SF housing and activism

Dec 30, 2015

The Atlantic published a great article yesterday on housing activism in San Francisco. It starts out talking about the usual line of the evil lords of tech manifested in a kindergarten play by a particularly enthusiastic after-school director. It goes on to point out some of the real culprits: backwards legislation and deeply entrenched property owners and longtime residents.

A choice quote:

But if the musical’s director aim was to present oversimplified truths for the sake of social justice, the main antagonists shouldn’t have been evil politicians and tech executives—it should have been property owners gleefully watching the value of their biggest assets skyrocket as they aggressively blocked high-density development.

And on a more accurate version of the kindergarten play:

The homeowners see themselves as upright “preservationists,” protecting the character of their city even as they turn it into a time-capsule for the old and rich. In my propaganda play, they’d be sympathetic with the plight of the working class, but wouldn’t value them nearly as much as living amidst refurbished Victorians. They’d prevail by tricking economically illiterate activists into allying with them after sneakily tearing the supply-and-demand chapters from their econ textbooks.

And on tenants groups:

Then the rent-controlled tenants care far more about eviction protections than increasing supply. That’s because their most vulnerable constituents are paying rents that are so far below market-rate, that only an ungodly amount of construction could possibly help them.

The Reddit discussion accidentally points out that the issue is even more complex. State-level legislation like prop 13 is also doing its share of damage:

[Prop 13] creates a few problems. 1. We have no incentive to sell our house because our taxes will go up when we buy a new one 2. As prices go up, only new residents will bear the new tax burden. Therefore holding onto property is a super return on investment. The more I deny new residences and approve new business construction (Palo Alto), my property value goes up but I do not see increased taxes. 3. Because of the low cap on property tax, adding new residents does not add very much money to the tax pool which is another reason to deny new development

Take my parents in Westchester County, NY. On a house purchased for $350,000 in 1981, my parents pay $30,000/year in property tax. Their taxes have gone up each year since living there. Proposition 13 would have prevented such a tax increase.

Not mentioned in either place is that even decisions at the federal level are contributing to the crisis. Near zero interest rates combined with the government’s seemingly unlimited willingness to guarantee housing loans means that cheap debt is available to everyone. This drives prices on real estate in one direction: straight up.

So unlike the after school director’s imagination, there is no faceless villain sitting in a Google-themed secret lair built into a volcanic island thinking about how to squeeze the working class and minorities out of San Francisco while stroking a Persian cat. Instead, poor policy or unintended externalities (if you want to be charitable) at all levels of government have compounded to produce today’s affordability crisis in an effect resembling the tyranny of small decisions. Just like everyone else, property owners have their own best interests at heart and are voting in ways to protect themselves, and these micro-level campaigns happen to be contributors to macro-level problems. Unfortunately for activists and non-activists alike who aren’t already property owners, the same complex roots of the problem also make it a complex one to solve, and it’s hard to imagine any of the small measures currently being proposed ever having a profound enough effect to lead to a widespread satisfactory outcome.

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