The Burlingame Voice

B'game better than "Climate best by government test"

If you grew up with oppressive summer heat and humidity like I did, you really appreciate how nice the weather is in B'game.  Yesterday was a perfect example.  It was on the verge of being uncomfortably hot and a bit humid here.  High temperature was 88.  But down in Redwood City, with its motto "Climate best by government test", their temperature topped out at 100 degrees.  Yuck.

And the Chronicle noted "Livermore recorded 102 degrees Tuesday afternoon, according the National Weather Service. Fairfield reached 105 degrees, and Vacaville hit 102 degrees."  Double yuck.  I haven't seen any reports of brownouts yesterday, but we aren't done yet.  When the "Burlingame For All" people reappear, remember why people pay extra to live here and why it's worth it.

It is also time for the annual summer check-up on my ancient pear tree.  The yield goes back and forth year-to-year like last year.   The year before was a low yield too, but we had good harvests the two prior years.  This year I count eight, but they are already big and beautiful, so now we try to outwit the squirrels by letting them ripen, but not too much.

Local real estate update - The Ups & Downs

Two tidbits of B'game real estate news came in today from Zumper and the County assessor's office.  First the Zumper rental update shows B'game in the middle of the pack at $2,300 for a one-bedroom--up 1.82% year-over-year.  Two-bedrooms were a bit of a surprise with average rent off 11.6% at $2,830.  That's the only noticeable decline of all 20 cities surveyed.  Not sure what is going on, but the wave of For Rent signs on El Camino has subsided a bit yet there are still many available.  It's a good thing we don't have rent control.

On the assessed property value side, the DJ is reporting

San Mateo County’s property assessment roll increased year over year by $22.2 billion, or 8.34%, to a record high of over $288 billion in assessed value, San Mateo County Assessor Mark Church announced Tuesday.  San Carlos had an increase of 12.64%, South San Francisco was up 12.53%, Burlingame saw a hike of 10.77%, Millbrae increased 9.43% and East Palo Alto was up 9.29%.

The property tax revenue generated is approximately 1% of the annual property assessment roll and this year will increase to $2.88 billion. Approximately 45% of the revenue will go to schools within the county, 25% to the county, 18% to cities, 10% to special districts and 2% to former redevelopment agencies.

One factor in the growth of the San Mateo County secured roll is new commercial development. In all, 64.6 million square feet of new construction are expected to be completed in the county over the next six to eight years. A total of 9.12 million square feet are under construction, 13.9 million square feet have planning approval, and 41.6 million square feet are under review. Approximately 17 million square feet of new construction have been completed in the last five years, according to the Assessor’s Office.

That puts numbers to our collective amnesia about the drought.  And who knows, a lot of this new real estate may be underwater as John Horgan notes in his column:

According to Dave Pine, chair of the OneShoreline Board of Directors and a member of the county’s Board of Supervisors, projects to counter climate change along the shore could take decades to finish.  And, even then, they might not be enough to ward off the worst aspects of what could be coming. “This will take generations,” he predicted.  To that end, OneShoreline and the county are examining the need for an ultralong-term parcel tax to help to finance the myriad construction efforts under discussion.

You knew where that was headed, right?

City Council: Rai$e A$ Much A$ You Need at $4,900/head

Nobody has watched the city council campaign contributions over the last 20+ years as much as I have, unless maybe they were on the ballot themselves.  Even then, I doubt it.  Back in 2007, B'game-specific limits were imposed.  That was the Dark Ages of fundraising.  These days you can raise a boatload of "outside" money, meaning from outside of B'game, by getting on one or the other social media platforms and begging.  It has already happened here.  So why the archaic limits?  You could ask "why any limits at all?" but let's save that for another day.  In the meantime, as the DJ is reporting:

In a split vote, the Burlingame City Council this week opted to increase campaign contribution limits from $719.93 to $4,900, scrapping the lower citywide limit and defaulting to the state rule allowing larger contributions from individuals and organizations.

The local rule, established in 2007, had set a $500 limit for individuals and $1,000 for organizations, numbers that have been adjusted upward to account for inflation over time. The most recent cap for organizations was $1,439.87. In the beginning of this year, a state rule went into effect limiting contributions to $4,900 from both individuals and organizations in cities or counties that had not previously set stricter rules.

We don't see all that many split-votes unlike the Olde Days in town.  But in this case, I love this logic.  It may be twisted, but B'gamers are not the ones doing the twisting:

“I think people should be able to raise within the limits of the state,” Councilmember Donna Colson said. “The state has told us what to do around housing, the state has told us what to do around transit, sea level rise, lots of things, so why wouldn’t we comply also with the state regarding the elections.”

I will get to the nuances of the soon-to-be-implemented district council elections next week, but in the meantime rai$e what you think you need and maybe a bit more because the dark money from outside B'game is waiting to pounce--particularly the YIMBYs.

The CA exodus is real, so why do we need SB 10?

There are plenty of people who foolishly believe we can build our way out of the so-called "housing crisis".  Dense development hasn't caused lower housing costs anywhere in the world--in fact, many of the densest locations are also the costliest.  And when the other quality of life components and job prospects are as good as the Bay Area, one would have to be extra foolish to try to out-build the demand and further diminish the quality of life.  But Sacramento has foisted SB 9 and SB 10 on us anyway.  Most of them couldn't get through Econ 101, but that is where we are at.

The Burlingame City Council will discuss what to do about SB 10 tomorrow night.  The Staff Report is super thin on SB 10:

SB 10. California Senate Bill (SB) 10 allows (but does not require) local agencies to adopt an ordinance to allow up to 10 dwelling units on any parcel if the parcel is within a transit-rich area or urban infill site. (Ed:  pretty much all of B'game).

The General Plan Update has already provided a range of multiunit residential and mixed use land use districts with a wide range of residential densities, and the Zoning Ordinance Update underway will provide refined development standards for the corresponding zoning districts.

Staff requests direction from the City Council on whether to pursue zoning allowed by SB 10.  Whereas SB 9-compliant zoning is required, municipalities may choose to adopt (or not adopt) SB 10-compliant zoning.

And the report claims that neither SB 9 or SB 10 will have any fiscal impact!  It might be time to double-check the thinking on that since residential property taxes never cover the cost of providing city services--never mind the costs to the school district that is pretty much out of real estate.

But let's look a little deeper courtesy of last Sunday's Mercury News piece with the sub-head "In an area noted for its booming economy, stunning weather and natural beauty, a majority feel their quality of life is in decline".  The Silicon Valley Leadership Group and the Bay Area News Group commissioned a survey by Embold Research to dig into this and it's not pretty.

In a foreboding breakthrough, for the first time since the poll began posing the question in 2018 a solid majority -- 56% -- said they expect to leave the Bay Area in the next few years...a similar majority said the region is headed in the wrong direction.  In the survey of 1,610 registered voters, 71% said the Bay Area's quality of life has declined in the last five years.

Two problems topped the list of increased concern being "serious or very serious"?  Drought (+41%) and Water Supply (+32%).  I'm glad to know I'm not alone on this.  The cost of housing was still the highest overall at 92% but only up 6%.  What if even half of the half of people that are considering leaving do so?  Even if it is only 10% that would be significant.   B'game has a huge amount of new housing already approved, in design and "in-the-dirt".  Maybe we should see how that all plays out?  I hope the council's direction to staff on SB 10 is a brisk, clear "forgetaboutit" so they can get back to ensuring our public safety, water supply, small business vitality, economic health and quality of life.

Economic Lesson for Rent Controllers

I was having a chat with a friend who owns two rental units last week and has been doing some regular maintenance.  He told me generally the same thing that the Wall Street Journal has crisply quantified

Prices are surging for the raw materials used to build American homes.  Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn.

Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021, according to the Bureau of Labor Statistic’s producer-price index, which measures the change in prices that producers receive for their output. Drywall and ceramic tiles are short of records but have also climbed.

Building supply chains weren’t prepared when Americans began swarming model homes and Home Depots in April. Sawmills and factories shut down like most other workplaces early in the lockdown.  Suppliers never caught up. Now building permits for residential construction are being issued at their highest rate since 2006.

Can you imagine if B'game had passed rent control?  There would be deferred maintenance all over town.  You have to wonder how the neighboring towns that did (looking at you, Mountain View) will view the creeping neglect that has to occur when prices go up 80%, double, or a third on key materials.  The Law of Unintended Consequences isn't an economic law, but it should be.  I'm unclear on how the Fed can say they don't expect inflation to hit soon.  Oh, and gas is right behind.  "In California, the most expensive market, average prices stand at $3.88, according to AAA."

Bay Area Exodus? How Big? How Long?

A lot of the fire, heat and policy-making on the Peninsula lately has  been driven by the belief that we will be adding more of...well, everything.  Except perhaps affordable, local entertainment.  Rent control.  Affordable housing.  Mass transit.  High density.  Subsidized X, Y, Z and back to A.  ADU's.  UBI.  Free lunch.  What if it's all just BeeEss?

You can find polls and surveys to support or contradict any position you choose.  But you can't deny the fact of open market pricing.  Not the engineered, subsidized, hidden-cost stuff like renewable energy.  I'm talking the "walk into a place of business and get a price quote" response.

Here's the "walk-in" price that caught my eye this week.  A friend of a friend is moving to Portland.  I know, I know--really? Now?  He's got remote work status until..... who knows when.  She can transplant her practice anywhere.  All that aside, the cost to rent a truck to move your stuff yourself to Portland today is $2,500.  The price to rent the same truck in Portland to drive to the Bay Area is.......wait for it, $300.  If I gave you my special 20 minute How-to-Negotiate class, I'll bet you could get them to pay you $300 to bring the truck back for them.  It would cover gas, lunch and the Golden Gate bridge toll.

Will the exodus continue?  Yes.  Will it last more than a couple years?  Maybe.  Will it reverse within the next five?  Doubtful.  I'm glad I'm not all-in on a high-density, all-electric$$, bird cage with a minuscule courtyard, 6' x 6' elevators and no balcony that I will need to sell for $650,000 to break even.  The old saying "don't fight the Fed" only applies if you have to get in the ring.

Single-Family Homes Need Single-Family Zoning

The Wall Street Journal and the NY Times are both reporting that people all of sudden want out of dense city living and are on the hunt for single-family homes in the suburbs.  We talked about that and the associated turn away from mass transit here a month ago.  But it's not just the national media reporting generally.  Our very own high-performing realtor, Raziel Ungar, is seeing much the same thing right here in B'game as he wrote this week

It's been an adventurous week in real estate - from what I've seen, things are heating up. Two homes in Burlingame that were well priced, move in ready, and in excellent locations, had five offers each on them and sold multiple hundreds of thousands over asking. I've had more inquiries in the last few weeks from buyers living or renting in San Francisco than I can remember in a concentrated period of time; naturally, many people who may or may not have considered the peninsula, Marin, or the East Bay have placed moving to the suburbs to a home and a yard towards the top of the list. An article in yesterday's New York Times called Coronavirus Escape: To the Suburbs detailed in more detail what I have been experiencing as well.

The Journal's take on the trend is that it's not just buyers.  Renters are feeling the same need

Wall Street’s wager on high-earning suburban renters is paying off, and it is raising its stakes.  Investors are flocking to America’s mega landlords, drawn by signs the companies that emerged from last decade’s foreclosure crisis owning huge pools of rental houses are weathering the economic shutdown far better than feared. Many also expect that the coronavirus pandemic will make suburban single-family homes both more desirable and more difficult to buy for even the relatively well-heeled.

Share prices of the largest home-rental companies, such as Invitation Homes Inc. and American Homes 4 Rent, have outpaced the broader stock market since they and the S&P 500 bottomed in late March. Invitation is up 57% since then and American Homes has gained 36%, compared with the S&P 500’s 31% climb.

Perhaps you also saw the SF Comicle piece about people setting home offices in tents in their backyards to get some more private workspace.  You can only do that if you HAVE a backyard.  So the question is will the city continue to fight to protect single-family zoning, will the state bureaucrats get drawn into more pressing matters than ruining neighborhoods and will the development industry respond?  One of the rare silver-linings of the Covid-19 upheaval is according to Zumper "It seems rents for studios through 2 beds in Burlingame have seen large month-over-month drops between 5-7%".  Anyone care to guess whether or not rents would be coming down now if we had rent control in place?

Office Growth Drives Housing Demand, Duh.

It's generally fun to poke fun at EssEff politics, but this Election Day brought a rare instance of sanity out of EssEff voters.  As the Chronicle reported

Also winning was Proposition E, which will limit the amount of office space San Francisco can allow each year if the city fails to build enough affordable housing, based on targets set by the state.  The measure, which needed a simple majority to pass, was leading 54.54% to 45.46% — 130,736 to 108,983.

Prop. E was sponsored chiefly by Todco, an organization that operates and advocates for affordable housing in San Francisco, and its executive director, John Elberling.  Jon Jacobo, Todco’s policy director, said in a statement that voters “have shifted the paradigm of San Francisco. They have declared that we prioritize affordable housing before office development, and that is now the new norm in San Francisco.”

This move won't be a panacea nor will its impact be felt immediately.  In fact, a number of other crosswinds like the macro-economy, availability of leading edge skills, and the perception of quality of life in the Bay Area will all drive the influx or exodus of people.  Over the course of the last 20 years of my professional career I hired, or attempted to hire, dozens of professionals and admin staff into the Bay Area.  It's always been expensive and attractive, but re-balancing the availability of commercial space with residential space should help just a bit with the cost.  One wonders why it took a Proposition to do this in SF and why it isn't happening in other hotbeds like Mountain View or RWC instead of the futile rent control measures?

"Nimby's" Win One

I am enjoying the gnashing of teeth I hear from the SF Comicle and various other development addicts and so-called affordable housing advocates over the recent court ruling in favor of the city of San Mateo and its well-established building code.  Judge George Miram is leading the race for Person of the Year as the Daily Journal reported

An effort to take legal action against San Mateo for the City Council’s decision to reject a proposal to build a 10-unit condominium building off El Camino Real in 2018 hit a stumbling block earlier this month when a judge ruled the city did not violate the Housing Accountability Act when the council denied the project’s approval based on height differences between properties.

City Attorney Shawn Mason has alleged the city’s decision regarding the project near El Camino Real and West Santa Inez Avenue is defensible because the proposed development objectively violated the city’s multi-family design guidelines aimed at smoothing height differences between properties with transitional features, such as setbacks.

“This court finds that the city of San Mateo is a charter city whose charter fully incorporates the home rule doctrine and that the approval of the instant residential housing project is an appropriate exercise of municipal affairs,” wrote Miram in the denial. “Furthermore, this court finds that to the HAA is unenforceable to the extent the HAA conflicts with or purports to disregard otherwise enforceable portions of the city’s Municipal Code regarding review of housing development projects.”

That ruling has set off a firestorm of criticism from the housing fascists who want the biggest, cheapest, densest buildings built the fasted wherever some developer can acquire a lot.  The Gavinor is apparently one of them now along with all of the usual suspects.  The SF Comicle followed up its "news" piece titled "Ruling may undercut law on housing: Judge says San Mateo can ignore California statute" with an editorial today that starts and ends with some gibberish about "objective standards" that show a crisis--one that they help manufacture with a steady stream of name-calling, narrowly-edited statistics and a refusal to admit the basic economics of bad policies like rent control.  And yes, I do realize I am fighting fire with fire on the name-calling.  Bottom Line:  We should be thankful there is at least one judge willing to reinforce the obvious and stand up for local control.

P.S. If Laura's comment on the Lyon Hoag Emergency post is accurate (I have no reason to doubt her) and the developer has scratched that approved project at Bayswater and Myrtle  perhaps the development addicts will realize over-in-filling the Peninsula is even more complicated than they think.  Anyone care to speculate on whether the latest rent control statewide law or the return of even more stringent ones next election may have played into the decision?  Here's the now empty Hower Auto lot.

Renters Are Screwed

There have been a number of crazy rent control proposals floating around California and now five of them have actually been passed into law.  Rather than me describe the Unintended Consequences, let's let a Berkeley professor (in the actual subject matter being discussed) lay it out.  The Comicle buried the lead at the bitter end of today's article

Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley’s Haas School of Business and a real estate consultant, said California was making a mistake by adopting a cap on rent increases.

Research on local rent-control ordinances has found they reduce the supply of rental housing, Rosen said, by encouraging landlords to convert apartment units to condominiums or other uses and diminishing the incentive for developers to build new housing.  The rent cap will become a floor for many landlords, he added, who will raise prices by the maximum amount allowed each year — which is far higher than annual rent increases recently.

“From a housing policy point of view, nothing could be worse,” Rosen said. “It’s going to make housing less affordable.”

There you have it.  I'm guessing empty units are being pulled off the market as we speak in buildings more than 15 years old.  Next up?  A ballot measure to break down Prop 13 by going to "split rolls" separating commerical property from residential treatment and raising rates.  If this passes you can plan on much more pain for brick and mortar retailers and restaurants on B'way and the Avenue as the rents jump.