There's plenty of room to build more housing in SF, could easily build up.
"Building up" can definitely increase the housing supply, which is not the same thing as increasing the supply of houses. People aren't complaining about the skyrocketing price of apartments, but of houses. With yards for their dogs, and space for a garden, and a garage where they can store their tools.
Seattle has plenty of apartments, and ten new blocks going up at any given moment. Those are not the problem.
We're building lots of apartments, sure, and rents are stabilizing as a result, but that's after several years where 10% year-over-year increases were the norm. A lot of people here
are complaining about the price of apartments, having been forced to move farther and farther from the city center as their wages failed to keep pace with market rents.
A house with a yard is a fundamentally different product from a fifth-floor apartment, and it's true that the supply of the former will not be increasing in Seattle. I fully expect the price of detached houses to keep increasing as the city keeps gaining more and more well-compensated people who will bid the prices higher than ever before, making such houses more and more of a luxury item.
However at the same time there's also a growing political movement to make it legal to build more apartments and townhomes and duplexes in more places, so that people who have no hopes of ever buying a "house" here will still have the opportunity to have some sort of housing in nicer, walkable neighborhoods close to where the jobs are.
Just last week we had a final public hearing for a very controversial but (in my opinion) rather modest set of zoning changes, adding a story or two of allowed height to most areas where apartments are already allowed, and allowing small-scale apartment buildings in a small sliver of the land currently zoned exclusively for detached single-family homes. The opinions on this law seem to break very strongly across generational lines. One blogger
took a tally of people who spoke up at the hearing. Every single person opposed to the changes appeared to be over 50 years old to the blogger's eyes, while the vast majority of people speaking in favor of the changes appeared to be under 50.
Based on this I do have some concern about the long-term viability of sol's strategy of just expecting real estate to keep appreciating indefinitely, and for cash flow to be a secondary factor.
See, right now most of my neighborhood is zoned exclusively for detached single-family homes. This has pushed land prices way, way up because the law limits the number of homes in my neighborhood to basically the number that is already there. I've seen run-down houses purchased by developers for over half a million dollars and demolished in favor of a larger, fancier one. These aren't huge lots by any means, it's just that each one comes with a golden ticket: the right to live in a pretty nice neighborhood.
What if the land use rules change, and we print ten times as many tickets to live in my neighborhood? This doesn't seem like a very far-fetched outcome if we just wait a couple decades. Many of the people who spoke out in favor of single-family zoning at last week's hearing will be dead, and the Overton window will have shifted as a result. If this happens we might see a situation kind of like the price of taxi medallions in a post-Uber world. Where before the mere right to drive people around for money was a valuable thing because of the limited supply, now it's practically worthless.
I'm not saying that land will become valueless in a more liberal zoning regime, but whatever portion of the current land value is tied to the regulatory scarcity of housing could evaporate. How much is that? I'd love to see a good analysis on that front.