Crisis? What crisis? San Jose ranks at bottom of major metro areas for new housing permits
The Census Bureau recently came out with its 2019 report on housing permits by metro area. Despite much political noise about addressing housing supply and affordability, San Jose and San Francisco lag dramatically, compared to other U.S. cities, in building new housing. Scott Beyer of the Market Urbanism Report explains.
Opportunity Now: What are the big takeaways from the Census report?
Scott Beyer: It shows that cities that build lots of new housing, per capita, have lower housing prices. And housing prices are higher in cities that don't build much new housing.
Here are the raw numbers for the major metros in terms of new building permits. The top-performers are:
Dallas 62.6k, Houston 61.8k NYC 60.7k, Phoenix 35.4k, Atlanta 32.7k, Austin 32k, L.A. 29.9k, Seattle 26.6k DC 26.3k Orlando 24.4k
And the bottom-dweller metros, in terms of new building permits are:
Boston 14.8k, Chicago 18k, Denver 19.3k, Philly 15.4k, Portland 16.8k, San Diego 8.1k, SF 14.1k, San Jose 6.5k
And it's important to remember that really big cities like New York may have lots of new permits in an absolute sense. But that could simply be a factor of their size. The more useful data explores how much new housing per 1000 residents. When you look at it that way, Houston is building three times more new housing than New York City on a per capita basis. That's why Houston has much lower housing prices (median $185k in Hoston) than New York. In fact, Houston has the lowest median home price of any of the 20 large metros I researched.
ON: What does a "permit" represent to the Census Bureau?
SB: In the language of the report, a housing permit is a per unit permit. So a single family home is one permit. A Four story building that has 20 units is 20 permits.
ON: Are you surprised by these results?
SB: It's so predictable. When you look at the metro areas that we think of as exclusive, coastal metro areas—Boston, D.C., New York, San Francisco, San Jose—they are all at the bottom of the list of new permits. And are some of the most costly areas in the world. When you look at the metros that are at the top of the chart in terms of new permits, like Houston and Dallas, you see that they are some of the most affordable cities.
ON: Living out here in the Bay Area, it seems all the politicians do is talk about building new housing. But they aren't delivering: we are some of the worst-performing cities not just in an absolute sense, but also on a per capita basis. What gives?
SB: My experience tells me that, usually, the city administration actually wants to issue permits and releases and add more housing. They understand the need to increase supply. But they don't control zoning or the approval of permits. The political bodies do. And the NIMBY resistance on the neighborhood level puts pressure on the political body to hold back new permits. They will use every argument. They will point to other new developments, cranes in the sky, and say, "Look, we're building lots of new housing." But these are just anecdotes, not facts.
ON: Can a model which relies on subsidizing new housing ever make a dent in this problem? Especially when new unit costs are—at least in Los Angeles—north of $600k per unit.
SB: These new so-called "affordable" units being are expensive because they're being built in exactly the same way as the expensive market rate housing. Expensive land. Expensive neighborhoods. Union labor. The same regulations that make a regular apartment building expensive apply to them. Many of the elements that make a luxury complex expensive are working to make the affordable units expensive. The money just won't go very far.
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