The most interesting and insightful analysis of the local housing crisis that I’ve read in quite a while appeared today – not in the pages of the Chron, or in a City Hall report, or in anything published by the local think tanks like SPUR. No: It’s an opinion piece by the renowned geography professor at Berkeley, Richard Walker, and it appeared in the East Bay Express.
Walker goes where most of the mainstream local observers don’t dare to tread: he talks not just about the supply problem, but about the demand side.
And he argues, correctly, that the housing crisis has more to do with speculation, finance, and economic inequality than with any claim that cities like San Francisco are too slow to build housing.
According to mainstream policy shops and planners, such as Gabriel Metcalf, president and CEO of the pro-urban growth organization SPUR, the housing crisis is caused by activists and neighborhood residents who oppose more market-rate housing development. Their solution is to allow developers to build more freely.
But while it’s true that we need to expand the region’s housing supply, building more housing cannot solve the problem as long as demand is out of control, as it is today. There is simply no way housing could have been built quickly enough to avoid the price spike of the current boom.
Three basic forces are driving the Bay Area’s housing prices upward: growth, affluence, and inequality. Three other things make matters worse: finance, business cycles, and geography. All of these operate on the demand side of the equation, and demand is the key to the runaway housing market.
He notes that the biggest reason most people can’t afford the rent is that the Bay Area has been experiencing a tech boom that brought tens of thousands of high-paid workers to the region very quickly. There’s no way San Francisco, or Oakland, could have built housing fast enough to accommodate them. He doesn’t say, but I would argue, that the tech boom was in part inspired by local political decisions, including the Twitter tax break and the Google bus program, which have made San Francisco more appealing to tech employers.
Mayor Ed Lee decided when he first took office that his top priority had to be “jobs,” which wound up meaning jobs that paid a lot of money and went mostly to people who moved here from somewhere else.
But Walker goes deeper, and says that the roots of the crisis lie in financial markets and the needs of the rich:
We need to think outside the box of simple supply and demand and look further at a trio of conditions shaping demand: credit and capital, boom and bust cycles, and the spatial preferences of the elite.
He notes:
[F]ootloose capital from around the world has once again been flooding into the Bay Area in search of high returns, whether as venture investments in hot start-ups, stock holdings in tech giants, or purchases of mortgage bonds. All the wealth in tech is not generated locally, nor is all housing demand.
And he agrees with me that part of the problem is that cities on the Peninsula love to encourage tech companies to build huge offices there, but then outsource their housing problems to San Francisco.
Third, housing markets are badly distorted by the geography of privilege and power. If the nouveaux riches of the tech world want to live in San Francisco (even if they commute to Silicon Valley), they have the means to outbid working stiffs, families, artists, and the poor; the result, as we’ve seen, is a city that has become richer and whiter with remarkable speed. And that’s just the tip of the iceberg: The greatest distortion to housing markets is the demand by the wealthy for exclusive, leafy, space-eating suburbs from Palo Alto to Orinda. These favored enclaves reduce overall housing supply by using low-density zoning to block the high-rises and apartments that provide moderate priced homes (not to mention low-income public housing).
Walker’s not a fan of blocking all new development or housing, and he agrees that communities are going to have to accept change. He also argues, correctly, that if we depend on the private market, we aren’t going to get what we want or need:
But developers are profit-seekers, so don’t expect them to be innocent bearers of what people need. It is absolutely necessary to question developers and city planners over what is to be built, how high, how big, and where. A livable city demands good design, historic preservation, neighborhood protections, mixed use, and social diversity, among other things, and figuring out what those things are should be a collective, democratic and, yes, conflictual process of politics and public debate.
So when will the housing crisis end? Walker is a bit more confident than me: He thinks that eventually, the tech bubble will pop, money will stop flowing into the region, developers will over-build, and prices will drop by as much as 20 percent. That’s not the historic pattern in SF; prices sometimes stabilize a bit, but they rarely drop by 20 percent. And they would have to drop by about 400 percent to get us back to a level where ordinary people could afford to live here. And he doesn’t even mention how Airbnb has (mostly illegally) taken some 6,000 units off the San Francisco rental market.
But he does understand that the crisis doesn’t come from any simple place of progressives blocking new housing; it’s about capital markets.
Conservative critics, of course, denounce all popular efforts to control runaway housing costs, displacement, speculation, and bad planning as unnatural violations of some “natural law” of perfect markets. No one should be fooled by such fantasies. The real “market distortions” propelling the housing crisis are inequality, speculation, financial bloat, tax havens, and more. The day when the runaway privileges of bankers, builders, speculators, wealthy suburbanites, and the rest are reined in — that’s the day the housing crisis will be over.
This is the kind of debate we need to have in San Francisco – not about whether environmental laws discourage increased density or whether every square inch of space in existing vulnerable communities needs to be turned into luxury condos, but whether we are letting our city be overrun by the same forces that have created financial havoc, ruined the middle class, and taken control of this country.
And that is the struggle that is playing out in local politics.
