A recent New York Times article, headlined “Why Does it Cost $750,000 to Build Affordable Housing in San Francisco,” continues the Gray Lady’s endless assault on the factual reality of San Francisco’s housing market.
Upon reading the piece, it turns out that there aren’t any special problems with “affordable housing” specifically but, in fact, “… the vertiginous prices of housing in California “that “begins…with the price of land labor in the state.”
So why didn’t the headline read “Why Housing Costs in California are the Highest in the Nation,” or “Why Are Market Rate Rents in San Francisco the Highest in the World?” both of which are equally true.
Any reader of Adam Smith knows that land and labor costs are an intrinsic part of capitalist production. How can it be a surprise that in the fastest growing economy of the United States, with the highest job growth in the nation, both land and labor prices dramatically increase in value? Doesn’t this indicate a rather astounding misunderstanding of how capitalist real-estate markets actually work?
The reason the New York Times article argues that affordable housing, indeed all housing, is so expensive in California is because, based upon an interview with a single Republican state senator, “California’s housing market is vastly overregulated.”
Thus, the Newspaper of Record, ignoring the very nature of the market system it so aggressively defends, embraces the Trumpian notion of  “de-regulation.”
Forgetting the both tragic and deadly consequences of “de regulation” of the electricity market in California — PG&E’s current structure is the result of its previous bankruptcy caused by deregulation — the New York Times bravely advocates for the return to deregulation and fully embraces the equally discredited  trickle-down, supply side economics.
Let’s take a look at the facts and see if supply-side deregulation would really help housing costs in San Francisco — or California, or anywhere.
Fact: Not mentioned in the piece is that in San Francisco, for a development to get the affordable housing subsidy the units must be kept affordable for 50 years or the life of the building, whichever is longer. The city ensures this fact by retaining ownership of the land, which keeps the developer honest and insures that no developer can get a subsidy from the city and then flip the property on the red hot housing market.
That’s why only faith and community-based non-profits develop affordable housing in San Francisco. Speculation and flipping, two primary objectives of market-rate developers, have been removed by this requirement.
Is this “overregulation” — or a sensible requirement to ensure that affordable housing subsidy investments actually result in permanent affordable housing for our neighbors?
This “regulation” was somehow not mentioned in the Times piece. The 50-year “regulation” plays a  central role in the development-subsidy community development model that was pretty much pioneered in San Francisco and responsible for producing some 35,000 permanently affordable homes over the last 30 years in the highest priced real estate market in the nation .
In a capitalist market and a city like San Francisco, there is no “affordable” land, no “affordable” lumber, sheet rock, or cement — and union building trades members expect and get the same hourly wage building affordable housing as market-rate housing. If truly permanently affordable housing is to be developed in a capitalist system, those market-rate costs cannot be passed on to the low-income. There must be a subsidy to “write down” those costs and “buffer” the final residents from them. That’s the development subsidy that now costs about $750,000 a unit in San Francisco.
Fact: If it is understood that that development subsidy is used to produce a unit that, by regulation, must be made affordable to a specific income group for 50 years or more that means that the monthly cost of that subsidy comes to about $1,250 per unit per month.
Comparing that number to units produced by the market, we can see that subsidy in a different light.
The average monthly cost of a market-rate rental apartment in January, 2020 in San Francisco was about $3,800. The average monthly housing payment, applying the real estate industry “One percent rule” (monthly payments are one percent of the price), for a San Francisco condo was $13,000 a month — not counting home-owners association fees, which could be as much as half that figure again. For an averaged priced single family home, the figure would be $15,000 a month.
That “shocking” $750,000 a unit subsidy costs now looks like what it actually is: The best housing deal in San Francisco. The only problem is that there is that there are not enough such development subsidies to meet our needs. There would have been had Proposition C passed with a two-thirds vote and not been held hostage in court.
That is to say, it’s not impossible to produce that subsidy at the local level in one of the richest cities in the richest state in the richest nation in the world.
Finally, one last”fact that is never mentioned by the New York Times, our State Senator Scot Wiener, nor our local paper: A full 63 percent of San Francisco’s current housing stock is priced controlled, either by local, state or federal regulations. That’s right, in 2015, 242,000 of San Francisco’s 383,000 units are price controlled:
Rent control: 174,000 units
Non-profit developed permanently affordable housing: 31,000 units
Below-market units: 2, 300
Residential hotel rooms: 19,000 (either non-profit owned or unable to be converted    to market-rate hotel rooms)
Section 8 vouchers: 9,500 units
Public housing: 6,000 units
San Francisco’s experience has shown that under capitalism, real-estate markets can only produce housing affordable by working and poor people through subsidies and regulations. De-regulation and supply side production programs displace existing residents and produce housing unable to be afforded by any but speculators and the very wealthy
