Northern California

One Size Will Not Fit All in the San Francisco Bay Area

Headshot Final__Dean Wehril

Dean Wehrli

July 20, 2012

For many environmentalists and planners, high density urban housing is the Holy Grail, and they are making it increasingly more difficult for new suburbs to emerge. Though demographic shifts will help drive demand for this product, this will not be to the exclusion of demand for more conventional housing types, as some planners and academics believe.

A recent and egregious example of this bias is the recently released Sustainable Communities Strategy (SCS). Developed by the Association of Bay Area Governments (ABAG), these guidelines would mean that future single family builders in the Bay Area would bear the brunt of a strong movement toward high density development. While the goal – to limit pollution through transportation policies – is a worthy one, getting there by way of the SCS proposal is a well-intentioned impossibility that would leave little room for traditional housing stock.

The guidelines of the SCS would push most future residential development in the Bay Area toward very high density product types in urban transit-oriented locations. Four of every five new homes built over the next three decades would need to occur within Preferred Development Areas (PDAs) that allow for only very high density living – averaging 38 units per acre! The table below provides a sense of this.

Footnote: The table summarizes the seven PDA types according to the share and unit count expected for new housing creation through 2040 (per the SCS). Density figures refer to dwelling units per acre. We have applied mid-point values and one-fourth point values (e.g., at 75 units for City Center instead of the 100 unit mid-point) to indicate “typical” densities for each PDA type. One percent of development would be in “rural” PDAs that do not have associated densities, while the remaining 20% would be in non-PDA areas.

This means that the vast majority of future San Francisco Bay Area homes will be at a minimum of 20 units per acre, with many 60 + units per acre, and they will be located only in urban, transit-oriented locales. That will be a far cry from the townhomes and detached homes that dominate the new home market today.

Pros

  • Demographer Arthur Nelson and others see a coming wave of Millennial-fed high density desires, and, in fact, this is a key underlying rationale for the SCS plan.
 
  • Would likely result in reduced pollution levels, at least from automobiles.
 
  • Groups backed by the Urban Land Institute have been actively promoting high density, noting that the price per square foot is higher in cities so demand must be higher.
 

Cons

  • Our work estimating housing demand by lifestage, and our research on consumer preferences of prospective Bay Area home buyers, strongly indicates a resilient and ongoing preference for single family homes. The feasibility studies, consumer surveys, and focus groups that we conduct tell us this is true. This means the guidelines embodied in the SCS are dramatically at odds with the very people these policies are designed to house.
 
  • High density urban housing is expensive to build, which drives pricing beyond the means of median household incomes. All too often, planners and analysts seem to ignore the economic reality that urban housing is much more expensive to build and therefore must cost more to purchase or rent.
 
  • The SCS guidelines will undoubtedly result in a more rental-oriented housing landscape given the densities, locations, and costs that will result. Most households do not want to rent indefinitely – even if in a hip transit-oriented urban hotspot.
 

A diverse place like the Bay Area will take a variety of product types to satisfy its housing needs. The SCS guidelines are simply not feasible. Preferences and pricing will make sure of that. Other alternatives to this sustainable housing plan that could be worth exploring include: higher gas mileage standards, incentives to induce more telecommuting, and disincentives to long distance commutes. Creativity will be needed, but multiple methods must be found. Ultimately, do we alter how we drive or work or tax ourselves, or do we dramatically change where and how we live?

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About The Author

Dean Wehrli
Principal
Dean helps housing sector clients figure out not just what might work and what might not, but why.

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