The affordable housing community beat back a bad Jerry Brown bill, so let's forget the blame

At the heart of the appeal of Trump’s successful campaign message was (is) the accusation that the leadership of the Democratic party was (is) in the hands of people who claim they are for the poor, working and people of color when, in fact, they were (are) for “the elite establishment “of Wall Street and the banks. Just enough former Democratic voters bought the argument to elect him or simply not vote which had the same effect.

Jerry Brown is not prepared to help fight Trumpism
Jerry Brown is not prepared to help fight Trumpism

That Trump has peopled his cabinet with nominees drawn from exactly this same “elite” guarantees yet another four years of bitter disappointment and deepening alienation from a growing number of Americans, this time betrayed Trump voters. But it seems to be consistent with current Republic political strategy to undercut faith and hope in national government, empowering Republican controlled state houses — 32 of them — to implement a far right economic and social agenda.

But aren’t we in California, and certainly here in San Francisco, safe from such shenanigans? Won’t our super-majority Democratic state government and City Hall save us from all of this?

No — because even before this November’s collapse Democrats here is California and San Francisco followed policies that can only be called “Trumpism without Trump.”

The most obvious example is Governor Jerry Brown. He has repeatedly shown, from his re-entry into politics as Oakland’s mayor through his second go-round as governor, that he is no friend of poor, working or people of color. From his open embrace of gentrification as mayor of Oakland to vetoing affordable housing and farm labor legislation and slashing state health and human service funding as governor, Jerry Brown has repeatedly shown he is more in the California tradition of liberal Republicanism, a brand no longer welcomed in the California Republican Party but finding a home in the state’s Democratic Party. It seems clear that in terms of economic policy Jerry Brown is the nation’s 34th Republican governor, although a “socially liberal” one.

One need look no further than the Governors January 10th 2017-18 Budget message for confirmation of this fact.

Its primary focus is on a balanced budget and that balance is to be achieved by cutting spending, not increasing revenue in the fastest growing economy in the nation and the sixth largest in the world. The governor, again, proposes no extraction (“severance”) tax on oil, leaving California — the third largest producer of oil (only behind Texas and Alaska) the only state in the nation without any such tax.

A 2012 proposal (SB 1017) of a 9.5% severance tax was estimated to yield some $2 billion a year, more than enough to meet the $1.6 billion deficit projected by Brown in his current budget message.

He of course proposes no tax on any aspect of the technology economy centered in California, not on UBER, not on Airbnb (last year he signed legislation that would allow state employees on state business to spend state funds using UBER and Airbnb, however) although both are primary contributors to both transit impacts and housings costs at the local level.

Brown’s budget proposes cutting state housing subsidies by $400 million and health and human services by a whopping $1.2 billion (see page 4 and Figure SUM-02). Thus the total projected budget deficit of $1.6 billion is balanced by cuts in affordable housing and health and human services.

But it’s even worse than that.

Brown refuses to acknowledge, in the budget, that the state has any obligation to backfill any cuts in federal funding of healthcare. Indeed, his budget assumes a continuation of “current federal law” and assumes some $19 billion this year $17 billion next year in federal funding for Medi-cal expansion. He blithely states that “at this point it is not clear what those changes will be or when they will take effect. As such, the Budget continues to reflect existing state and federal law (page 53).”

This bizarre assumption is made in the face of both House and Senate votes allowing for a federal “budget blueprint” that would allow not only the repeal of the Affordable Care Act by also Paul Ryan’s announced plan to privatize Medicare. For Brown to make no allowance, over the next two years, to replace the massive hit on the state budget that would come from Congress repealing the ACA and/or privatizing Medicare means that local governments would be left holding the bag.

While the governor s budget for health care funding shows a fundamental disregard for local government, his budget language concerning affordable housing shows his utter contempt not only for local government but for us local residents.

All politics are local for the simple reason that all voters are local. And it is local government (and people) that Browns budget dismisses when it come to affordable housing.

As stated above Brown removes $400 million affordable housing subsidies he placed in the budget last year.

 In an extraordinary section entitled “Housing and Local Government” (page 115-125) Brown argues that by simply increasing the supply “at a lower per unit cost” that the magic of the market place will make that new housing somehow affordable since for-profit developers will somehow pass that lower per unit cost on to buyers and not retain it in profit. This magical thinking is made even more precious by asserting local government is responsible for high market-rate housing costs and by having the state limit local control over development approvals costs will fall.

Brown then argues that direct subsides, which write down these high development costs, are simply too expensive for the state to fund. This from a governor who thinks that a $50 billion water tunnel that will be paid for by steep increases in water bills is “affordable” and will have no impact on housing costs.

The governor favors a state-set mandatory density bonus for market-rate development with limited local control and environmental review with extremely limited affordability requirements. It’s a classic bait-and-switch approach, as stunning as Trump’s campaigning against Wall Street elites and then appointing the elite of Wall Street to his cabinet.

There is no real-world evidence that greater density (or height or bulk) automatically results in lower housing prices. It may well be true that they result in lower unit cost, but under capitalism, cost and price is mediated by profit.

In San Francisco we have a real world, real time example of the absurdity of the Brown neo-liberal, maximum density, minimum affordability approach to housing.

Late last year a local developer of a project at 333 12th street applied for a density bonus under the same program Brown favors: A mandatory density increase and a fixed amount of affordable housing, set at a level far below what we local voters in San Francisco demand.  The base project was 148 units with an affordability requirement of 27 units. With the density bonus the project went to 200 units and the affordable units stayed at 27 units since the law prohibited additional affordable units on the 52 “density units.” Under existing city law, the 200-unit building would have had a total of 36 affordable units. Thus the city lost nine affordable units with an in-lieu fee value of some $3.3 million. The additional 52 density units will be sold at market rate — and thus will be unaffordable to 90% of San Francisco residents.

This is how Browns “density bonus” program works: more unaffordable housing, less affordable housing and no local control. It is Trumpism without Trump: weak local government, powerful local developers, private profit, public loss.

Last November, voters in four Bay Area counties approved more than $3 billion in housing subsidies and extended or created rent control in four cities. These are the local voters Brown wants no longer to have a say in housing development issues in their cities and counties. We need to get with them to resist both Trump and “Trumpism without Trump.”

And then there is Mayor Lee, who supports Governor Brown in deregulating local land-use control and giving for-profit developers more density at the cost of demolishing thousands of rent-controlled units and displacing hundreds of neighborhood merchants. He was stopped last year, but indications are he will try again. “Trumpism without Trump” has a home in room 200.

With “Democrats” like Brown and Lee we have our work cut out for us. Luckily both are short termers and cannot run again. But other Democrats embrace “Trumpism without Trump” development policies and we must take a page from the Tea Party playbook and show them what a Democratic primary contest looks like. Let’s get cracking

  • Watson Ladd

    Tim, why is toothpaste so cheap? Clearly it’s because if Crest raises their prices, I switch brands to Colgate. Every developer is in competition with every other, and people want the cheapest houses. Your attitude of excluding newcomers from San Francisco and refusing to provide them places to live at any price is at home with Trump’s anti-immigrant stance.

    • You know, I wish I could believe that the free market will solve SF’s housing crisis. It would be so easy. But I don’t. No matter how much housing we build, it won’t bring costs down to the level were the majority of people who work here can afford to live here. I have nothing against people moving here; I just think housing needs to be regulated like a public utility, and new housing needs to be affordable to people who work in the city’s biggest industries — government, health care, and hospitality. Not just tech.

      • Watson Ladd

        How many houses do you think it would take to make up for past 20 years of missed demand and expected inmigration? Plenty of cities build to be affordable like Houston, Chicago, and the Sunbelt. Even public housing and affordable housing is subject to the zoning process, which thanks to NIMBYs has lead to thousands of units going unbuilt.

        • It’s more than just building tens of thousands of housing units. San Francisco — thanks to Prop 13 and other anti-tax laws — simply doesn’t have and can’t build the infrastructure necessary to accommodate that level of rapid growth. Developers pay only a tiny fraction of the costs they impose on the city. You need buses, trains, schools, parks, water and sewer, public safety … and new development doesn’t pay for itself. To handle the 200K or more units it would take to even make a dent in prices (much less bring them to the level they need to be for middle-class affordablity) would take tens of billions of dollars. Where will that come from?

          • FunnyBecauseItsTrue

            It could come from taxes from the massive amounts of office space that included in the central SOMA up-zoning that recently occurred.

            It could come from bonds issued by the city to support infra projects

            It could come from parcel taxes on development

            It could come from potentially a lot of creative sources

            We should do a study to identify effective sources of funding!

          • Brian T

            The 200k new units number is hyperbole. There are less than 400k total units in SF. If we added 10% or 40k units, that would surely make a dent in prices. Just look at Seattle for an example of a city that has achieved a similar percentage unit growth and saw prices stabilize and decline.

            I agree it would take tens of billions to achieve. If we let developers build, the tens of billions of dollars all come from private investment. Hoping that the public sector will come up with those tens of billions is what I like to call magical thinking — or I guess these days “alternative facts”.

          • Y.

            Seattle prices, like those in Portland, San Francisco, New York have dipped in the later part of 2016. I haven’t seen any demonstration that this is due to a housing glut in all those places.

          • disco_burrito

            It’s not magic, builders just need a profit margin and capital from a bank.

            Right now midrise construction runs $325 per square foot and the finished units are going for $1000/sf, so plenty of motivation.

          • disco_burrito

            New units generate more revenue than old ones, so wouldn’t that increase the per-capita infrastructure funding?

            Your argument “we don’t collect enough revenue from prop 13 for additional infrastructure” is also an argument to repeal prop 13. Don’t think you want to go there.

      • Don Sebastopol

        It does seem that high density cities such as SF and NYC are the least affordable. But the price could come down, at least temporarily, if there is a flood of new housing. But then, it might ruin the quality of life we now enjoy.

        In Bay Area cities where the price of homes are more affordable, fewer (smaller percent) of their workers live in those cities. Housing price does not necessarily mean that more workers will live in the City. Also 42% of those who live in SF don’t work in SF.

        • 4th Gen SF

          Exactly. And that is why I’m for LIMITED building. QOL is important & green areas.

        • disco_burrito

          Density is not related to prices, see “The Impact of Building Restrictions on Housing Affordability” by glaeser/gyourko

      • disco_burrito

        “No matter how much housing we build, it won’t bring costs down to the level were the majority of people who work here can afford to live here.”

        Have you ever considered why you don’t believe that? Perhaps because it doesn’t match your anti-density agenda?

        Publishing opinions and fallacious arguments to support a self serving agenda is not journalism.

      • Kraus

        The “free market” did provide naturally affordable housing in San Francisco from 1945 (the end of WWII) until about 1979.

        From that point onward, an increasingly anti-housing regulatory regime began to systematically inhibit the creation of adequate amounts of housing — and ever since then, decade-by-decade, housing has become less-and-less affordable relative to the average person’s income.

        From 1945 to 1979, SF created, on-average, 32K units of housing per decade. This was during a period of decreasing population — from about 825K in 1945 down to 690K in 1979.

        Supply-and-Demand definitely worked and hippies, like Calvin Welch, were able to buy Victorian mansions relatively cheaply on account of it.

        From 1979 until 2015, SF created, on-average, only about 19.5K units of housing per decade. A 40% decrease in productivity! — even though this was during a period of consistently-increasing population — about 865K today.

        This is due to the onerous and counter productive anti-housing regulations that have been imposed in SF and throughout coastal California — a regulatory regime that makes it increasingly expensive, time-consuming and uncertain to create housing — hearings, endless “studies”, ever-increasing impact fees, mandates, meetings discretionary reviews, etc. etc. etc.

        Increasing taxes, fees, and other disincentives to housing production will not create more housing.

        Tim’s bizarre counterproductive desire to increase regulations and “treat housing like a utility” will only continue to make matters worse.

        Such policies have been clearly demonstrated over the past 40+ years to have been a manifestly disasterous failure.

        Doubling-down on them, as Tim incessantly advocates, is the classic definition of insanity.

    • Don Sebastopol

      No one is excluded from moving to SF. They have a place to live if they can afford it.

      • ms_leo

        that’s stupid that means only rich that means everyone else IS excluded

        • Don Sebastopol

          It is true that over the past 50 years high-skilled high-wage jobs have replaced lower-skilled lower-paid jobs. Those with high paying jobs are better able to compete for housing. The incomes and education levels have gone up. I would say the City has become less middle-class and more upper middle-class. However, newcomers continue to arrive; they are not excluded. And there is a range of incomes, not all are rich.

          • ms_leo

            stop rationalizing it

          • Don Sebastopol

            Rationalize what? You mean explain? Those at facts. It is better than urban decay. In any case, I sympathize with you if you can’t afford a suitable place to live in the City. But there are many nice places to live outside of SF that offer a higher standard of living. There are several SF neighborhoods I can’t afford and some where I can I would not want to live. Most of my childhood friends and all of my relatives left the City. Moving out of the City It is not a death sentence.

          • ms_leo

            We can’t afford anywhere that’s the problem,,,I don’t live or want to live there but if my job is there I need a place to live so I can work,,,,rich have bogarted the entire state from the beaches to even rural areas in the country,,,even plots of land are outrageous ,,,some of us can be mobile and move anywhere but if they don’t let you buy anything because they want to jack the price up because the rich want the area we got a massive problem

          • Don Sebastopol

            So you work in SF but don’t live in SF? How far away do you live? Also, depending on your occupation there are other places to work. Over 80% of the jobs in the Bay Area are outside of SF. 62% of those who work in SF don’t live in SF. That is a low percent compared to many other Bay Area cities.

          • 4th Gen SF

            Oakland & Vallejo are still affordable.

    • Don Sebastopol

      The principle of supply and demand works all other things being equal. The problem is that not all other things are equal.

    • disco_burrito

      +1

      It’s a little more complicated than toothpaste since land is in finite supply.

      Some articles/videos/books that support the YIMBY perspective:

      “The Impact of Building Restrictions on Housing Affordability” by glaeser/gyourko (addresses finite land issue)

      “Why Tokyo is the land of rising home construction but not prices” on financial times

      “How an Average Family in Tokyo Can Buy a New Home” – youtube video

      “Zoning Rules!” by William Fischel

  • Andy M

    A few thoughts

    This article omits any mention of increasing revenue through Prop 13 reform, which would tax the largest beneficiaries of the current boom; long-term property owners.

    The Brown development policies that the author decries are actually the opposite of the current Republican Party platform. On the other hand, the policies this author advocates for are very much in line with the current Republican Party platform: http://www.slate.com/blogs/moneybox/2016/07/20/the_gop_platform_explains_why_the_party_has_ceased_to_compete_in_most_big.html

    It seems very strange to accuse Brown of “Trumpism” when he’s pushing for exactly the opposite of the Republican Party platform.

    The author fails to mention that the state density bonus program can be strengthened locally, and when we it was attempted this author opposed it. http://48hills.org/2015/12/20/plan-that-could-lead-to-massive-displacement-moves-forward-quietly/

    That same state program was put in place because many cities delay/deny housing and/or don’t have any affordable housing requirements. This forces them to do so. Again, we’re allowed to strengthen it locally, but it wasn’t passed when this author led the opposition.

    Regurgitating the myth (https://newrepublic.com/article/138754/blame-trumps-victory-college-educated-whites-not-working-class) that Trump voters were working class people who were upset at corporate elitism in their politics doesn’t do anyone any good. The central message of his campaign was not taking on the elite (unless you consider immigrants and people who need healthcare elite) and his voters weren’t especially downtrodden.

    • JustJake

      Prop 13 reform is a non-starter. Move along.

  • earlrichards

    Brown is just a Big Oil flunky.

  • SnapsMcKenzie

    “There is no real-world evidence that greater density (or height or bulk) automatically results in lower housing prices.” Rental prices are dropping in Denver due to the massive number of new apartment and condo complexes built in the past 5 years.

    • Y.

      Denver, Seattle, Portland, SF and New York show the same slight decline in rents in the last several months. What makes you think that it’s because of unit glut in all those places?

    • disco_burrito

      You’re on the right track, but remember, a change in prices only indicates a changing relationship between supply and demand. So yes, increasing supply puts a downward pressure on prices, but does not tell you whether prices will rise or fall.

      Also, density little to do with prices. See “The impact of zoning on housing affordability” by glaeser and gyourko for more on this.

      • Watson Ladd

        What you say: “density has little to do with prices”. What the article you cited says: “The price of housing is significantly higher than construction costs only in a limited number of areas, such as California and some eastern cities. In those areas, we argue that high prices have little to do with conventional models with a free market for land. Instead, our evidence suggests that zoning and other land use controls, play the dominant role in making housing expensive.”

        http://www.nber.org/papers/w8835

        So zoning is having an impact on housing prices in California by restricting supply and raising prices, the same conclusion as arrived by the legislature’s research arms. We need to build more housing.

        • disco_burrito

          I agree, we need to build more housing.

          I was referring to the chart on the last page of that paper. Yes, an increase in supply (which can result in increased density) puts a downward pressure on prices.

          One of the NIMBY fallacies is to point to a place like Hong Kong as proof that density does not reduce prices

  • JustJake

    “Won’t our super-majority Democratic state government and City Hall save us from all of this?”

    Government works best when there is a hint of checks and balances. California has shown us that a super-majority typically results in a skewed, partisan agenda. Beware, if Newsom gets the keys we are all screwed.

    • ms_leo

      Like them crying about driving so far to work making 6 figures and not being able to buy a mansion,,,yet,,,this housing problem and the poor is so secondary,,,sarcasm

    • 4th Gen SF

      Vote for Peter Thiel. I am.

  • Don Sebastopol

    Who buys below market rate condos? Not the the working or people of color. From what I can tell those who buy BMR condos are young White or Asian professionals early in their careers. I suppose the BMR program does allow them to become owners at an earlier age, but BMR raises the price on market rate units harming more people than are helped.

    • 4th Gen SF

      BMRs are not helping the poor at all.

  • jnffarrell1

    Poppycock. One more call for Trump like overreach. Governor Brown’s position is that sustained foresight by California makes sustained comfort for the poor possible. Litigious Old Ladies claim preferences for shad or shrimp or starfish to upset long term infrastructure improvements that protect the air, water and lives of all Californians. Wake up and smell the smog you Moran.

  • 4th Gen SF

    Agree with some of this, & agree that Jerry Brown is horrible.

  • Kraus

    Calvin (and Tim’s) bizarre argument against market rate housing development is as follows:

    Over the past 40+ years, anti-housing-development government regulations — like the kind Calvin and Tim endlessly promote — have resulted in the continuous underproduction of housing relative to ever-increasing need.

    This has, in turn, resulted in sky-high housing costs because there is insufficient supply.

    Accordingly, since market rate development produces 90% of what limited housing has been allowed to be built, market rate housing development is responsible for the housing crisis.

    Calvin and Tim — both baby-boomer homeowners comfortably ensconced in their $1M+ homes — live in an “alternative facts” universe.

    If you’re young, newly-arrived and/or of modest means, these two are wolves in sheep’s clothing — they are definitely not your friend.

    • disco_burrito

      Part of the issue is Tim doesn’t benefit from lower housing costs because he already owns a house.

      Another issue is there are phenomena that are bewildering to NIMBYs, like when prices rise despite a rash of new construction. NIMBY interpretation: supply and demand doesn’t work. YIMBY interpretation: Supply is rising, but demand is rising faster.

  • Flax Seed

    “achieved by cutting spending, not increasing revenue”

    “achieved by cutting spending, not taking more money from taxpayers and redistributing it”

    Fixed it for you 🙂