Does Adding Expensive Housing Help the Little Guy?
marketurbanismreport.com
marketurbanismreport.com
I've been writing about (and to some extent working in) these issues for a while and come at them from another angle here: https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut...
The Hoover Institute and Russ Roberts have a neoliberal/libertarian slant, but he does a great job in inviting people to his program that he doesn't agree with, but he asks great questions and gives them an open forum.
He helped me grow beyond a cliche idealistic libertarian worldview into something much more practical and based in real world policy.
I highly recommend his 'Wealth, Poverty and Politics': https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell...
Or for something more lightweight see his book 'Basic Economics': https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... --- Despite it's name it's not an economics 101 guide, it basically a teaching-through-example guide by listing policy after policy that were implemented in the realworld, for ex:
- rent control in NYC/Toronto in the 1970s which severely reduced access to affordable housing, disincentivized building maintenance, incentivized arson, and gave countless upper/middle class residents cheap rent for beautiful properties
- various industry licensing pushed by market incumbents not protecting consumers, such as interior designers requiring 4yr bachelors degree to choose the colorscheme of an apartment
- etc, etc
He digs into their good intentions but unintentional self-defeating side-effects. Many of which have countless analogies to today (see Uber vs Black cabs in London).
After reading it I'm hardly surprised Japan's economy has stagnated, to the point where it's almost so obvious it saddens me. They are one of the worst proponents of the type of heavy handed economic-intervention he critiques.
The question is not “will adding N market-rate units help?” because that’s trivial. Of course it will. The question is: “what if you have to knock down N affordable units to build M market-rate units?” This “simulation” doesn’t even come close to addressing that question.
Like it or not, that’s the situation in San Francisco.
Many in San Francisco (and other cities) argue against this. It's certainly not universally accepted.
"The question is: “what if you have to knock down N affordable units to build M market-rate units?” This “simulation” doesn’t even come close to addressing that question."
That's because housing units are virtually never knocked down in San Francisco, so this question basically never comes up. Almost all new housing is built on warehouses, parking lots, gas stations, and so on. See my analysis of all recent housing built in the Mission District:
https://rationalconspiracy.com/2015/05/25/new-york-times-mak...
That may have been true, but the city’s own analysis shows it isn’t true anymore, and it certainly won’t be true by the time we’ve built enough to lower market rents (yet another reason why this “simulation” is nonsense).
San Francisco simply doesn’t have that many vacant parcels of land.
Alright, this is three times you've said and been called out on the same exact lie. You're going to need to provide some sources, or at the very least some references to sources, to back up your extremely bold and most likely false claims. What specific housing is being targeted for being knocked down for which projects?
https://my.paragon-re.com/Docs/General/SixtyFortyImages/Hous...
By my math, that’s 769 legal units removed or merged between 2012 and 2015.
AKA, it happens all the time. So let’s talk about your definition of “lies”...
No it isn't. No one is seriously proposing knocking down N affordable units unless they're also including N+X affordable units + M luxury units in the new structure. Any such plan would be a massive waste of time because it has zero chance of being approved.
This article is addressing protesters against "The monster in the mission!!!!1" who marched against replacing an empty warehouse and a Burger King with 16 stories of housing. It is also addressing people like Dwyer who thought they were untouchable and important enough to work against building more housing without suffering any consequences.
I've noticed some attitudes starting to shift out in Sunset as lifetime SF residents find their kids coming home from college or getting married, yet being forced to live hours away. Suddenly the anti-development stance is less attractive when it means never seeing your grandkids.
Ultimately I don't think the Bay Area can muster the political will to solve the housing problem. Too many people benefit from eternally-rising housing costs or have a "screw you, I got mine" attitude. The state government will have to step in and remove local zoning control.
In most places in SF, the resistance comes when housing is being replaced and/or the developer doesn’t want to build low-income units (instead preferring to donate to the low-income housing fund). It’s not a clean story.
In SF, the resistance often seems centered on the idea that however much subsidized housing the developer proposes isn't enough for the interest groups fighting it. Often the push is for 100% subsidized, plus assorted "community benefit" donations to non-profits.
Jesus Christ, you wouldn't believe the opposition to it. The preschool next door will be shaded for 2 more hours! The proposed mural doesn't align with the community.
Unbelievable! This would bring another 90 units to the Mission with 15 of them for low income residents.
To be honest, people like to extol the virtues of Bay Area liberalism, but to me the housing policy in the Bay is one of the most systematic (and regulated) form of prejudice. Cities like SF are losing their minorities, their middle class, all to fatten the paycheck of existing landowners. Almost the entire black population has emptied out of SF. It's one of the most pervasive form of class discrimination I've seen.
If you are a home owner or landlord, reduced supply results in asset appreciation.
If you are a renter with rent control, then building more housing in your neighborhood may not seem like much of a benefit either.
Policy makers are always looking for piecemeal solutions, e.g. let's give teachers a rental subsidy, tweak the % of affordable housing that must be build, etc.
Lawmakers really need to create incentives so incumbents have a reason to want more housing.
Almost the entire black population has emptied out of SF.
https://sf.curbed.com/2016/10/6/13189882/1296-shotwell-affor...
How does that work in a way that someone that really needs the affordable unit gets it, versus, say, a thrifty young (well paid) engineer?
Are they held back only for people with HUD vouchers or something? Or is "affordable" just a relative term?
Asking because I've never lived somewhere like SFO.
There's often a weird negotiation/ battle that goes on between developers and the city over what percent of units in a new building ate affordable vs market rate. It has nothing to do with them being small or Spartan or anything like that, and everything to do with income requirements and rent caps put on them
I actually studied housing issues in college because I was pursuing a BS with a concentration in housing as I wanted to be an urban planner. I am fully aware of the fact that the term is used that way in some situations and stated so in my comment. But, I write a fair amount about affordable housing and that isn't how I use it.
Good communication starts with context. This is the internet. It is not San Francisco.
If you replaced every low income unit in SF with twice as many market-rate apartments tomorrow, you would raise those individuals’ rent to some value near market rate.
Assume there are 100,000 rental units in SF and 50,000 of them are low-income units. If overnight you replaced those with 100,000 units that will float to market rates, you are correct that the displaced individuals would now have no units available that are significantly below market rate. However, the market rate will not be the same as what it was previously. It will go down based on a 50% increase in supply. From an economic standpoint, the same thing should happen regardless of what percentage of low-income housing is being replaced. Whether or not this goes down to the artificial price they have in low-income housing depends on how much more supply is being introduced into the market.
> there are hard floors on new construction rent.
If you are saying that the price set for "affordable" housing is so low that new construction couldn't even break even at that price, then there is a whole different set of problems involved in addition to supply and demand.
A landlord has 3 older units that rent for $x. She wishes to redevelop the property to create 6 new units that rent for $3x. Net result is that 3 units have been created, but 3 people have been displaced. Likely permanently.
This is the heart of the redevelopment debate in SF.
I know, I know. Politics, right?
Side note: >woman who has staked her career on a pro-housing political platform announces that market-rate redevelopment is good for everyone.
What's the point of this statement? Do you equally scoff at groups that delay housing construction to increase subsidized housing units and ludicrous when they advocate that slowing down housing construction benefits certain groups?
Lots of legal housing has been demolished or merged over the past five years. It happens all the time, you just don’t hear about it on pro-development blogs.
I have no particular problem with development, but Sonja Trauss is not an objective commentator, and this “simulation” is little more than opinion dressed up as data.
The vast majority of new housing construction happens without the removal of any previous housing unit.
SF doesn’t have much infill development left. That’s the point. Arguing about what people did in the past isn’t relevant today.
Merged units are not in this category. Merged units are when someone buys a duplex (or bigger) and removes all but one of the kitchens in the building and thereby makes one big house out of what used to be a house that was split into 2-4 apartments. That is not an example of housing being demolished in order to build new housing.
It has more specific numbers, like in 2015, the city built 3,000 units and tore down 25. 15 of those were single family houses, which is not a category of housing that is affordable by any measure in SF in 2015. Vastly more affordable units are lost in SF through merger, Owner Move In evictions or just the previous tenant moving out and the new tenant being charged more than by demolition.
It very much confuses the housing debate to believe or claim that every time a new apartment building goes up, it means by default that dozens of low income people were kicked out to make that happen. That is just not true.
Say someone proposes to demolish a 100 unit SRO hotel in the Mission and replace with with a high rise luxury condo building with 250 market rate units. There will be a big protest about how gentrification is pushing the people out of their own neighborhood and where will the people in those 100 SRO units move to? etc etc etc.
What this tells you is that after adding an additional 150 houses all income groups will have more housing opportunities period. That might seem non-intuitive but the model works.
What happens when you replace 150 SROs with market rate condos? You make 150 of the poorest people in the city homeless, and you remove a tiny bit of competition (maybe) at the higher end of the market. (You’ll note that this post doesn’t discuss who is evicted.)
At a minimum, it is the responsibility of the simulator to show that their simulation reconstitutes reality before it is to be trusted for any form of prediction.
The only “powerful message” here is that Sonja Trauss is running for office on a pro-development agenda.
And the model exactly models this, showing that as long is M > N, everyone will will get more housing. If you run the simulation you can see how it does this, market rate housing captures people who can afford it, they move out of mid-tier housing, which captures the folks who want mid-tier, which frees up affordable units that were being occupied by people who could move up.
There's no reason to have this kind of thing be an example scenario because that's not how housing gets built. SF isn't tearing down 100 unit SROs, they're tearing down one story commercial.
http://sf-planning.org/sites/default/files/FileCenter/Docume...
>The prototype rental unit, also drawn from the Sensitivity Analysis work program is also 800 square feet and rents for $2,500 per month or a little under $3.20 per square foot per month. New rental units are not feasible in today’s market; however, the inclusionary program will be in place beyond the current market cycle and must anticipate development of rental units in the future. The assumed rental rate is higher than is achievable in the current market except under extraordinary circumstances (luxury projects in premier locations, etc.). The rental rate has been estimated as the required minimum level for a project to be feasible, given total development costs, conventional financing terms, and typical operating expenses. The household living in this unit is likely to be paying approximately 30% of income on rent (not including utilities). This translates to a household with a gross income of $102,000 per year.
This is a rather interesting claim that I haven't heard come up in this debate before. I'm not sure if it's just because it made more sense to sell condos in 2007 (before November) or because construction costs are actually so high you can't build apartments that cost less than $2500/month and/or $3.20/sf.
It seems that research into cheaper building types, and regulatory initiatives to permit those, ought to be part of a solution. Although since the majority of the value of a property in SF is often the land, a land tax might be called for as well.
(I think, and hope, that it's not. But I think the author danced around the central question by building this model.)
It would be very difficult to devise a study to prove whether exogenous demand is real, but a casual examination of San Francisco suggests that it is not - SF has built very little housing and still consistently out-attracts many other metro areas.
That's one of the uses of a model, to think about one aspect of a process at a time.