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News + PoliticsHousingOPINION: The Bad Things about Wiener's housing bill, SB9 ...

OPINION: The Bad Things about Wiener’s housing bill, SB9 …

... and how it could be amended to include Good Things.

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The now-pending Senate Bill 9, authored by state Senator Scott Weiner and others, proffers opportunities for needed new housing development in the thousands of single family home neighborhoods of California, both urban and especially suburban.

In the abstract that is a good thing. It would enable construction, with SB9’s permitted lot split, of up to four new housing units on any single-home lot in the state. And to protect current residents from displacement, it excludes properties protected by rent control or other factors.

Scott Wiener’s housing bill would lead to gentrification and displacement.

But there are no affordability requirements for the new units – all can be market rents/prices. SB9’s Yimby/Gentry proponents believe that over the long term, the “filtering” (aka, “trickle down”) impacts of the resulting increased overall housing supply in these neighborhoods will work to reduce rents/prices there too.

Perhaps. But until that may happen in the long-term – 20 years? – in the near term the immediate result if SB9 passes as now written will be a BIG jump in the value/price of ALL the single-family home properties where this new development potential might be used. In the high-cost Bay Area, SB9’s passage will add at least $100,000 to the price of any feasible house/lot. And most such homes in San Francisco could see jumps from $200,000 to $400,000 (view lots, etc.).

There is no way that instant price jump in home prices is a Good Thing. It will put even more housing units financially out of the reach of today’s hopeful home buyers. And it will make those properties even more attractive to “investors” (aka “flippers”) looking to exploit the State’s housing crisis for their own personal profits.

Those are Bad Things.

How does that work? The simplest example is an existing home located on a lot big enough for two homes. If SB9 passes, that extra space on that lot will then have the same value as any vacant lot the same size in the same neighborhood. So add that amount to the former value/price of the existing home, and that is the new higher price for that house.

And if the property has enough room for three new homes – unlikely but possible, especially in in the ‘exurbs’ – add the value of three such vacant lots to its price.

Tear down/rebuild scenarios are more complex. It would only make financial sense to tear down an existing house if the land value for two vacant lots in that location is more than the existing house is worth itself. This could apply if that house was very small or run down in bad condition in any city. Or if the property is in a luxury neighborhood, like Ross in Marin. Or if the property had spectacular views, like Twin Peaks in the City.

But a tear down/rebuild scenario is much more feasible if the home lot is big enough for four new units after a lot split as allowed by SB9. And single homes with lots that size can often be found in older urban neighborhoods, like East Oakland.

The tear down/rebuild scenario where possible will be very attractive to ‘flippers’ (they call themselves “investors”) looking to make a pretty quick profit. They don’t build new housing themselves. Instead they will put together deals with a smallish developers that focus on small projects like a fourplex. Most will be condos for sale, and even if not, they will be mapped as a subdivision for future conversion to condos without any further local approvals.

There is no way the rent/sales price needed to finance such housing is going to be “affordable” to renters/buyers with incomes less than 120 percent to 150 percent of local medians. Instead, the land price always pushes overall total development costs up to the levels “that the market will bear” for that location – that is how market capitalism works.

Which means most current residents of lower-income neighborhoods won’t be able to afford the new housing that SB9 would make possible to build in their own communities. Instead, the new residents of those projects moving into those largely immigrant/people of color central city neighborhoods will be higher paid younger professionals, much like the bill’s Yimby/Gentry proponents.

And that demographic shift in turn will reinforce and accelerate all the other social and economic pressures for the gentrification of these communities.

But that doesn’t have to happen. There are two straightforward ways to amend SB9 and avoid those negative consequences:

First, the vulnerable urban neighborhoods at risk of gentrification and displacement of lower-income and minority/immigrant residents could simply be cut out of SB9 geographically. They are now referred to as “Communities of Concern” by regional planning agencies, like the Bay Area’s Association of Bay Area Governments, and many have been identified and mapped already.

Second, SB9 could require that, when its lot split provision is used to build three or four new units in a single-family home district, one of those units must be affordable at least to middle income renters/buyers with incomes up to 150 percent of local median. That will assure there is no possible loss of existing affordable homes as a result of the existing house being torn down. And it will provide new housing opportunities for the so-called “missing middle” households that cannot qualify for subsidized affordable housing yet also cannot pay market rents/prices either.

And that requirement would also have the very beneficial effect of neutralizing some of SB9’s inflationary impact on existing home prices described above. Developers could still make a profit on the new housing, but they would not pay extra anymore just for sites big enough for a lot split.

These are Good Things.

If SB9 were amended with these provisions, BAFCA and other affordable housing advocates could support it.

John Elberling is a member of Build Affordable Faster California, a regional and state advocacy and action project of the Tenants and Owners Development Corporation (TODCO), a nonprofit community-based community development corporation in San Francisco’s South of Market Neighborhood (SoMa) since 1971.

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8 COMMENTS

  1. curious40, they will tear down the $1.2 million house, and biuild four houses that they will ask $1 million for, and probably, will be bid up to $1.2 million. You have no room to to talk about dishonesty.

  2. mcmsf – you’re logic is that of a moron. So you think folks can by an entire lot for 1 million, but they will pay 1.5 million to get 1/3 of that lot? WRONG WRONG WRONG. Just plain idiotic. Guessing you don’t have a job that requires analytical thought.

  3. Trickle down does not work. These bills are written for the large investors who are buying up property all over the country to control it. They want to eliminate all regulations that may stop them from using the land, water, and whatever other resources it possesses in whatever way they choose. Eliminating CEQA and environmental controls is what they want and are paying for. Check who is funding the lobbyists on these bills: https://calobbysearch.org/

  4. Adding more homes lowers prices in exactly the way that adding more freeways ended traffic jams. It hasn’t, it won’t, it can’t. The greater the capacity, the more people rush to fill it.

    Say you have a single family home for $1m. To make it into two units would cost about $750,000. To get that large of a construction loan, you have to be very wealthy already, so only deep pocket investors will do this and they want a very, large return. That means building at least three units either by tripling the height or by taking away the backyard, eliminating real green space. Each of those units will go for at least $1.5m, so you’ve actually raised the housing prices, not lowered them.

    21,000 people move to SF Bay are every year for high paying tech & finance jobs. To get the equilibrium the supply & demand argument makes, to give each person a hotel room sized studio apartment means building four SalesForce Towers every year at a cost of $4 billion plus the cost of infrastructure. This is financially & physically impossible. It would also be an environmental disaster.

    BTW, way are we only focusing on supply and not demand? It is the lure of high paying jobs that pulls people to this already stressed area. Those people can go anywhere and build communities just as people have done for generations. California could stop joining the tax break based race to the bottom and instead make alliances with states that have resources, housing, and people who need jobs. No one gets to build a new campus or hire more workers from out of state until they’ve built a satellite campus in Michigan or Ohio or Wisconsin. That way wealth and culture gets spread across the country and the deep divide in income and point of view can be breached

    100% tax on housing allowances and payroll for multi-billion corporations would force them to actually pay taxes. Most of the companies located in CA are registered in no tax Nevada and funnel money through outside of US tax havens, so don’t pay corporate taxes here. They also get funding for research & development and they get to keep 35% of the sales taxes on their products. If a company can spend $10 billion on a headquarters, while admitting to only the still outrageous $5 billion, they have too much money. This isn’t punitive, it is simply fair.

  5. Replacing one home with four will produce 4 lower costing homes vs. one expensive home. Lowering the average home price in that area. Here’s how it works. A house on a big lot sells for $1.2 million. If they tear it down and develop 4 homes on the same property, they cannot sell those homes for $1.2 million each. Since there is the same amount of space for four units vs. one, they will not be as expensive than the one unit. This is really simple to understand even if you just have a 4th grade education. The author is either ignorant or purposely leaving out this obvious information.

  6. The exact opposite of what “michael barnes” has claimed is — in fact — the truth.

    We cannot have increased homeownership opportunities if we do not allow more housing to be created.

    “michael barnes” disingenuous and reactionary NIMBY-driven arguments are the “anachronism” when it comes to housing policy.

    One cannot claim be pro-immigrant…. and anti-migrant.
    One cannot claim to be pro-environment…. and anti-density.
    Once cannot claim to be pro-equity….. and anti-housing.

  7. Good piece, but actually, SB 9 would allow up to six units where single-family home used to be. No affordability requirements. No impact fee to cover costs to the public for expanding utility hookups. One more opportunity for homeownership lost, probably forever. The bill was introduced in the legislature a few weeks before the March 2020 pandemic lockdown. None of the amendments have been or will be made to the bill. The bill is an anachronism. Covid changed everything–except the housing bills in Sacramento.

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