The Burlingame Voice

Total Cost of Homeownership: Not just the cost of the house

For all the talk about our "housing crisis", there is little media or politician discussion about what makes housing expensive here or many, many other places.  The build-our-way-out of it people, like the YIMBYs, just focus on the four walls.  As the letter writer below noted, it's tiresome.  It's also myopic.  The WSJ chimes in today with a piece titled "Insurance and Taxes Now Cost More Than Mortgages for Many Homeowners: Ballooning expenses rewrite the math of homeownership".  The piece zeroes in on home insurance, flood/fire insurance, property taxes and home repair costs and shows

These ballooning expenses are rewriting the math of homeownership. In September, 32% of the average single-family mortgage payment went to property taxes and home insurance, the highest rate ever for data going back to 2014, according to Intercontinental Exchange.  For a small but increasing share of households, the burden is far more significant. In five major metro areas—Rochester and Syracuse, N.Y.; Omaha, Neb.; New Orleans and Miami—at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance, according to ICE. 

These metro areas have high property taxes or pricey home insurance relative to typical home costs, or both.  Nationwide, taxes and insurance make up more than half of the monthly mortgage payment for 9% of single-family mortgages. That is up from less than 4% at the end of 2014. 

Left out of the equation because of how the study gathered data are the other costs--electricity, natural gas, garbage, sewer/water and bond measures for schools and anything else the politicians can dream up (looking at you Caltrain and sea level rise).  A major variable will always be interest rates, but all of these other factors just pile on and increases get waved through regularly.

One could even argue the YIMBY mentality will make it all worse.  More grid, more water, more sewage treatment, more classrooms, more, more, more.  Decarbonize your house in the next 10 years?  That won't be easy or cheap as we noted here.  Looking at all of the costs in total reveals the real story--not the faddish one.

Pushing back on the YIMBYs

From the "broken clock is right twice a day" file comes this Letter to the Editor of the SF Comicle.  Somehow the editors let this one slip through the cracks and into print.  I don't know the woman or the organization, but she hits pretty much every button right on the nose:

YIMBY housing fantasies won’t work in California. Here’s the reality

Regarding “There’s no protecting California values without building more housing” (Open Forum, SFChronicle.com, Dec 13): The steady drumbeat of op-ed pieces from SPUR and YIMBY housing advocates is tiresome. Many Californians disagree with them.  Urban density and infill housing are supposed to remedy suburban sprawl. But urban density, in practice, simply creates overcrowded streets, with motorists circling in search of rare parking.   Infill comes at the expense of historic buildings and districts, which are often demolished. A classic example is the enormous apartment buildings planned for the former California College of the Arts campus in Oakland.

Transit-oriented development? This fantasy assumes that public transportation is a fixed utility. Many bus lines that once served our communities have been cut.  How many voters will oppose a tax to support BART because of the agency’s plans to put apartments in its parking lots? How many people have quit taking BART because there is no secure place to park near the stations?

The SPUR and YIMBY people want Soviet-style apartment blocks wherever they can be crammed in, extinguishing every vestige of charm from neighborhoods.  It’s time for the state to stop forcing draconian “density bonus” and “builder’s remedy” laws on neighborhoods that want to retain some breathing room.

Amelia Marshall

Board member, Oakland Heritage Alliance

Amen, Amelia.  Look no further than our latest Cellblock at One Adrian Ct.  It may not extinguish any charm in the neighborhood since it sits next to a Public Storage business, but you can bet it will raise traffic thru the Worst Intersection in the State and put pressure on all sorts of public services.  Did the grid get any major upgrade?  School capacity?  Did we hire another police officer for traffic enforcement?  Anything thing else listed here?  Keep up the good work, Ms. Marshall.  You are far from alone.

Measure GG: Some clarifications

The second school parcel tax, GG, that is on this ballot is a) a little confusing and b) a tough decision in the current economic climate.  Having said that, some clarification is in order.  On another post, a commenter asked, "I just read in John Horgan’s column that the school tax GG “can be increased or decreased, depending on fiscal circumstances.”  Can this be true!?

I made an inquiry to one of the measure's supporters who provided the exact language in question:

The Board will determine, on an annual basis, the amount of the levy for the following fiscal year, up to the maximum allowable rate shown above. If, in any given year, the Board elects to levy an amount less than the maximum allowable rate, it may, in subsequent years, levy the maximum allowable rate.

I take that to mean if the Board decided on a lower levy in one year, the levy the following year could go back up, but still not exceed the maximum allowable rate.  The essential part of that rate is:

The tax, at the uniform rate of $0.14 per square foot of building improvements per year, capped at $2,500 per parcel per year for 8 years.

The other confusing wrinkle is this 8-year tax overlaps the last parcel tax (Measure L that you see on the property tax bill you just got in the mail) for the next three years--i.e. two taxes for three years, then just the GG version for five more.  The reason for that is the district has to budget out three years and the state funding is erratic and mostly erratic not in our favor.

Voting for Measure GG may be a tough call for some property owners who are struggling with insurance increases, energy cost increases, building material cost increases, labor cost increases, the SALT tax cap, the three state bond measures also on the ballot and who knows what else.  As usual, I consider that all of the GG revenue stays in town and has to go straight into classroom resources.  That's your decision framework.

Treehugger Update: Cheap at double the price

This is a treehugger post of a different species.  Instead of celebrating our amazing City of Trees foliage as usual, we are left to decide what is the right price to cut down a mature tree.  The new ordinance is still in progress as the DJ notes

The updated draft ordinance would include increased replacement standards, according to the staff report, as well as the incentivization of native tree planting.  The city has yet to finalize a fee schedule for in-lieu fee amounts for those who do not replace removed trees, Richard Holz, parks superintendent and city arborist said, but similar fees in Sacramento are set to $325 per one inch of Diameter Standard Height of tree removed.

Those relatively high fees would cover the cost of staff time and effort to plant trees elsewhere in the city.  “It’s not meant to be punitive, this is just what the actual cost would be for our staff to establish a tree somewhere else, if you are not going to comply with the ordinance and plant a tree on your own property,” he said.

I don't think paying less than $4,000 to cut down a one-foot diameter tree and not "replacing" it is a "relatively high fee" at all.  In fact, I would like to see it be double that since I doubt $4K covers nearly all the costs of having city staff source it, transport it, plant it and track all this work just to get a 24' or 36" box tree somewhere else that doesn't replace a one to four foot wide mature tree.  And of course, one of the driving forces behind this is Sacramental authoritarianism as discussed

In previous conversations, councilmembers discussed the city’s limited ability to deny tree removals for projects like accessory dwelling units or Senate Bill 9 housing, which have state-mandated zoning requirements.

Crank up the density and cut down the neighborhood trees--remind me again about how important net-zero carbon emissions and carbon capture are.

Poll: 70% say Bay Area quality of life has declined

When I read headlines like 7 in 10 residents say the region’s quality of life is getting worse, I think about how bad the roads have become (looking at you, El Camino), how poorly many government agencies are being run, how much traffic there is, how we are losing control of our local voting and zoning, and public safety.  School quality, water security, utility costs---the list is long.  Having spent years in market research, I know a poll can be tweaked in any number of ways from who gets polled to how the questions and multiple-choice answers are phrased to who does the analysis of the results.  The Merc reported on the latest public sentiment here.  It notes

According to the poll, 70% of registered voters said the Bay Area’s quality of life has worsened over the past five years, while just 13% said it has improved. Seventeen percent said it’s stayed the same.

A whopping 46% of respondents said they were likely to leave the Bay Area in the next few years, with two-thirds of those citing high housing costs as the main reason to consider a move. During the pandemic, people fleeing the region contributed to a 3% population drop, though that exodus has since slowed.  When asked to select ways the region might best be improved, respondents’ top choice at 39% was building more affordable housing.

Of course, that means 61% chose something other than to jam more people into the Bay Area.  See how the reporting can spin the story?  If the other choices had overlap to split the responses, 39% starts to look big.

Homeowners in the poll (note, that percentage is not revealed) also said the state’s home insurance meltdown is hitting their finances. Fifty-two percent said their home insurance premiums have increased significantly, 22% said they have avoided using their home insurance policy out of fear of cancellation or rising rates, 12% said they’ve had a difficult time finding an insurer to write them a policy and 8% said an insurer had canceled a policy.

Insurance has been slipping down a slippery slope for years with no real solution from the state. And many renters don't realize their rent is tied to the insurance on their apartment.  Then there is this bit of Sacramental hand-waving following on the heels of even more restrictions on drilling.  When you leave the state the gas prices are almost unreal---unreal low.

To prevent spikes in gas prices, state lawmakers are now considering a plan from Gov. Gavin Newsom to force oil refiners to keep minimum fuel reserves, though doing so likely wouldn’t lower overall prices at the pump.

The piece finishes off by describing some people who think Silicon Valley giants are "villains" who have "lost their moral compass".  I can't understand where that is coming from or what it has to do with the quality of life in the Bay Area.  At least the piece noted huge support for Prop. 36 to get the organized theft back under control and remove the locked plastic doors protecting shampoo and deodorant.  The big question remains how many people we should jam into the Peninsula?  The RHNA requirements are nonsense, but they are driving down the quality of life for long-time residents who look at things like this on the north end and wonder "why"?  That's the B'game police building in the front.

Building more vacant office space?

Some dots are so obvious to connect that it's child's play.  Take for example all the office building going on up and down the mid-Peninsula.  One wonders what the developers are thinking.  A big dot was publicized last week in Mountain View per the Merc:

MOUNTAIN VIEW — A lender has seized through foreclosure a South Bay tech campus once touted as an “exquisite” property in fresh sign of the economic troubles facing the Bay Area office market.  The office campus, located at 350 and 380 Ellis Street in Mountain View, was seized by an affiliate of KKR Real Estate Finance Trust, which is managed by New York City-based investment behemoth KKR & Co. Inc.

The $120.6 million that KKR invested to buy the tech campus is a jaw-dropping 66% less than the $357.6 million that an alliance of investment behemoth Goldman Sachs and Bay Area real estate firm TMG Partners paid in 2021 to buy the office complex.  The Ellis Street tech campus is now worth just one-third of its value at the time Goldman Sachs and TMG bought the property almost exactly three years ago.

I did business with clients in those buildings for years.  They are nice spaces (probably "Class A" but I'm no expert).  I just know they have a great location compared to many others in Silicon Valley.  And they lost 2/3 of their value in three years. The dot begging to be connected is this building below on Old Bayshore in dear Old B'game.  It's just one of several in progress as materials and labor costs jump and interest rates stay sticky at about 7%.  It will be a nice space as well with a giant parking garage on the left.  But will it be vacant for a while...or longer?  There are more Bayfront spaces lined up for redevelopment--the Hyatt Cinema is looking ready to fall down by itself.  At least the Broadway-California intersection is getting fixed.....wait, what?

Connecting the Density Dots

Sometimes connecting the dots is hard--other times it's pretty easy.  Last week's connection was pretty easy.  The Chronicle ran two pieces on density, but no one there connected the dots so let's do it here.  The front page piece was "Density" cited in canceled policies".  It noted property insurers consider two flavors of density--how closely packed together houses are and how many policies any one insurer has in an area.  Both are causing the insurance crisis in California to spiral up.  Insurers don't like the risk of a fire in one house jumping to its neighbors.  And they realize multi-family means multi-kitchen, etc.  So "you're canceled".

Two pages later there was a headline "Court rules lawmakers can override local housing limits"--to force more, you got it, density.

Limits on housing density approved by local voters can be overridden by lawmakers, a California appeals court ruled, upholding legislation that was intended to encourage construction of small apartment buildings.  The law, SB10 by state Sen. Scott Wiener, D-San Francisco, allows city and county governments to authorize new housing with up to 10 units in some urban areas, including those near transit, without conducting environmental studies.

“The housing shortage is a matter of statewide concern,” and SB10 is “reasonably related to addressing that concern,” Justice Brian Hoffstadt said in Thursday’ 3-0 ruling, which upheld a judge’s decision.Hoffstadt cited previous legislation aimed at addressing the shortage of affordable housing, starting with a 1965 law that required local governments to adopt long-term plans to promote adequate housing.

You read that right.  This has been an issue since 1965.  Why?  Because it's always going to be an issue.  You cannot outbuild the global demand to live in the Bay Area--unless you make it notably less livable vis a vis water, traffic, grid stability, crime, street parking, et al.  Those are symptoms of density.  Some stupid judge can't change that, and neither can the legislature.  If you live next to a project that is building three, four or five units on a 5,000 square foot lot and you lose your insurance coverage, will you have a cause of action?  Against whom?  The state?  Good luck with that.

And if you are thinking insurers can't or won't cancel you, think again.  No explanation required.  They could easily use housing density as the deciding factor in where to reduce their policy density.  The Law of Unintended Consequences will not be denied.

Squatter zoning restrictions being studied for B'game

In a proactive effort to get ahead of the burgeoning trend of squatters taking over uninhabited residences, the Burlingame City Council has asked staff to quickly assess which sections of town should be zoned for squatting.  Staff has been asked to assess whether the zones should be patterned after the new city council districts, the elementary school districts or the zones for legal leaf blowing on a particular day of the week.  There are legal guidelines for squatters to follow as shown here:

Squatters’ rights, also known as “adverse possession”, refers to laws that allow a person to gain legal ownership of a property they have occupied without permission from the legal owner. In California, squatters can make a legal claim to own the property they are occupying after residing there continuously for 5 years. 

Squatters differ from trespassers, in that trespassers occupy a property illegally but make no claim of ownership or legal right to live there. Squatters, on the other hand, occupy the property without permission but may be able to gain legal rights if they meet the criteria for adverse possession.

With the recent arrest of a squatter at the Burlingame train station master's quarters after flying below the radar for several years, the city council felt some urgency to codify which sections of town should and should not welcome squatters.  Enhanced surveillance of the no-squat zones would preclude the 5-year window from opening.

State Senator Scott Weiner immediately attacked the proposed ordinance as "knee jerk NIMBYism of the first degree" and promised to introduce legislation in Sacramento to prevent local governments from reducing the squat-friendly housing supply in the name of fairness and equity.  Weiner did not rule out including affordable squatting requirements based on income and reduced gas and electric rates for young, first-time squatters. 

Real Estate: "The death of the 6% commission"

There is big news in the real estate market after a legal settlement on Friday.  The Journal squib reads "Home buyers and sellers are experimenting with new models to compensate agents after the death of the 6% commission in a settlement with Realtors".  In much of the country this will be more like small-to-medium news because homes are cheaper elsewhere.

The state with the least expensive housing market had a median price of $229,000 in September 2023, according to Redfin’s monthly housing data. The priciest was almost 3.5 times as much at $787,000.

The $787,000 was for California, of course, but Redfin notes:  "In February 2024, San Mateo County home prices were down 1.8% compared to last year, selling for a median price of $1.5M."   Zooming into B'game, Redfin says "In February 2024, Burlingame home prices were up 35.0% compared to last year, selling for a median price of $2.2M."

Six percent of $229,000 in East Oshkosh is $13,740.  That's the 10% down payment in B'game where the old six percent commission on a $2.2M transaction is a cool $132 grand.  The Journal notes that in some regions:

Some buyers pay their agents directly through a flat fee or an hourly rate, instead of relying on the seller to set a rate. Some sellers offer a lower commission to a buyer’s agent than the currently typical 2% to 3%.  But these nontraditional approaches often mean buyers have to do more work themselves. And sellers who offer lower commissions could find it tougher to sell if buyers’ agents discourage buyers from bidding on their homes.

Starting in July, most home sellers won’t need to make an upfront offer for how much they will pay a home buyer’s agent. That means if home sellers won’t cover the cost of the buyer’s agent, buyers could have to pay their agents out of pocket. 

It will be very interesting to see how this plays out in B'game where Redfin notes the average sale this year took 14 days.  Anecdotally, I see even beat-up R-1 properties selling quickly for more than $2.2M.  Something that sells in two weeks with little or no contingencies doesn't need a lot of commission push behind it.

Backhaus: Sweet introduction

According to the show of hands local realtor Raziel Ungar asked for at Friday's hosted event at Backhaus, I am one of the last people to clue into our newest bakery.  That's probably because most people are having lunch around the time I am finishing breakfast and from what I hear, Backhaus can be sold out by then.  Raziel is one of the most active realtors in town and loves to bring his clients together for events like movies and pie giveaways.  His latest event brought about 100 people to Backhaus for a talk and tasting with co-owner Anne Moser.

Anne gave us the story of how she and her husband Robert started baking at home, then moved to Kitchentown, onward to the B'game Farmer's Market and the CSM market, then to a space on 3rd Ave in San Mateo and now to a larger, more flexible space here at 261 California Dr.  The space was our first movie theater, George Roy's Photoplay that opened in 1913, according to Russ Cohen's article in this quarter's Burlingame Historical Society newsletter.

After extensive, and I mean really extensive, Q&A that Anne handled with ease, Raziel asked for a show of hands as to who had bought bread and pastries from Backhaus at each step of the journey.  When he finally asked for a show of hands as to who was a first-timer on Friday, I was in the tiny minority that raised their hands.  Raziel is a big supporter of Copenhagen as well and his annual pie event at Thanksgiving is a B'game tradition.  Baking sounds like an arduous task since each day starts at 3am so that the goods are ready for the 7:30 opening.  After tasting the Country Bread at the event, I may have to get up early to snag some.  Here's Raziel and Anne making the pitch.