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News + PoliticsHousingStudy: New housing for the rich leads to more evictions for the...

Study: New housing for the rich leads to more evictions for the poor

Data from Madison Wisconsin could have implications for efforts to force more market-rate development into vulnerable SF neighborhoods.

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A new study out of Madison, Wisconsin shows that building dense, amenity-rich market-rate housing in vulnerable neighborhoods leads to higher evictions.

While there are significant differences between Madison and San Francisco, the data has implications for new local attempts to encourage more dense housing into existing residential areas that may be threatened by gentrification and displacement.

New study suggests that some high-end housing causes more evictions. Photo by Gerard Koskovich

The author, University of Wisconsin Professor Revel Sims, looked at areas where five-unit or larger buildings were constructed in areas with older buildings and lower-income residents.

His conclusion: New housing for rich people is associated with the displacement of poor people.

You can read the study here.

Sims told me that it’s a “totally reasonable” assumption that the driving force for the evictions is rent increases by landlords in properties surrounding the new housing.

That’s consistent with a 2020 study from two professors at the University of Minnesota, who found that new high-end housing causes rent increases in nearby low-rent housing. While the data shows that average rents went down when more housing was added to an area, the impact is very different on different types of housing.

That is, if you put a lot more fancy housing in a neighborhood, rents for other fancy housing come down. But rents for lower cost housing go up.

This shouldn’t come as a surprise, even to people who believe that the free market will solve all of our housing problems. Put simply, rich people change the natural of a neighborhood – and landlords see the opportunities in gentrifying areas to charge higher rents.

It’s also consistent with what Yonah Freemark, a doctoral student in Chicago, found.

From Anthony Daminao and Chris Fenier at the University of Minnesota:

The amenity effect refers to how the construction of new housing creates spillover effects that could increase demand to live in the surrounding neighborhood. Examples of amenity spillovers include new restaurants, entertainment, streetscape improvements, or perceived desirability of the area. Depending on the relative magnitude of the amenity effect compared to the local supply effect, new construction could theoretically result in higher rents for the surrounding neighborhood.

Sims takes that theory and applies it to actual evictions and displacement.

He told me that proponents of the “filtering” theory argue that any type of new housing will eventually lead to more affordability. But that’s a long-term process—possibly decades—and in the meantime, existing residents can be the losers.

“The moral issue,” he said, “is why are we doing housing affordability on the backs of poor people who are forced to move out now for possible future lower rents? Filtering may take generations; how can we justify this?”

There are some important differences between Madison and San Francisco, starting with Wisconsin’s statewide ban on rent control. Tenants in Madison, and in many other cities, can face huge rent increases anytime a lease ends. Damiano and Fenier quote a tenant in Minnesota who makes the point:

“My landlord does nothing to improve this 3 bedroom apartment we’ve been living in for 7 years, but every year he raises the rent. This year he tried to raise it twice in a year. I asked him why he was raising it without doing anything; he replied, “have you seen what apartments are going for on Craigslist?” So basically he was just saying ‘BECAUSE I CAN’.” –Debi (Tenants Together—Tenant Voices Project, n.d.)

San Francisco rents are controlled as long as a tenant remains in their unit. The city also has eviction protections that limit how landlords can toss their tenants out.

But the reality on the ground is that, as long as the Ellis Act is in place and the Costa-Hawkins Act prevents effective rent control, San Francisco tenants are constantly vulnerable to evictions.

Just look at the data. It’s stunning. Between 1994 and 2002, 5,300 San Francisco households were displaced—for no fault of their own—by speculators using the Ellis Act.

Sup. Rafael Mandelman is the latest to push for more dense housing—in his proposal, fourplexes—in every neighborhood zoned for single-family housing. (Sims told me that his cutoff at five units was just based on how data was collected.)

Nothing in Sims study addresses the impact of building fourplexes, or higher, denser housing, in neighborhoods that are largely owner-occupied with wealthy residents who aren’t at risk of losing their homes.

Allowing denser housing in, for example, St. Francis Wood or Seacliff isn’t likely to lead to any displacement.

Bayview Hunters Point, the Mission, Soma, and a lot of other neighborhoods present a very different challenge.

So far, Mandelman’s measure doesn’t require that any of the four new units be affordable. As John Elberling, CEO of affordable-housing developer TODCO, notes on Facebook:

Unless An Affordable Unit Is Required, This Legislation Will Make All Home Lots Where It Can Be Used More Valuable—Right Away! And That Will Make Any House There Now Cost More To Buy—Immediately!

SF needs more affordable homes, not higher home prices. Require that one new unit must be affordable for middle-income homebuyers. That will offset the land-value-caused price increases that will result without it. Developers will still make a profit—they take a one-time fee from the project financing—but speculating ‘flippers’ won’t.

San Francisco is already the third-densest urban area in the United States. But it’s fine to talk about increasing density in some parts of San Francisco.

It’s not fine to do it, as Sims suggests, on the backs of existing vulnerable populations.

I keep asking our representatives in Sacramento (and the real-estate industry that gives them money) who want to impose new housing mandates on cities:

Why are there no new tenant protections in the package? Why do you want to force new market-rate housing into vulnerable communities—without first giving cities the tools to protect them?

Why not repeal the Ellis Act and Costa-Hawkins—and then, and only then, talk about new urban housing mandates?

Why? Because the real-estate industry won’t go for it. And nobody in power in Sacramento (including the governor) has shown the leadership to take on that industry.

So: Displacement now, for a dubious more affordable future.

“I don’t buy the argument,” Sims told me. “If we want to build affordable housing, why don’t we build affordable housing?”

Good question.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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6 COMMENTS

  1. TODCO is simply a political operation, they’re nothing but political hacks who appear every two years to claim they are developers. In bed with Peskin and the Teachers Union. Evil and sick.

  2. People keep making some version of a supply & demand argument which is complete garbage. S&D was Reagan’s simplistic explanation of capitalism; it isn’t a market theory. It’s popularity is based on the false idea that there’s such a thing as a free market. There’s never been any such thing and there can’t be.

    First of all, slavery is at the root of all our markets, so to say that there was a free market means you are not taking free labor and cruelty into your economic equation. Second, every market is shaped by public policy, taxation, tariffs, taxation, natural events, need, desire, and greed. Thirdly, housing is at once a need, a commodity, and an investment, so it was never a simple supply/demand situation.

    By the way, why are we talking about supply when we never address what is creating that demand?

    It’s the tax breaks we give to multi-billion dollar companies to keep bringing very highly compensated people to this essentially arid state regardless of our capacity to provide water or homes. Communities are built by people and they can be anywhere. If supply & demand was direct and simple and real, then those companies would have left San Francisco and California long ago. But we subsidize those companies with the money from those who are being pushed out of their homes.

    If we were really concerned about housing, we would be making federal and state tax laws that disallow tax breaks to multi-billion dollar companies, tax all those who must move to stressed places 100% for every employee they bring in, deny building permits (and the many variances they’re always granted) for new headquarters, and stop building. Every honest study of housing prices, including ones conducted by the Department of the Treasury, shows that the main drivers of housing prices are luxury housing, real estate speculation, and foreign investment/money laundering.

    https://www.kpu.ca/sites/default/files/The%20Housing%20Supply%20Myth%20Report%20John%20Rose.pdf

    https://www.citylab.com/equity/2019/05/housing-supply-home-prices-economic-inequality-cities/588997/

    https://medium.com/@andrewdobbs/debunking-the-housing-supply-myth-857c2ecc30a

  3. Small note, it’s not really accurate to call John Elberling an affordable housing developer – TODCO is banned from developing new buildings in San Francisco and also banned from managing its existing buildings, which it outsources to a third party. Its primary activity nowadays is political organizing and lobbying, as well as favorable tax treatment for the rent-free room Elberling uses in one of the buildings.

    Maybe “affordable housing political campaigner” would be more accurate.

  4. You are too kind to say that filtering will take decades. Filtering will never happen. As long as more rich people move in, there will be profit to be made in building expensive housing. Once they stop, developers will stop building and wait for more to come. The only way developers will build affordable housing on their own is if no more buyers for unaffordable housing are expected.

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