Condominium Conversions in San Francisco: GIS Analysis...

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Condom

iniu

m C

onve

rsio

ns

in

San

Fra

nci

sco:

GIS

Anal

ysis

of

Det

erm

inan

ts

by

J. M

. Po

godzi

nsk

i, E

conom

ics

Dep

artm

ent

and U

rban

and

Reg

ional

Pla

nnin

g D

epar

tmen

t, S

an J

ose

Sta

te U

niv

ersi

ty

Alic

iaT.

Park

er,

Urb

an a

nd R

egio

nal

Pla

nnin

g D

epar

tmen

t,

San

Jose

Sta

te U

niv

ersi

ty

Tito

Van

der

mey

den

, G

IS M

anag

er,

Nex

tbus,

Inc.

Dow

nlo

ad P

rese

nta

tion

Go t

o h

ttp:/

/ww

w.p

ogodzi

nsk

i.net

/an

d

clic

k on “

ESRI

UC 2

007 P

rese

nta

tion”

Ove

rvie

wRel

atio

nsh

ip t

o e

arlie

r pap

erBac

kgro

und

Conce

rnin

g C

ondom

iniu

m

Conve

rsio

ns

in S

an F

ranci

sco

Dat

aab

out

Condom

iniu

m C

onve

rsio

ns

in

San

Fra

nci

sco

Eco

nom

ics

of Condom

iniu

m C

onve

rsio

ns

GIS

Applic

atio

n t

o C

ondom

iniu

m

Conve

rsio

ns

Supply

-sid

eD

eman

d-s

ide

(in e

arlie

r pap

er)

San

Fra

nci

sco v

s. S

an D

iego

Rel

atio

nsh

ip t

o E

arlie

r Pa

per

This

pap

er e

xten

ds

the

empiric

al/G

IS

anal

ysis

to a

longer

per

iod o

f tim

eThis

pap

er e

xam

ines

“su

pply

-sid

e”in

det

ail

Ear

lier

pap

er h

as d

etai

led “

dem

and-

side”

theo

retica

l dev

elopm

ent

Bac

kgro

und C

once

rnin

g C

ondom

iniu

m

Conve

rsio

ns

in S

an F

ranci

sco

San

Fra

nci

sco is

the

only

City-

County

in

Cal

iforn

ia

177 C

ensu

s Tra

cts

in C

ity-

County

of

San

Fra

nci

sco;

575 C

ensu

s Blo

ck-

Gro

ups

65%

of

housi

ng u

nits

in S

an

Fran

cisc

o a

re r

enta

l units

What

are

condom

iniu

m

conve

rsio

ns?

chan

ge

in t

he

typ

e o

f o

wn

ers

hip

of re

al

pro

per

ty t

o c

ondom

iniu

m,

com

munity

apar

tmen

t pro

ject

or

stock

cooper

ativ

e an

d in

whic

h t

wo

or

mo

re u

nit

sof

such

pro

ject

s ar

e cr

eate

d w

ith

in a

n e

xis

tin

g s

tru

ctu

re

Ow

ners

hip

C

on

do

min

ium

sR

en

tal

Ap

art

men

ts

San

Fra

nci

sco:

What

are

the

public

polic

y is

sues

in

volv

ing c

ondo c

onve

rsio

ns?

Co

nd

o c

on

vers

ion

s ch

an

ge t

he b

ala

nce

b

etw

een

ren

tal an

d o

wn

ers

hip

ho

usi

ng

Posi

tive

Asp

ects

:N

egat

ive

Asp

ects

:

+Pr

ovi

de

affo

rdab

le

ow

ner

ship

housi

ng

+Im

pro

ve t

he

housi

ng

stock

and incr

ease

pro

per

ty v

alues

thro

ugh

upgra

des

-Red

uce

the

apar

tmen

t re

nta

l in

vento

ry,

ther

eby

incr

easi

ng r

ents

-Li

mit h

ousi

ng o

ptions

for

low

-inco

me

peo

ple

San

Fra

nci

sco C

ondo C

onve

rsio

n

Ord

inan

ce

Key f

eatu

res:

Larg

e co

mple

xes

built

for

renta

l housi

ng a

nd o

ccupie

d b

y te

nan

ts

cannot

conve

rt

Condo c

onve

rsio

ns

are

limited

to

ow

ner

-occ

upie

d b

uild

ings

of si

x units

or

less

and t

o o

nly

200 a

pplic

atio

ns

(i.e

. build

ings)

per

yea

r

Lott

ery

syst

em d

esig

ned

to a

lloca

te

appro

vals

San

Fra

nci

sco D

ata

U.S

. Cen

sus

dat

a on S

an F

ranci

sco c

ensu

s tr

acts

and b

lock

gro

ups

–in

cludes

dat

a on

Housi

ng s

tock

(re

nta

l an

d o

wner

-occ

upie

d)

Ow

ner

’sas

sess

men

t of house

val

ue,

Ren

ter’s

report

ed r

ent

pay

men

ts,

med

ian inco

me,

and

dem

ogra

phic

var

iable

s (i

ncl

udin

g e

thnic

/rac

ial

clas

sifica

tion)

San

Fra

nci

sco E

nte

rprise

GIS

web

site

San

Fra

nci

sco D

epar

tmen

t of Public

Work

s (f

or

dat

a ab

out

condom

iniu

m c

onve

rsio

ns)

San

Fra

nci

sco D

ata

Eco

nom

ic M

odel

(su

pply

sid

e)

Model

exa

min

es b

oth

supply

-sid

e an

d

dem

and-s

ide

variab

les

Supply

sid

e is

sig

nific

antly

affe

cted

by

regula

tion

Lim

ited

lan

d a

vaila

bili

ty a

nd

limitat

ions

on c

onve

rsio

n m

ean t

hat

su

pply

of

housi

ng

may

not

adju

st

quic

kly

to incr

ease

d d

eman

d (

short

-ru

n m

odel

)

Eco

nom

ic M

odel

(dem

and s

ide)

Eco

nom

ic liter

ature

on t

enure

choic

e

Ten

ure

choic

e m

odel

focu

ses

on c

om

par

ing t

he

satisf

action

a house

hold

der

ives

fro

m o

wnin

g v

s. t

he

satisf

action

it d

eriv

es f

rom

ren

ting (

Hen

der

son a

nd

Ioan

nid

es[1

983])

Ten

ure

choic

e m

odel

can

als

o b

e m

odifie

d t

o a

pply

to

diffe

rent

types

of

ow

ner

ship

(e.

g.,

ten

ants

in c

om

mon

vs.

indiv

iduat

ed o

wner

ship

)

Ten

ure

typ

e w

ithin

the

sam

e st

ruct

ure

may

yie

ld

diffe

rent

leve

ls o

f sa

tisf

action a

nd b

e as

soci

ated

with

diffe

rent

cost

s

Model

Exp

ecta

tions

(supply

sid

e)In

the

short

run,

more

conve

rsio

ns

should

occ

ur

wher

e th

e su

pply

of pote

ntial

conve

rsio

ns

is t

he

gre

ates

t

Sugges

ts looki

ng a

t ab

solu

te o

r re

lative

mea

sure

s of

supply

of re

nta

l housi

ng

Mea

sure

s in

clude

pro

port

ion o

f re

nta

l housi

ng t

o o

wner

-occ

upie

d h

ousi

ng a

nd p

roport

ion o

f re

nta

l housi

ng in o

ne

area

rel

ativ

e to

the

city

-wid

e st

ock

of

renta

l housi

ng

Sugges

ts looki

ng a

t m

ore

ref

ined

mea

sure

of

renta

l housi

ng in a

ppro

priat

e si

zed u

nits

Mea

sure

s in

clude

the

pro

port

ion o

f re

nta

l housi

ng in

build

ings

with a

spec

ifie

d n

um

ber

of

units

in o

ne

area

re

lative

to t

he

city

-wid

e num

ber

of

renta

l units

in b

uild

ings

with t

he

spec

ifie

d n

um

ber

of

units

Model

Exp

ecta

tions

(dem

and s

ide)

Whet

her

ow

nin

g o

r re

nting is

bet

ter

for

a par

ticu

lar

house

hold

dep

ends

on s

ever

al fac

tors

Pric

e vs

. re

nt

for

com

par

able

pro

per

ties

(m

ort

gag

e in

tere

st r

ate

affe

cts

the

cost

of

ow

ner

-occ

upie

d

housi

ng)

Exp

ect

price

-to-r

ent

ratio t

o b

e posi

tive

ly r

elat

ed w

ith

tenden

cy t

o o

wn;

spec

ula

tion o

n incr

ease

in h

ouse

va

lue

also

a p

oss

ible

exp

lanat

ion

Inco

me:

ow

ner

-occ

upie

d h

ousi

ng is

assu

med

to b

e a

“norm

al”

good,

like

HD

TVs,

unlik

e sh

oe

repai

rs.

Exp

ect

inco

me

to b

e posi

tive

ly r

elat

ed t

o t

enden

cy t

o

ow

n

Em

piric

al M

ethods

Cre

ate

GIS

lay

ers

of

variab

les

1)

Ren

tal an

d O

wn

er-

occ

up

ied

ho

usi

ng

u

nit

s2

)p

rice

-to

-ren

tra

tio

3

)m

ed

ian

in

com

e

4)

perc

en

t A

sian

an

d

5)

perc

en

t A

fric

an

Am

eri

can

Geo

code

addre

sses

for

various

year

sbet

wee

n 2

000

and 2

006

Cre

ate

map

ove

rlay

s of

condo c

onve

rsio

ns

with

laye

rs r

epre

senting t

he

mai

nva

riab

les

of in

tere

st

Geo

code

addre

sses

of al

l co

nve

rsio

ns

Map

conve

rsio

ns

and v

aria

ble

s

Supply

-sid

eVar

iable

s

Sto

ck o

f Ren

tal

Housi

ng

Pric

e-to

-Ren

t Rat

io

Const

ruct

ion

Cost

s

Inte

rest

ra

tes*

Condo

conve

rsio

n

* I

nte

rest

rat

es a

ffec

t both

the

dem

and s

ide

(mort

gag

e in

tere

st)

and t

he

supply

sid

e (c

onst

ruct

ion loan

s an

d d

isco

unting o

f in

com

e st

ream

s fr

om

ren

tal pro

per

ties

.

Why

thes

e su

pply

-sid

e va

riab

les?

The

liter

ature

and t

he

econom

ic m

odel

support

thes

eva

riab

les

as d

eter

min

ants

of co

ndo c

onve

rsio

ns:

Co

nst

ruct

ion

Co

sts:

condo c

onve

rsio

ns

inva

riab

ly

require

rem

odel

ing t

o c

om

ply

with c

odes

Inte

rest

Rate

s:re

flec

ted in c

ost

of co

nst

ruct

ion loan

s an

d u

sed t

o a

sses

s th

e dis

counte

d v

alue

of

a st

ream

of

renta

l pay

men

ts

Sto

ck o

f R

en

tal H

ou

sin

g (

esp

eci

ally in

ap

pro

pri

ate

si

ze r

an

ge):

conve

rsio

ns

occ

ur

of existing

housi

ng

(short

-run)

Ren

tal vs

. O

wner

-Occ

upie

d H

ousi

ng

by

Cen

sus

Tra

ct

Dark

est

: 1

00

%-8

0%

ren

tal

Lig

hte

st:

20

%-8

% r

en

tal

Dis

trib

ution o

f th

e Ren

tal H

ousi

ng

Sto

ck (

as p

erce

nt

of Tota

l Ren

tal U

nits)

Dark

est

: 2

.01

%-1

.19

%Lig

hte

st:

0.2

4%

-0.0

1%

Dis

trib

ution o

f th

e Ren

tal H

ousi

ng

Sto

ck (

as p

erce

nt

of Tota

l Ren

tal U

nits)

Dark

est

: 2

.01

%-1

.19

%Lig

hte

st:

0.2

4%

-0.0

1%

Sel

ecte

d:

tra

cts

above

Med

ian (

appro

x. 0

.48)

Condo C

onve

rsio

ns

(2002 &

2003)

and

Dis

trib

ution o

f Ren

tal H

ousi

ng S

tock

Condo C

onve

rsio

ns

(2002 &

2003)

and C

ensu

s Tra

cts

with M

ore

than

Med

ian S

har

e of

Ren

tal

Sto

ck

Condo C

onve

rsio

ns

and D

istr

ibution o

f th

e Ren

tal

Housi

ng S

tock

in B

uild

ings

with a

Sm

all N

um

ber

of

Units

(as

per

cent

of Tota

l Ren

tal U

nits

in s

uch

build

ings)

Dark

est

: 1

.63

%-1

.07

%Lig

hte

st:

0.2

1%

-0.0

0%

Condo C

onve

rsio

ns

(2002 &

2003)

and C

ensu

s Tra

cts

with M

ore

than

Med

ian S

har

e of

Sm

all U

nit

Ren

tal Sto

ck

Dem

and-s

ide

Var

iable

s

Med

ian

Inco

me

Pric

e-to

-Ren

t Rat

io*

Perc

ent

Asi

an

Perc

ent

Afr

ican

Am

eric

an

Condo

conve

rsio

n

* T

he

valu

e use

d in c

alcu

lations

is m

ore

com

ple

x: {[(

P*r)

/12]R

} w

her

e r

is t

he

annual

mort

gag

e in

tere

st r

ate,

P is

the

med

ian h

ouse

val

ue

and R

is

the

med

ian r

ent.

See

the

pap

er f

or

det

ails

.

Why

thes

e dem

and-s

ide

variab

les?

The

liter

ature

and t

he

econom

ic m

odel

support

thes

eva

riab

les

as d

eter

min

ants

of co

ndo c

onve

rsio

ns:

Pri

ce-t

o-r

en

t:th

e va

lue

of ow

nin

g v

s. r

enting is

bas

ed

on a

com

par

ison o

f th

e as

set

price

to t

he

cost

of re

nta

l

Med

ian

inco

me:

ow

ner

ship

is

a “n

orm

al”

good –

a good

the

dem

and for

whic

h incr

ease

s w

hen

inco

me

incr

ease

s

Perc

en

tA

sian

/P

erc

en

t A

fric

an

Am

eri

can

:oth

er

fact

ors

hel

d c

onst

ant,

Asi

ans

(esp

ecia

lly C

hin

ese)

hav

e a

hig

her

pro

bab

ility

of bei

ng o

wner

-occ

upie

rs,

and A

fric

an

Am

eric

ans

hav

e a

low

er p

robab

ility

of bei

ng o

wner

-occ

upie

rs

Dis

trib

ution o

f Pr

ice-

to-R

ent

Rat

ioC

ensu

s B

lock

Gro

ups

in P

rice-

to-R

ent R

atio

Cat

egor

ies

(Tot

al N

umbe

r of B

lock

Gro

ups

= 57

5)

020406080100

120

140

160

0 .01-1.

00 1.01-1

.501.5

1-2.00

2.01-2

.502.5

1-3.00

3.01-3

.503.5

1-4.00

4.01-4

.504.5

1-5.00

5.01 p

lus

Pric

e-to

-Ren

t Rat

io

Number of Census Block Groups

Cate

go

ry c

on

tain

ing

med

ian

valu

em

ed

ian

valu

e 1

.73

Dis

trib

ution o

f M

edia

n H

ouse

hold

In

com

e

Med

ian

Hous

ehol

d In

com

e

020406080100

120

140 $0

-$15,0

00 $15,0

01-$2

5,000 $2

5,001

-$35,0

00 $35,0

01-$4

5,000 $4

5,001

-$55,0

00 $55,0

01-$6

5,000 $6

5,001

-$75,0

00 $75,0

01-$8

5,000 $8

5,001

-$95,0

00$9

5,001

-$105

,000

$105

,001-$

115,0

00

$115

,001-$

125,0

00

$125

,001-$

135,0

00$1

35,00

1-$14

5,000

$145

,001-$

155,0

00

$155

,001-$

165,0

00

$165

,001-$

175,0

00

$175

,001-$

185,0

00

$185

,001-$

195,0

00

$195

,001-$

205,0

00

Number of Census Block Groups

Cate

go

ry c

on

tain

ing

med

ian

valu

e$

59

,35

1

Pric

e-to

-Ren

t Rat

io &

Condo C

onve

rsio

ns

Hig

her

pri

ce-t

o-r

en

t ra

tio

Mo

re c

on

do

co

nvers

ion

s

Med

ian H

ouse

hold

Inco

me

& C

ondo

Conve

rsio

ns

Hig

her

Inco

me

Mo

re c

on

do

co

nvers

ion

s

San

Fra

nci

sco D

ata

Freq

uen

cy D

istr

ibution:

Condo C

onve

rsio

ns

per

Blo

ck G

roup in 2

000

Cla

sses

Freq

uenc

y0

- 29,

999

130

- 49

,999

1150

- 69

,999

7870

- 89

,999

2990

- 10

9,99

98

110,

000

and

over

9To

tal

136

Cla

sses

Freq

uenc

y0.

002

0.01

- 1.

002

1.01

- 1.

505

1.51

- 2.

0036

2.01

- 2.

5035

2.51

- 3.

0023

3.01

- 3.

5016

3.51

- 4.

0011

4.01

- 4.

506

4.51

- 5.

000

5.01

and

ove

r0

Tota

l13

6

Sourc

e: A

uth

ors

’ca

lcula

tions

bas

ed o

n c

ondo c

onve

rsio

n d

ata

supplie

d b

y San

Fran

cisc

o D

epar

tmen

t of Public

Work

s

575 B

lock

Gro

ups

136 c

onve

rsio

ns

in 2

000

155 c

onve

rsio

ns

in 2

001

91%

34%

93%

67%

San

Fra

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Alic

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yahoo.c

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Tito V

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@nex

tbus.

com