On September 27th the Obama administration released a “Housing Development Toolkit” promoting a deregulation program for market rate housing development at the local level. It’s remarkably similar to the May, 2016 version of Jerry Brown’s “by-right” proposal that was quietly withdrawn by the governor, failing to get any support in either the Assembly or the Senate after the emergence of a broad statewide c.oalition of tenants, affordable housing advocates, trade unionists, environmentalists, and local government officials, all of whom opposed it.
“By-right development” requires local governments to approve a market rate development with no public hearing and no ability to change the density or affordability of the proposal once submitted. It is usually linked to a density bonus and has minimal requirements for being “transit-oriented.”
Indeed, the first “tool” listed in the Obama toolkit is “establish by-right development.” Brown attempted to sugar coat the by-right pill with a $400 millon state funding program for affordable housing that would be available if and only if the legislature passed “by-right”
Obama continued his policy of austerity of funding affordable housing by making available $300 million (nationwide!) to implement the program, not for additional affordability in the new project. Like Brown’s May proposal (quickly amended in June) Obama does not require a by-right development to replace affordable housing demolished to make room for the new project.
To say that the Obama administration has been a disappointment to advocates for innovative and well-funded urban programs around affordable housing, rebuilding public housing, and the development of inner city communities (mainly communities of people of color) would be so understated as to be misleading.
It is hard to credit a more cruelly disconnected phenomenon that these two facts of the Obama years: The Democratic Party is totally reliant on an urban vote for its victory — and has systematically failed to provide an effective policy addressing the single most critical aspect of urban life today: housing affordability.
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To put it bluntly, Obama’s urban housing policy favors the displacement of Democrats from urban America and their replacement by Republicans. It’s one of the most stark examples of political suicide yet seen.
Go back and look at the last three Democratic party platforms. Other than some very generalized statements about the need to “rebuild the infrastructure,” usually defined as roads and bridges for cars and trucks, and to bail out homeowners hurt by the great recession, try to find an urban program. Try to find policies and programs for affordable housing, for urban tenants, for urban transit riders, for funding non-profit services, community centers and public housing. Spoiler alert: you won’t find such programs or polices, not even as “campaign promises'” in a basically meaningless party platform.
In every major city in the nation that has a functioning economy, there’s an affordable housing crisis: from Portland to Denver, from Boston to Winston-Salem, from Dallas to St. Paul, where the economy is booming because of the Federal Reserve Banks policy of “quantitative easing,” which pumps some $80 billion a month into the financial sector fueling investment in tech and market rate housing development. The “recovery” under Obama has been lopsided, with a few benefiting greatly — those that can access quantitative easing government assistance — and all the rest of us who must endure governmental austerity benefiting not so much.
Just how austere has the Obama years been for federal funding of affordable housing and community development? It is sobering.
The last Democrat to fully fund an urban housing and community development program was Jimmy Carter. In his next to last year, he got Congress to approve a budget of $67.9 billion for the Department of Housing and Urban Development. Adjusted to 2015 dollars that was $249.2 billion. In 2015, Obama next to last year in office, he requested (in 2015 dollars of course) $46.6 billion, less than 20% of Carters 1978 allocation. Obama has never requested more than $50 billion a year for HUD, and this year he is requesting $800 million less than last year, including the $300 million to implement “by-right” development.
Obama isn’t even meeting Bill Clinton’s level of HUD funding and Clinton, we must not forget, instituted a “one strike and you are out” for drug possession of any family member in public housing policy that pushed San Francisco’s population of homeless families to all-time highs in the mid 1990’s. In 1992, Clinton allocated $6.8 billion in for HUD’s Community Development Block Grant program funding, among other things community centers and the weatherproofing programs for low income people that young Barak Obama worked as a community organizer for. President Obama spent $3.3B for CDBG in 2012, or 300% reduction in 2012 dollars.
According to Harvard’s Joint Center for Housing Studies, there has been a 55% decline in funding HUDs HOME program the primary subsidy for multi-family rental housing development over the last ten years and the number of people living in neighborhoods with the poverty rate of at least 40% has more than doubled on Obama’s watch.
In September of 2013, as the Planning Department was receiving hundreds of complaints from neighbors about the then-illegal short term rentals in their neighborhoods, and the Board of Supervisors had yet to make the practice legal (the law wasn’t passed until the end of 2014), Obama’s White House issued a press release featuring “80 top innovators” who were busy working on “ways to improve disaster response and recovery efforts” that featured Airbnb’s participation. In most American cities (including San Francisco) the renting of homes and apartments for less than 30 days was illegal. The battle over Airbnb still rages here as well as New York, Portland, Los Angeles, New Orleans, Toronto, Paris and Berlin to name but a few.
One would never know that from the wet kiss on the lips for Airbnb by the Obama White House.
Between that 2013 and today, the Obama White House has issued seven press announcements featuring Airbnb good deeds on an amazing range of issues: from “fighting” the Zika Virus (Airbnb “messaged over 100,000 hosts that live in areas impacted by the virus”), to “answering a call to action for private sector engagement on the global refugee crisis” (Airbnb will “allow humanitarian workers to book accommodations” and to “develop a renewed global call to action”) to “empowering all Americans as we age” at a White House Conference on Aging where Airbnb committed to “research to support and understand the experience of older Americans in their travels and…use of technology”).
But the Obama administration did more than flack for Airbnb, it provided high level access to a new market in Havana, Cuba. Obama took Airbnb CEO Brian Chesky with him, as part of the official party, to Cuba in March of this year and featured him at an “Entrepreneurship and Opportunity Event” in Havana. Just before that even the White House announced a “special authorization” for Airbnb to “become a one stop shop” for both US and non US citizens to book rooms in Cuba according to the LA Times, a federal license that only Airbnb has.
In May, Bloomberg reported that Cuba was Airbnb’s fastest growing market and in September The New York Times reported that by August of this year “Airbnb had 90% of all rooms in the country.”
With three former Obama White House staffers and former Attorney General Eric Holder working for the company. it was perhaps inevitable that Chesky would try to do some direct business with the Obama. Late last year, according to Bloomberg, as Chesky was staying in the Lincoln Bedroom he “made sure I mentioned to him one thing he needed to do: he needed to get the Lincoln Bedroom on Airbnb.” For the time being, Obama declined Chesky’s offer.
There has been no indication that anyone in the Obama administration might see some impact that removing tens of thousands of apartments from the rental long term market may have a national impact on the housing crisis. Others, however, have.
A June 2016 study of New York concluded that short-term rentals (mainly Airbnb) “exacerbate already severely low vacancy rates,” a March 2015 study of Los Angeles that found Airbnb rentals “[incentivizes] large scale conversions of residential units to tourist accommodations,” and three studies in San Francisco that show reductions in the vacancy rate, an increase in evictions in neighborhoods that have high numbers of Airbnb units, and that for every housing unit “withdrawn for the market for short term rentals…would have a total impact on the City’s economy -$250,000 to – $300,000 per year.”
Knowledge and interest at the federal level in the importance of Airbnb was shown in July, 2016 when Senators Warren, Schatz and Feinstein, troubled by Airbnb practice of allowing “renting out entire residences or multiple residences simultaneously…without providing more detailed information which would help officials to determine the legality of those rentals,” called upon the Federal Trade Commission to provide “reliable data on the commercial use of online platforms.” It is hardly possible that the Obama administration was unaware of the problem posed by Airbnb in the nation’s largest cities and best known cities.
San Francisco’s 8,000 Airbnb units exert a profound impact on the cost of rental housing, making our local rental market the most expensive in the nation. With a 2.5% vacancy rate of its 200,000 apartments vacant, adding the 8,000 units back to the rental stock would more than double the vacancy rate with resultant drop in rents.
In addition, the law legalizing Airbnb in San Francisco was drafted to gut its enforcement by including the unenforceable “hosted”/”unhosted” language in which the city must determine where primary residents sleep. It also fails to hold Airbnb accountable for the continued listing of unregistered units rendering the registration system totally ineffectual. Knowledge of this reality prompted Feinstein to sign the letter to the FTC asking for more data.
Obama’s Toolkit doesn’t even mention the existence of short term rentals nor their possible impact on housing availability and costs. And it certainly does not suggest any regulation of Airbnb to preserve affordable rental housing.
THREE: THE DEREGULATION “TOOLKIT”
With just five months left in his administration, Obama is calling for wholesale deregulation of housing development at the local level. His Toolkit is a full embrace of the supply-side school of economics argument, neither acknowledging nor even mentioning the massive federal dis-investment in urban America over which he has presided and the simultaneous impact of a nationwide (indeed, global) business which chief characteristic is the removal of permanent housing opportunities from the inventory of every city in the country.
His Toolkit never entertains even the remote possibility that refusing to provide needed funds for the development of new affordable housing, and allowing the wholesale conversion of existing affordable housing may impact the supply of that housing.
Instead, building on the theories and studies of the neoliberal libertarian urban economist Edward Glaeser, the Toolkit embraces the notion that “local barriers to housing development have intensified” and that only by removing these barriers- zoning “and other land use regulations, and the lengthy development approval process” can “housing markets…respond to growing demand.”
Doing these things, says Obama’s Chair of the White House Council of Economic Advisors, Jason Furman, the son of a successful New York real estate and shopping mall developer who endowed the Furman Center of Real Estate and Urban Policy of NYU, will result in “mobility and economic growth.”
That, in a nutshell, is the Toolkit.
We in California have some experience with deregulated markets. We tried that with electricity and got Enron-ed. George Will and others of his ilk blamed us because we didn’t approve enough power plants and over regulated the supply when in fact it was the “market makers” and speculators at Enron that drove up power prices after energy deregulation. When we re-regulated electricity and pushed roof top solar power, our energy prices stabilized.
I submit that we are experiencing the same phenomena now in housing: Prices are being driven up by under-regulated speculative manipulations (Airbnb) and market rate development, afloat in a sea of quantitative-easing cheap money.
In 2009 San Francisco adopted, in its Eastern Neighborhood rezoning, virtually all of the deregulation policies advanced in Obama Toolkit: streamlining permitting, greatly reducing off- street parking requirements, enacting high-density zoning. Other suggestions of the Toolkit — accessory dwelling units (“in-law units”) and inclusionary housing — were adopted citywide.
What has been the result?
First, let’s look at the Eastern Neighborhoods. In September, 2015 the City Planning Department issued a report on development in the area since 2011. It reported that 1,375 housing units were built, representing some 14% of the new housing produced citywide over the same period. Another 11,650 units are in the “housing pipeline” in the Eastern Neighborhoods, representing about 19% of all pipeline projects.
Applying the deregulation tools suggested by Obama produced less housing than we saw in other areas subject to non-toolkit public hearing and regulation. A full 86% of all new housing actually built in San Francisco and 81% of all entitled units were built subject to city policies that did not involve deregulation. Offering “tools” less useful than existing procedures is simply ideological problem solving in search of a problem.
Second, the basic assumption of the Obama Toolkit authors and their local allies — SPUR, BARF and a chorus of smug bloggers — is that supply and un-regulated supply alone (no tenant protections, no rent control, no anti-gentrification policies, no mandatory minimum affordability and most especially, no public hearings) will address our housing needs.
The City Planning Department lists housing production by affordability level in San Francisco. Looking at the cumulative reports from 2007 to the first quarter of 2016 — the Obama years — San Francisco has built some 25,019 new housing units (with some 24% affordable to moderate and low income households) and has “entitled” (approved) 41,000 more, with some 23,000 of the entitled units in three major developments: Treasure Island, Hunters Point Naval Shipyard and Park Merced. That’s 66,000 units built or approved in less than a decade, or more than 7,000 units a year.
Nearly 80% of this housing has been market-rate, with a declining proportion being affordable to even middle income residents let alone the tens of thousands of service workers who serve the 60,000 or so tech workers added to the city during the same period. Only about 11% of “pipeline” (or future) projects are listed as affordable — down from the 25% from units already built, reflecting the loss of tax increment financing by Brown and the continued “austerity” funding of HUD from Obama.
In April, 2015 the pro-market city economist, Ted Eagan, reported that “from 2011-13, an average of 60,000 people a year moved out of San Francisco, 63% of them were members of low or very-low income households.”
How do the market de-regulators answer these very clear facts on the ground in San Francisco? At the very time that San Francisco reduced approval regulations and approved thousands of high-density, “transit oriented” market rate housing units, some 180,000 San Franciscans were driven out, including 50,000 of the most favored “middle class.”
Eagan has an idea: “Adjusting for other demographic factors, income appears to be a significant contributor to whether an individual has moved out of San Francisco this decade.”
In the Obama era (2009-2015) San Francisco’s median income for a four-person household increased by 5%. The cost of a single family home went up by 60%.
THE LOCAL GOVERNMENT SHIELD
It is, of course, ironic that the first self-identified community organizer ever elected president is pushing an urban policy that it antithetical to the gains made by authentic community organizing. With the Toolkit’s emphasis on “removing restriction…and speeding up permitting and construction processes,” community organizers’ local efforts to secure local employment, remove toxics from the neighborhood, ensure statutory affordability for residents, preferences for neighbors, and guarantees against evictions and displacement — the very stuff of urban community organizing — might well be a “restriction” that needs to be “removed” should the policy be adopted at the local level.
It is, of course, at the local level that the real protections against deregulated markets now occur. In San Francisco, for example, about 60 % of the housing stock is under some sort of price restrictions, with about 230,000 units protected by local rent control, conversion controls, and city-owned, non-profit developed permanently affordable housing. Only 16,000 units of Section 8 and public housing are Federally guaranteed (with the public housing portion being rapidly deregulated, allowing market rate developers access to once publicly owned land). The rest are controlled by local programs. That there are any seniors and low and moderate income working people left in San Francisco is largely because of the existence of these local “restrictions” on the market.
Since these restrictions are place-based — that is they go with the buildings themselves — removing this housing stock through new, high density development means removing the residents of that housing. And since those rules were created by local decision makers ( or, in many cases, voters) responding to local conditions and needs, replacing local decisions with state or, now, federally mandated “by-right” approvals will lead to local opposition. That’s exactly what happened both here in San Francisco with the defeat of Mayor Ed Lee’s “Density Bonus” and Browns “By-right” programs this year.
To call such efforts for community control over de-regulated markets “NIMBYism” is simply Orwellian. Fighting to protect economically and socially diverse neighborhoods from being displaced by high density market rate development by demanding mandatory affordability at significant levels, preservation of neighborhood serving small businesses, arts and social service space, eviction and existing affordable housing protections, guaranteed transit service for both existing and new residents and meaningful local hire requirements is simple community preservation.
The vibrancy (if not desperation) of this attempt to regulate market excess t the local level can be seen in the number of measures on this Novembers ballot throughout the Bay Area.
There are six measures that either establish rent control and regulate evictions or extend existing controls (Burlingame, San Mateo, Mountain View, Richmond, Oakland and Alameda). There are seven measures (four in San Francisco, Props. C, K, S and W and one each in Alameda, San Mateo and Santa Clara county) that that will increase local taxes or issue general obligation bonds that, if passed , would generate $1.8 billion in bond money and some $134 m a year in new taxes to pay for housing homeless people and building new affordable housing.
The birth of this new “local urbanism” here in the Bay Area as a response to the failure of either state or federal government to address the local impacts of neoliberal policies aimed at only facilitating high-density market rate development is the most exciting and meaningful social and political movement you will never see covered by any national media.
Watch this space for more reports from the front.