What's Behind San Francisco's Sudden Building Boom?
San Francisco has long had a reputation as an anti-growth town, as a place not much interested in big new developments or massive change, where people who can afford to have learned to live with the consequences (notably in the form of exorbitant rent). In 2011 alone, the city added just 269 new housing units, pushing its badly imbalanced residential supply and demand even further out of order. Around this time last year, the San Francisco Business Times dubbed 2011 “The year of (almost) no new housing.”
Add to that local culture the effects of the national recession – which still linger across the country today – and San Francisco would seem poised for a prolonged and silent construction season.
This prediction, then, sounded a little far-fetched: “Developers started telling me we’re in the biggest boom of our lifetime at the beginning of 2012,” says Gabriel Metcalf, the executive director of the San Francisco Planning + Urban Research Association. "But I didn’t believe them or see it until the summer."
That’s when the tower cranes started to appear, now about two-dozen of them around town hovering above both public and private new developments. By SPUR’s count, construction has begun this year on more than 4,220 new housing units. An old furniture store is being rehabbed into a million square feet of commercial space. An old data warehouse is converting into a 250,000 square-foot office for the financial services tech company Square.
Just walking down a two-and-a-half mile stretch of Market Street, you could pass by 20 construction sites in San Francisco this year. “By the summer,” Metcalf says, “it was completely obvious that something big was going on, even if you didn’t know any more than what you could see with your own eyes.”
SPUR has documented the birth of this boom in a new analysis that suggests the city could be on pace for unprecedented construction in the coming years, following a particularly deep low (notice on the chart below, from the report, that new housing construction in the city has typically followed spikes in new permitting activity by three to five years).
San Francisco Planning Department. SF Housing Permits and Construction Trends 1960 - 2010. Teresa Ojeda (personal communication, October 22, 2012).
“The question is how long will it go?” Metcalf asks. He acknowledges that SPUR has stepped onto a ledge trumpeting a construction boom so early in its cycle. “The other question I’m still excited to see is what will the results be for the built fabric? Is this construction cycle going to leave a residue of buildings that we’re proud of for the long run?”
San Francisco isn’t alone among cities now dotted with construction cranes. New York, Washington, Boston and Seattle are other examples, although perhaps less surprising ones. In the Bay Area, though, the mystery is this: How did this boom so quickly get started with a recession still petering out, and in a town so traditionally averse to development?
The answer, SPUR argues, is more complicated than any mere glance toward Silicon Valley would suggest. True, the area’s economy is now humming along thanks to its tech sector in a way most other cities would envy. But this boom hasn’t been powered alone by demand for high-priced condos for tech entrepreneurs. SPUR offers a long list of factors (yes, the tech boom is one of them), from the low cost of construction to the high price of rent to the tedious decade-plus of planning work that’s gone into rezoning many of the areas now under construction. The politics of development in the city have been changing, too, and this may be directly related to the recession.
“It became possible for city leaders to take some hard votes to approve projects because the voters wanted growth," Metcalf says. "The voters could not take prosperity for granted.”
Locals, he adds, are also growing more comfortable with San Francisco's identity as a big city. But he cautions that so much new construction could prompt a boom backlash. Public opinion moves in cycles just as construction does. “I want to stop just short of saying that that’s inevitable, because I hope it isn’t,” Metcalf says. “But it seems likely. That’s how it’s been.”
Anything could happen from here, including a shift in public support. The price of materials and labor could go up as the national economy improves. Interest rates could change. The fiscal cliff could alter factors beyond San Francisco’s control. But even if the city gets just these buildings – the ones already under construction – this boom will still be pretty impressive.
Cranes over San Francisco, by Sergio Ruiz, courtesy of SPUR.