Fighting a War on Two Fronts: Gentrification and Displacement

As San Franciscans watch the vote results trickle in, housing affordability continues to dominate the headlines and the political discourse. Attention continues to focus on the impact of gentrification and displacement on low-income communities and whether or not market-rate development is helpful or harmful.

I believe this kind of thinking represents a false dichotomy rooted in the city’s existing zoning structure that forces all new residents and new development into small pockets of the city that allow multi-unit housing, which them against the existing lower-income residents.

Market-rate Housing is More Like a Vaccine than a Cure

We’ve talked about the San Francisco Housing Wars before (boy, have we ever), and why market-rate housing may not be enough to satisfy current low and middle-income residents. Housing development, as necessary as it is: 1) will not arrive in time to stave off those most at risk of displacement, and 2) it probably won’t ever succeed in bringing prices down. Rather it will only slow the rate at which prices increase.

Even as price increases begin to flatten, thanks to new housing supply, it is almost certainly the case that existing residents’ income is still too low to securely afford housing.

Don’t get me wrong, attacking the cost curve from the top is still a very good thing, because it means things aren’t getting worse. If we don’t produce enough market-rate housing, upper-income people will gobble up all the existing housing that previously served lower-income residents.

Prop I report

Every time housing prices increase, a new cohort of residents now have to turn their attention away from new market-rate housing to lower-cost affordable housing. If prices go from $1,000 per month to $1,100 per month, then all those people who could previously only afford up to $1,000/month no longer can.  We’ve seen this phenomenon in the city’s study on the effect’s of the proposed Mission Moratorium (2015’s Prop I), and the state’s study on the impact of market-rate housing.

state report blurb

If you want to protect the existing stock of affordable housing (i.e. rent controlled units occupied by people paying below market rents), it’s very important to stave off price increases.

So if adding to the housing stock through market-rate development slows (or stops) price increases then the existing affordable housing stock is preserved (i.e. existing affordable housing isn’t turned into market-rate housing through evictions, demolitions, or through the natural churn of tenants).

A War on Two Fronts: Displacement and Gentrification

The process of actual/existing residents losing their ability to live in their historic homes or neighborhoods because of price increases is displacement (if your reading this blog you probably already knew that). Landlords whose apartments were previously affordable can take advantage of the instability of low income populations and lack of vacancy price controls to raise rents, such that a similar low-income family would not be able to replace the one that they just left.

Market-rate housing, unequivocally, is crucial to preventing future displacement. No matter what Tim Redmond says. New market-rate housing diverts higher-income populations away from the existing affordable housing stock. I described the opposite phenomenon in my post If the Development is an Unstoppable Force and the Mission is an Immovable Object, in which new higher-income residents flood the old apartments in the Mission. Without housing development, higher-income populations outbid existing lower-income populations for whatever housing stock exists.

But what if alleviating displacement isn’t the goal? Or rather, what if it isn’t the only goal? I started thinking about this question after Gabriel Medina of the Mission Economic Development Agency (MEDA) strongly opposed the revised plan for the “Beast on Bryant” development, even though it included a much larger land dedication for affordable housing. “It’s better to not build any market-rate in the Mission if you’re not going to build 100 percent affordable… No housing is better than gentrified housing,” Medina said, as quoted in Mission Local.

Many Mission housing advocates have vocally opposed market-rate developments, usually giving the development a catchy, if hyperbolic moniker like the Monster in the Mission, the Beast on Bryant, the Fright on Folsom, and the Titanic Mess on South Van Ness. Their opposition is usually based on the idea that the majority of the units would not be affordable to the existing residents of the neighborhood.

This brings me to the main issue with using market-rate housing construction exclusively: gentrification. Displacement is about individuals, but gentrification is about neighborhoods. It’s when a previously lower-income or minority neighborhood is slowly transformed into a wealthier and whiter one. Here in San Francisco displacement is nested within gentrification. As in, we have gentrification because we have a lot of displacement. This phenomenon is especially noteworthy in the Mission.

Though many refuse to admit itmarket-rate housing development will mitigate displacement. However, it can still propel gentrification.

In the best of circumstances, neighborhood in-migration when coupled with equal housing development can prevent displacement. All the original residents can stay in their apartments, even as the neighborhood grows.

In short, gentrification without displacement looks like this:

gentrification chart

Every new resident changes the neighborhood culture, and character. In high-income neighborhoods, like the Potrero Hill or Telegraph Hill, this produces wails about loss of sunlight or street parking, which should be treated with the appropriate seriousness (none). However, in low-income neighborhoods, this demographic change can alter the political and economic landscape in ways that may not be beneficial to the pre-existing low-income residents. New residents may demand goods or services that are different from those provided by the current retail or commercial environment, causing business turnover. As demographics shift, new residents’ political influence may grow and dilute that of the older residents.

So attacking housing prices from the top, even in the best circumstances, may not be ideal for all existing residents. Gentrification can still occur when the built environment only expands to accommodate new high-income residents.

To combat gentrification and displacement, we have an Inclusionary Housing Policy in San Francisco. It requires developers to provide some on-site affordable housing or pay a fee into the affordable housing trust fund. The point of this policy is to recognize that the current market-rate housing production will not be affordable to low and middle-income San Franciscans.

Inclusionary housing is great. It’s one of the few ways San Francisco can produce new affordable housing. However, it still produces more market-rate housing than it does affordable housing, and thus, can lead to gentrification.

So when Mission Activists protest development, even development that has significant onsite affordable housing, like the recently approved Beast on Bryant, they do so because they see every new project as further transforming the neighborhood. With that, I can’t disagree. I can argue that not building housing is worse, because it expedites displacement and gentrification. But I cannot say that building market-rate housing will not lead to gentrification.

Density Equity Could Turn Growing Pains into Economic Gain

Is gentrification the best case scenario? No.

Baked into our exercise is an assumption that higher-income people can only move into lower-income neighborhoods.

Here in San Francisco, much of the ire in response to the rapid gentrification has been directed at young people who work in tech, because they’re higher-income apartment dwellers who arrived more recently. In truth, there were few areas in which they could move.

San Francisco is only 46ish miles, but two-thirds of that space is zoned for single-family housing (i.e. no multi-unit buildings). Despite our status as the second-densest city in the US, that density is concentrated in a few areas.

Residential_Density

That means 66% of the surface of our city is basically off-limits to new residents. If the city would allow multi-unit development in this (often transit-accessible) single-family districts (I’m looking at you, West Portal), then all the residents wouldn’t need to move into SOMA or the Mission.

pig in python

This concept is called Density Equity. It’s a term I first heard used by Planning Commissioner Cindy Wu, used in regards to the 5M development. I don’t know if she would define it this way, but “Density Equity” basically means that as a city grows, each part should grow with it. The low-income and minority areas should not be made to shoulder all of the city’s growth.

As I’ve written before, the city’s growth is relegated to a few areas in the city. Growth-spread more evenly across the city (or region, for that matter) could provide an economic boost to each neighborhood. More residents would be living, working, and shopping in those areas. It would also allow each neighborhood to grow a little more slowly. Uneven growth requires that certain areas grow more rapidly. Because housing takes a long time to plan and build, rapid population growth concentrated in one neighborhood can cause displacement and gentrification.

That’s exactly the dynamic in San Francisco. As of mid-2015, there were about 1564 housing units in the developments in the District 9, which includes the Mission. Meanwhile, the  Districts 1 and 4 (on the Westside) only have about 333 on the horizon. That means District 9 has 4.6 times as many units in the pipeline as Districts 1 and 4. That’s density inequality. To only further underscore that point, the Districts east of the Mission (6 and 10) are growing even more unequally. The have over 40,000 units in the pipeline.

densit vs non dense

So, on one hand I understand Medina’s position. In the absence of economic power, it’s perfectly rational for the folks in the Mission to use political power to extract as many concessions as possible. On the other hand, opposing any and all market-rate housing, doesn’t seem like it has much of an end game.

Rather than oppose market-rate housing, I wish Mission activists would protest the zoning wall that prevents would-be apartment dwellers from living on the West side.

Neighborhood Feudalism

Why aren’t neighborhood activists clamoring for more housing in less dense neighborhoods? Neighborhood activism in San Francisco got its start as an anti-development movement. In the past, San Francisco’s political machinery was run by business and labor; as embodied in Mayor Joseph Alioto. His aggressively pro-growth agenda generated a strong backlash from folks on the left who rightly saw the redevelopment of SOMA and the Western Addition as a racist tool to displace low-income minorities. Meanwhile, folks on the right feared “Manhattan-ization” would diminish their quality of life. With an emphasis on hyper local-control and community input, neighborhood slow-growth activism turned neighborhoods into mini city-states, with activist power-brokers pulling up the drawbridge more often than not. The slow-growth movement successfully capped annual office development  and prohibiting development that cast shadows on city parks.

As applied to housing, slow-growth policies have led to displacement and gentrification among renters in low-income and minority neighborhoods, while spurring rapid price appreciation among home-owners in wealthier and whiter ones.

Despite the divergence of interests, the left/right anti-development alliance still exists. Employing phrases like “people over profits,” slow growth activists decry housing development as capitalism run rampant. That kind of thinking would upend capitalism only to replace it with feudalism; where most of the city’s housing is available to very few and what little affordable housing is doled by powerful intermediaries.

oliver

That’s why we’re seeing many more density-equity inspired proposals from “moderate” supervisors who operate outside of this coalition.

Though they haven’t yet employed the language of density-equity or the social justice implications, several Supervisors have proposals that are on the right track. Supervisor Farrell requested a report on the economic impact of zoning restrictions. Supervisors Wiener, Christensen, and Peskin (not considered a “moderate”) proposed accessory-dwelling unit legislation. Most notably, Katy Tang’s Affordable Housing Bonus Program is the first real heroic step toward density-equity that I’ve seen. It’s the first proposal that would actually incentivize affordable housing creation in neighborhoods that have very little. Instead of displacement and gentrification, we could have low and middle income families moving into rich enclaves like Pacific Heights, Telegraph Hill, and West Portal.

The YIMBY movement has emerged in opposition to the anti-growth policies for which many (but not all, and not consistently) of the “progressives” on the Board of Supervisors have vocally advocated. Most of the pro-housing activism has focused getting support for individual housing developments, but recently it’s turned its eye to bigger prizes.  SFBARF is suing the leafy-suburb of Lafayette for blocking housing development.

And last week,  Greg Ferenstein, a writer, put forward a proposal that Kim-Mai Cutler, another writer, described as a Hail Mary:

kim-mai cutler

It’s a radical plan to upzone the entire city for multi-unit dwellings, which is the first step to a more equally dense future. I’m excited for it, and to see how well it does. However, a ballot initiative of that scope and magnitude requires severing the slow-growth movement from the political left. That’s a feat that can only be accomplished if the pro-housing movement 1) takes fear of gentrification seriously, and 2) embraces density-equity as a tool of social justice.

Districts to Grow Into

The politics of housing and growth in San Francisco is something I bloviate about with some frequency. Usually, I try to respond to the events of the day in a timely fashion.

Today, however, I’m going to break new ground and write about a topic that is so tangential that you, dear reader, are going to correctly assume that I need to get a life.

Today’s topic is: Population Growth, the Census, and How the Board of Supervisors Districts are Drawn.

I’m going to argue that by ignoring growth patterns, the Redistricting Task Force created districts in a way that would expedite their obsolesce; a phenomenon which we can see now, just four years after the new map was finalized.

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Figure 1: 2010 population by District before Redistricting

The History

Population changes identified during the 2010 census triggered an adjustment of the Board of Supervisors’ district boundaries. Each of the 11 districts is supposed have an equal population, which would have been 73,203 people each at the time of the last redistricting.

The census revealed that our districts were pretty far out of whack. District 6, most pressingly, had 20,000 residents to shed. In response, the city formed the Redistricting Task Force to adjust the district boundaries to bring them closer to equality.

As a result, several neighborhoods were moved from District 6 into Districts 9 (the North Mission), District 3 (several blocks north of Market St), and District 5 (areas west of Van Ness St).

The Rules

 Despite the fact that inequality is what prompted redistricting, the Task Force cannot simply just draw the most equal districts possible. In fact, equality in population is only one piece of criteria that governed the Task Force’s work. The city Charter considers districts with variations of +/- 1% from the statistical mean (732 people in 2010) to be equal enough.

Districts are allowed to exceed the 1% variation (up to +/- 5%) “if necessary to prevent dividing or diluting the voting power of minorities and/or to keep recognized neighborhoods intact.” There are federal elections laws and Charter requirements that require the the Task Force to use this higher threshold if necessary to preserve “Communities of Interest.”

Generally the pillars of redistricting (pg 3) are: Equality in population, Contiguity, Compactness, Preservation of Neighborhoods and Communities of Interest.

The Results

The Redistricting Task Force took full advantage of the 5% threshold in their final results. Seven out of 11 Districts had variations greater than 1%.  Here is the final map:

final-districts-550x434

Figure 2: The Final Board of Supervisors Map after the 2012 Redistricting

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Figure 3: The population by district before and after Redistricting

And a table of the changes:

The Redistricting Task Force, not wanting to take a sledgehammer to the whole map, made only the bare minimum changes so that as many communities and neighborhoods could stay intact and in their historic districts as possible (often at the behest of the public). The downside is that many of the boundaries push pretty close to that 5% threshold.

Plus-or-minus 5 percent is kind of a lot. Especially if one district is plus (like District 11)  and another is minus (like District 1). The result of the Redistricting Task Force  The residents of districts 11 , 9, and 8 are under represented compared to their friends in Districts 1, 2, and 3, but the deviation is within the tolerance set by Redistricting Task Force criteria.

These Districts would be fine if the city’s population grew evenly, but we know that hasn’t happened. Growth has largely been relegated to the Eastern neighborhoods. We know this is the case because the lop-sided growth in District 6 is the reason we had to redistrict in the first place. As we’ll see, those growth patterns are more pronounced now than they were in 2010.

Durable Districts

The issue is that these district boundaries were not made to last. They are not durable. By “durable,” I refer to whether or not these districts will ensure equal (ish) representation for the entire 10 years that they’ll be in place. If a district boundary, after 10 years of existence, still meets the original criteria then it is durable.

It’s entirely possible that you cannot reasonably create totally durable districts. It may be that growth patterns are such that there’s no way to draw districts today that will be valid 10 years, but that doesn’t mean you can’t design districts with the idea that they should be as durable as possible. At some point between 2002 (when the previous map was created) and the 2010 census (when the current map was created), the district boundaries stopped meeting the criteria set by the city’s charter and state and federal law. Maybe they fell out of tolerance after eight years. Maybe it was three.

The issue of how long these districts remain valid is important. These districts exists to ensure that voters are represented equally. We’ve set parameters around what counts as “equal” (contiguous, compact, about the same population, neighborhoods and communities are not split), but what good are these parameters if our districts only meet them for a year or two?

Our Districts Today

The Redistricting Task Force in 2012 was concerned with creating a map that met the criteria at the time of its creation, but it’s obvious that they didn’t really (or weren’t able to) care about how long those district boundaries remained in tolerance.

The city continues to grow unevenly, but thanks to the housing pipeline report have some idea how the city will grow and could use that information to inform how our district boundaries are drawn.

table3

Figure 4: Current net units by district in the Housing Pipeline Report

Note: just because it’s in the development pipeline doesn’t mean its anywhere near being built (or will ever be built. 8 Washington was in my pipeline report as one of the largest projects in D3, but has since been yanked). The point of looking at the pipeline is not to look precisely at each project individually, but to understand overall what parts of the city are growing in proportion to others.

Here’s what housing growth looked like in San Francisco the last time I checked the housing pipeline report ( in Fall 2015). There were almost 55,000 net new units in the pipeline at that time. That number is now over 62,000. As you can see, the eastern neighborhoods continue to do the lion’s share of the growing. Development in Districts 6 and 10 account for over 75% of the total. District 7 comes in a distant third at 11% (largely from one project, Parkmerced, which accounts for over 5,000 of D7’s new units). Parkmerced, it should be noted, hasn’t yet opened (this is one of the limits of using the pipeline report, more on that later).

The San Francisco’s estimated 2014 population is 852,469; an increase of 47, 234 from the 2010 census.  If we use the growth patterns indicated by the pipeline report to allocate these 47K new San Franciscans across the 11 different Supervisorial Districts, we see that the districts created only four years ago are not be valid today. Indeed, they are already deeply unequal.

Table4

Figure 5: 2014 Population by district using the Housing Pipeline Report as a proxy for growth

If San Francisco’s population growth followed it’s housing development then six of the eleven districts are outside the +/- 5% threshold, and only three out of the eleven are within the +/-1% threshold.

The reason these districts became so lop-sided so quickly is because the Redistricting Task Force gave the benefit of being 5% below the target population to the slow growth districts. While they didn’t make the highest growth districts (Districts 6 and 10) 5% above the target population, that didn’t stop the populations of those districts from blowing right through the 5% thresholds.

In order to get District 6’s population within tolerance, the Task Force loaded up Districts 11, 8, 9 and (to a lesser extent) 5 with extra people. Those are almost all the districts that touch Districts 10 and 6. That means that we cannot just cleave off parts of Districts 6 and 10 and shunt them next door. Next door is already pretty full. That would really just be kicking the can down the road again.

By starting the decade with over representation in some of our slower growth districts (Ds 1, 2, and 3), we ensured that our faster growing districts would only be more under represented as the decade wore on.

An Alternate Universe 

Had the Task Force considered growth patterns when it was drawing its district boundaries and tried to make their districts as durable as possible, they may have created district populations that looked something like the tables below. On the left, we have the hypothetical populations of each district if I had been on the Task Force. On the right, we have those same districts in 2014, using the pipeline report to approximate population growth.

Table5table6

Accounting for projected growth requires that our growth centers, Districts 6 and 10, have the smallest populations possible (-5% from the statistical mean). In this demonstration I also gave District 7 a lower population because its also projected to grow more than some of the other districts. Districts 1 and 4 (the furthest West) need the larger populations because they experience the least growth.

The rest of the districts need slightly larger populations, basically just to account for how small Districts 10 and 6 need to be. Despite my best efforts, I wasn’t able to make still wasn’t able to make Districts 6 and 10 durable. This is because the current geography of the districts concentrates growth. The only way to make truly durable districts would have been to carve out some of the growth and put them in other districts.

Caveats, Provisos, Stipulations, Limitations

Changing the map changes growth rates: I played with numbers but not geographies. Increasing the population of a district may also impact it’s growth rate. For example, by expanding the boundaries of District 1 to include new populations, I might also have to include some new developments as well, which means the new District 1 would grow more quickly than projected. In a way this is ideal. By better distributing growth into several districts, you help mitigate the diluting effect it has on the voters when it all happens in one district. However, because growth is so incredibly concentrated along the East side of the city, we would need radically different district boundaries for this phenomenon to have an impact.

Communities of Interest: I didn’t yet consider the implication these hypothetical population distributions have on neighborhoods or communities of interest. I’ve only just started playing with ReDrawSF.

The Pipeline Report isn’t Perfect: I’ve already mentioned, that many projects in the pipeline report are a long way from being finished. Many of them may not be built. New projects are added all the time. District 7’s growth is contingent on one really large development. Districts 6 and 10 have a few very large projects as well. If something happens to derail those large projects then our projections will be off. The Task Force wouldn’t necessarily want to look at the whole pipeline, but they would want to see estimates of how many units would be completed each year. However, individual projects normally aren’t that important (except Parkmerced) because we’re really only trying to get a directional indicator of where growth is and isn’t occuring. For that reason, the pipeline report isn’t a terrible indicator of growth. It certainly shows us where growth isn’t happening.

Growth that is Significant and Concentrated is Impossible to Accommodate: As we’ve seen even, growth in San Francisco is so concentrated that it’s impossible to follow all the rules and create districts that will last for 10 years without really changing the current map. However, just because you can’t mitigate it entirely, doesn’t mean you should mitigate it as much as possible. And it certainly doesn’t give you license to exacerbate the impact, as the Task Force did in 2012.

Why Is This Important?

San Francisco, by design, has concentrated growth in it’s Eastern Neighborhoods. One of the unfortunate consequences of concentrated growth is that, as the decade wears on, the influence of those voters is gradually diminished relative to the voters in the Western neighborhoods. Because each Supervisor gets one vote, the voters in slow-growth districts influence increases as the city’s total population grows, but not in their districts.

Imagine the grid on the left is San Francisco in 2010 after redistricting. Each square represents a district with roughly the same number of people and each district gets one voting representative at the Board of Supervisors. With our concentrated growth, two districts grow much more rapidly than the others and, by 2014, those districts still only have one voting representative, but a much larger number of people. That’s the grid on the right.

image1

It’s pretty obvious why district populations are supposed to be as close to equal as possible. The city Charter mandates near equality at the time the map is adopted, but it also goes to great pains to reinforce the idea that voters’ influence should not be diluted, especially that of minority voters.

Faced with the dramatic concentration of growth in San Francisco, Redistricting Task Force would never have been able to create districts that were completely durable without completely dismantling the existing map. However, by allowing the slow growth districts to begin the decade with over representation (though within the legal limits), they ensured that the voters in the faster growing neighborhoods would see their influence increasingly diluted as decade wore on. This is especially troubling, given that District 10 contains San Francisco’s largest, but shrinking, African American population.

Some will argue that accommodating growth runs, like an oncoming train, into the mandate to preserve communities of interest. I would argue the opposite. I think failing to accommodate growth puts certain communities above others. Districts 6 and 10 have diverse neighborhoods, whose communities should not have the quality of their representation systematically undermined.

Consider that if the next Task Force draws a map similar to what the previous one drew, then the residents of District 6 will have been under represented for about 30 years compared to their Western neighbors.

I am not arguing that growth should trump all other considerations. However, it shouldn’t be ignored, as it was in 2012. The next Task Force needs to strike a balance and take equal representation seriously. I believe the only way to do that is to consider future growth. Despite the risks and uncertainties that come with trying to anticipate growth,  to ignore it undermines the principle of “One Person, One Vote.”

 

 

 

Responding to Aaron Peskin’s Marina Times Article

This is a response to Aaron Peskin’s March 2016 article in the Marina Times about the Affordable Housing Bonus Program (AHBP), entitled Progressives Didn’t Cause This Problem.

Before I launch into this tirade, I  want to state upfront that I don’t mean to suggest that Supervisor Peskin is bad or evil or malicious. Google him and you can find countless examples of individuals facing extreme hardship (usually eviction) who have benefited from his intervention. However, Supervisor Peskin flagrantly mischaracterizes the Affordable Housing Bonus Program (AHBP) in his article below. Love it or hate it, his constituents deserve an honest discussion about the program on its merits.

Peskin’s original text is in normal font, my responses to each paragraph are in italics.

Progressives didn’t cause this problem

The headline is really bonkers (that’s probably on the Marina Times editors). The article isn’t about Progressives, its about the AHBP. However, the more operative question is “Will Progressives Fix This Problem?” By flat-out opposing the AHBP, Progressives will have continued it.

A 1979 relic of a state law permitting developers to add height and bulk if they set aside 13 to 20 percent of units for “affordable housing” has our Planning Department ready to push through a flawed local Affordable Housing Bonus Program (AHBP). The Planning Department’s argument for what is essentially a plan to up-zone most of San Francisco is a 2013 court ruling that Napa County’s local density bonus ordinance placed unfair burden on developers by setting a higher threshold than is allowed by state law. Napa had a 20 percent inclusionary housing requirement, and its density bonus program required even more. The court sided with the developers, upholding their right to cough up less affordable housing in exchange for significant height and bulk increases.

In the paragraph above, Mr. Peskin calls the AHBP “flawed.” However, you’ll see that he never actually lists a flaw with the program. He perpetuates two untrue myths about the program and vaguely derides up-zoning. 

Our Planning Department is worried that San Francisco will be challenged next, because we are subjecting developers to “unfair” affordability requirements with the 12 percent inclusionary housing requirement. After 37 years without a peep regarding the state’s density bonus law, the sudden fear of legal action for not doing enough to incentivize development density seems more than a little bogus.

One important point that Mr. Peskin leaves out: The state density law goes into effect regardless of whether or not the AHBP passes. The point of the AHBP is to force developers to implement the state law in a way that generates more affordable housing. Developers are already submitting applications asking for their state-mandated density bonus

Regardless of what has happened over the last 37 years, land-use law firms are already fishing for cases in San Francisco. However, if the question is “Do we even have to follow the state law?” then the answer can only be provided by the City Attorney (who signed off on the AHBP see FAQ 55). However, if we do have to comply with the state program, then the AHBP is actually a lot stronger than the state law. It requires more affordable housing.

WHERE’S THE FIRE?

According to the Association of Bay Area Governments’ 2015 housing progress report, our tiny 49 square miles have taken on the lion’s share of regional housing production in the last decade. To give you a sense, between 2000 and 2009, San Francisco averaged about 2,892 new housing units per year, compared to 605 units in all of Napa County. For all of SPUR’s caterwauling about how “progressives” created the housing crisis, the decade I was first in office saw a tremendous amount of housing production, mostly as a result of up-zoning in eastern San Francisco, enabling us to create some 10,000 new units. The reality is that other counties are not pulling their weight when it comes to building housing for the Bay Area’s growing population. In fact, the growth has not been in San Francisco; the city’s chief economist recently submitted a report highlighting the real impacts of gentrification and displacement: a stunning outmigration of 62,757 San Francisco residents since 2014.

How does someone start a paragraph off arguing that San Francisco has built enough housing and end that very same paragraph decrying the plight of the displaced? This is total doublespeak. Our neighboring counties have definitely failed at producing enough housing, but so have we.  According to that same city economist Mr. Peskin cited, we’re not doing well at all. 2,892 units per year is still about 1000 units too few to stabilize housing prices (slide 9). That problem is compounded every year we build too little.

But since you brought up “fire,” Mr Peskin, it’s actually a really big problem for tenants in San Francisco. Here are three articles about it. Sadly, when old apartments burn down, there’s no mechanism to replace those lost affordable units. That’s exactly what the AHBP aims to do. Instead being replaced with a totally market-rate apartment building, developers know have an incentive to make a third of their units affordable. Under this program, they can build larger buildings, so that 30% gives you an even greater number of affordable units.

No, San Francisco’s issue is not that we haven’t built enough housing — it’s that most of the housing that is being built is out of reach for over 60 percent of the population. Even with the passage of lofty policy goals and studies galore, the city is still building at 150 percent of its market-rate development goals and only 30 percent of its affordable housing goals.

We have not built enough housing at any income level, especially lower income levels, but the AHBP was designed to address exactly the problem laid out by Mr. Peskin.

The goal of the AHPB is to produce more affordable units. It takes developments that would be entirely market-rate and turns them into potential mixed-income affordable developments.

Without this program developers have no incentive to build any affordable housing. They can just continue to build the market rate housing they always would have built. This program allows up to two additional stories of height as long as the entire building (that includes the two new stories) is 30% permanently affordable.

THE AFFORDABLE HOUSING DISPLACEMENT PROGRAM

For starters, more density cannot come at the expense of our existing renters and small businesses. Recently, while enjoying coffee at a local cafe, I was stunned to hear from the proprietor that he and his fellow merchants were relegated to month-to-month leases after the landlord declined to renew their long-time agreements. The reason the owner gave? He was eagerly awaiting passage of the proposed AHDB program so he could tear down the building — rent-controlled units above and commercial retail below — to build anew and up. This is just one troubling tale in a chorus I’ve heard from people citywide, reinforcing my belief that any incentive program that applies to existing housing and commercial sites is a recipe for displacement, not density.

This is where I flipped out. Mr. Peskin is perpetuating two myths about this program that are wholly untrue.

The AHBP cannot short-cut the current demolition process. If this landlord can’t get a demolition permit now, then he won’t be able to under the AHBP. 

But guess what? Even if he can get a demolition permit he still can’t take advantage of the AHBP. Buildings with rent-controlled units are excluded from the program. Supervisor Breed’s amendment on this subject can be found here.

It’s true that the program can be used on buildings that are existing commercial sites, but this isn’t a flaw of the AHBP, it’s a function of the state law (remember that Napa case?). The state law applies to every parcel of land in the city: rent-controlled, commercial, etc. If someone is going to take advantage of the state density program, wouldn’t it be better if we could get them to use the AHBP instead and provide more affordable units

Not to mention that tearing down an existing building, evicting all the tenants, spending years (and millions) getting a new (only modestly taller) building approved and built is an incredibly expensive proposition. To get the maximum density bonus, 30% of the units in the building must be permanently affordable. So this landlord can only collect market-rate rents on 2/3rds of the building even after spending years not collecting anything from a vacant building. This makes no sense.

This paragraph was really sneaky. Mr. Peskin didn’t actually say that he believed this program could be used on rent-controlled units. He said he a cafe owner told him that their landlord planned to use the program to demolish rent-controlled units. By using that clever rhetorical device (hearsay), Mr. Peskin can put misinformation out into the world without having to make the claim himself. 

The problem? Mr. Peskin is a city Supervisor. It’s his responsibility to dispel misinformation about government programs. If he has an honest beef with some aspect of the program, we certainly don’t get to hear about it here.

TIME FOR DENSITY EQUITY

To be clear, I support density, but I think it’s time we had a real conversation about who we are building for and who is absorbing the burden of that development. District 3 has some of the city’s densest neighborhoods — you can find it easily on the AHDB map, bathed in color indicating it’s ripe for up-zoning. The Planning Department claims the program will net 15,000 units on 240 potential “soft sites,” yet it’s not targeted those, and the potential impact on historic rent-controlled neighborhoods where tenants and small businesses are already struggling to survive is clear.

Density: Less density is VERY costly to existing renters and small businesses. The State’s Legislative Analyst put out a report showing that neighborhoods with less development gentrify more rapidly than those with less development. Specifically in San Francisco, the city economist found that NOT building was likely causing more rapid displacement in the Mission. Density isn’t the problem. It’s that our city’s population grew by A LOT, but our housing stock didn’t.

Application of Soft Sites: “Soft sites” are places like abandoned gas stations or parking lots. These sites are ripe for turning into housing, but the program doesn’t just apply to those sites. Why? Again, the program applies to existing buildings because the state law applies to existing buildings. We can limit the AHBP, but that means that developers can use the state program to get more density and provide fewer affordable units.

My office is working to refresh an old piece of legislation I introduced during my first term, allowing the construction of accessory dwelling units citywide. Though we didn’t have a majority to pass the citywide law then, Supervisors Scott Wiener and Julie Christensen each passed district-specific versions last year. With the Planning Department projection that the District 3 legislation alone will net 3,000 units of rent-controlled housing stock, this is a far better citywide alternative than passing wholesale up-zoning of a city still struggling with concerns about incentivizing displacement. When the Planning Department’s projections are applied to all 11 districts, we’re looking at a minimum of 33,000 potential new units with tenant protections. This is just one tool to tackle the affordability crisis in San Francisco, and I haven’t even gotten to June’s Fair Share and Feasible Affordable Housing Charter Amendment or Rent Stabilization Act. Let’s pick this conversation up next month.

This is all great stuff! It really is, but it has nothing to do with the AHBP. In fact, no one ever suggested that AHBP was the only solution to the housing crisis. We need LOTS of different policy tools in our toolbox. This program does one thing: it helps turn entirely market-rate housing developments into partial mixed-income affordable housing developments

As we kick off the Year of the Monkey, we’re hoping the city benefits from some of the monkey’s best traits: cleverness, shrewd business sense, magnetism, and most important, mischievous fun. Gung Hay Fat Choy from District 3.

There are plenty of honest changes one could want to make to the AHBP. Supervisor Breed did just that by amending it to exclude rent-controlled units. Maybe Supervisor Peskin thinks that the affordable units generated by the program should be targeted at lower income populations (it currently targets people with “middle-incomes”). Maybe Supervisor Peskin knows that his constituents hate the idea of modestly taller buildings (many of them do). Personally, I wish the AHBP applied to all the single-family housing zones in the city (it currently can only be used on parcels zoned for 5 or more housing units). A perfect program, it is not. It is MUCH better than the alternative – no density bonus and no incentive for affordable housing development.

Supervisor Peskin doesn’t engage in any legitimate criticisms of this program in his article and that’s not fair to his constituents. They deserve deserve the facts and his honest opinion.

Perhaps there’s a political calculus in play, maybe Supervisor Peskin will alter the program in some way (limit it to soft sites only) that has no real impact on the program anyway and call it a political victory. I hope that’s the case here. Despite the fact that Supervisor Peskin spends much of this article congratulating himself on how many housing units have been produced in San Francisciso, we’ve gone far too long and done far too little. 

The Techie and the Lefty Should Be Friends. San Franciscans Should Stick Together.

City Divided” is an oft-printed headline here in San Francisco, but how can a city with a reputation for being on the liberal vanguard be divided about anything? “What could all those communists have to argue about,” my curmudgeonly and Republican father asks. Well, as it turns out, quite a lot, but nothing more so that the cost of the price of housing.

In San Francisco, the cost of housing is the singular political issue around which all others revolve. At least it is today. When I first moved here, a simpler time, we worried about was whether or not we should eat foie gras or finally make our local nudists cover up, but not anymore. Now we have real problems.

Housing is the sun around which all other issues orbit these days… as it should. Shelter is pretty important. I can’t think of a society that manages without it. Quality of life in San Francisco is flagging because of a lack of it.

You’d think that the laser-like focus on housing would prompt action. That fact that it hasn’t, is an indictment of San Francisco’s political leadership (I mean “political leadership” to include our elected officials and our un-elected political activist groups). It’s also an indictment of ourselves as voters (probably more so). It’s our job to hold our government accountable, and given that we can’t manage to be less expensive than New York I think it’s fair to say that we’ve all failed at that job.

How is this a political problem? The environmental and historic factors that gave birth to San Francisco and have drawn (and continue to draw) so many people to the area are mostly out of our control; like the fantastic climate, strong institutions of higher education, a close proximity to agriculture, a great shipping port, low interest rates, foreign investment, the way the complete collapse of the world economy coincided with the dawn of mobile technology drawing disproportionate investment to the Bay Area, etc.. The list goes on and on, and I don’t expect the Mayor of San Francisco to be able stop those things from happening. I wouldn’t want him to. Most of those things are pretty awesome (not the economic collapse part).

However, I do expect our political leaders to identify those factors and respond accordingly. We know that hasn’t happened in San Francisco because, despite the nearly universal hysteria over the cost of housing, it continues to skyrocket.

Instead, we have an extremely divided board of supervisors; a mayor that everyone loves, but is also completely loathed; and an upcoming local election that’s being pitched as the next Godzilla vs. Mothra.

“Oh naive boy,” I can hear you say to yourself, “when isn’t politics like that?”

I know, I know. It isn’t surprising, but it is just so terribly unproductive. Again, I hear you’re collective “no duh”‘s.

If the strife among our political class seems bad, its only a minor tributary compared to the great river of discord down which the general public water tubes.

In the great housing war of 2015, two rival narratives have flourished;  (1) a wave of unthinkably wealthy “techies” who, in the vein of Marie Antoinette, have thoughtlessly driven lower income families from their homes and into the streets;

gam_scum1 and (2) the long-time residents, or old “lefties”, who have lived under the protection of rent control for years, are butthurt now that their discount rent-party is over. They want prices and neighborhood character to stay the same, and if that means building a wall around their neighborhood, then so be it. If only these sore losers would stop blocking development, we could put Econ 101  into action and build housing for everyone!

While there have been some prominent examples that have perpetuated these narratives, I think that they’re generally cartoonish and uncomplicated by reality. Anyone who rents (more than half the city), be they lefty or techie, is harmed by the high cost of housing.

Instead of one city filled with people on the verge of ruin because of runaway housing prices, we’ve turned our guns on each other. The price of housing has turned this city into the Lord of the Flies. While we’re screaming at each other, or screaming past each other, almost nothing affirmative has been done to make life better for anyone.

As I wrote earlier, we’re fighting with each other over increasingly small and expensive slices of the same pie. I have always advocated for a much larger pie, but we also need to make sure that translates to larger slices at every segment of the population. Right now, a pretty politically active segment of the population doesn’t see that happening, and therefore, has no incentive to fight on behalf of more development.

Acrimony over the role of development has corrupted every topic that relates to housing, and left us nipping at the heels of fringe issues.

We can’t agree on what to do about Airbnb, foreign investors and pieds-a-terre, or whether market rate housing is good or bad. As a result, we have a series of non-initiatives. We have a toothless approach to both AirBnb and real estate speculation, a development moratorium that failed, and development proposals that also fail. The only successes either side have involve defeating the proposals of the other.

I won’t say there hasn’t been any movement. Recently, Supervisors Wiener and Christensen have passed legislation allowing for the construction of in-law units in pre-existing housing, but that only applies to housing in their districts. Only when compared to all that we haven’t done could this be considered an accomplishment. But something is better than nothing, right?

We’re spending a lot of energy to accomplish very little, which brings me to the title of this post:

The Techie and the Lefty Should Be Friends. If you haven’t seen Oklahoma!, you should. Or at least you should just watch this youtube video of the Farmer and the Cowman.

The cowmen (lefties) who pioneered life in Oklahoma (San Francisco), and are upset at the recent arrival of the Farmers (Techies) who “come out west and made a lot of changes.” The Farmers, in turn, look down on the Cowmen and need to be encouraged not to “treat ’em like a louse, make ’em welcome in your house.”

Ultimately the Territory folk come together under one issue from which they all will benefit. In the case of Oklahoma!, it was statehood:

“When this territory is a state and joins the union just like all the others, the farmer and the cowman and the merchant, must all behave themselves and act like brothers.”

Should they remain divided, they won’t be able to successfully lobby for statehood and lose the associated benefits. Like the Territory Folk, unless we can all get behind a comprehensive series of housing policies, our inability to get along means we will surely all continue to suffer together.

What are those polices? I’m not really sure. Whatever they are they must be policies that both spread the love and share the pain. Easier said than done, I know. That means policies that increase the housing stock at all price levels, and does so in a way that is visible. Maybe its allowing developers to build taller buildings, but also require a higher percentage of affordable units, like Prop D.

Maybe it’s proposals like the Mayor’s Affordable Housing Density Bonus program seems like a good start. The more affordable housing you build, the more you get to build.

Personally, I would really like to see all the neighborhoods zoned exclusively for single-family homes (the RH-1 zones) expanded to allow multi-unit dwellings up to 40 ft (which allows for small apartment buildings), and the height limit of the pre-existing multi-unit zones increased to 65 ft.

Why do I like this kind proposal?

It allows for thousands of new housing units. I’ve got 99 problems and each of them is that we don’t have enough housing.

Preserves character, prevents “gentrification bombs.” Allowing a lot of small scale development would ensure that most neighborhoods continue to look like they currently do, which is something people really want. None of the developments would result in lots of additional “luxury condos.” Plus allowing a lot of this kind of construction happen at once means that we’ll have more small landlords competing with one another for tenants.

One of the biggest hurdles to development is the cost of land. Land is so expensive that developers want to build extremely large buildings to recoup cost/increase profitability. This proposal would mostly impact people who already own land. A lower cost of production means that rent on those units could be lower. Of course current landowners could sell their properties to developers, but those developers wouldn’t be able build extremely tall building, which means they wouldn’t want to pay very much for those lots.

It doesn’t benefit “greedy developers.” Large-scale development will and should continue to exist, but one of the major objections to new large-scale development is that they require “spot upzoning” that “unlocks new value” for developers by allowing them to take lots in low-rise neighborhoods and build much taller buildings. This proposal “unlocks” a little value for a lot of people, and “unlocking” for so many people all at once actually minimizes the value that they can extract.

It doesn’t favor one neighborhood over another. Huge swaths of land in the city would be slightly affected. It just raises the floor on minimum development standards slightly. Ideally this would result in small amounts development and construction all over the city and help minimize the psychological trauma (and opposition to development that comes with it) from the perception that any one neighborhood is under siege.

Is my idea DOA? Probably (especially considering the resistance to in-law units that came from residents of West of Twin Peaks), but I hope that we find a way to start crafting policies that are demonstrably beneficial in ways that we can easily articulate. Unless we call some sort of truce between the “techies” and the “lefties” there will be very little measurable progress toward reining in the cost of housing in San Francisco.

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.

The Boogeymen of San Francisco Housing

In case you haven’t heard, San Francisco is a pretty expensive place to live. Regardless of whether you’re a renter or buyer, you’ll face prices high enough to make you second guess that decision to leave Kansas City.

The total bonkers-ness of the real estate market is one thing we all agree on, but that’s about it. When it comes to why housing is so expensive, the field of ideas is as crowded as a Tokyo subway. The sense of exasperation around this discussion is palpable. If you read about this issue casually it sounds like everyone thinks, “We could get this thing fixed, if only you’d listen to me.”

In this regard, if San Francisco housing policy is an undiagnosable illness much of the chattering class has its own variety of snake oil to sell.

I think it worthy to explore some of the major phenomena that are oft cited in a way to suggest that if we could stop this, than housing won’t be so expensive anymore. I’m talking about things like zombie ‘hoods (pieds-a-terre, foreign investment), short-term rentals (Airbnb), too much/too little regulation, etc.

The point of this post isn’t to say that these phenomena aren’t happening. I just don’t think that they’re (1) not pervasive enough to be responsible for a preponderance of the housing crisis, or (2) are actually a side effect or symptom of the core problem.

I think it’s a worthwhile exercise to walk through each of these “causes” and see how many units they’ve removed from the overall housing stock.

Before we start this exercise its important to know a few things:

First: How many housing units are there in San Francisco? That number is 379,597 (as of 2014, according to the city).

Second: We’re going to look many issues for which there is very little solid data. Part of the reason policy makers, the media, and the public have been fixated on things like zombie ‘hoods, Airbnb, and foreign investors is because of that dearth of information. If we can’t measure the extent to which those things occur, its difficult to say whether or not its a problem vis-à-vis housing prices. That being said, we’re sure going to give it the old college try.

ZOMBIE ‘HOODS

The first phenomena is ZOMBIE ‘HOODS, and it’s one of my favorites because it almost makes no sense. A “Zombie ‘hood” is an area where there are apartment buildings where LOTS (how many? Hard to say) of units sit empty most of the time. These are housing units that could be someone’s primary residence, but for some reason are not.

How could it be that in a city where housing is scarce and rents are at an all time high that there’s even one square inch of space that isn’t used as housing? The very idea that hundreds of whole apartments could be built and then sit vacantly defies reason. This is especially puzzling, given that San Francisco is a city with more than a little overcrowding — meaning that there would probably be someone out there willing to pay good money to rent it out.

The scourge of zombie ‘hoods has attracted the local politicians’ attention. Supervisor Eric Mar wants to tax anyone that would zombify a building out of existence. From socketsite:

socketsite

 

But how big a problem are zombie ‘hoods, really? To answer that we need to know what causes an owner to decide to let go unoccupied, and how often that happens. According to the news, there quite a few reasons (myths/scapegoats?) for why these units are empty.

Pieds-à-Terre: Quite a bit of ink has been spilled over San Francisco’s part-time residents. They’re the kind of people who love the nightlife, who love to boogie, who love to return to San Mateo. These units aren’t exactly vacant, but they aren’t exactly not vacant either.

The San Jose Mecury News wrote about how the Silicon Valley Wealthy are scrambling to buy San Francisco’s luxury condos.

Similarly, 48 Hills reviewed 28 new luxury condo buildings in San Francisco and found 2,034 of the 5,212 (39%) of the units were owned by someone whose tax bill is mailed to an address different from that of the condo itself. Many of those addresses were in nearby counties.

But are pieds-à-terre really a foot on the neck of the city’s housing stock?

Despite the fact that the SJMN wrote a whole story about it, they only found 30 units that fit their thesis. And in regards to the 48 Hills review, the authors admit its entirely possible that the owners live there full-time or rent those units out to permanent tenants. The way those facts are presented makes it appear as though more of those units are vacant than we can reasonably infer.

Foreign Investors: Foreigner’s have always made for convenient scapegoats, and the San Francisco housing crisis is no exception. There have been plenty of articles tying increased foreign (especially Chinese) investment to rising housing costs. See:S.F. Places Third in Foreign Investment How and why buyers from China are snatching up Bay Area homes, Chinese Investor Activity in San Francisco Real Estate Reaching Fever PitchForeign Investment Drives Housing Booms in San Fran, NYC, and California Love: Chinese appetite for the Golden State.

While investment from China is undoubtedly increasing, implying that it’s a catalyst for the rise in area home prices is a dubious claim that also strikes me as more than a little racist. By describing Chinese investors as “snatching up” property in a way that “drives housing booms,” or “pose a threat to residential real estate,”  these articles lay blame at their feet without actually being able to explain why. None of these articles cite a number of housing units are being made unavailable for permanent tenants.

It’s also possible that the foreign investment is a response to the rapid increase in housing prices — investors blindly following a perception of hi high  return-on-investment. Or that we need foreign investment, because it’s is necessary to grease the wheels of housing development. There’s no doubt that foreign investment has increased, but maybe their here because we’ve created an environment that attracted their attention.

Burdensome Regulation: Another widely believed culprit of housing vacancy is rent control and/or tenant protections. If you thought there was little data regarding Chinese investment, information about vacancies due to over regulation is ever worse. Based almost entirely scare anecdotal evidence, the popularity of this narrative far exceeds the evidence that it’s at all true. The fact is that both rent and  the number of no-fault evictions is very high, which suggests that landlords in the city are ready, willing, and able to charge market-rate rents for their units regardless of the regulatory environment.

When it comes to vacant units there isn’t much in the way of solid information, especially when you try to break it down by cause, but SPUR took a look at Census data and found, what they believe is, a fairly reasonable approximation for the total number of part-time residences in San Francisco. They found that 9,075 of the total city housing stock is used for “seasonal, recreational, or occasional use. The Census also indicated another 9,689 units that were vacant for “other” reasons, which could be a mix of the reasons we’ve cited above.  Assuming the worst case scenario, that’s 18,764 units that currently sit vacant without the prospect of a resident on the horizon. Remember that number, you’ll need it in a few minutes.

SHORT TERM RENTALS

Short Term Rentals (AirBnb), is another oft-cited cause of the housing crisis. The argument is that units that would otherwise house renters are being used as tourist accommodation, and thus “exacerbate the housing crisis.”

Don’t get me wrong, there’s plenty of reasons to criticize AirBnb. Their failure to pay taxes on time, being chief among them.

But sentences like, “In neighborhoods like the Mission, which has become ground zero for displacement, you see that as high as 40 percent of the housing stock that could be rented is being Airbnb’ed,” or headlines like “Airbnb makes housing crisis much worse, city study shows,” overstate the connection between short term rentals and the rise in housing prices.

This article is so misleading it makes me angry. It states things like, “Airbnb rentals are reducing the number of available housing units by almost 25 percent.” This makes it sound like 25 percent of the city’s housing stock has been converted into AirBnB rentals, which is not true.

These quotes comes from a report by the city’s Budget and Legislative Analyst. The report compares the number of units being used as short term rentals to the vacancy rate. That is to say, of the number of vacant units in a particular neighborhood, how many are being used as short term rentals.

Let’s look at the actual number of units that have converted into full time short term rentals.

The report estimates that 6,113 units in San Francisco are being listed on AirBnb. Of that 6,113 the report estimates that at most 3,006 of those units are commercial (i.e. full time, without a permanent resident) short term rentals. The other 3,107 are units where the resident rents out a spare room part time, or rents out the unit when out of town.

THE TOTALS

Let’s assume the worst case scenario. That means there’s:

  • 9,075 Seasonal, Recreational, or Occasional Use Units
  • 9,689 “Other” vacancies
  • 3,006 Commercial Short Term Rentals

Assuming that none of those populations overlap (which is unlikely, but its impossible to say how much overlap exists), that’s a total of 21,770 housing units that have been removed from the market. That sounds like a lot, right? Especially since the Mayor’s housing goal is to build 30,000 units by 2020.

But 21,770 units is only 5.7 percent of the total housing stock (379,597 housing units). The fact is that the vast majority of housing stock in San Francisco (like over 94 percent) is occupied by people who use their dwellings as a primary residence.

In 2000, the city’s population was about 776,700. Over the next 15 years it’s grown to about 852,000. That’s an increase of about 75,00 people who all need a place to live. In the same time period the housing stock only grew by about 31,000 (see page 18). About two-thirds of that population growth  occurred in the last five years, whereas only about 20 percent of that housing stock growth occurred in the same time frame.

What’s the upshot, you ask? In the starkest terms, 50,000 people arrived in the last five years and the housing stock only grew by about 7,000 units. The city isn’t just growing, it’s growing more rapidly than it has in the past, but the pace at which we build new housing hasn’t kept up.

Don’t get me wrong, I’m not saying that having 21,770 (at most, remember its almost certainly lower than that) un-rented apartments in San Francisco is a good thing. It’s not, but its also not the cause of the current housing crisis. Given that the city only built 31,000 units in the last 15 years, I would love to be able to unleash another 21,000 units on the market tomorrow. However, that’s only necessary because the city hasn’t responded to the rapid increase in population with the appropriate urgency.

I also don’t write this to suggest in any way that the wave of displacement currently taking place, especially in the Mission, is in any way not a crisis of its own (with it’s own policy solutions). Obviously, the problem of displacement is related to the problem of rising housing prices. Rising rents and home prices incentive landlords to find ways to evict their longtime and lower income tenants, who, once evicted, then face a housing environment that is wholly unaffordable.

The other fact to consider is that San Francisco is not an island (it’s a peninsula!). This crisis is a regional one, but there hasn’t been a coordinated regional solution. That’s a problem I have no idea how to solve. Conquer Daly City? Take to the sea? But before we can focus on a region-wide solution, we need get our act together as a city. Focusing on hyper local fringe issues like short term rentals or blaming foreign investors is the opposite of city-wide.

Rather than focus on 5 percent of housing that sits vacant. Take a look at San Francisco’s current mix of housing stock:

Single Family Homes 123,951 32.65%
2-4 Units 79,878 21.04%
5-9 Units 37,088 9.77%
10-19 Units 37,975 10.00%
20+ Units 99,960 26.33%
Other (Houseboats) 745 0.20%
Total 379,597 100%

What can we glean from the table above, besides the fact that San Francisco suffers from a terrible dearth of houseboats? Single family homes comprise a  full third of our housing stock. Parcels that can only house one family disallow the possibility of growth (someone moving in without someone moving out, i.e. displacement).

Even the problem of vacant units is exacerbated by the the fact that our housing stock is so heavily skewed to single family homes. If multi-unit dwellings are  best at absorbing growth, and all the vacant units are in multi-unit dwellings (that’s a big assumption, but play along with me) then vacant units reduce the available housing stock by 8 percent, instead of 5.

My point is that, in stories about the housing crisis, media attention has been fixated on issues that affect the numerator, and our attention should be focused on the denominator.

I don’t think (nor do I believe that most people think) that San Francisco became the most expensive American city because just one thing went wrong, but there’s just an awful lot of attention focused on these stray issues at the fringe of the housing crisis. By focusing on short term rentals, pieds-á-terre, foreign investors, or the “burden” of rent control we’re just nipping at the heels of the housing crisis. We need to put a stake through its heart.

If the development is an unstoppable force and the Mission is an immovable object

Progressive San Francisco Supervisor David Campos intends to propose a 45-day (possibly longer) moratorium on new market-rate housing development in the Mission, saying that a moratorium would curtail the flow of wealthy professionals from displacing long time Latino residents.

Housing advocates both local and national are comparing Campos’ quest for a moratorium to that of Don Quixote’s. They argue, using tools familiar to anyone who took Econ 101, that limiting the supply of housing will only exacerbate the affordability crisis in the Mission by further driving up property values and housing prices and hasten the Latino displacement in that community.

Campos, however, isn’t leading his community on this issue. Rather, he’s just taking his cues from the community. Residents in the Mission are mad as heck, and given little other option, they’re going to make a huge scene. Protesters and housing activists are showing up  making it as hard as possible for developers to get market rate housing built in the Mission.

Yesterday, those opposed to market rate development stormed the gates of City Hall. Regardless of whether or not a moratorium is a good idea, local sentiment has reached a fever pitch. Campos would be a political idiot not to propose something as sweeping and dramatic as a moratorium. Before we examine who a moratorium helps and hurts, its worth looking at how the Mission became the Ground Zero for the tech boom, housing affordability, displacement, gentrification, yoga studios replacing taquerias, hipster nonsense, and basically all the issues facing San Francisco today. As many have documented, San Francisco’s population is growing, fueled by a strong local economy, but that growth is outpacing housing development.

That means all these new residents have increasingly less choice about where they’ll roll out their sleeping bag when they get here.

As it turns out, when you look at the city dynamics that existed leading up to this crisis, it looks like the Mission’s fate was predetermined. Let’s start by taking a look at a map of the city. map of San Francisco Take a few minutes to orient yourself. Get nice and familiar with it. We’re about to play a game of housing musical chairs.

When asking ourselves the question, “What parts of the city are going to be the ones most likely to absorb new residents,” we need to start by excluding those that have the highest barriers.

The first place new residents can’t move is the part of the city that already has a de facto housing moratorium. By that I mean the nearly two-thirds of the city that’s zoned exclusively for single family homes. single family homes map Because these neighborhoods are zoned for single family homes it means that an old resident needs to leave in order for a new resident to take his or her place. That sounds like displacement, but it’s not because the owners of these single family homes hold all the cards. They don’t have to move or sell if they don’t want to. They are the most housing-secure populations in the entire city. This much single family housing means that if the population is increasing, but these areas aren’t building any new housing at all, then that the other areas of the city have to pick up the slack.

So what does our map of the city look like for folks moving into the city? Map of SF2 There’s an awful lot less of the city that’s prepared to house an increasing city population. The next factor we need to look at is similar to the first, but not the same. It’s neighborhood home ownership rates. Specifically, we’re now looking to exclude neighborhoods that are zoned for more than just single family homes, but whose residents are mostly comprised of homeowners (you know, folks with mortgages) who actually live in the dwellings they own. Owner_Occupied What’s left of the city when you layer owner occupancy on top of single family zoning? Map of SF3 In the interest of full disclosure, the orange represents (roughly) areas where home ownership is over 38 percent, but weren’t zoned exclusively for single family housing. Like the single family areas, the high home ownership areas have a population that can’t be dislodged without their permission. The unobscured parts map above shows the parts of the city that are zoned for increased density and are not occupied by home owners. In short, this is where the apartment buildings are.

Apartment-filled neighborhoods are the most equipped to absorb population increases because they have the capacity to house more people AND the cost to enter is lower. But the relative cost of these areas is important. Not all apartment-centric neighborhoods are priced equally. This is where we start hone in on the Mission specifically. This is what rental prices look like here in the city today(ish). SF Rents February-thumb This map shows that basically all the areas in the city where new renters could look for housing pretty universally looking at one bedroom apartments that are over $3,000. There’s some variation in price by neighborhood, but not a ton.

Just as a reference point, $3,000 a month means $36,000 per year. If housing is supposed to be a third of your household income your household needs to make at least $108,000. But it didn’t start out that way. These neighborhoods weren’t always so uniformly expensive. If we look at price increases over the last ten years, we’ll see that certain neighborhoods have always been expensive. Price increase map The darker the red, the higher the prices have risen over the last ten years. I realize that the first map was rent prices and the second shows sale price increases. Rent and sales prices aren’t the same thing, but they are siblings in the housing cost family.

Since we already said that most of the neighborhoods are close to rent parity with one another, but the prices in some neighborhoods have had to rise much more steeply during that time. If we exclude the neighborhoods that are now over $3000 per month for a one bedroom that have also had historic price increases lower than 30 percent (Admittedly, I’m sort of cherry picking here) this is what’s left: Map of SF3 The reason I think it’s appropriate to exclude the neighborhoods that are historically expensive (in green pentagons), is because when we have a new population moving to the city, they are going to be more likely than not to move disproportionately into cheaper areas. That’s going to be especially true if we’re talking about a housing market (like San Francisco’s today) that requires a salary approaching six digits.

At this point in our adventure, we’ve narrowed the city down to the the prime areas where new residents are more likely to find housing, and frankly there isn’t much left. Now that we have this map, we need to shift our thinking to displacement, which is what the issue that the folks in the Mission are so upset about.

The last factor we discussed was cost in absolute and relative terms, but we need to switch our thinking to affordability. Given that the city is a generally expensive place with rapidly increasing costs, which neighborhoods have residents who are able to bare those increases?

The first thing I wanted to look at was areas with families living in poverty. I’m not saying “not living in poverty = able to afford housing,” because it doesn’t in San Francisco. There are a lot of folks not living in poverty that have been locked out of the housing market. However, families living in poverty are going to be less able to survive rapidly increasing housing costs than families who aren’t living in poverty. Poverty There are other ways to try to measure the ability of residents to pay their rents. You could look at areas where residents are paying over 50 percent of their income to housing, or at which areas have apartments that are over crowded, but it all pretty much says the same thing. If we exclude the neighborhoods where at least 27 percent of the population is living at or below 200 percent of the poverty line we get a city that looks like this: Map of SF3 So what have we learned so far (besides the fact that I have crazy awesome Paint skillz)?

There are roughly only four areas in the city where where the residents are prime candidates for displacement. They’re lower income renters in apartment buildings where housing costs have been more rapidly rising rapidly.

So why has the Mission beat the Western Addition, SOMA, and the Tenderloin in the contest to become the spokes-‘hood for gentrification and displacement?

It may be because the Mission is pretty unique, even by San Francisco standards (where every neighborhood is its own special snowflake). It’s the only area in the city where the majority of the population is a Latino, and as such it has a great food scene. In Supervisor David Campos, the community has a representative who loudly advocates on their behalf. It also has a ton of public art.

But there’s something that it doesn’t have that the other three neighborhoods do: affordable housing. Affordable_Housing (1) Compared to its similarly situated neighborhood brethren, the Mission is an affordable housing desert. Given the totality of factors facing Mission residents, it should come as no surprise that (1) they’re facing high rates of displacement, and (2) they’re really upset about it. The San Francisco’s rising population is a fire hose and the Mission is trying to drink from it alone.

Now that we know how the Mission came to shoulder most of the burden that is our rising population, I want to focus on Supervisor Campos’ proposed market rate housing moratorium. For the record, I think development moratoriums (moratoria?) are a uniformly bad idea. The current crisis was caused because we haven’t increased the supply to keep pace with the population. But that’s a problem several decades in the making, and it may be even longer in the unmaking. No amount of housing approved today is going to stop the displacement taking place in the Mission, which is the problem those residents face right now.

Housing development (at every level) is the best policy solution for lowering housing costs in the long term, which is socially and economically beneficial for the city as a whole. But being generally beneficial, doesn’t mean that every group or individual actually benefits. The people in the Mission have disproportionately incurred the cost of rising population, and the medicine that’s been prescribed is going to cure some future person. So in supporting a moratorium, the people that stormed City Hall are using their political agency to put some of that cost on the people that stand to benefit from the phenomena (rising housing costs and property values) that’s driving them from the community. They don’t give a flying fig about development because its not going to solve their problem.

Some have been quick to accuse the folks in the Mission of being socialist economic sore losers who don’t understand that their proposals that will only exacerbate their problem. As Armand Domalewski writes , “a tech bro living in a luxury condo, is a tech bro who isn’t outbidding you on your apartment.”

I would discourage that way of thinking for two reasons (and not because I don’t believe in market solutions), but because:

(1) there’s already a ton of distortion in this market. Remember the first map we looked at — the one that showed two thirds of the city is zone for single family homes? That kind of zoning isn’t all that different from what David Campos is proposing. The Mission is already among the densest neighborhoods in the city. If the law of supply and demand were working properly, we would see development shift to the western neighborhoods that are much less dense and where prices are still lower (see the cost maps above); and

(2) As I’ve already pointed out, the individual residents in the Mission are incurring an actual economic cost and they’re using all the tools available to them to make life difficult for those that they perceive as imposing that cost upon them. Therefore discouraging the imposition of future cost. The residents in the Mission are behaving in their own rational self interest, and what’s more Ayn Rand than that?

I, personally, wish that Campos proposed raising the density in the rest of the city to equal the density in his. Likewise, I hope that any of the Supervisors who votes against the moratorium also votes to increase the density in their own districts to meet that of Supervisor Campos’. Two Supervisors have already come out against the moratorium.

Farrell

weinerNote: This is an update made at on 5/10/15 at 9:46pm PST. Supervisor Weiner left a comment on this post, the full text of which is below. He, rightly took issue with this paragraph, which ran where this note now runs:

excerpt

He pointed out that he has been vociferous advocate for increasing density in neighborhoods in his district (including on several projects that I didn’t know about, but hope are successful), so it’s unfair of me to call him “reprehensible.” Honestly, it’s unfair and unkind of me to call Supervisor Farrell reprehensible too. To the both of them, I apologize. I got a little carried away. Both those Supervisors do represent populations that are generally wealthier, live less densely, and have higher rates of home ownership, which means they’ll be more likely to weather rapidly increasing housing costs without facing displacement. Again, I say this as a person that unequivocally does not support the moratorium. It certainly isn’t a solution to displacement. However, I was bothered by the idea that I perceived these two Supervisors (inasmuch as their tweets can be interpreted as such) as being unsympathetic to the folks in the Mission for whom displacement is a fearful reality. There constituents face different challenges and have different needs, and for that reason flat-out opposing a moratorium is easier. What I actually thought was “reprehensible” was my perception that they weren’t appropriately concerned for the people in the Mission who live in fear of displacement. I got myself all hot-and-bothered unnecessarily. I know that they both care a great deal about the welfare of all San Franciscans. Despite the fact that tensions are running high, I hope that they’re able to help craft a policy solution that leaves all parties feeling like winners.

The rest of the original post continues in its original form below.

So if development is an unstoppable force and the Mission is an unmovable object, what happens next?

If Campos’ initiative fails at the Board of Supervisors, it will probably end up as a ballot initiative. I sort of see the moratorium as the act of an understandably desperate population. If the initiative passes, Mission residents will continue to face rapidly rising costs and imminent displacement, but they’re going to take more of the city down with them.

The proposed moratorium is a starting point. They’re saying that if we want the Mission to be part of the solution we’re going to need to give the current residents more of the benefit. That sounds like an invitation to negotiate to me.

Instead of forcing market rate development, which will ultimately be too expensive, down the throats of the Mission’s residents and risk having them shut it down completely, we need to come to the table with a policy solution (maybe stricter affordable housing mandates for development in the Mission?) that will garner the political support of all its constituents. At this point I don’t know what that solution would be, but that wasn’t the point of this post. My point is that it’s possible to think a moratorium is bad (which I do), but also understand why it’s not a completely irrational response to the current circumstances.