Interesting how Mr. Carlisle very clearly says that the market is very strong, just not a feeding frenzy and the reporter sandwiches it with other quotes and statements that the market is “cooling.” I agree with Patrick, not the reporter. There is a lot more high-end inventory than there was last year. However, we were at the lowest inventory in recorded real estate history (since about 1992) for the last four years. So having some more inventory is healthy and a smart seller can still do very very well by pricing correctly and marketing perfectly. A smart buyer can also take advantage of those situations where the seller is not doing everything right. This is a more complex than there being zero inventory and multiple offers on everything. Makes my job more fun and allows me to really make a difference for my clients. – Jennifer
When it comes to low teacher pay in San Francisco’s public schools, City Hall and the San Francisco Unified School District often point to the Teacher Next Door Program as a solution.
But it might as well be called the Teacher Still Renting a Tiny Space in the East Bay Program for all the money it has given teachers to buy homes in San Francisco.
Begun by then-Mayor Gavin Newsom in 2007 with an initial $1 million investment, the program has provided a total of $1.04 million. In nine years. In a city with a $9 billion annual budget.
That means all the money teachers have gotten in the program’s existence isn’t enough to buy one median-priced single-family home or condo in San Francisco. That figure, according to Paragon Real Estate, now stands at $1.285 million.
The district employs 3,292 teachers, and a recent Chronicle investigation found their average pay of $65,240 ranks 528 out of the 821 school districts in California that reported salary data to the state despite the city’s outrageous cost of housing. Seventy percent of city teachers rent, according to their union, with many renting other people’s living rooms or dining rooms or commuting very long distances. A few have lived in their cars, in single-room-occupancy hotels or in hostels.
Bolstering public perception
Despite the clear need, no teachers have received a Teacher Next Door loan this year. Last year, two did. In total, 52 teachers have received the $20,000 loans since the program’s inception, according to data from the Mayor’s Office of Housing. More turned to Teacher Next Door during the recession when $20,000 went further. The peak for the program was 2009, when 14 teachers received loans.
“This Teacher Next Door program, it’s not real. It’s something there to bolster public perception,” said Jennifer Rosdail, a real estate agent with Paragon and a mom with one child in the city’s public schools and two younger ones headed there. “What are we really saying? We’re saying, ‘Go teach somewhere else.’”
Rosdail said six of her recent clients worked in the public school district and none qualified for Teacher Next Door because it is so restrictive. (Full disclosure: Rosdail helped my family buy a small house in Glen Park in 2010. Sadly, there is no Reporter Next Door Program, but surely Mayor Ed Lee will get right on that.)
In October, Lee announced that his $310 million housing bond, which voters passed the next month, would include an additional $4 million for the Teacher Next Door Program to give 200 more teachers $20,000 loans by 2020.
“An investment in a teacher is an investment in the success of our city and the success of our young people,” Lee said at the time.
But whether the money is there doesn’t matter if teachers can’t qualify for it and, even with it, can’t afford homes.
First, the teacher must work with a participating lender from a pretty short list. All of the paperwork for the $20,000 loan is more time-consuming than the rest of the entire mortgage, Rosdail said. And lenders don’t earn any additional money for completing it.
To qualify for the loan, the teacher’s household income must not exceed 200 percent of area median income — $215,400 for a family of four. Only classroom staff qualify, not principals or assistant principals. The teacher must be fully credentialed and not be one of the emergency teachers the district hires because it doesn’t have enough credentialed teachers.
The teacher must be a first-time home buyer, be purchasing in San Francisco and be buying a single-family home or condo and not a tenancy-in-common unit. The number of bedrooms must not exceed the number of people in the family.
Teachers must have three months of housing expenses in a reserve fund but cannot have more than $60,000 in liquid assets. The teacher’s monthly housing costs — including property taxes, mortgage payments and property insurance — cannot be less than 30 percent nor more than 40 percent of the household’s gross income. The monthly housing costs plus other household debt, such as credit card and car payments, cannot exceed 43 percent.
But, wait! There’s more. The teacher must complete an eight-hour home-buyer education course and then deliver all the documentation to the Mayor’s Office of Housing “in a legal size manila folder with two fasteners.” If the loan is approved, it will be granted after 45 days, longer than the standard escrow process, Rosdail said.
After all that, the teacher gets $20,000, or about 1.5 percent of the cost of a median-priced house in San Francisco. The teacher doesn’t need to repay the loan if he or she stays in the district for 10 years.
Maria Benjamin, director of homeownership programs for the Mayor’s Office of Housing, said Teacher Next Door is worthwhile.
“This is a tough market, and $20,000 seems like a drop in the bucket,” she said. “But people are finding this program helps. It helps cover closing costs and increases their down payment a bit.”
She added that many recipients of the loans also apply for and receive money from the city’s separate Downpayment Assistance Loan Program, which currently can amount to up to $200,000 and later this year will rise to $375,000. The money must be repaid with a portion of the home’s appreciation when the home is sold. That program is available to households earning up to 120 percent of area median income, $129,250 for a family of four, and is not intended just for teachers. Benjamin said that since 2011, a few dozen teachers have been helped by a variety of other programs through the Mayor’s Office of Housing with some overlap between those and the Teacher Next Door loan recipients.
Asked why the Teacher Next Door Program has so many rules and restrictions for so little money, Benjamin said, “All of our programs are set up that way. We’re using public dollars so we want to make sure we’re giving the dollars to the people taxpayers meant for the dollars to go to.”
Lee told The Chronicle’s editorial board Thursday that he is open to increasing the loan amount for the Teacher Next Door program.
Supervisor Jane Kim, who previously served on the school board, said she intends to push for loans of more than $20,000. So what would the best dollar amount be?
“I don’t have an answer to that, but it’s definitely not $20,000!” she said. “That’s how much I have in my savings, and I know I can’t buy a house.”
‘$20,000 doesn’t cut it’
Kim makes $113,851 — more than double the $52,657 starting salary of a public schoolteacher in the city.
Her opponent in the upcoming state Senate race, Supervisor Scott Wiener, agreed that the Teacher Next Door Program needs to provide far more than $20,000.
“When you look at the nature of buying a house in San Francisco in 2016, $20,000 doesn’t cut it,” he said.
Unlike Kim, who rents, Wiener is a homeowner. He bought a 490-square-foot condo in the Castro in 2004 for $400,000, he said. Even with his six-figure salary and his previous work as a lawyer, Wiener said he couldn’t buy the unit now.
No word yet on whether Kim and Wiener will advocate for a Supervisor Next Door Program next.
Many of the charts included below are based on the San Francisco Planning Department’s excellent 75-page 2015 Housing Inventory report, released on May 27, 2016, which can be accessed using the link at the bottom of this article. We are very grateful for the enormous effort put into creating that report by Audrey Harris and other Planning Department personnel.
Numbers in different charts below will not always agree: This is due to the vagaries of how and when condos and other housing units are counted as filed, authorized, permitted or completed by the different agencies who compile this data. As far as the real estate market is concerned, the situation is complicated by the fact that new construction condos are often marketed and “sold” (offers accepted) well before they finish construction, i.e. market dynamics of supply and demand may be significantly affected by units that do not yet exist.
The politics of new home development in San Francisco are not for the weak of heart. There are vociferous disagreements between neighborhood and homeowner associations, developers, affordable housing advocates, tenant’s rights groups, business groups, and pro-, slow- or no-growth advocates regarding how it should best proceed (or not proceed). The battles are non-stop in every political or legal venue available.
Comparing total inventory (illustrated above) to annual sales reveals that condos and TICs turnover about twice as often as houses in San Francisco. About 2% to 2.5% of all SF houses are now sold each year, an extremely low turnover rate, which has exacerbated the city’s inadequate, house-listing inventory situation. For condos, turnover runs in the 4.5% to 5% range, which is roughly in line with national averages for home sales, and for TICs, turnover is in the 5% to 6% range. These are all very general approximations. Since condos and TICs are typically smaller than houses, and often purchased by younger buyers and/or smaller households – singles, couples, beginning families – it’s not surprising they sell more often than houses, whose owners are often older, more settled in life, and have larger households.
The process of application and review, public hearings (and sometimes ballot proposals), revisions, entitlement, permitting, construction, inspection and completion is complex and lengthy. Housing units are being planned and built, and existing units are being altered and removed. And there are many housing types: rental or sale units, market rate or affordable, social-project housing or luxury condominiums.
The new-housing landscape in San Francisco is in constant flux: new projects, developer plan changes, city plan changes, and shifts in economic and political realities. The basic fact is that the city, after its recent 2008-2012 new-construction slump, is now experiencing a huge building boom. However, it should be noted that booms can slow dramatically or even come to a screeching halt if economic circumstances significantly change.
Residential Development by City District
New construction has been concentrated in a few specific districts of the city, mostly where there are commercial lots able to be converted to residential use and where higher density housing projects are most viable. The ability to take under-utilized commercial property sites and turn them into multi-unit or even high-rise residential projects is particularly prized. Generally speaking this describes the quadrant of San Francisco around and to the southeast of the Market Street corridor.
New Housing Construction by Bay Area County
Affordable Housing Construction
Very generally speaking, the city requires that new home developers either dedicate 15% of their units to affordable housing, which could be built on-site or on another city site, or contribute to the city’s affordable housing fund “in lieu” of building the units themselves. (The rules are more complicated than that, and there’s something on the June ballot that will change them further.) There are few subjects more difficult and politically charged in San Francisco than affordable housing: how much should be built where and who should be responsible for the costs.
Affordable housing units are allocated, rented and sold under rules and formulas pertaining to social and economic circumstances and housing cost. Large projects are also built on an ongoing basis by private-public social organizations for dedicated purposes such as senior housing. Looking at the number of units actually being built, there is a general consensus that current construction is deeply inadequate to needs.
In 2015, a total of about $73 million was collected from developers as partial payments of in-lieu fees for projects.
Bay Area Housing Affordability Trends
San Francisco Housing Units Demolished,
Merged and Removed
Housing units are gained by additions to existing housing structures, conversions to residential use, and legalization of illegal units. Dwelling units are lost by merging separate units into larger units, by conversion to commercial use, or by the removal of illegal units.
New Development Pipeline
We also have an overview of the quarterly San Francisco Planning Department’s Pipeline Report, which complements the annual Housing Inventory reports with a longer term perspective: The San Francisco Residential Pipeline Report.
There are over 60,000 housing units of all kinds currently in the pipeline – and the pipeline is growing and changing quickly now – but some of the bigger projects (such as Treasure Island, Hunter’s Point/Shipyard, Candlestick Point) may take decades to complete. Also, just because a project is in the pipeline does not mean it will be built as planned, or even built at all.
Pipeline Analysis, Based on SF Business Times June 2015 Project Breakdown
(A little outdated but still providing useful insight)
San Francisco Housing Stock Breakdown
A Fascinating 2014 Analysis by the San Francisco Controller’s Office
The Context behind San Francisco New Housing Development
What ultimately underpins new housing construction is demand. San Francisco has been experiencing surging population, employment and new wealth creation, that has so far been outpacing new housing supply. However, as of spring 2016, it appears that new hiring has slowed, at least in the short term.
Insufficient Housing = Increasing Prices & Rents
Below are two of our charts illustrating the rental and sale markets in San Francisco. As of spring 2016, it appears that appreciation rates may have begun to finally slow or plateau.
Condo Values by Era of Construction
The first golden age of SF apartment buildings, many of which were later turned into condos, was in the period of 1920 – 1940: The units in these buildings are large, light, gracious and filled with elegant detail. Pacific Heights and Marina are filled with these buildings. Though there are beautiful condos built in other eras (Edwardian flats, Art Deco apartments), the second golden age really arrived with the latest burst of new-condo construction, built for an increasingly affluent population: These units are ultra-modern, high-tech and feature highest quality finishes and amenities. They are exemplified by the new, luxury high-rises of the greater South Beach-Yerba Buena area, though variations on this theme, in non-high-rise form, have been springing up all over the city.
The units in these newer buildings command a premium both when rented or, as seen in the chart above, when sold – now surpassing an average dollar per square foot value of $1000, and sometimes far above that. This is the major motivator for developers today, many of whom are now concentrating on luxury or what might be called ultra-luxury condo construction. There is a question as to whether the luxury segment is being overbuilt considering the size of the buyer pool for such expensive units.
Housing Unit Construction by Bedroom Count
We haven’t found an easy place for construction data by unit size, so this first chart above is extrapolated from SF MLS sales of condos built 2001 -2015. It may not apply perfectly to units built as apartment rentals or affordable housing.
Typically, the smaller the unit, the higher the dollar per square foot value on sale or rental, however in San Francisco, 3+ bedroom condos are often high-floor units with spectacular views that sell for extraordinary sums – but these would be outliers to the general rule.
Below are links to the SF Planning Department Pipeline and Housing Inventory report webpages. They contain a huge amount of data, which we have attempted to represent accurately. As noted by their authors, who did an incredible job, the original reports themselves are “compiled and consolidated from different data sources and subject to errors due to varying accuracy and currency of original sources.”