How to Solve the Bay Area’s Critical Housing Shortage in one fell swoop

The crippling housing shortages in the San Fran area is well documented. The enormous growth of high tech industry has fueled house prices to the extent that some cities restrict economic growth altogether. The constraints have become so great that many Californian Companies are relocating to Texas.

Not only are there few areas where there is zoning potential to build up the are is naturally land constrained by several parallel ranges of mountains and hills and the sea. Few flat and accessible and undeveloped areas exist and those that do are often prized wine country. The Northern California coast is very little development because it has no coastal plain and because the Pacific is so cold leading to Summer Tempreatures like Finland.

Such constrained areas have four strategic planning possibilities, build up, build out, build elsewhere or some combination of the first three.

Oddly there seems to have been no real strategic studies on a regional scale looking at options, even when the potential of high speed rail or such has presented an obvious opportunity.

Within 30km east of Oakland however there is an almost unpopulated and unconstrained area of over 300 sqkm which is occupied by little more than dozens of windfarms. It is poor prairie ground with few farms. I’m talking about Solano county the area east of Fairfield and west of Rio Vista and North of the Sacramento River Estuary (it never had a bridge but its own Ferry). Historically this area was bypassed. The electrified Sacramento Northern Railway ran through here running streetcars all the way to Oakland. The depression saw no development north of the Sacramento River (not surprising given the barge connection) and the line closed. However South of the Sacramento river rail connections to Oakland and San Fran, in some cases as part of the BART network.

The idea is simple bridge the Sacramento River and development a high speed rail line alongside or above existing rail corridors to the Bay, utilising the Amtrak Capital Corridor for Hugh Speed and a Bart extension for metro. Rebuilding the Transbay Terminus in SancFrancisco as a rail terminus would enormously facilitate this. To the east it would connect to the planned high speed rail to Sacramento as a Y junction, leading to the potential for high speed trains between Los Angles and Oakland/San Francisco with a stop of course at our new city – only 15 minutes journey from Oakland, and with Bart connections to Antoch and Concord. The area is large enough to absorb the full housing shortage in California (4-5 million houses) or about 60% of the entire Bay are metropolis.

The area is so empty it has few geographical names, however there is Montezuma Island and the hills to the East are known as the Montezuma Hills, so Montezuma it is.

Image a new city here of several million homes, zero carbon and affordable, just 25 minutes commute from San Fran, its land value uplift paying for Californias High Speed Rail at no cost to the tapayer .

Understanding Gentrification and Upzoning – The Double kinked Veblen Good Demand Curve

I have been speculating whether an explanation for all of the arguments about whether upzoning causes or cure high house prices is the shape of the demand curve.

It is widely accepted that luxury goods including luxury houses are Veblen Goods that is for high prices they dont obey the law of demand, the higher the price the greater the demand. In other words the supply curve kinks backwards. Oddly though I never see this discussed more broadly in studies of urban housing markets. There is a disconnect between micro and macro price Take Leica cameras 3000 dollars plus premium against camera of similar specs, trade on a brand mystique of usability and optics, largely eroded now that they are basically rebadged Panasonic Cameras. Imagine however a change of tactics and they decided to produce as many cameras as Panasonic did once upon a time (the sales of digital cameras has fallen by 75% in 10 years) then they would no longer have such an exclusive cachet, increasing supply would push down the price.

This is what I think is going on with high density apartments in high value parts of cities. They have a short fall of luxury (or even relatively posh) new houses, they are basically old cities. New apartments release a pent up demand. Prices go up, though not necessarily across a housing market area through filtering/fishtank effects.

Next look at the supply curve, generally fairly flat and gently pointing upwards, it will intersect the demand curve just once, at what might be a socially sub optimal point. The aim of policy should be to make it curve upwards as sharply as possible so that it intersects multiple times, not all of these combinations might maximise returns, which is the point of inclusive zoning of affordable housing, to ensure that affordable rent and intermediate missing middle housing gets built.