Who Is Buying San Francisco’s Luxury Condos & Why?
A report just published by 48HillsOnline analyzed the SF Assessor’s Office owner mailing records for 23 condo buildings comprising 5212 units, most built in the last 10 years and/or qualifying for the description “luxury real estate.” It found that 39% of owner mailing addresses were not those of the property, with percentages over 50% for ultra-prestige buildings such as the St. Regis, Four Seasons and Millennium – some of the most expensive real estate west of Manhattan. The article’s basic thesis is that building condos for the rich to use as second or third homes does virtually nothing to alleviate the city’s shortage of housing. Without agreeing with their conclusion, the analysis does confirm an interesting insight, i.e. the city is increasingly becoming a destination for wealth, as well as a location for the creation of new wealth.
As to the article’s anti-development case: First of all, 61% of owners appear to be owner-occupiers – working professionals, empty nesters, famous ballplayers and so on - and are clearly helping to address local home-buyer demand. Of the 39% with different mailing addresses, there may be a number of explanations: 1) units are indeed being used as second homes or pied e terres by the ultra-affluent who like to visit the city (and spend money in the local economy), 2) the units are being used as investments by local or, often, foreign buyers: to buy and hold, as long-term rental properties (which help alleviate the housing shortage), or as short-term Airbnb type rentals (which don’t), and 3) units are being occupied by dependents, such as children attending college. It’s also possible some mailing addresses are for services handling financial matters for owners.
Additionally, it’s true that developers of these condo projects, under city law, must build a certain number of affordable housing units or contribute funds to do so. Last but not least, the sale and ownership of these high-end condos contribute huge sums to the county’s transfer tax and property tax revenues, which help support city services.