Sound Off

Appearing in the San Francisco Chronicle Real Estate Section

From time to time, the editors of the Real Estate section at the San Francisco Chronicle will ask leading area real estate agents their opinion and thoughts about various topics related to the Bay Area’s housing market. This is right up our alley given our track record, experience helping buyers and sellers in various parts of the Bay Area and given the fact that Kevin used to be a reporter and lawyer, so you know there‘s an opinion just waiting to get out.  

Excerpt of the San Francisco Chronicle

This Week‘s Question:

How will the decline in construction of new homes affect the Bay Area‘s marketplace?


Being a transplant from Iowa, I grew up constantly hearing, “if you build it, they will come,” from the movie “Field of Dreams.” The film’s self-fulfilling prophecy of baseball legends and fans being drawn to a spontaneously built baseball diamond in the middle of an Iowa cornfield is heartwarming, but it’s also instructive especially in a time where the Bay Area needs to build new homes.

While acute market forces are curtailing new construction starts now, development here was already an uphill battle. Development timelines take years, so any non-NIMBY-related delays in adding new homes will keep housing prices high that much longer. But even for people who can afford to buy in the Bay Area, there’s a shortage of accessible destination homes for folks who are downsizing or ones who can no longer do the stairs in their 3-story Victorian. If we build it, think about all the people who would not only come to build the places but also those who would stay. Lawmakers should be doing everything in their power to promote building modern, denser, homes that are more affordable and ADA-compliant —redeveloping and reinvigorating our communities while simultaneously adding to tax coffers, what’s not to like?

This appeared in the Sunday, March 4, 2023 edition of the San Francisco Chronicle and on SFGate. 

SF skyline blended with cornfield

Maybe Instead of Yes! or No! 

Some Further Reading About Issues that bookend the YIMBY vs NIMBY debates:

As we said in the San Francisco Chronicle above, development is an uphill battle in the Bay Area. We’ve said this before in various columns, tv news interviews and in person. But it’s been a while since we last outlined what “uphill” meant especially considering two major changes to the equation: California’s mandated state housing inventory increase targets and the Pandemic’s effects on housing preferences whereby denser urban housing has become less sought-after than less dense homes like single-family residences with yards for example.

Perhaps there is a middle way between the NIMBYs and the YIMBYs – maybe the Maybe in the My Backyard? MIMBY?

NIMBYs May Say... 

Among many other arguments that are case by case, here are many of the arguments we‘ve heard over the years against development and redevelopment are these: 

Gentrification and displacement of populations who cannot afford living there

Changing the ‘character’ of a given neighborhood or property

Increased strain on infrastructure, roads and neighborhood amenities

Increase density, changed demographics and increased crime

Nuisance and hassle of construction



Icon weighing investing vs development

Could It Ever Pencil Out? 

To illustrate the point, we did a thought exercise…

Let’s say a developer bought an especially-big-for-San-Francisco-sized parcel for $3 million and wanted to build 10 units. To keep things simple, let’s assume the developer can sell each unit for $1,000,000. Total construction costs, per door, are $500,000 (which is very conservative). That means that land acquisition and construction costs are $8 million, leaving a $2 million potential net profit. Ah, but you’re forgetting carrying costs and sale costs. Real estate commissions add up to $500,000 and let’s say carrying costs are $200,000, thus lowering the potential net profit to just $1.3 million.

But wait, there’s more.

One of those 10 units has to be a BMR (we’re assuming the developer didn’t or couldn’t pay the in lieu fee), so instead of selling for $1 million the BMR only sells for $200,000 to $300,000 (there’s a formula the City applies for a BMR’s list price). The overall potential net profit then, is done to just $1 million, which sounds like a lot (and it is to a certain extent) but the time this all took, from buying the property to handing over the keys to the very last unit is anywhere from 3-5 years. Why not have invested your initial capital into stocks, a startup or investment funds or other types of business ventures you say.

And that’s the point. If costs and headaches rise to the point that makes building anew unfeasible, what then? 

Mounting Costs for Developers  

Developing properties and doing new construction takes a special kind of dedication and commitment especially in the Bay Area where it‘s oftentimes too expensive and too long of a process for many. These are the costs that create high barriers of entry to this important part of our housing market.  

High land values lead to higher acquisition costs, especially in San Francisco where it’s increasingly rare to find parcels large enough to accommodate high density housing.

Long approval times for any type of project means higher carrying costs for any would-be developers. And we are not talking months but years. Even for smaller projects like adding an Accessory Dwelling Unit (ADU), approvals from authorities in most Bay Area communities are long. Essentially, a developer is paying property taxes, upkeep costs and, if financed, interest costs for an unimproved property the entire time from when they bought it to when they sell the last unit.   

Soft costs that are increasingly harder to stomach. In development parlance project costs are divided into various categories with hard costs (actual costs for labor, lumber, concrete and building materials) which have skyrocketed already since the Pandemic, and soft costs (permit fees, architect and lawyer costs along with required project studies and environmental reports). Various state, county and local level requirements all add to the time and money needed to get a project from idea to keys. While soft costs are substantial (usually 10-15% of the overall budget), those costs can balloon if there is any kind of neighborhood or community-based opposition to the project, which can take years to resolve with the only people making money being the lawyers charging their fees and lenders collecting interest on the as-of-yet started project.

Regulatory Concessions. Many communities with San Francisco being the prime example, require developers to set aside some portion of a development to be inclusionary housing or require additional fees to be paid. In San Francisco, developers seeking to build a project with 10 or more units are obligated to set aside anywhere from 10-15% of their completed to be below market rate (BMR) units or pay a fee in lieu of having onside BMRs.    

Market conditions and volatility. A whole lot of weird things can happen when it comes to developments in general. On the one hand you have delays on the developer side. One large project on San Francisco’s market street sits completed but totally empty because of shenanigans with the developer and an FBI corruption inquiry. About 10 blocks away another new-build project was delayed by several months as everything was done except for kitchen cabinetry. The reason? The cabinets were Italian, and their fabrication had to stop because it was summer holiday in Italy. On the other hand, you have much bigger forces at play like the unexpected and complete embrace of working from home culture and the tech sector’s rapid cooling that hollowed out San Francisco’s downtown core for example whereby studies in 2023 have concluded that there are now 150,000 fewer people going to work downtown every day as compared 2019 and 2020 levels. 

Excerpt of the San Francisco Chronicle

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