Example of rent drop in San Francisco: one bedroom down from $4,300 to $3,150

After hearing of rent drops in Manhattan, I read about one example of rent dropping in San Francisco:

Until the pandemic hit, the city’s housing market was so tight that would-be renters lined up for viewings and arrived with thousands of dollars in cash, ready to sign a lease on the spot.

But now landlords are hard-up for tenants and some are offering several months free, said Coldwell Banker realtor Nick Chen, who recently rented out a one-bedroom for $3,150 that before would have easily gone for $4,300.

“San Francisco rents have been really inflated over the past couple years,” Chen said. “It will come back, but I think the question is: Will it come back to the level it was at previously? Maybe not.”

This is a sizable drop in rent, roughly 25% in a short time frame. Yet, that is still a price that few Americans across the country could meet. Even with significant changes in social life in cities like San Francisco and New York, this does not mean these places are now accessible to many.

Presumably, there is a bottom floor below which rents will not drop. The person who owns the property has their own bills to pay. Some people will see this as an opportunity to get a place in San Francisco at a lower rent and jump at lower prices.

Or, does COVID-19 shift housing prices in high-priced markets for a longer time? If businesses decide to continue work from home and employees are skittish about being around a lot of people in a dense city, do rents drop even further? Is there an opportunity for developers, buildings owners, housing groups, and local governments to jump in and acquire and/or offer cheaper housing? I would not guess expensive housing markets like San Francisco, Seattle, or Manhattan will soon become reasonable but perhaps there will be some opportunities for more people in the region to take advantage.

“Dream Hoarders” in exclusive locations

The 2018 book Dream Hoarders connects the actions of the top 20% in income to where they live and how they control who lives near them. Excerpts from the book:

https://www.brookings.edu/book/dream-hoarders/

The physical segregation of the upper middle class noted in chapter 2 is, for the most part, not the result of the free workings of the housing market. This inverse ghettoization is a product of a complex web of local rules and regulations regarding the use of land. The rise of “exclusionary zoning,” designed to protect the home values, schools, and neighborhoods of the affluent, has badly distorted the American property market. As Lee Anne Fennell points out, these rules have become “a central organizing feature in American metropolitan life.” (102)

Zoning ordinances, which began life as explicitly racist tools, have become important mechanisms for incorporating class divisions into urban physical geographies. This is not a partisan point. If anything, zoning is more exclusionary in liberal cities. (103)

So, those of us with high earnings are able to convert our income into wealth through the housing market, with assistance from the tax code. We then become highly defensive – almost paranoid – about the value of our property and turn to local policies, especially exclusionary zoning ordinances, to fend off any encroachment by lower-income citizens and even the slightest risk to the desirability of our neighborhoods. These exclusionary processes rarely require us to confront public criticism or judgment. They take place quietly and politely in municipal offices and usually simply require us to defend the status quo. (106)

There are numerous connections in this section to earlier posts. Here are a few:

One of the reasons Americans love suburbs is that suburban life allowed for excluding people they do not want to live near.

There is bipartisan white suburban support for homes rather than apartments.

-Housing rarely comes up in national political conversations. It may get a few minutes at debates or occasionally come up in trying to appeal to some voters.

-Tackling this at the state (example of California) or local level is difficult (example of Naperville, Illinois and suburban New Jersey).

In sum, it is hard to understand the life of wealthier Americans without also addressing how this wealth and the opportunities that come with it are closely connected to particular locations.

During COVID-19, wealthier people now less mobile than poorer people

Researchers found changes in mobility patterns among Americans of different income levels during COVID-19:

woman in yellow tshirt and beige jacket holding a fruit stand

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Writing in the journal PNAS, researchers from several California universities describe how they used anonymized cell phone location data and census info to show a dramatic reversal in how mobile Americans have been this year. Before Covid-19 struck, rich Americans moved about more than poor Americans—they can always afford to travel. But between January and April, that flipped. Rich folk are now far more likely to stay completely at home than poor folk: The study found that 25 percent more high earners stayed completely at home during the pandemic, compared to the number of them who had stayed home before. That increase was only 10 percent among low earners. And that has major implications for how we as a nation can fight the pandemic.

“In the early stages of the Covid-19 pandemic, there was a clear mobility response across the board,” says University of California, Davis environmental economist Joakim Weill, lead author on the paper. “In the US, everyone started to stay at home more. But we also found that there is a clear differential between wealthier communities and poor communities, where individuals in wealthier neighborhoods tended to stay at home much more than people in poorer neighborhoods.”…

Close to half of the wealthiest Americans stayed completely at home on weekdays in April, compared to less than 40 percent of low-earners. The poor traveled farther distances on average: In the same month, people who live in lower-income areas traveled between 5 and 6 kilometers, while the rich traveled closer to 4. The rich nearly halved their visits to recreational and retail areas in April, while the poor cut their visits by only a quarter—perhaps because their jobs required them to return to work there.

To be clear, the researchers can’t definitively say why the data shows this dramatic discrepancy, but they can begin to speculate. For one, essential workers often earn lower incomes, like clerks at grocery stores and pharmacies. Indeed, the US Bureau of Labor Statistics has found that among Americans 25 and older with less than a high school diploma, just 5 percent teleworked in June. On the other hand, 54 percent of Americans with a bachelor’s or more advanced degree were able to work remotely.

Social class is connected to mobility, health, and a whole lot of factors in social life. The anonymized cell phone data also seems to align with other patterns: those who can leaving certain big cities as well as differences in COVID-19 cases across communities and racial and ethnic groups.

As the article goes on to note, the fact that anyone can contract COVID-19 is not the same as saying everyone has the same likelihood of contracting COVID-19. Those with resources have more options in how to respond to crises plus more options when it comes to treatment. These differences are generally present regarding health but a large pandemic reveals some of the underlying patterns that deserve attention.

Wealthier Americans have a larger carbon footprint in part due to larger homes

Large homes and McMansions do not just take up land and resources at construction; according to a new study, they have larger carbon footprints. Here is the abstract:

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Residential energy use accounts for roughly 20% of greenhouse gas (GHG) emissions in the United States. Using data on 93 million individual households, we estimate these GHGs across the contiguous United States and clarify the respective influence of climate, affluence, energy infrastructure, urban form, and building attributes (age, housing type, heating fuel) in driving these emissions. A ranking by state reveals that GHGs (per unit floor space) are lowest in Western US states and highest in Central states. Wealthier Americans have per capita footprints ∼25% higher than those of lower-income residents, primarily due to larger homes. In especially affluent suburbs, these emissions can be 15 times higher than nearby neighborhoods. If the electrical grid is decarbonized, then the residential housing sector can meet the 28% emission reduction target for 2025 under the Paris Agreement. However, grid decarbonization will be insufficient to meet the 80% emissions reduction target for 2050 due to a growing housing stock and continued use of fossil fuels (natural gas, propane, and fuel oil) in homes. Meeting this target will also require deep energy retrofits and transitioning to distributed low-carbon energy sources, as well as reducing per capita floor space and zoning denser settlement patterns.

More from the study linking energy use, wealth, and housing size:

We find that both household energy use and emissions per square meter vary widely across the country, driven primarily by thermal energy demand and the fuel used in electricity production (“grid mix”). ZIP-code level analysis shows income is positively correlated with both per capita energy use and emissions, along with the tendency for wealth and living area to increase together. City and neighborhood analyses underscore the environmental benefits of denser settlement patterns and the degree to which carbon-intensive electrical grids counteract these benefits.

Bigger homes require more energy to heat, cool, and light. Wealthier people can afford these expenses. Indeed, being able to shoulder all of these costs with a larger home may be a form of conspicuous consumption: “I have enough resources to live in a larger home and maintain it.” Critics of McMansions argue that such homes are meant to impress those who see them, not necessarily great spaces for residents to inhabit.

The study also connects the findings to possibilities for making single-family homes more green. The models work with two options: (1) retrofitting homes to make them more energy efficient and (2) reducing power generated with fossil fuels (“grid decarbonization”). Yet, there are other options to pursue that could help with the situation:

1. Promoting the construction of or the inhabiting of smaller homes. This could range from tiny houses to the “not-so-big home” to smart-sizing or down-sizing. This may require more significant lifestyle changes – cutting on consumption would be difficult – that are too hard for many people.

2. Promoting fewer single-family homes. While they are the basis of suburban life and popular in many other American communities, multi-family housing is more energy efficient. Given the rhetoric surrounding suburbs (such as President Trump claiming Democrats want to abolish suburb), this may not be easy.

3. Promoting less energy use within homes. What if residents used less heat, air conditioning, and lighting? What if they watched less TV and used their phones and computers less? Again, this might require large lifestyle changes that many would find difficult.

4. Constructing newer homes with much stricter energy guidelines, perhaps even net-zero-energy homes or passive houses. Even if these are restricted to wealthier homeowners who can afford the changes, this could help limit the energy use of larger homes. Also, if such homes are viewed by the public as cool or desirable, perhaps these features trickle down.

5. Could wealthier homeowners purchase carbon offsets for their homes? This would allow them to keep their bigger structures while providing funds that could be put to good use elsewhere.

The scenarios in the paper as well as the ones I proposed all require working multiple sectors of society to get to a place where homes, particularly large ones, use less energy.

Poor Census response rate in neighborhoods with fleeing New Yorkers

Here is another consequence of city residents leaving for other places during COVID-19: absent New York residents are not filling out Census 2020 forms at a good rate.

chart close up data desk

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Only 46 percent of Upper East Side households have filled out their census forms, according to a June 25 report circulated by the Department of City Planning’s chief demographer, Joseph J. Salvo — well below the neighborhood’s final response rate in 2010, and short of the current citywide rate of almost 53 percent…

Even if New Yorkers have asked the Postal Service to forward mail to their second homes, census forms are addressed to the household, not the individual, which — unless New Yorkers pay for premium forwarding — prevents the post office from including them with the forwarded mail…

Officials hope that many of the coronavirus evacuees will return by the end of October, the new extended deadline for final responses to the census. But with Manhattan parents now enrolling children in schools outside the city, it is not clear that the evacuees will return to New York City in time…

The pandemic has prompted census outreach workers to adjust their tactics, especially in trying to reach undocumented immigrants and residents in illegal housing, who may be fearful of sharing information with the government. In the heavily immigrant neighborhoods of North Corona and East Elmhurst, outreach workers have approached New Yorkers while they wait in lines at food distribution sites, for example.

A lot of effort goes into conducting the decennial census and the data collected is helpful to many. Trying to boost response rates to surveys in a world awash in data collection is a difficult task without a global pandemic. But, I imagine this might lead to some interesting lessons about data collection. Researchers need to have some flexibility in all cases as circumstances can change and plans may go awry. This could be a helpful story about how a large organization adapted in a difficult situation and maybe even made future data collection more robust.

While the article mentions the potential consequences for New York City, there is another consequence of the movement of people: would these wealthy New Yorkers boost the Census numbers elsewhere, provided that they fill out the forms about residing in other locations? Granted, they would still have to fill out a Census form but others might do that for them (if they are living with others) or they might fill out a form once they are more settled in.

The McMansions and their wealthy owners who do not need house numbers

As one writer walked every street of zip code of 22207 to look at house numbers, they noticed something about some of the larger homes:

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Some exorbitant McMansions featured no address numbers at all, only very pointed security-company signs. (The cars parked at those homes often sport diplomatic plates.) Many of the richest houses in Arlington—for example, the mansions overlooking the Potomac near Chain Bridge—were not visible from the street at all, and so the only address numbers ascertainable were on mailboxes or security gates at the foot of long, winding driveways.

One of the purposes of McMansions, particularly according to critics, is to broadcast the status and money of the owners. Through the garish architecture and an imposing facade, McMansion owners show what they have.

So, if a homeowner does not have a street address visible, does this mean their home is not a McMansion? Perhaps the home still shows off even if it more difficult to connect the home to its particular owners.

The story might be a little different here. Might these be less of McMansion owners – those who want to project their success – and more of people with real money and status who want to stay quiet about their success? One of the advantages of being elite and/or having resources in insulating yourself from the public. This may be why it is harder for sociologists, journalists, and others to get access to the elite as they can better control access to themselves. Not having easily visible house numbers is just a start.

Coming back to the McMansion status of such homes. I wonder if this could turn into a minor addendum to defining McMansions: how does the visibility of the home to the street affect whether it is a McMansion? Let’s say the McMansion is shielded from the road by trees and a gate; does this render the home less offensive since it is not broadcasting its architecture so much?

More on the wealthy leaving cities, San Francisco edition

The flight of some out of New York City amid COVID-19 has attracted attention. This may also be happening in San Francisco:

city skyline during golden hour

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Amid the depths of a global pandemic and financial downturn, the demand for real estate is unexpectedly rocketing in wealthy regions outside San Francisco, reports Bloomberg. Agents say that demand is soaring in affluent areas around the Bay Area such as Napa, Marin and further afield in Carmel, as people who have the means look to get away from the city. Meanwhile, the market in San Francisco and Alameda County is still well below where it was last year.

Elsewhere, Lake Tahoe has also seen a surge in real estate interest. The prospect of living out of the city on an alpine lake while maintaining a career is appealing for a new generation of young buyers, as many tech companies have signaled that remote work may be the new norm for a long time…

Meanwhile, the rental market in San Francisco has dropped significantly, with rates for one-bedroom apartments in the city dropping by 9.2% since June 2019, and hitting a three-year low.

However, buying a new home in an isolated haven in a nearby bucolic county is not an option for lower-income San Francisco residents, and some believe the trend is only exacerbating the wealth divide.

And, as noted in the final paragraph of the story, it is hard to know whether this is a long-term trend. But, this is one of the advantage of wealth and resources: residential options during times when many others are limited in where they can live. And this is not just limited to where they can live; it includes being able to travel back and forth easily, owning or renting multiple properties at the same time, and having all the resources for working from home.

More broadly, the evidence cited above is interesting in that people moving out of the city are not said to be moving very far. They are still within a drive of San Francisco/the Bay Area/Silicon Valley. Are people in the Bay Area more willing to stay close by or do they have to due to work (a need for at least some in the tech industry to be at meetings, see people and products, etc.)? Does this differ from New York City where many of those moving ended up in the suburbs while others left the metro region all together? Staying in driving distance changes the moving experience.

I am also imagining the possibility of a more significant migration than some wealthy people heading for the suburbs or other cool metro areas. What if Facebook said they want to get out of the petri dish of Silicon Valley, be a different kind of tech company that really wants to connect people, and picks up for Omaha or St. Louis or another smaller big city in the middle of the country? Clusters of organizations have particular synergies and efficiencies but if more workers are going to be at home, is there still the same need to locate near everyone else?

Related earlier post: the evidence for this happening in Washington D.C. may not be as strong.

Using helicopters to avoid driving in traffic

Highways and major roads in and around big cities can be full of traffic. For those with resources, traveling by helicopter can be much quicker:

But the use of commuter helicopters in the greater Los Angeles area is probably second only to New York City, said Kurt Deetz, who ferried Bryant from 2014 to 2016 as a former pilot for the charter service Island Express Holding Corp.

The customer base skews rich, famous and traffic-averse. In 1997, for instance, Apple Inc. co-founder Steve Jobs got permission from officials in Richmond, Calif., to build a heliport that was only a short drive from his office at Pixar Animation Studios.

“It’s about time and money,” Deetz said. “If you were to go from Orange County to Los Angeles on a Friday at 4 p.m., how long would that take you? It’s convenience.”…

The choppers are used by “everyone from celebrities to actors to investment guys and simply people with a lot of money,” Deetz said. “It’s not a poor man’s way of transportation.”

Perhaps this information would fit into a class-based system of daily transportation in the United States (in broad strokes): poor and working-class with more reliance on mass transit where available, people of most classes looking to drive themselves if they have the resources, and then the wealthy seeking alternatives (ranging from having drivers or using helicopters and planes). Driving regularly signals a level of independence and status that many Americans want – unless they have so much money that they can get around everyone else who wants to drive.

The article mentions expanding opportunities for helicopter transport in Los Angeles as well as the possibility of flying cars or vehicles that can vertically land and take off. Would there be a point where there are so many trips by those vehicles that the advantage of going by air is decreased?

Considering regional transit in the suburbs of Detroit

Suburban voters and leaders regularly resist efforts to bring mass transit to the suburbs (see examples like Nashville). The tide might be changing in parts of suburban Detroit:

In contrast, Coulter has declared that he will be a “champion” of regional transit—and given how narrow the initial defeat was, that could make all the difference. In November, he appeared with other regional leaders to announce legislation that would give Wayne, Oakland, and Washtenaw counties the power to negotiate a transit plan among themselves—a first step toward putting a revised plan before voters in 2020.

Like his predecessor once argued of sprawl, Coulter touts better regional transit as an economic development tool: “If we’re going to try to keep our young talent here, we’re going to have to compete with other regions in the country.”

The change in leadership has Detroit’s transit boosters thinking positively. “I am pretty optimistic,” says Megan Owens, executive director of Transportation Riders United, a local advocacy group. “When Brooks Patterson passed away and Dave Coulter was appointed executive, that was a watershed moment and a huge opportunity for regional transit. Dave Coulter understands what regional transit could mean—not only for urbanized communities, but for the county as a whole.”

In that way, she says, Coulter is more in-step with changing suburban demographics and preferences in a region where immigrant communities are growing, populations are aging, and young professionals are more likely to want to live in walkable communities. “We look back 20 years ago, and there was much more of an attitude of, ‘Transit? Who cares! We’re the Motor City!’” Owens says. “Now, the conversation is more about, ‘What kind of transit?’”

Suburbanites have resisted mass transit for multiple reasons: they do not want tax money going to transportation forms they do not plan to use or going to bureaucrats they do not control; the kinds of people who might ride mass transit (particularly from the city to the suburbs); the kind of denser development that might accompany mass transit corridors or hubs; and concerns about having enough money to pay for roads since many suburbanites would prefer to drive.It is then interesting to put these reasons next to the logic expressed above: what if mass transit is an economic development tool for suburbs? If suburbs are regularly competing with other suburbs and a big city within their own metropolitan region (let alone competing with other metropolitan regions), what if they need mass transit to keep up? Putting in significant mass transit will not be easy and I assume there will always be limits on how much density suburbs will accept but it will be worth watching to see how many wealthier suburban areas go in this direction in the next decade or two.

(On a more cynical note, perhaps the demographic change in the suburbs with more non-white and lower- or working-class residents means that suburbanites can no longer easily dismiss mass transit because they are worried about city residenst accessing the suburbs.)

Emily Post, pretense, and McMansions

A look at Emily Post’s etiquette connects her advice then and McMansions today:

Many of her admonitions are still relevant today. Thank-you notes were a sign of good character, Post argued. She also recommended ignoring “elephants at large in the garden,” otherwise known as wealthy know-it-alls: “Why a man, because he has millions, should assume they confer omniscience in all branches of knowledge, it something which may be left to the psychologist to answer.”

Above all, however, one must avoid pretense! Hence her indictment of the tastelessness of what today might be called a “McMansion”: “But the ‘mansion’ with coarse lace… and the bell answered at eleven in the morning by a butler in an ill-fitting dress suit and wearing a mustache, might as well be placarded: ‘Here lives a vulgarian who has never had an opportunity to acquire cultivation.’”

These two passages cited above suggest that those with wealth and resources should not flaunt their advantages by either acting like they know everything or having possessions that indicate status but not refinement. Hence, a McMansion might be an issue because the owner is purchasing a relatively expensive and large house and making a statement with its architecture and design. Instead of a more understated or traditional looking or older wealthy home, the McMansion is often said to be a plea for attention by those with new money to burn.

At the same time, this hints at some broader issues Americans have with wealth and dwellings. Is it more acceptable to have a more subtle but truly grand big home as opposed to garish McMansion? Both dwellings might contribute to inequality. Both could discourage social interaction. Both are larger than the average home and arguably waste a lot of space. Both show that the homeowners have money.

In American society, there have long been certain ways wealthy people should try to downplay their wealth. Because has more democratic and meritocratic ideals than some places, having certain possessions – the ultimate or unusual luxury goods – are truly markers of having a lot more than others. McMansions are not these luxury goods; they are too common and are within the reach of relatively more Americans. The big mansions of Hollywood, in the wealthiest suburbs and urban neighborhoods, and home to the 1% are the ultimate mansions and indicators of wealth.