing in the US.

  Well, it turns out that housing density and median housing values don’t actually exhibit a particularly strong correlation. A better and much stronger relationship can be found in what Kasey Klimes explains, here, in this excellent post, which is that home prices more accurately follow incomes. In other words, the more high paying jobs that exist in a market, the more likely that housing will be expensive.

  Here is what that looks like for US metros over 1 million people:

  

  The above chart compares median home value to aggregate income per unit of housing. And here, Kasey discovers an r-value of 0.9, which suggests that “over 81% of median home values in large metros can be attributed to aggregate income per unit of housing.” This explains why San Jose, and San Francisco, are such outliers. They have very high incomes for every unit of available housing, despite the former being not all that dense.

  Okay, so now that we know this, how do we make housing more affordable? One option is to just make people poorer. If you reduce incomes per unit of housing, then home prices will, almost certainly, go down. And this is why poorer cities tend to have more affordable housing. But this is obviously suboptimal. The better option is to keep people wealthy and simply increase the denominator in “aggregate income per unit of housing.”

  Meaning: build more housing!

  Chart: Kasey Klimes

  2024.04.12

• California has a plan for 2 million new homes

  On July 1 of this year, a new California bill, called the “Affordable Housing and High Road Jobs Act of 2022”, will go into effect. And the goal of this legislation is to significantly increase the supply of new homes in the state by allowing multi-family construction on lands that are currently zoned for commercial uses.

  On some level, it is of course curious that there even needs to be this bill. Because what we are effectively saying is, “hey, we should allow people to build a mix of uses on our main streets and with high enough densities that we might actually be able to support transit.” Why was this not always the case? (Rhetorical question.)

  In the words of architect and planner Peter Calthorpe, who was recently interviewed here in ArchDaily, this is a “landmark piece of legislation” that has “received very little attention.” So that’s why we’re talking about it today.

  Calthorpe was actively involved in crafting this legislation, and his work apparently started with different scenario land-use models. The first experiment looked at a 43-mile stretch of El Camino running from San Francisco to San Jose (pictured below). And what they found was that this one strip alone could accommodate somewhere around 250,000 new infill homes.

  

  To put this into context, the state of California is currently building about 140,000 new homes each year, through a roughly equal (1:1) split of multi-family and low-rise single-family. Already this represents a shift, as supply used to be slanted (3:1) toward low-rise. (I don’t know when exactly this was the case, but Calthorpe mentions the figure in his interview.)

  Moving on from El Camino, Calthorpe and his team then ran a similar exercise for the five-county inner Bay area. And here they found that some 700 miles of commercial land could produce up to 1.3 million multi-family homes at “reasonable densities.” This was then expanded to the entire state of California and the number increased to 10 million new homes.

  Of course, as we have talked about before on this blog, not all of this land might actually be feasible for development. Sometimes the math doesn’t work even at a zero land cost; you might need a negative land cost in order to pencil a new development. Meaning, you might need to be paid, perhaps through some sort of subsidy.

  So what Calthorpe and the team did was use MapCraft to quickly run development feasibilities on the above sites. They had it run 6 different pro formas using local rents, construction costs, city fees, and so on. And what they determined was that this 10 million number drops down to 2 million when you apply the economic realities of the world.

  As a disclaimer, I’m not at all familiar with MapCraft. But I’m going to take this number at face value and say that this is still a lot of new homes. And this is what people are hoping for come July 1 of this year.

  Image: HDR / Peter Calthorpe

  2023.04.08

• How affordable is a Nabr home?

  We have been speaking about Nabr and the productization of housing for the last year (and, more broadly, about prefabricated housing for probably as long as this blog has existed). And now it is possible to go on to Nabr’s website and reserve a new home in their San Jose project. Here’s what that looks like:

  

  What is immediately clear is that this is an obvious improvement over the way that new homes are typically purchased. The pricing is transparent. You can easily see the floor plan and features of each home. And if you’d like to reserve one, you can go ahead and do that right away for $1,000:

  

  You can also specify whether or not you’re interested in Nabr’s lease-to-purchase program (known as LEAP). More information on that can be found, over here.

  But the exciting question remains whether thinking about and executing on this new housing as a product, rather than as an individual project, will ultimately bring greater cost efficiencies and savings. In other words: can it make housing more affordable?

  Today, the base pricing for SoFA One looks something like this:

  • Home 1002: $1,415,000, ~1080 sf (excluding exterior space), $1,310 psf
  • Home 1003: $2,144,000, ~1547 sf (excluding exterior space), $1,386 psf
  • Home 1108: $938,000, ~795 sf (excluding exterior space), $1,180 psf

  These are just the first 3 homes that showed up for me when I opened the website. And while I’m not intimately familiar with the San Jose housing market, Realtor tells me that the median sold price is $1.2 million and that the median list price per square foot is about $766.

  Though not really an apples-to-apples comparison, this suggests to me that the above pricing may not be as affordable as some people were hoping for. However, it is more or less where I figured pricing would need to be in order to make a high-rise project like this pencil.

  Does this change over time with more product scale? I think it could.

  2023.02.16

• Where Americans moved over the last year

  

  According some recent data from the US Census Bureau and USPS (via this CityLab article), the number of Americans who registered (between March 2020 and February 2021) that they were making a permanent move somewhere else, only increased by about 3%. And the vast majority of people that did move tended to simply spread out and move within the same metro area — about 84%. About 7.5% moved within the same state. And about 6% moved to some other top 50 metro area in the US.

  Some are of the opinion that these moves to the outskirts of cities would have happened regardless. The pandemic simply sped things up. Perhaps. But whatever the case may be, CityLab and others have argued that an “urban exodus” is likely the wrong way to describe what is happening. Despite reports that everybody seems to be moving to Texas and Florida (yes, Miami saw a spike), most people are simply spreading out in geographies where they already happened to live.

  The notable exceptions are the Bay Area and New York. San Francisco and San Jose — both of which usually register as being two of the most expensive housing markets in the US — saw permanent moves increase by 23% and 17%, respectively. Compared to other metro areas in the US, these figures stand out. (I assume this data is collected after somebody goes to the post office and says that they want to change their address forever.)

  

  But we are already seeing net outflows from San Jose and San Francisco start to taper off (see above). It’s also important to keep in mind that these cities were losing people well before the pandemic started. They are expensive places. And the fastest growing cities tend to be ones that sprawl, have a more elastic housing supply, and are consequently more affordable. That said, I suspect we’ll see this tapering off continue. The “urban exodus” isn’t going to be what it’s cracked up to be.

  Images: CityLab

  2021.04.26

• What drives attachment to cities

  The Knight Foundation recently published a report looking at what attaches people to the place in which they live. To get this information, they surveyed over 11,000 Americans, some of which live in urbanized areas and some of which just live in metro areas across the United States. This is interesting information to know at any time point in time, but you could argue that it’s even more important at a time like this, where everyone seems to be questioning everything about cities.

  Here are two of their key findings:

  • People who spend more time in the principal or main city of a metro area — whether as residents or as frequent visitors — tend to be more attached. This is is true both in terms of how they feel, but also in terms of how they act, such as how much they give back to the community. I suppose you could debate whether going to the city creates attachment or whether attached people tend to go to the city, but this association does seem somewhat intuitive to me. I am imagining a greater sense of place in principal cities.
  • People who choose to live in a place because of its quality of life tend to express more attachment than people who live in a place for other reasons — such as for work. About 40% of Miami transplants cited the climate as the primary factor for moving. Sounds right. Weather is pretty hard to control, but there are lots of other things that cities can do to improve quality of life. And it seems to be one of the stickier factors. Similarly, access to cultural activities and recreational amenities seem to lead to greater attachment.

  More specifically, here are how some people feel about their metro areas:

  

  This chart is showing the “perceived accessibility to quality features.” The left column is what they believe to be the national average. And the other columns are for Akron, Charlotte, Detroit, Macon, Miami, Philadelphia, San Jose, and St. Paul. Looking at one row in particular — affordable housing — we see that about 50% of Americans surveyed believe they have access to it. In comparison, only 29% and 12% of residents in Miami and San Jose, respectively, feel the same way.

  For a full copy of the report, click here.

  Chart: Knight Foundation

  2020.05.22

• Building a new city in Colombia

  This month’s issue of Monocle Magazine has a feature on a new masterplanned community to the north of Cartagena called Serena del Mar. Currently under construction, the entire 971 hectare community is slated to be finished by 2030. When complete the developers believe it will house upwards of 200,000 people — effectively an entirely new city.

  It will also be entirely self-governing. There will be no mayor or city council. Revenue to operate the community will be collected through a mandatory monthly fee, though low-income residents will be exempt from paying it. As I understand it, large projects in Colombia have historically been mired in corruption issues, and so this is probably a response to that.

  But the approach has naturally caused a bunch of skepticism. Does this bifurcate the city between public and private? Is this a vote of no confidence on Cartagena’s current governance structures? Building a city from scratch is also exceptionally difficult (there’s a quote in Monocle from Toronto’s own Shawn Micallef on this). Cities usually take time to evolve and settle in.

  I don’t know enough (or anything, really) about Colombia, Cartagena, and this development project to comment specifically. And so I won’t. But these are the questions that are being asked of contemporary masterplans. There’s a reason most (or all) of the tech companies involved in large scale masterplans have banned the word “campus” from their lexicons.

  2020.02.04

• Labor force and housing units across Silicon Valley

  I don’t love how this WSJ article starts. It seems to place the blame on technology companies for “pumping the west coast full of choking traffic and expensive homes.”

  But I do really like these charts:

  

  They show the gap between the increase in labor force and the increase in housing supply across the various cities in Silicon Valley.

  The solid line is the percentage increase in labor force since 2010 and the dotted (bottom) line is the percentage increase in housing units since 2010.

  The darker the color, the bigger the gap.

  Many new jobs. Lots of wealth created. Not nearly enough housing. And yes, there have also been a number of negative externalities.

  The full article is definitely worth a read. It’s about Google’s development plans for downtown San Jose.

  Charts: WSJ

  2020.01.28

• 4 decades of inequality

  We all know the story: Much of the world is becoming increasingly less equal thanks to the new knowledge economy. Using data from the Federal Reserve Bank of New York, the NY Times (Emily Badger and Kevin Quealy) recently published this interesting piece on “4 decades of inequality” in American cities. This is what the findings look like:

  

  

  In 1980, the United States was relatively flat in terms of wage inequality (except for maybe Fairfield). In fact, inequality in a place like Binghamton, New York was about the same as in New York City. But thanks to decline in the former and growth in the latter, New York City is now a much more unequal place.

  Economic growth is usually considered a good thing, but inequality is not. Emily and Kevin rightly call attention to the fact that — according to the above charts — these two things seem to come together as one package. See New York, Chicago, San Francisco, San Jose, Washington, D.C., and so on.

  The other takeaway from these charts is the way in which inequality seems to correlate with metro area population. We know that as the population of a city increases it tends to also become more productive. And so what we are seeing here are those urban agglomeration benefits accruing to some, but not all.

  There’s a lot that can be inferred from these charts.

  2019.12.02

• Zoned for detached single-family housing

  We are in West Virginia now, where the only kind of housing that we have come across is — not surprisingly — low-density, detached, and single-family.

  Indeed, approximately 75% of the residential land across the entire US is estimated to be zoned for detached single-family homes. Using data from UrbanFootprint, the NY Times recently published a series of city maps outlining the percentage of land dedicated exclusively to this housing type.

  

  

  In some cases, such as on residential corner lots in Portland, duplexes are allowed. But generally speaking, the pink corresponds to detached single-family housing. About 15% of residential land in New York City is zoned for this, compared to about 94% of the land in San Jose.

  Interestingly enough, none of the residential land in Manhattan is zoned to accommodate detached single-family housing.

  2019.06.30

• San Jose approves 800-unit co-living project

  Earlier this year, an 800 unit co-living project was approved in downtown San Jose. The developer is Starcity. And it is said to be the largest co-living project in the pipeline in the United States right now.

  A few months later (presumably because of this project), San Jose also created a new “co-living” land-use classification. It is similarly thought to be a first for US cities.

  I think it still remains to be seen how broad the market can be for co-living. Do older generations also want to go back to dorm-like living? Or is this a housing solution mainly for twenty-somethings?

  At the same time, it’s not an entirely new housing idea. I like the parallel that Sarah Holder of CityLab draws between today’s co-living and yesterday’s single room occupancy buildings (SROs).

  There are, of course, many differences, including the amount of space dedicated to common areas (the community aspect). But in both cases, part of the value proposition is about affordability.

  Where do you see co-living going?

  2019.06.14