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Thursday, February 2, 2023

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News + PoliticsPolitics, 2023: The budget crisis, housing, the mayor's race, criminal justice ....

Politics, 2023: The budget crisis, housing, the mayor’s race, criminal justice ….

... and will this be the year that the Yimby narrative finally falls apart? Our projections.

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There should be no municipal election in San Francisco this year. Under Prop. H, the races for mayor, district attorney, and city attorney are moved to 2024.

That all depends, of course, on Rep. Nancy Pelosi, who won office in a special election and could trigger another one by resigning in the middle of her term.

That would set off a political avalanche as a number of prominent politicians would scramble for one of the best jobs in American politics, a lifetime safe seat in Congress.

Mayor Breed is going to have a tough year, and she offers no real agenda.

But the stakes will be even higher if Pelosi decides to finish her term, since many of the folks who might seek her seat would have to give up their current sinecures to do it.

State Sen. Scott Wiener is up for re-election in 2024. So is Assemblymember Matt Haney, and City Attorney David Chiu, and Mayor London Breed; any of them would have to declare for Congress instead of for re-election. Lose and go home.

In the meantime, even without a special election for Congress, it’s going to be a busy year. Some of the trends and themes to look for:

Who is going to be the new Board of Supes president? The progressive majority that elected Shamann Walton two years ago is a lot more shaky now, and a combination of the two new moderate-conservative members, Matt Dorsey and Joel Engardio, combined with the likes of Rafael Mandelman, who has moved to his right since his first election, could shift the balance to a more centrist candidate.

The board president isn’t nearly as powerful as, say, the speaker of the state Assembly or the speaker of the House, and doesn’t control the legislative agenda in the same way. Any board member can introduce anything and likely get a full hearing in committee and a full board vote.

But the president appoints committee members, and that can be critical, particularly this year, because:

The Budget and Appropriations Committee could have a huge role to play.

This will be the first time Mayor Breed has faced what could be a brutal budget situation. As the Mayor’s Office noted in a Dec. 15 press release:

Over the next two years, the City is projecting a budget shortfall of approximately $728.3 million with a $200.8 million deficit in the first year and $527.6 million in the second year. This is out of an annual general fund budget of approximately $6.8 billion. The shortfall is the result of slowed revenue growth, specifically the City’s largest tax revenues that include property and business tax, and loss of temporary federal COVID-19 funding. 

That’s more than 10 percent of the General Fund. There’s no easy way to slice it; the Mayor’s Office will be making cuts, and cuts mean priority decisions. Add to that Breed’s insistence that the city deploy more cops and put more people in jail—and both options are very expensive—and a long list of social programs will be on the block.

The Budget Committee can’t rewrite the mayor’s spending plan, and typically in the past few years has mostly tinkered around the edges. An aggressive budget chair could offer a serious alternative and force some real public debate.

Look for labor to challenge the mayor if the budget cuts lead to layoffs or efforts to renegotiate pay and benefits. The more conservative side of labor, primarily the building trades, has sided with the mayor and her allies on a lot of issues, but if the city employee unions take her on, it will be hard for the other unions to stand aside.

That matters as the 2024 Election shapes up. If any serious candidate is going to challenge Mayor Breed, they will have to start in 2023. It takes a lot of money and organizing to beat an incumbent mayor, and late-starters don’t tend to finish on top. If labor is unhappy with Breed, look for a broader base of progressives seeking a challenger.

In fact, I don’t see much the Breed can do to prevent her popularity from slipping even further in the next year. The city’s tax base will continue to decline (and all she has done is called, weakly and futilely, for employers to bring workers back to the office). She’s shown no leadership in addressing homelessness (even the Chron has noticed this) and her talk about addressing drug addiction and the overdose crisis has gone nowhere.

She has no bold policy initiatives, for good or ill. A majority of the supes still aren’t that excited about working with her, since she has made clear she doesn’t want to work with them.

And the news media are slowly getting tired of “Mayor Breed wasn’t available for comment.”

A lot of people who supported Chesa Boudin for district attorney (and remember, he won!) are unhappy with DA Brooke Jenkins. She won the right to finish Boudin’s term, but her main challenger, John Hamasaki, got in the race late and with no real name recognition. She has a year to demonstrate that she’s actually making the city safer, and that’s a high standard that she is unlikely to meet. I don’t know who is going to start organizing to challenge her, but I think somebody will.

Meanwhile, this could be the year that the entire Yimby narrative starts to collapse. That would have a significant impact on local politics; a prominent political strategist told me a few months ago that “the Yimbys have won the argument,” and the election of Matt Dorsey and Joel Engardio are supposed to be evidence of that.

The argument goes like this: The reason housing prices are so high is that the city has a shortage of housing, and the reason the city has a shortage of housing is that local rules make it too hard to build, particularly to build dense multi-family housing, and if we just got rid of those obstacles, more housing would go up and prices would come down.

In fact, since the Yimbys are allied with the real-estate folks in Sacramento, who have long won the day in the Capitol, almost everything that the Governor’s Office has said about new local housing elements is that they have to “eliminate obstacles” to building.

And those obstacles, the story goes, are mostly put in place by Nimbys (who are linked to the progressive movement) who want to preserve single-family housing and by implication, their property values.

Sometime in the next couple of months, the supes will be asked to approve a new Housing Element, and those state mandates will play a key role.

But any realistic assessment shows that the entire process is a farce. Some of the supes may make that point; some of the news media may have to stop ignoring it.

Since many of the people who are leading the Yimby charge were not here 30 years ago, allow me to offer a little historical context.

In the late 1970s and early 1980s, developers and investors were making a fortune in highrise office development in cities like San Francisco. It all went crazy after Reagan deregulated the savings and loan industry, and institutions desperate for cash started offering as much as 15 percent annual return on savings accounts.

The only way to make a profit at that level was to invest in urban office buildings, which were at one point returning almost 50 percent (thanks in part to another Reagan trick, accelerated depreciation, which made an office building profitable for tax purposes even if nobody occupied it).

Of course, at some point all of those buildings would fill up with tenants, who would hire workers, who would need housing. But nobody was building housing back then—and Nimbys had nothing to do with it. The return on capital was higher in offices, so that’s where the investment money went.

Along the way, neighborhood groups pushed for lower height limits (“downzoning”) outside of the Financial District not because they feared apartment buildings but because they saw downtown creep—offices moving into Chinatown/North Beach, Soma, Civic Center and up Van Ness, along Mission Street … that was all about stopping Mayor Dianne Feinstein’s office madness, not about housing.

In fact, the progressives, the left, the people the Yimbys decry, were the only ones talking about new housing, and pushing for what was called the Office Housing Production Program, which sought to link approvals for new offices to the approval and construction of housing for that workforce.

Feinstein and the developers opposed it, saying it would present an “obstacle” to more office development.

I was there. I wrote dozens of stories about the impact on housing prices of uncontrolled office growth and a failure to mitigate it with new housing.

By the way: The developers and the realtors back then kept saying that they couldn’t build new housing in San Francisco—but it wasn’t because of downzoning or planning “obstacles” or Nimbys. Instead, they blamed rent control. See, they told me, if you have rent control, nobody will want to be a landlord, so nobody will build apartments.

Of course, under state and local law, no housing built after 1979 was subject to rent control anyway. That was a lie, designed to hurt tenant rights and to divert from the real issue: The developers could make more money building offices.

If you move to the past decade or so, the pattern just became more clear: Highrise condos and luxury apartments in San Francisco and a few other cities offered the highest return on capital investment. So that’s what developers built. Many of the new condos were and remain unoccupied, but it doesn’t matter: If you can sell them as in investment, you can make a profit.

Now the market has changed again. Construction costs are up, demand for high-end housing in SF (thanks to Covid remote work) is softening, and the return on investment is down. So “obstacles” or not, market-rate developers aren’t building housing.

The Yimbys in the past couple of years got pretty much everything they’ve asked for. The entire city is upzoned, single-family zoning is gone, the state gives developers big density bonuses … and it’s not working. Private developers are not bringing housing prices down.

For all the furor over 469 Stevenson, the “obstacle” to that project is not the Board of Supes and the progressives; it’s (get this): The Free Market. That project has no financing and won’t get built any time in the forseeable future.

In 2023, Late-Stage Capitalism has hoist the Yimbys on their own petard. We shall see how the local political establishment responds.

48 Hills welcomes comments in the form of letters to the editor, which you can submit here. We also invite you to join the conversation on our FacebookTwitter, and Instagram

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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