<p>Areas such as San Francisco Bay Area have very strict zoning laws. In fact as <a href="https://belonging.berkeley.edu/single-family-zoning-san-francisco-bay-area" rel="nofollow noreferrer">this source</a> shows in San Francisco Bay Area many houses are restricted to be single family houses. The source focuses mainly on Berkeley and Oakland but discusses also the situation of the wider area.</p>
<p>Adding an extra story just for your own family might not be economical even if there is housing shortage. Furthermore, there might be further restrictions on any such buildings (e.g. neighbors complaining to the zoning board that second story blocks their view/sun). Lastly, the housing shortage and exorbitant housing prices in cities such as San Francisco can actually itself be attributed (among other things) to the zoning laws themselves in the first place (see for example <a href="https://www.nber.org/papers/w8835" rel="nofollow noreferrer">The Impact of Zoning on Housing Affordability Edward L. Glaeser, Joseph Gyourko</a>).</p>

CC BY-SA 4.0
2020-07-10T18:14:04.313Z
And of course nobody who owns a house wants houses to be cheaper.
Criticize SE actions means ban
CC BY-SA 4.0
2020-07-10T18:39:35.930Z
@user253751 that in itself would not explain it unless you can argue that all house owners are able to collude (which for such numerous group would be extremely difficult). Homeowners are basically locked in a prisoner's dilemma type of situation, if they all dont build prices of their assets stay high but if someone else builds they those other ones will still get good prices and your home value still drops. Given that the dominant strategy would be for both to build even if it hurts their home values. Thats why some legal restrictions are essential.
1muflon1
CC BY-SA 4.0
2020-07-11T12:39:00.727Z
Part of the dominant strategy is to vote for things that make it hard for other people to build, such as stupid zoning laws (I am not saying zoning laws are inherently stupid by their nature, just that some particular zoning laws are stupid)
Criticize SE actions means ban
CC BY-SA 4.0
2020-07-11T12:44:00.423Z
@user253751 I agree but my understanding is that once you go to political process you are making a collective choice not an individual choice. That’s why these kind of gov policies are examined through collective choice models. When society is making collective choice is any particular individual responsible?
1muflon1
CC BY-SA 4.0
2020-07-10T16:56:02.717Z
2020-07-10T23:40:53.417Z
2020-07-10T23:40:53.417Z
1muflon1
<p>Except that it isn't supply-demand that has driven up housing costs.  It is in part the boom-bust economic cycles that drive housing costs, particularly the tech bubble and the 2008-2009 housing bubble and great financial recession.  The first six minutes of Inside Job explain the situation very well, using Iceland as a simplified example.  People lost their savings while housing prices doubled.  After six minutes the film segues into the US.  Mortgage Backed Securities did more damage to housing markets.  The printing of dollars during pandemic, trade imbalances such as with China where parts like light switches are made, lowering interest rates below the time value of money, increasing wealth gaps, there are so many influences on the housing market as the dollar erodes and investors seek tangible investments.  Building more housing will not reduce the housing prices since dense areas are more costly and their economies are extremely operate differently from low cost areas.  Density increases infrastructure costs and logistics costs and leaves less space for things like parking to be free.</p>

CC BY-SA 4.0
2024-03-07T05:59:03.960Z
2024-03-07T05:59:03.960Z
Gwendolyn Anderson
<p>The San Francisco Bay Area is an interesting place. Housing prices are through the roof (hehe) and increasing by an average of 5-20% per year for the past 20 years. This is largely driven by an increase in land values, as the SF Bay Area has very high incomes and rapid hiring, but geographically constrained area for settlement, leading to a supply and demand issue that has been driving up home prices to astronomical levels.</p>
<p>Interestingly, nearly all homes in the Bay Area are one-story, as opposed to the two-story homes so common elsewhere. I'm trying to square this with the relevant economic factors and I'm coming up just a bit short. Why would a land-dominant housing market lead to below-average construction of larger houses, when the relative cost of building a second floor is lower than it would be in a market where land is cheaper?</p>

<microeconomics><supply-and-demand><housing>
Why doesn't the San Francisco Bay Area have two-story houses?
TheEnvironmentalist
# Why doesn't the San Francisco Bay Area have two-story houses?

(Asked by: username_0 on 2020-07-10)

The San Francisco Bay Area is an interesting place. Housing prices are through the roof (hehe) and increasing by an average of 5-20% per year for the past 20 years. This is largely driven by an increase in land values, as the SF Bay Area has very high incomes and rapid hiring, but geographically constrained area for settlement, leading to a supply and demand issue that has been driving up home prices to astronomical levels.

Interestingly, nearly all homes in the Bay Area are one-story, as opposed to the two-story homes so common elsewhere. I'm trying to square this with the relevant economic factors and I'm coming up just a bit short. Why would a land-dominant housing market lead to below-average construction of larger houses, when the relative cost of building a second floor is lower than it would be in a market where land is cheaper?

**Tags:** microeconomics, supply-and-demand, housing


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## 2 answers

### Answer by username_1 on 2020-07-10. Score: 2

Areas such as San Francisco Bay Area have very strict zoning laws. In fact as [this source](https://belonging.berkeley.edu/single-family-zoning-san-francisco-bay-area) shows in San Francisco Bay Area many houses are restricted to be single family houses. The source focuses mainly on Berkeley and Oakland but discusses also the situation of the wider area.

Adding an extra story just for your own family might not be economical even if there is housing shortage. Furthermore, there might be further restrictions on any such buildings (e.g. neighbors complaining to the zoning board that second story blocks their view/sun). Lastly, the housing shortage and exorbitant housing prices in cities such as San Francisco can actually itself be attributed (among other things) to the zoning laws themselves in the first place (see for example [The Impact of Zoning on Housing Affordability Edward L. Glaeser, Joseph Gyourko](https://www.nber.org/papers/w8835)).

> **Comments:**
> **username_2**: And of course nobody who owns a house wants houses to be cheaper.  
> **username_1**: @user253751 that in itself would not explain it unless you can argue that all house owners are able to collude (which for such numerous group would be extremely difficult). Homeowners are basically locked in a prisoner's dilemma type of situation, if they all dont build prices of their assets stay high but if someone else builds they those other ones will still get good prices and your home value still drops. Given that the dominant strategy would be for both to build even if it hurts their home values. Thats why some legal restrictions are essential.  
> **username_2**: Part of the dominant strategy is to vote for things that make it hard for other people to build, such as stupid zoning laws (I am not saying zoning laws are inherently stupid by their nature, just that some particular zoning laws are stupid)  
> **username_1**: @user253751 I agree but my understanding is that once you go to political process you are making a collective choice not an individual choice. That’s why these kind of gov policies are examined through collective choice models. When society is making collective choice is any particular individual responsible?  

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### Answer by username_3 on 2024-03-07. Score: -1

Except that it isn't supply-demand that has driven up housing costs. It is in part the boom-bust economic cycles that drive housing costs, particularly the tech bubble and the 2008-2009 housing bubble and great financial recession. The first six minutes of Inside Job explain the situation very well, using Iceland as a simplified example. People lost their savings while housing prices doubled. After six minutes the film segues into the US. Mortgage Backed Securities did more damage to housing markets. The printing of dollars during pandemic, trade imbalances such as with China where parts like light switches are made, lowering interest rates below the time value of money, increasing wealth gaps, there are so many influences on the housing market as the dollar erodes and investors seek tangible investments. Building more housing will not reduce the housing prices since dense areas are more costly and their economies are extremely operate differently from low cost areas. Density increases infrastructure costs and logistics costs and leaves less space for things like parking to be free.


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