The Sheridan Report
by Matthew C. Sheridan
My last column speculated that upon further examination, San Francisco neighborhoods with high homeownership rates may contain a high percentage of minority households and would have a higher percentage of families with kids. I didn't have all the facts and figures at the time, but now I do.
Straight from the Board of Supervisors' own Legislative Analyst's report, the data shows that the neighborhoods/supervisorial districts with the highest homeownership rates just happen to contain the highest percentage of minorities in the city, and as you may have guessed, they also have the highest percentage of families with kids. They are: Sunset/Parkside (District 4), Mission/Bernal (District 9), Potrero/Bayview (District 10) and Excelsior/Ingleside (District 11). This should come as no surprise for many, but it is quite awkward to think of the city's racial and renter demographic profiles in such simple terms. The correlation between racial diversity and homeownership is never made in the press, and certainly not spoken of at City Hall.
The areas with the highest percentage of white residents in the city the Marina (District 2), the Haight/Western Addition (District 5), and the Castro/Noe Valley (District 8) contain large majorities of renters. Meanwhile, the districts with the most renters North Beach/Chinatown (District 3) and South of Market/Tenderloin (District 6) have an even split between minorities and whites. The Richmond (District 1) and Inner Sunset/Stonestown (District 7) are slight anomalies, with the former's white population just under 50% and a renter class of 65%, and the latter 57% white with a homeowner class of 61%.
So what's wrong here? Over the past four decades, the perception is that San Francisco has evolved into a city populated with people of different cultures, races and lifestyles. While no doubt this is correct, policymakers, intellectuals and activists focus on contributing factors that are generally not related to housing. When they do employ housing as an argument, they often advocate for continuation of a large renter class to maintain San Francisco's unique flavor. But what is unspoken and now quite apparent from this data is that racial and cultural diversity are, in fact, advanced by homeownership.
Even San Francisco's gay neighborhoods the Castro, Bernal Heights and sections of the Mission while possessing a mixture of renters and homeowners, clearly have grown thanks in part to the seeds of homeownership that helped nurture these blossoming communities.
The War Begins
Over and over, the Board of Supervisors has stymied the expansion and development of homeownership opportunities in San Francisco. They imposed moratoriums on developing industrial quadrants of the city. They enacted laws attempting to curb TICs. They banned property owners from the right to move into their own homes. Just last month, they banned the conversion of hotel rooms into condominiums—the latter, in the name of preserving union jobs.
These guys have been holding back a break in the dike—the demand for affordable, middle-class homeownership in San Francisco. Now, with the advent of individual TIC financing—courageously developed by a few local banks (tenant activists have sworn they will protest at the banks' headquarters)—San Francisco is about to enter a new era. An epic war will likely erupt, pitting tenant activists and their supporters at City Hall against the forces of change.
The vacuum created by San Francisco's lack of a coherent housing policy has produced a situation where demand outstrips supply for ownership housing. Add to this the renaissance of San Francisco, low interest rates, housing appreciation, high vacancy rates, the return of empty nesters and families, and we have a perfect storm for change. Now, pioneering property owners, lawyers, bankers and residents are uniting to create ownership housing where once there was none. And for many, the potential of reaping huge financial rewards.
The signs have been obvious: apartment buildings selling at sky-high P/E ratios, housing values increasing, the national condo-conversion craze. Now the dike is crumbling, and after decades of ignoring the stormy waters, the river called ownership has finally broken through and is unlikely to be dammed back up at least for the short-term.
As rumored for months, and reported in a few local newspapers, some apartment owners have been preparing to convert their rental buildings into ownership housing, by creating large-scale tenancy-in-common arrangements, á la New York-style co-ops. Primarily planned for trophy properties in upscale neighborhoods, the growth of such arrangements will likely improve the housing imbalance in the city. But such developments come with a price.
Already, the San Francisco Rent Board has registered a huge jump in the number of apartment units affected by Ellis-Act petitions filed over the past few months. According to Tim Lee at the Rent Board, “The reason for the large upswing is that larger buildings are being Ellised.” Owners could simply implement a gradual conversion upon vacancies through attrition or buyouts. But now there is potential for widespread evictions across the city. Whenever a person, a family, a senior citizen is evicted for traditional reasons ;such as nonpayment of rent ;it is a troubling situation; reflective of not only their failures, but society's failure as well. By employing the Ellis Act on such a large scale, owners will be severely disrupting the lives of numerous tenants. They also run the risk of prompting a political backlash that may result in legislation not only here, but in Sacramento as well. However, I place the blame squarely on the recent crop of supervisors, who, instead of harnessing the demand for ownership housing in San Francisco, have clung to the failed housing policies of the past. The recriminations of how we got here will be everywhere. They should look in the mirror.
Vacancy Rates Soars – 11.4%
In numbers never seen before, the residential rental-vacancy rate soared to 11.4% in the second quarter of 2005 for the San Francisco MSA, according to the U.S. Census Bureau.
The region, which includes both the Oakland and San Francisco Metro Areas, had a vacancy rate of 6.9% in the first quarter of the year; the rate stood at 4.9% a year ago. Many readers will scoff at this number, and with a standard error of 4.3%, they rightfully should. Certainly, San Francisco's rate is a few hundred basis points lower than the region as whole, but it does appear the rental market is still weak. Here is a snapshot of vacancy rates in similar cities on the West Coast:
Portland: 8.2%
San Diego: 4.4%
Sacramento: 9.2%
San Jose: 7.3%
Seattle: 7.7%
Payroll Gains
The unemployment rate for the San Francisco Metro Area (San Francisco, San Mateo and Marin counties) jumped up to 4.7% in June, from 4.1% in May. The summer uptick in unemployment reflects the surge in newbies popping up in our foggy city, hungry for new summertime jobs. During the same period, the area experienced an increase in 1,400 jobs from May to June. The seasonal loss of education-related jobs (-2,900) was offset by gains in the professional and business sectors, as well as construction, and leisure and hospitality gains (combined gain of 3,600). Year-over-year employment increased by 6,300 jobs, the sixth consecutive month the metro area added jobs, according to the State's Employment Development Department.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine.The Sheridan Report does not make any guarantee, warranty or representation as to the completeness or accuracy of the information contained herein. Matthew C. Sheridan is the editor of the San Francisco Apartment Magazine and the East Bay's Rental Housing magazine. For more information, please visit www.sheridanreport.com. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.