Pieds-A-Terre: The Scale of the Problem

9 08 2017

Construction of luxury condos on Folsom Street. Credit: Noah Arroyo, San Francisco Public Press.

The idea of a “pied-a-terre” tax has been in the headlines recently, with Vancouver and other cities taking the lead in disincentivizing unoccupied housing units.

Secondary/non-primary residence homes (NPRs, or what are more colorfully called “pieds-a-terre”) in San Francisco are significant in number, and the numbers and value of these homes continue to rise, inflating market housing and contributing to the scarcity of available housing.  As of 2014 data (the most recent available) NPRs now comprise nearly 30% of all vacant housing units in the City, and the increase over recent years is equal to 26% of all the new housing production in the same period.

San Francisco has seen a significant increase in NPRs in the past 10 years. Whether these housing units are second homes for the wealthy or units that are rented as short-term vacation rentals, NPRs take housing units out of the rental market, depleting the supply of available housing for San Francisco residents and adding pressure to rising housing prices.  This has become not only a San Francisco issue but a phenomenon in other major “hot market” cities nationwide and even internationally.

 

The scale of the problem

There are three key takeaways from recent research: The number of NPRs in San Francisco is increasing rapidly, pieds–a-terre seem more prevalent in newly constructed housing, and these secondary vacation home units constitute a significant portion of the City’s total vacant units.

The most recent 2014 ACS data shows that San Francisco had 9,307 seasonal units. In 2005, the number was 5,822. That is a 60% increase in secondary/vacation homes since 2005. When compared to the total number of vacant units in the housing stock, the number of NPRs are significant in any year.  In 2005 the total number of vacant units citywide was 32,564, making seasonal homes 18% of those unoccupied units.  By 2012, the total number of vacant units dropped to 30,057 while the number of seasonal units almost doubled to 9,075 accounting for 30% of all vacant units.  To put that in relative terms, the number of new pieds-a-terre over that 2005-2012 period was equal to 26% of all new housing production over those same years.

While San Francisco has not approached the number of secondary units affecting housing markets in places like New York City and Miami, it outstrips other cities when we look at the rates.  Secondary units in New York account for a lower percentage of overall vacant units than in San Francisco. In 2014, there were 63,916 recreational units in New York City, out of 290,675 unoccupied units. That means 21% of vacant units in New York were secondary homes, a significant number but still much lower than in San Francisco where pieds-a-terre account for roughly 30% of all vacant units.[1]  New York, like San Francisco, has seen these numbers increase since 2005, when secondary units only accounted for 17% of vacant units.  However, unlike San Francisco, New York has begun to actively talk about regulating these homes. [2]

 

Conclusion

There is a clear policy and even moral logic in implementing a policy to disincentivize this trend of “ghost units,” and, to the extent that this market behavior continues to persist, to ensure pieds-a-terre are subject to a “luxury tax” that can help fund affordable housing and offset the impact on the City’s housing supply.

 

[1] 2014 ACS 1-year estimate, American Factfinder

[2] http://www.nytimes.com/2014/10/26/realestate/pieds-terre-owners-dominate-some-new-york-buildings.html?_r=0


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