If Displacement is a Wave, We’re Going to Need a Bigger Boat

The massive 5M development (condos, retail, open space, offices, arts) was approved at the San Francisco Planning Commission last week, but not without a lot of controversy. The session took nine hours, most of it was for public comment.  I spoke during public comment in favor of the project, but I also understand why so many others did not.

The historically working class Filipino (and also plenty of non-Filipino’s) community in SOMA turned out en masse to protest this development (though, I should note that there were more than a few Filipinos who spoke in favor).
5M

The general concern is over gentrification and displacement. This new large development contains over 400 market-rate (and in SF, “market-rate”=”luxury”) condos, and the concern is that it will drive up surrounding property values and put upward pressure on the price of rent. One of the public speakers at the meeting referred to the development as a “gentrification bomb.”

The anti-development movement has had some success in derailing specific projects, like the “Monster in the Mission” or the “Beast on Bryant” before they ever had to face the crucible of the San Francisco regulatory machine.

Neighbors fear that these developments, while not directly displacing residential tenants, will put upward pressure on prices in the immediate area, and inspire their landlords to file no-fault eviction notices. This is an imminently reasonable concern.

However, rents are already high, and I believe that any landlord that wants to evict their longtime, rent-controlled tenants already has every incentive to do so. The chief economist in San Francisco recently released a report that looked whether or not a development moratorium would prevent gentrification and indirect displacement and found that it did not.

report blurb

That same report also looked at the relationship between evictions and housing prices over the last 17 years and stated that they did “not find statistical relationship between housing prices and evictions, in the Mission or in the city as a whole.” This is the chart they presented as part of their analysis:

evictions 1

Generally, the solid blue line (housing prices) goes up, and the dotted red line zig-zags in a pretty random seeming fashion. However, I did notice one thing. Take a look at the no-fault evictions that come after 2009 (i.e. as we exited the great recession).

evictions 2

I’ve highlighted (red-squared, actually) these two spikes in no-fault evictions. The first spike is smaller and occurred just as prices started to increase again after the great recession. The second spike begins in 2011 and coincides with a dramatic increase in housing prices (and an increase in all other evictions) before tapering off in 2013.

I’ve got two things to say about this analysis. First, even though the report says found no relationship between prices and evictions, its no surprise that low income communities fear gentrification as a catalyst for eviction. There have been too many evictions over the last few years for that fear not to loom large over their families.

The second thing I want to proffer about this analysis is a guess about how it plays out in reality. Looking at the last 17 years, it seems to me that when prices start to rise, there’s a rash of evictions that then peters off, which suggests that we have a certain population of landlords who have a  greater propensity to use eviction as a tool to get low paying tenants out of their buildings. When prices rise, that population evicts, but many others don’t, which is why the evictions then decline for a year or two. So I would say that it’s possible that there is a relationship between housing prices and evictions, especially in the post recession years. However, we’ve already seen a spike in evictions, and that doesn’t necessarily mean we’ll see another. It doesn’t mean we won’t see another either.

“You might not necessarily be evicted” is a phrase that hardly instills confidence.

San Francisco evictions are catastrophic because, as I wrote earlier, previously expensive rental neighborhoods (like the Marina or Pac Heights) have stayed pretty expensive, but  the previously inexpensive rental neighborhoods (SOMA, the Mission) have seen prices rise dramatically. As a result, evicted families have nowhere to move.

I believe, and a recent Market Urbanism article argues, that the only way to really impact prices is by increasing supply. However, it makes some really important points about the limitations of this policy:

The point about how prices may never actually get lower is especially relevant to the folks who face displacement. Here’s how average rental rates have increased over the last few years:

graph 1

This graph is based on real average rental data for one bedroom apartments in San Francisco, but the specific prices aren’t that important for this discussion. Averages can be misleading, especially in discussions of rents, because we actually think of rents as being more of an average range of prices. We all generally know that there are prices above which there are very few apartments, and likewise there are prices below which there are similarly very few options. It would sort of look like this:

graph 2

The idea is that most of the housing market lives between those two pink lines (which are not at all based on actual data, but are merely demonstrative). In my hypothetical scenario, the cheapest one bedroom apartment may have been under $1,000/month in 2000, but would now be rented for over $2,000.

Let’s add affordability to the mix, let’s say that in 2009 the average household could afford the average one bedroom apartment, but that same household experienced very little income growth (cause that’s what probably happened).

graph 3

In my completely made up example, you can see that our average household (the green line represents the hypothetical upper boundary of what our average family could afford) stops being able to find an apartment in San Francisco sometime in 2013. This means that if our average household is evicted, there’s no place in the city for them to go.

As prices continue to rise, the problem only gets worse. Our average family gets further and further away from being able to find an apartment.

graph 4

So when we talk about adding supply as a remedy for high housing prices, which is what proponents, like me, of the 5M development argue, we’re talking about a solution that will benefit those facing displacement last.

Let’s assume that prices don’t actually decline, but just increase at a much slower rate thanks to the welcome and necessary addition of new housing stock. We avoid the future in the graph above for something more like this (blue lines represent the new future):

graph 5

This time I added a new purple line to represent our hypothetical low-income families. These were the folks who were able to secure housing in 2009, but just barely, and its going to take a really long time and an incredible amount of housing (or an incredible rise in wages) before they’ll be able to secure new housing on the open market. They’re only hope is to not be evicted from the apartment they secured in 2009, which is now worth much more than they’re paying.

While I don’t agree with the argument that new development is making San Francisco neighborhoods more expensive (because they’re already crazy expensive), I understand why lower income communities protest development. These developments will be so far outside the range of affordable that it makes no difference if they’re built or not, and therefore has little impact on the likelihood they’ll be displaced.

So, unless something drastic happens, the Filipino community be priced out of SOMA whether 5M goes up or not. A community in this position has very little choice other than to exercise their political agency to extract valuable concessions from the city government and the developers.

I supported 5M because I believe increasing supply is key to stabilizing housing prices in this city, but stabilizing housing prices in the future means very little to people who fear eviction today. Randy Shaw at BeyondChron has written pretty extensively how he believes that the best way to fight displacement is by generating as much affordable housing as possible.

I thought the deal the developers presented was as good as any I’ve seen (in exchange for lots of market-rate condos and offices, they were going to provide over 200 affordable housing units, new parks, and arts space), but many members of the Filipino community didn’t see it that way.

In the debate over San Francisco development, we often hear the line that the existing communities need to make room for the new people moving to San Francisco. As a newer San Franciscan, I generally agree with that principle, but what I see more and more often is that only certain existing communities are asked to make room. More affluent neighborhoods like Presidio Heights and the Outer Sunset really aren’t being asked to “make room,” even though they have plenty of it. They’re large areas with very less housing density. However, I can easily imagine members of these communities asking themselves “Why should we make room for them when no one is making room for us?”

I wish that instead of proposing a development moratorium, the anti-development groups would lobby the city to up-zone the low-density areas of the city or impose higher affordable housing mandates. It’s going to take a lot of different policy initiatives to fight both housing prices and displacement, and while I don’t agree with the moratorium, I understand that the communities protesting development feel like there isn’t enough being done to curtail the parts of the housing crisis that they feel most acutely.

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2 thoughts on “If Displacement is a Wave, We’re Going to Need a Bigger Boat

  1. Pingback: The Techie and the Lefty Should Be Friends. San Franciscans Should Stick Together. | Lord of the Fails
  2. Pingback: 2016 Election: Can the Primary Results Predict the Next Six Days? | Lord of the Fails

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