San Francisco

Overview

San Francisco is one of the most land-constrained and expensive housing markets in the United States, and this wiki treats it as a leading modern illustration of the housing-crisis-is-a-land-crisis diagnosis. Using AEI-adjusted land price and land share indicators, San Francisco County's average land share of residential real estate value was estimated at 70.9% in 2020 — meaning that, on average, buyers are paying far more for the location than for the physical structure on it.[1] A spot comparison in Land Is a Big Deal makes the same point vividly: a vacant San Francisco lot priced at roughly $865 per square foot compares with about $0.0054 per square foot for vacant land in Gerlach, Nevada — a difference of some 159,000-fold driven entirely by location rather than any physical property of the land itself.[1]

Geographic Supply Constraints

San Francisco's high land values are not purely a policy artifact — they are also underwritten by geography. In Albert Saiz's widely cited satellite-derived measure of developable land within a 50-kilometer radius of 269 US metro centers, San Francisco is named among the handful of metro areas most severely constrained by unbuildable terrain and water, alongside Miami, Los Angeles, Oakland, New York, San Diego, and Boston; its estimated long-run price elasticity of housing supply is about 0.66, near the low end of Saiz's national range (some interior metros exceed 3).[3] Saiz's model treats physical geography and land-use regulation as jointly determining supply elasticity, and finds that regulatory stringency itself clusters in already land-scarce, high-demand places — a "homevoter" pattern consistent with the discretionary permitting system discussed below. Saiz's paper is not an argument for land value taxation and does not evaluate one; it establishes only that where new housing cannot be built — because land is physically scarce, tightly regulated, or both — rising demand converts into higher land and house prices rather than more construction, the same land-scarcity logic behind the Georgist affordability case.[3]

Land Value and Productivity

Independent of the supply-side story, mainstream urban economics research places San Francisco at the top of the country's land-value distribution. David Albouy's Rosen-Roback-style spatial-equilibrium model, built on 2000 Census data for 325 US metro areas, finds San Francisco has the highest inferred land-rent differential of any US city, with land on average roughly 100 times more valuable per acre than the lowest-value land in his sample (McAllen, Texas); combining Albouy's separate productivity and quality-of-life measures, San Francisco is also the single highest total-value metro area in the country.[4] A later paper by Albouy with Gabriel Ehrlich and Minchul Shin, using an entirely different method — roughly 67,000 actual land-parcel transactions drawn from the CoStar COMPS commercial real-estate database, 2005–2010 — corroborates the finding from observed market prices rather than a model: San Francisco is one of just five metro areas (with New York, Chicago, Washington DC, and Los Angeles) with the highest central land values in the country (in the $17–38 million-per-acre range) and one of five metro agglomerations that together account for 48% of the total value of all urban land in the United States.[5] Both papers are measurement studies rather than policy arguments — neither discusses land value taxation, and Albouy explicitly cautions that his individual-amenity regressions "should not be interpreted causally."[4]

The 1906 Earthquake: A Land-Tax-Financed Rebuild

San Francisco's most-cited historical episode in the Georgist literature is its recovery from the 1906 earthquake and fire. Mason Gaffney's historical survey "New Life in Old Cities" reports that the city entered the disaster with 75% of its real-estate tax base already in land value, and grew roughly 22% per decade from 1907 through 1930 under Mayor Edward Robeson Taylor — who had helped Henry George edit Progress and Poverty — and later "Sunny Jim" Rolph.[6] In a companion essay contrasting San Francisco's recovery with New Orleans's failure to fully rebuild after Hurricane Katrina, Gaffney argues the mechanism was not abstract "coordination" but a land-focused property tax that pressured every landowner to rebuild or sell at the same time, rather than sit on a vacant, appreciating lot.[6] A separate, unpublished Gaffney outline applying his broader "response to stress" thesis to California history corroborates the episode independently, in briefer form, describing the 1906 quake and fire as a "challenge and response: rebuilding modernizes, revitalizes city," in which "Mayor Taylor, old friend and patron of Henry George, finances reconstruction by taxing what is left: the land."[7] Gaffney separately reports that statewide California land assessments reached 72% of the property tax roll in 1917, during the peak years of Luke North's statewide single-tax initiative campaigns — a high-land-tax-reliance baseline that predates, and stands in sharp contrast with, the post-1978 Proposition 13 regime discussed below.[6] As with all of Gaffney's city case studies, the population figures are checkable Census data, but the causal attribution to land-tax policy is his own interpretive argument, not a controlled comparison; see the fuller treatment, including this and eight other Gaffney city cases, on Gaffney (2006): New Life in Old Cities.

Housing Shortage and Land Value Tax Proposals

Between 2010 and 2013 San Francisco's population grew by roughly 32,000 residents while its housing stock grew by only about 4,500 units, and the median cost of housing rose about 47% over 2013–2014 alone.[2] Critics point to the city's discretionary permitting system — under which even code-compliant projects face lengthy review, CEQA litigation, and ballot challenges — as a central driver of scarcity, consistent with the broader mainstream finding, discussed in the wiki's zoning-restrictions objection page, that regulation explains much of the price-cost gap in constrained US metros. Because the city's own property tax rate sits only just above 1% — a ceiling set by Proposition 13, not a local choice, discussed further below — land-tax commentators have floated proposals ranging from a modest, revenue-neutral shift from property tax to land value tax, up to an aggressive 80–100% tax on land values paired with abolishing other local taxes — on the reasoning that taxing land rather than buildings removes the disincentive to build and makes holding valuable, underused parcels vacant expensive.[2]

Proposition 13 and the City's Property Tax Base

San Francisco's roughly 1% property tax rate is not a local policy choice but a constitutional ceiling: California's Proposition 13 (1978) capped ad valorem property tax at 1% of "full cash value" statewide and moved assessment onto an acquisition-value basis, so that a property is reassessed to market value only on sale or new construction.[8] In a market as supply-constrained and fast-appreciating as San Francisco's, this acquisition-value lock-in compounds the scarcity problem documented above: because moving triggers reassessment at full market value, long-tenured owners face a large implicit tax penalty for selling or trading up, discouraging exactly the turnover and densification a tight housing market needs. No San Francisco-specific empirical study of this lock-in effect is held on this wiki; the mechanism here is the general, statewide Proposition 13 effect — documented by Wasi & White (2005) and Ferreira (2010) — applied to a city where the geography and land-value evidence above already shows land is unusually scarce and valuable, not an independently measured local finding.[8] Proposition 13 has a documented precedent elsewhere in California land/resource taxation, too: it eliminated most of the state's in-situ property-tax revenue from oil and gas reserves as an unintended side effect of a reform aimed at residential property, a parallel case of the same 1978 measure curtailing rent capture outside the housing context.[9]

See Also

• The Housing Crisis Is a Land Crisis (narrative)
• LVT improves housing affordability
• Land Is a Big Deal (book)
• Objection: Planning restrictions cause high prices
• Saiz (2010): The Geographic Determinants of Housing Supply — the geographic and regulatory basis for San Francisco's low housing-supply elasticity
• Albouy (2016): What Are Cities Worth? — finds San Francisco has the highest inferred land-rent differential of any US metro
• Albouy, Ehrlich & Shin (2018): Metropolitan Land Values — transaction-based confirmation that San Francisco is among the five highest-value US metro land markets
• Gaffney (2006): New Life in Old Cities — the 1906 earthquake rebuild case, one of nine city studies
• Proposition 13 — the 1978 property tax cap underlying the city's ~1% rate and acquisition-value lock-in
• California Irrigation Districts and the Wright Act (1887) — an earlier, distinct era of California land-value-based public finance, drawing on the same Gaffney workpaper that corroborates the 1906 episode

Sources

1. Lars A. Doucet, Land is a Big Deal: Why rent is too high, wages too low, and what we can do about it (Shack Simple Press, 2022), Ch. 13 — used for San Francisco's AEI-derived land share of real estate value (70.9%, 2020) and the vacant-lot price comparison with Gerlach, Nevada. Book page
2. Jeff Andrade-Fong, "How to Fix San Francisco's Housing Market," Foundation for Economic Education (FEE), 13 March 2017 — used for the 2010–2013 population/housing-stock gap, the 2013–2014 price increase, and the range of land-value-tax proposals discussed for the city. Free article. Note: FEE is a libertarian, free-market advocacy outlet; cited here for its housing-market data and as an accessible statement of local land-tax proposals, not as a neutral academic source. See also Glaeser & Gyourko (2018) and Saiz (2010) for the mainstream academic evidence on regulation and supply elasticity referenced above.
3. Albert Saiz (2010), "The Geographic Determinants of Housing Supply," Quarterly Journal of Economics, 125(3): 1253–1296. DOI 10.1162/qjec.2010.125.3.1253 — used for San Francisco's ~0.66 long-run housing-supply elasticity, its place among the most land-constrained named metros, and the geography-regulation joint-determination finding. See this wiki's dedicated page for full sourcing and nuances.
4. David Albouy (2016), "What Are Cities Worth? Land Rents, Local Productivity, and the Total Value of Amenities," The Review of Economics and Statistics 98(3), 477–487. DOI: 10.1162/REST_a_00550 — used for San Francisco's ranking as the highest-inferred-land-rent and highest-total-value US metro, the ~100x land-value ratio versus McAllen, Texas, and the "should not be interpreted causally" caution. See this wiki's dedicated page for the full model and findings.
5. David Albouy, Gabriel Ehrlich & Minchul Shin (2018), "Metropolitan Land Values," The Review of Economics and Statistics, 100(3), 454–466. DOI: 10.1162/rest_a_00710 — used for San Francisco's ranking among the five highest-central-land-value US metros ($17–38 million/acre) and among the five metro agglomerations holding 48% of total US urban land value. See this wiki's dedicated page for methodology and nuances.
6. Mason Gaffney, "New Life in Old Cities: Georgist Policies and Population Growth in New York City, San Francisco, Chicago, Cleveland, Toledo, Detroit, Milwaukee, Pittsburgh, and Other Cities, 1890-1930," masongaffney.org, emended 10-22-2006, and Gaffney, "Repopulating New Orleans: How did San Francisco do what a top economist says New Orleans cannot?," Dollars & Sense, March/April 2006 — used for San Francisco's pre-quake 75% land-value tax base, its 1907–30 growth rate, Mayor Edward Robeson Taylor's role, the 1917 statewide 72% land-assessment figure, and the New Orleans comparative framing. See this wiki's dedicated page for full sourcing, including the causal-attribution caveats that travel with every city case in this source.
7. Mason Gaffney, "Economic Development as a Response to Stress (Evidence from California, 1846-1991)," unpublished outline and rough draft, revised 22 Dec 1991, material added 26 Sept 1992 (workpaper WP020) — used for the independent, briefer corroboration of the 1906 earthquake/rebuild episode and its direct quotation on Mayor Taylor. An explicitly self-labeled "OUTLINE, AND ROUGH DRAFT," never independently published; cited here only for this narrow, checkable corroboration, consistent with its use on this wiki's California Irrigation Districts page. Free PDF (masongaffney.org); local mirror at sources/gaffney/text/WP020-EconomicDevelopmentResponseToStress.txt.
8. This wiki's Proposition 13 page — used for the 1978 property tax rate cap (1% of "full cash value") and acquisition-value/lock-in mechanics underlying San Francisco's current property tax rate and applied here to the city's already-constrained housing market; see that page for full sourcing (California Constitution Article XIII A; Wasi & White 2005; Ferreira 2010).
9. This wiki's A Severance Tax on California Oil? page (Gaffney, 2006) — used for the parallel, California-wide precedent of Proposition 13 eliminating most of the state's in-situ property-tax capture of oil-and-gas rent as an unintended side effect of the same 1978 reform.