It's Not Too Late to Make San Francisco Affordable Again. Here's How
My city, San Francisco, is in the midst of an affordability crisis. People here are angry and afraid. The skyrocketing cost of housing comes up in seemingly every conversation and dominates local news and local politics.
The recent piece on San Francisco's housing crisis I wrote for The Atlantic Cities seemed to hit a nerve. But it was mostly devoted to describing how the city got to be a place with the highest housing costs in the country. Now, I want to turn to what we can actually do about it.
We face a complex problem. It has roots in income inequality, a national issue, as well as regional anti-growth attitudes that extend well beyond the city boundaries. But at the city level, there are a surprising number of things we can definitely do.
Protect existing rent-controlled housing units
San Francisco has roughly 172,000 units of rent-controlled housing. Rent control is the city's core tenant protection, allowing many people to stay here. The first thing the city needs to do is to make sure we don't lose those units.
As housing prices go up, there is ever more incentive for owners of rental units to find a way to get out of the landlord business and sell. One of the most often abused mechanisms is California’s Ellis Act, a state law that says that landlords have the unconditional right to evict tenants to "go out of business."
Tenant groups in San Francisco have developed a set of proposals to make it more difficult for landlords to use the Ellis Act as a tool to evict people. One of the proposed reforms that seems to make sense is to discourage the practice of buying rent-controlled units for the purpose of converting to Tenancy-in-common units (TICs) or condos by requiring landlords to have been in the landlord business for some set period of time before using the Ellis Act to “leave the business.”
There is a social compact in San Francisco that needs to be upheld: rent-controlled units should stay under rent control, while ownership opportunities should come from new construction.
Reinvest in San Francisco’s public housing stock
The San Francisco Housing Authority has 6,300 units of public housing and roughly 9,000 Section 8 vouchers (which help subsidize rents for low-income tenants). The city is in the process of compiling a broad public housing reform plan to better manage this housing stock and provide resources to upgrade many of its public housing buildings.
1600 Market is a below market rate project. (Courtesy Brian Spiers Development).
At the same time, the city is also working on an ambitious program to rehabilitate its most troubled public housing units as part of a program called HOPE SF. Through Hope SF, the city government is seeking to build in a comprehensive set of social services to give residents the resources to get out of poverty. San Francisco has started this process by identifying the highest-need public housing developments (such as those at Sunnydale and Potrero Terrace), pairing them with project sponsor teams, but much of the funding for both the redevelopment and the resident services still needs to be identified.
HOPE SF and the broader set of public housing renovations offer an opportunity to physically knit public housing back into the fabric of the city. But most importantly, it means we can keep all those affordable units habitable.
Double the amount of subsidized affordable housing
San Francisco has about 16,000 units of "affordable" rental housing (not including public housing), most owned by non-profits. We need to build more.
Building housing is expensive. The construction cost of affordable housing units is the same as market rate units. But because they are subsidized, the prices paid by residents are reduced. The average subsidy per unit in San Francisco is around $250,000.
The roughly 16,000 units the city has today were built over a period of four decades—a long-term social housing program of which San Francisco should be proud. But given the wealth of San Francisco and the enormous problem we are having with housing affordability, I would suggest we adopt a long-term goal of doubling the current supply of subsidized affordable housing.
In 2012, San Francisco voters passed the Affordable Housing Trust Fund, which will ultimately set aside around $50 million from the city budget each year for affordable housing construction. If we can get the state of California to create a new affordable housing program, or create one regionally ourselves, we can make our local funding go further.
This green infill project located in the heart of SoMa will provide 160 units of efficiently designed studios and suites (including micro units). (Courtesy Panoramic Interests).
But given the uncertainty of committed state and regional funding sources, it’s also time for the city to make a couple of targeted investments with local money. We are experiencing extraordinary growth in the city budget right now, as a result of the boom. San Francisco’s revenues for fiscal year 2013-14 are projected to be $700 million larger than the previous year. The city should consider some one-time allocations from our budget for the next couple of years aimed at having a direct impact on affordability. This money could be spent on helping to rebuild the public housing mentioned above, or it could be spent helping to buy existing buildings and make more units affordable to low-income tenants.
Doubling the amount of permanently affordable housing is an expensive prospect, but we have a base to work from: thousands of affordable projects in the development pipeline, significant funding already in place and lots of affordable housing developers who know how to produce and manage these units.
Add supply at all levels
We got into this housing crisis because we don’t have enough places to live in San Francisco to meet the demand.
A cyclist rides adjacent to a vacant plot of land in San Francisco. Development rules make it difficult to add new housing stock to the city. (Robert Galbraith/Reuters)
If we want to keep the city a place where all types of people can afford to live, we must remove obstacles to adding housing. We've seen the social consequences of what happens when we don't. Our best guess is that if we added 5,000 units a year for a sustained period of time, prices would stabilize. While San Francisco has produced just 1,500 units a year over the past two decades, Seattle has averaged 3,000, adding them in a way that has improved the vitality of its downtown and kept prices from rising as drastically. The lesson is clear: making it easier to add housing supply keeps rents lower than making it hard to add supply.
We can get to more supply and more affordability through two types of reforms. First, we need to create more "zoned capacity" in the city where the law allows housing to be added. The city usually does this by conducting neighborhood planning processes, in order to be precise about where to allow development and where not to. In fact, San Francisco has a great model for how to do the kind of planning that is community driven and strengthens neighborhoods. (The Market-Octavia Plan and the Rincon Hill Plan are two good examples). We just need to do more of it.
Second, we need to make it easier to actually build buildings that conform to the zoning rules we've decided on. In many American cities, permits are issued by city staffers who merely check to make sure that a building conforms to the community’s zoning rules. But in San Francisco, even after we’ve done the work of figuring out our zoning rules, buildings that fit them are routinely rejected, shrunk or delayed by years of process. We need to make our own plans count, by making it much, much easier to get permission to build according to zoning.
Launch a wave of experiments to produce middle-income housing
The first three proposals are ones that could work at scale, but they leave unaddressed the thing everyone seems to be wishing for: middle income housing that's more affordable than what the market produces today, but which doesn't require subsidies.
I am not sure that such a wish can be fulfilled, but there are some strategies worth trying. It’s time to experiment.
One strategy falls into the category of reducing the actual hard construction cost of new housing. This generally means building units that are affordable by design, with less space or with fewer amenities than standard housing. That could mean creating smaller units, encouraging secondary units throughout the city, or building units without parking. All of these ideas are viable, many are in great demand. We should encourage creativity and flexibility in the quest for middle-income options. Maybe we could pick a neighborhood where all new housing is encouraged to be car-free. (In many neighborhoods a majority of households are already choosing to live this way.) And certainly the prohibition on secondary units in most of the city should be repealed.
Another strategy would be to try to form strategic partnerships with universities to get them to build more housing for their students and faculty. These units could be on or off-campus; the point would be to ease some number of students and faculty out of the competition for the rest of the housing supply.
Another strategy might be to create a new option within the city’s inclusionary housing law, which requires below-market rate units to be paid for by market-rate developments. Perhaps there is a way to experiment with a shallower subsidy for a larger number of units—in essence, spreading the same development subsidy across more people, to see if we can increase the supply of middle-income housing that way.
Finally, there may be a way for the city government to use publicly owned land in new ways. Can the city put surplus land into development for housing, but somehow impose a new kind of price control that ensures it is used for middle-income units? Perhaps there is an adaptation of the land trust model that the city could use for this purpose?
Use new property taxes from growing neighborhoods to improve those neighborhoods
At first this final strategy might not sound like it has anything to do with housing affordability, but it does, because it supports conditions in which well-considered development can continue to happen. Right now, certain neighborhoods are growing a lot more than others. If those neighborhoods are going to continue to grow, the current residents need to experience tangible benefits. We need to establish a bargain in which neighborhoods that accept growth can experience an improved neighborhood as part of the deal.
Of course there are people who will oppose physical change no matter what – even if it's well designed, even if it’s in the right locations, even if it comes with neighborhood improvements. But there are also legitimate concerns from people who care about their neighborhoods. The promise of new development is not just that the new buildings themselves will improve neighborhoods (although if well-designed, they often do), not just that they will provide more customers to support more retail options (although this usually happens), but also that they will provide funding to undertake public improvements in the neighborhood: parks, sidewalk widening, transit improvements, etc. This was implicitly promised in many of the neighborhood plans that were adopted. The city needs to do more to make good on those promises.
Rincon Hill. (Flickr user Brad Coy).
Some of the neighborhoods south of downtown that were planned for highrise development (South Beach, Rincon Hill, and Transbay) are generating hundreds of millions of dollars every year in new property taxes, way above the costs of providing basic public services to those neighborhoods. More of this money should be spent making improvements to the neighborhoods that are generating the revenue.
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In the long run, the only solution that will actually benefit the vast majority of people is to fix the supply problem. And the hard truth about San Francisco’s housing affordability problem is that most measures we could enact will take years, if not decades, to show results.
The solutions here have two great virtues: 1) they are legal; and 2) they are capable of being implemented at the city level. They were developed through months of dialogue with housing leaders and city officials, and we are extremely pleased to see that they align with the Mayor’s announced agenda for 2014.
It's also important to remember that it's not just San Francisco that needs to build more housing. Every city in the region needs to do its part if we are going to have an impact on housing costs. If other cities of the Bay Area did their part to create more walkable neighborhoods, there would be less gentrification pressure on the few that we do have. As everyone points out, we can't look at this issue just within one city. Oakland, San Jose, and the other cities of the Bay Area are all part of the solution.
Our work in San Francisco would be much easier if we had support from the national level, both to provide help for a social housing program, and more fundamentally to address income inequality. But as that doesn’t appear to be forthcoming we must take the lead locally. We need things like a higher city minimum wage (to increase purchasing power at the bottom of the income scale) and a major reinvestment in Muni (to reduce household transportation costs). We may be one of the first cities to experience this problem with huge new demand for city living that requires us to change our approach to affordability, but we certainly won’t be the last.
Top image: Transbay Tower. Image courtesy of SPUR.