However, in the blue collar sector, you might be right. The people renting those “average 2 bedroom apartments” may decide to brave the Minneapolis snows in order to find a lower cost alternative to the Bay Area. If this does happen, then rents will be forced down.

Exhibit 1: 2001-2003. How many people left then? How much did rents go down? 15% in SF, 8% in Oakland, more in certain parts of the Peninsula. That was with 250,000 jobs (and people) evaporating. Bust won’t be as focused here as last time (tech isn’t the bubble source), but it’ll happen as California unemployment remains structurally higher than the rest of the country, again due to higher costs (higher costs reduce labor demand, so unemployment will be higher here).

For a “weak” post, it sure has engendered a lot of interest.

And I disagree that simple supply and demand economics are at work here in the Bay Area – there are some very clear opportunists at work. I see this by simply reviewing rental prices and knowing what they were this time last year. Some supply and demand dynamic is certainly in play, but I would wager that the percentage increases in prices outstrip the increase in demand. Of course, I haven’t done any statistically significant data analysis, but I will search for a source. Someone probably has.

Harvard economist Raven Saks in a 2005 paper:

“To identify metropolitan areas where the supply of housing is constrained, I assemble evidence on housing supply regulations from a variety of sources. In places with relatively few barriers to construction, an increase in housing demand leads to a large number of new housing units and only a moderate increase in housing prices. In contrast, for an equal demand shock, places with more regulation experience a 17 percent smaller expansion of the housing stock and almost double the increase in housing prices.”

Here’s another Harvard link:

http://www.economics.harvard.edu/pub/hier/2007/HIER2131.pdf

Just one money quote:
“this ‘zoning tax’ represents about 50% of the cost of a house in New York City and in several other high cost areas.”

Please don’t take this as a personal attack, but that website you sent me to is almost comical. It appears to be a lobbyist group that publishes unsupported articles.

The figures you quote are in the article, but the sources for this data are “A recent study by the California Building Industry Association, and “A new report by the Oregon-based Thoreau Institute.” Where are the names of these reports/studies and publication dates? What were the methods used to gather this data? Even as an editor of my law school’s Law Review, I would require all of my authors to cite the publication name, date and pages of their sources.

When I click on the link for “research” I am redirected to a list of similar articles by the same author. Citing yourself as a source of research is only acceptable when you have actually gathered data! Even then, it should only done be once or twice in the same publication.

David, I am rather disappointed in this source because I have read your other posts which all seem to be insightful and spot on. I would assume you were reading more well researched literature. Bad day I guess.

If anyone needs a good laugh, please read another one of this group’s articles: http://www.reason.org/commentaries/balaker_20070128.shtml

No disrespect to David intended.

As for regulations, here’s a link to get you started.

http://www.reason.org/commentaries/gilroy_20060413.shtml

For example, regulation alone added over $850,000 to the cost of a median-priced home ($1.1 million in 2005) in San Francisco last year, totaling $591 billion across the San Fran and Oakland metro areas. Similarly, growth management tacked on $316,000 to the cost of the median home in Los Angeles ($463,000 in 2005), and the aggregate costs across the entire metro area total almost $700 billion, the highest of any major U.S. metro area.

Looking at the state as a whole, regulation increased housing costs in all California metropolitan areas by a staggering $2.7 trillion, which accounts for almost half of the nationwide total of $5.5 trillion. Nearly $2.5 trillion of these costs are attributable to growth management regulations in the state’s coastal metro areas—like the Bay Area, Los Angeles, and San Diego—alone.