I probably shouldn’t pay too much attention to a story about San Francisco written by a guy who lives in Venice and likes to make fun of student activists. But The Atlantic is taken seriously, and when a piece like this appears, and repeats all the inaccurate claims about the housing crisis, I have to say something.
The writer, Conor Friedersdorf starts off by more-or-less trashing as “propaganda” a theater production done by an after-school program in the city that looks at displacement driven by the tech boom.
He argues that tech companies aren’t the problem:
But I’ll be optimistic that the root of the problem is finally be addressed only if and when the progressives of San Francisco—and low-density peninsula municipalities south of it—stop singling out tech companies for opprobrium and begin to cast preservationist homeowners, the anti-density wing of the environmental movement, and other anti-growth forces as the villains of their morality plays.
We’ve heard this basic line before, over and over, and I’ve spent a lot of time talking about it. And I’ve already talked about the Peninsula cities, which are happy to take in tax money from tech campuses while ignoring the housing impacts – or just outsourcing them to San Francisco.
But the whole thing raises the larger issue that we have to be talking about: Are we going to be slaves to an unregulated economy? Does capitalism work for us – or do we work for it? Is there such a thing as reasonable urban and regional planning, in a national context?
Do the people who live in a city have any right to direct its economic future?
And why do we have to assume, without a single bit of actual, quantitative, non-theoretical evidence, that “lots more new building” will bring down the cost of housing and stop the displacement epidemic in San Francisco? What if that “economics 101” theory about supply and demand – which everyone who has studied economics beyond 101 knows is fraught with assumptions and caveats – turns out not apply in San Francisco in 2015?
The whole concept that “Nimbys” are at fault assumes some facts that, as the lawyers say, are not in evidence.
The first is that the opposition to development in many parts of the city is based on greed – that, in other words, people who worry about development in their neighborhoods are motivated by the notion that their property values will rise if they keep others out:
But if the musical’s director aim was to present oversimplified truths for the sake of social justice, the main antagonists shouldn’t have been evil politicians and tech executives—it should have been property owners gleefully watching the value of their biggest assets skyrocket as they aggressively blocked high-density development. Their success has caused much misery.
In my propaganda play, they’d be sympathetic with the plight of the working class, but wouldn’t value them nearly as much as living amidst refurbished Victorians. They’d prevail by tricking economically illiterate activists into allying with them after sneakily tearing the supply-and-demand chapters from their econ textbooks.
We will get to economic literacy in a moment. But first:
I know a lot of the leaders in the neighborhood-preservation world; we sometimes agree and sometimes disagree, and I am not defending all opposition to higher density … but in my experience, it’s rarely driven by a desire for higher property values. Most of the people I talk to aren’t looking to sell their homes and cash out; they want to stay here. That’s why they care.
Criticism of people who want to preserve “neighborhood character” when that means opposing affordable housing, or any more density west of 19th Avenue, is fair game. But I think the preservationists tend to care more about parking, crowds, and their overall quality of life than they do about greedily watching their homes increase in value.
And, of course, anyone who knows real-estate in the city knows that single-family homes won’t go down in value if more high-density housing is built. In fact, a lot of folks worry that more housing of the sort we are building today will increase property values, driving existing residents out
(I am a homeowner in San Francisco, and I am very unhappy about the fact that property values in Bernal Heights are soaring. I don’t want to live around only rich people. I bought a house to live in it, to have a place where I could raise two kids without fearing eviction. I have no desire to sell it. If I did, where would I go? I think I am not that unusual among local homeowners.)
The analysis of the gentleman from Venice profoundly misinterprets the roots of the neighborhood downzoning movement in San Francisco, which go back to the ugly era of redevelopment, in the 1960s and 1970s, when bulldozers tore up entire communities, when the forces of economic growth at any cost (not all that different from the same forces today) decided that San Francisco would be the West Coast Manhattan – and if there were people in the way, they would just have to go.
Justin Herman, the head of the Redevelopment Agency, looked at the low-cost housing in Soma that was in the path of hotels and a convention center and said, famously, “this land is too valuable for poor people to park on it.”
Developers were driving people out of the city at an unprecedented rate. It’s hard to blame the ones who remained – in the Mission, the Haight, the Richmond, the Sunset, West of Twin Peaks, the Excelsior, North Beach, Chinatown, and in plenty of other neighborhoods – for saying: Not me. Not here.
It wasn’t about property values. It was about the ability of people who lived here to be able to stay.
I’m not saying that sentiment from decades ago still makes sense; it often doesn’t. We absolutely need more density in a lot of parts of SF. Some people oppose that, for the wrong reasons, just as they do in the suburban Peninsula cities. But it’s mostly not because of personal greed.
There are, on the other hand, people who care deeply, and almost entirely, about property values. There is massive greed in San Francisco. The people who look to profiteer off the boom tend to be speculators and bad landlords. They also tend to be entirely missing from the neighborhood groups.
In fact, the big residential landlords, who under this particular argument would stand to profit the most from a slowdown in housing construction, are politically almost always in synch with the developers who want to build more housing. They support the same candidates and oppose the same ballot measures. If the big landlords wanted to greedily watch their property values rise, they wouldn’t be supporting the likes of Ed Lee, who wants to allow as much new construction as possible. But that’s where the landlord money goes.
Besides, the worst greedy operators aren’t holding on to assets to watch the prices rise – they’re buying, evicting, and flipping for quick cash.
The second fact not in evidence – in fact, the evidence doesn’t exist – is that building a whole lot more housing will bring prices down.
I took Econ 101. I did comparative statics. I studied supply and demand curves. Then I went on to take a dozen more courses in what became my major, and one of the things that I learned, and I have seen over and over again in the past 35 years as I’ve worked as a reporter and covered urban economic issues, is that the stuff in the textbooks doesn’t always relate to the real world.
The standard caveat in Econ 101 is called “cp.” That stand for “ceteris paribis” – Latin for “other things being equal.” Capitalism works really well in the intro textbooks, because every decision and every action is radically simplified.
In the world of a crazy urban economy like ours, other things typically are not equal: Supply and Demand are driven sometimes by such powerful outside forces that the whole equation thing goes out of whack.
In San Francisco, demand for housing is based in significant part on political decisions. Politicians and developers for years have sought to attract “jobs” – which almost never means jobs for unemployed people who live here. It means projects that will attract new workers who move here from someplace else.
That makes no planning sense at all: You approve projects that will ensure thousands of newcomers will arrive needing a place to live, but you have no place for them to live.
In theory, if the Nimbys would just get out of the way, Econ 101 would work, and the Magic of the Market would solve the problem, as private developers simply built to meet the need. That hasn’t happened in SF in at least half a century.
Why? Because the market is what the more advanced textbooks would call “irregular.” Developers build not to meet the market demand but to meet the demands of their investors. In San Francisco in the 1980s and 1990s, it was highrise office space, not housing, that brought the highest returns to investors (often the newly deregulated Savings and Loans, that were speculating wildly in real estate, ultimately causing a huge crash that costs the US taxpayers more than $100 billion).
In those days, no housing got built. I was here; I was watching. It wasn’t Nimbys who stopped housing construction in SF; it was investment capital.
(Oh, there were a few neighborhood battles in places like the Richmond, where small-time residential builders wanted to tear down vintage Victorian homes and replace them with multi-unit buildings. Which, by the way, were ugly. You could argue either side of that one, but at most, we are talking about a few hundred housing units either way. Nowhere near enough to impact the housing crisis.)
In fact, the people who are now called Nimbys were begging the city to force office developers to build housing. I sat through the meetings, followed the debate. The developers fought the idea all the way.
Today, investment capital gets higher returns with luxury condos. So that’s what is getting built. It’s not Nimbys, or Mayor Lee, or zoning policy that is driving the gold rush of housing for the very rich: It’s international speculative capital.
You can quiet all the Nimbys, stop all neighborhood opposition to development, let the builders go crazy – and still, nobody right now is going to build housing for the working class and middle class without government action and subsidies. The private market isn’t interested in that kind of housing.
Oh, and let’s not forget international demand for high-end housing as a place to park cash. That’s not in the textbooks, either. But it sucks up a huge amount of housing inventory.
They don’t teach that part in Econ 101.
Of course, if we want to go back to the basics, we should talk about the demand side of supply and demand. We have a housing crisis not just because we haven’t built enough housing (the supply side) but because, as a matter of public policy, we have decided to turn San Francisco and the Bay Area into the center of an industry that attracts tens of thousands of high-paid workers. And we did it without any consideration of what it would mean to the people who aren’t in that industry and already live here.
Let’s look for a moment at some of the things that they discuss not in Econ 101 but in the later years, in the senior and graduate seminars, where the students look at real-world problems like fighting unemployment in cities. One of the things they talk about is something called a labor-pool study, which isn’t that complicated: You want to lower the unemployment rate? The first thing you need to do is figure out which existing residents are unemployed. Then you look at what their job skills are. Then you talk about creating jobs that pay a decent living wage and fit with existing job skills – and you talk about training people who lack the skills for jobs that are part of your economic future.
In the case of this tech boom – which started when the mayor said he wanted to fight unemployment – San Francisco did none of that. Instead we created high-paying jobs for people who didn’t live here, with much-heralded spinoff jobs that pay people too little to afford the inflated rent caused by the boom. So: Displacement. Unemployment goes down because the unemployed leave town and are replaced with others.
San Francisco has always been a city of immigrants. Most of the people who live here today were not born here. This is good; this is what makes a city live. There is a political spin that says the Nimbys are against immigrants. So let’s look at that for a second.
Immigrants who come here fleeing oppression don’t tend to displace anyone; they don’t typically arrive with large amounts of money. And these days, they are often unable to survive in this city, because it’s become too expensive. The current policies, which get blamed on Nimbys, are actually anti-immigrant: People who flee to SF need a cheap place to stay, and that no longer exists.
Immigrants who come here with wealth need to understand: You are welcome, too – but you don’t get to kick someone else (often another immigrant, who is not as wealthy) out of his or her home.
If I were writing a screenplay with villains, they certainly wouldn’t be tech workers, most of whom have done nothing wrong. They got offered a sweet job in a great city; they just want a place to live. (Well, some of them are assholes; what are you going to do?)
Here’s how I think about the Bad Guys:
There are three categories. One falls in the narrow space between corrupt and clueless.
Was Mayor Lee so stupid that he thought we could offer tech firms a big tax break to move into town, at a time when the Bay Area was already booming with companies whose employees were fighting for housing here, without creating the worst housing crisis in decades? Did he actually think that most of those jobs would go to unemployed San Franciscans? Or was he so infatuated with tech leaders like Ron Conway and their money and campaign support that he did what they wanted with no regard for the consequences?
Did the supervisors who encouraged this boom forget that demand for housing is as much of a factor as supply of housing and ignore economic reality because they were clueless? Or were they corrupted by tech and real-estate money?
Did anybody at City Hall stop to ask the question: Will most San Franciscans be better off if we become the tech hub of the world? If the answer is no, then why do we want to do it?
Were the politicians on the Peninsula who encouraged corporate campuses the bring in tax money – and refused to allow any new housing – ignorant of the regional implications of what they were doing? Or did they know what they were doing and didn’t care?
And there are, of course, the very rich who don’t pay taxes. Most of the new tech wealth falls into that category. They may be following the existing laws, but unlike Warren Buffet, they are doing nothing to change the rules.
The wealth that the top 100 tech moguls in the region have accumulated, thanks to Reagan and Bush-era tax laws, would pay for all the affordable housing we need. If that wealth and income were taxed at the level that the rich were taxed under, say, Eisenhower and Nixon, hundreds of billions of dollars would be available for public resources, including housing. Hundreds of billions. Instead, the very rich decide where to put their fortunes – and none of it, none of it, goes for affordable housing. How about Zuckerberg, Benioff, Conway, and the gang put half their net wealth into a fund to build social housing in the Bay Area?
Nah; that ain’t sexy. You don’t get your name on a fancy hospital for that.
The other category is what I call the Earthquake Profiteers.
Imagine, for a moment, that the Big One hits – a really Big One, 9.0 or more, and the city of San Francisco is a disaster area. There is no electricity, no transit, water pipes damaged and taps unsafe – and a big supermarket opens up and charges $50 for a quart of drinking water and $20 for a cup of rice. Starving, thirsty children are turned away by armed guards. Parents beg for just a bit of humanity, but no: You got cash, you survive. You don’t, you can die on the streets.
A huge storm hits, with cold hail and rain. A big landlord has plenty of space in a building where people can sleep warm and dry – but it’s $500 a person a night for a cot. The sick, the elderly, people with infants … they are locked out if they can’t afford the tab. Let ‘em die.
Would we, as a city, vilify those people? Would every politician in town call them out? Would the newspapers publish their names in a Hall of Shame? Would the district attorney and the city attorney look for ways to prosecute them? Would the state and local governing bodies instantly pass laws against disaster-profiteering (as, by the way, we did during WWII, when “excess profits” from the war were not only heavily taxes but roundly criticized?) Would every decent human being refuse to have anything to do with them?
I would hope so.
But the people and corporations taking the same sort of advantage of the housing crisis? The speculators, the bad landlords, the evictors? The ones who are making a fortune off the misery of people who have done nothing but try to remain in a city under pressure they did not create, people whose only crime is to be less wealthy than the new arrivals? The political players who represent the interests of these vultures? They are treated, for the most part, as business people just doing what business people do.
And they are allowed to defeat laws that would reign in the profits they destroying other people’s lives, while the political class that runs this city and takes their money says it’s just fine.
The worst Nimbys in the city aren’t even close to that class of villains.
And that’s my morality play.