Editor’s note: San Francisco’s elected leaders are getting ready to review a major rezoning proposal that would allow for larger and denser housing developments across much of the north and west of The City.
As with all housing debates in San Francisco, this one has raised a host of thorny questions, and many residents are looking for answers. To help them out, The Examiner will be tackling some of those questions in an occasional series over the coming months.
San Francisco is currently working to rezone large portions of its cityscape in the hopes that added housing density will lead to greater affordability.
But some critics of The City’s plans warn that its upzoning proposal could spark unintended consequences — and that they might arrive well before any new construction work even gets underway.
While some residents are worried about the possibility of rapid redevelopment that transforms neighborhoods overnight, others argue that simply by changing the planning code to allow taller, denser construction, the rezoning proposal could send disruptive shockwaves through San Francisco’s housing market.
“Upzoning can lead to speculation, increased land values, and displacement,” warned one 2022 report produced by a progressive housing group that examined proposals intended to add housing density to the city of Berkeley.
This cascade of market forces is the result of “the higher revenues or sales prices that denser housing can command, and this can fuel gentrification,” the report said.
It’s a starkly different vision of San Francisco’s development future than the one laid out by the supporters of upzoning, who have long been making the case that allowing developers to build more homes in San Francisco is the surest path to reducing The City’s affordability crisis.
As city lawmakers hammer out the details of a new rezoning proposal for The City’s western and northern neighborhoods, how seriously should they take these warnings of sudden price shocks and market disruptions?
For some answers, The Examiner consulted with a number of housing-policy experts who have researched upzoning efforts in other cities.
A sudden change?
The link between upzoning and property-value increases is fairly straightforward.
Take a single-family home, for example. If a city rezones that property to accommodate a condominium, that parcel will likely increase in value as the housing market prices in the potential it now holds for larger, more lucrative development.
Academic research into the housing market has found plenty of evidence for this pricing dynamic as well. When cities add density, the value of rezoned properties tends to go up — and in relatively short order.
One of the most widely cited papers on this topic is a study examining Chicago’s housing market in the years directly following an upzoning effort intended to spur density around rail stations in the city.
The study found that the rezoning led to significant price increases for properties, with many owners cashing in as soon as six months after the upzoning took effect. Additionally, the study also found that loosened zoning rules failed to spur a substantial amount of new construction.
“Together, these two findings paint an interesting picture,” wrote the paper’s author, housing researcher Yonah Freemark. “In the first few years following an upzoning, construction may not immediately increase but the cost of property will.”
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Fueling skepticism
Since this paper was published in 2019, many upzoning opponents have positioned it as evidence in their case that efforts to spur new housing through zoning reform often backfire.
But housing researchers interviewed by The Examiner said that the Chicago study doesn’t necessarily offer the best guide for what is likely to happen in San Francisco if The City passes the proposed upzoning measure.
For starters, the zoning changes that took place in Chicago were relatively narrow in scope, covering just a small portion of the city. In addition, Freemark’s study considered only the short-term impacts of zoning reform, as it reviewed just the handful of years directly following the policy change.
Separate research examining the impacts of rezoning over longer stretches of time has generally found that any short-term housing-cost increases are later reversed when newly constructed homes — made possible by looser zoning rules — eventually come onto the market and drive down prices.
In addition, research findings have also led some to suggest that when it comes to upzoning, the size of the upzoned area makes a difference.
For example, one paper found that a large upzoning effort in Sao Paulo led to significant levels of new construction and a reduction in housing costs throughout the city.
“If more places — San Francisco and throughout the region — are zoned for multifamily, the value of multifamily-zoned land won't be such a scarce commodity anymore,” said Sarah Karlinsky, research director at UC Berkeley’s Terner Center for Housing Innovation.
In other words, when only a small geographic area is rezoned, it naturally becomes especially appealing for developers to buy. However, “if there are lots and lots of places that you can build apartments, then that will have a moderating effect on the price of land,” said Karlinsky.
But how it all plays out in practice — and whether or not higher property values actually translate into higher rents and less-affordable homes — seems to vary quite a bit from city to city and even neighborhood to neighborhood.
“It's a little unclear,” Karlinsky said. “And there are a lot of factors that go into that.”
Those factors can include elements such as an area’s affluence, the type of housing that already exists there, and even its walkability, according to one review of the academic literature also authored by Freemark.
What it means for SF
With so many potential factors at play, The Examiner reached out to Freemark for his take on how upzoning is likely to play out in San Francisco.
“Given the general desirability of San Francisco, I would suspect that the most substantial impact of the city's large upzoning plan will be an increase in construction,” he said in an emailed exchange.
Still, such construction, and the affordability gains many hope it will bring, could take years to materialize.
As San Francisco’s recently submitted upzoning proposal works its way through the legislative process, separate efforts are underway to pass companion measures intended to boost tenant protections and also pave the way for an expansion of publicly subsidized affordable housing for low-income residents.
But some remain skeptical that these efforts will be sufficient to deal with the housing disruptions that upzoning may unleash.
“I think that the challenge around displacement is real,” said Quintin Mecke, the executive director of the Council of Community Housing Organizations, which advocates for affordable housing in San Francisco. “That’s small businesses. That's low income households. That's communities of color. And we just make that part of the equation, rather than challenging that.”
