A Modern Housing Crisis

T H E S A N F R A N C I S C O B AY A R E AA M O D E R N H O U S I N G C R I S I S

W H O A M I ? H O W D I D I E N D U P H E R E ?

B O R N I N M O U N TA I N V I E W. R A I S E D I N A 1 9 6 7 C U P E R T I N O R A N C H H O M E .

W H AT H A P P E N E D I N 1 9 6 7 ?

R E A G A N B E C O M E S G O V E R N O R

“ T U R N O N , T U N E I N , D R O P O U T. ”

D E T R O I T, N E W A R K R A C E R I O T S

P L A S T I C S .

T H I S G U Y M O V E S I N T O A H O U S E A M I L E A W AY.

A H O B B Y I S T C L U B

G I V E S B I R T H T O T H E W O R L D ’ S M O S T VA L U A B L E C O R P O R AT I O N

In fact, the technology industry has produced four of the world’s six most valuable corporations by market capitalization today.

A P P L E

Market capitalization: $616 billion

Revenue per employee: $2.1 million

Employees: 60,000 1/4th are in Cupertino

A L P H A B E T ( G O O G L E )

Market capitalization: $521 billion

Revenue per employee: $1.2 million

Employees: 61,800

M I C R O S O F T

Market capitalization: $440.3 billion

Revenue per employee: $784,0000

Employees: 112,000

FA C E B O O K

Market capitalization: $321.2 billion

Revenue per employee: $1.4 million

Employees: 12,691

B E Y O N D T H AT, M O R E C O M PA N I E S A R E C O N C E N T R AT E D T H R O U G H O U T T H E R E G I O N

Venture capital and technology move very fast. California land-use moves very slow.

Something’s gotta give. But what?

E V E N W I T H A L L O F T H E S E C H A N G E S … .

R E S E A R C H I N T O C O M M E R C I A L A P P L I C AT I O N S

T H E 1 9 6 0 S

S E M I -C O N D U C T O R S

T H E 1 9 7 0 S

P E R S O N A L C O M P U T I N G

T H E 1 9 8 0 S

T H E O R I G I N A L D O T- C O M S

T H E 1 9 9 0 S

T H E B AY A R E A’ S B U I LT E N V I R O N M E N T R E M A I N S L A R G E LY T H E S A M E

1950 • Bay Area median

household income is $6,600.

• This Palo Alto home costs $9,400 with just $300 down for veterans.

$ 2 + M I L L I O N

T O D A Y ?

– S T E V E J O B S , A P P L E

“Eichler did a great thing. His houses were smart and cheap and good. They brought clean design

and simple taste to lower-income people.”

S O M E T H I N G H A P P E N E D … .

P R I C E - T O - I N C O M E R AT I O S D I V E R G E

Historically, the region’s economic growth has generally been a good thing.

B U T N O W, I T ’ S J U S T G E T T I N G W E I R D ( A N D S A D ) .

B A R B E L L J O B M A R K E T

S E R V I C E W O R K E R S , P U B L I C S E R VA N T S B E I N G L E F T O U T

"They have to get up at 3 or 4 a.m. in the morning to get to the BART. They jump on the MUNI bus, they drop their kids off at the school, then they jump on another bus to get to work. They're spending $389 a month on BART and MUNI and they're making $12 an hour. What kind of life is that?”— Roberto Hernandez, Mission activist

– PA L O A LT O O N L I N E , J A N . 2 7 , 2 0 1 6

“Tara Hunt, a third-grade teacher at Walter Hays Elementary School who has taught in the district for 10 years, said she has a two-hour commute each way to and from the house she rents in Santa Cruz. Her day starts at 4:45 a.m., and more than two-third of her paycheck goes toward rent, she said. By the time the weekend rolls around, she's too exhausted to head back to Palo Alto for school events or activities.”

T R A N S I T T I M E I S O N E O F T H E S T R O N G E S T FA C T O R S P R E D I C T I N G U P W A R D M O B I L I T Y

L I T E R A L LY M O R T G A G I N G T H E F U T U R E W O R K F O R C E O F T H I S S TAT E .

L E T ’ S TA L K A B O U T N O R T H E R N C A L I F O R N I A

S T R U C T U R A L Q U A L I T I E S

• Nine counties and 101 city governments for a regional population of 7 million people.

• Failed attempts at annexation after the 1906 earthquake.

• Weak regional government bodies in ABAG, MTC.

C O M PA R E W I T H N E W Y O R K C I T Y

• Functional grid layout up and down Manhattan. Decided when city was only built to Houston St. in 1811.

• 1898 annexation solidified five boroughs under a single government.

• One government for 8.5 million people in a tri-state region of 23.6 million.

W H Y I S A N N E X AT I O N A B I G D E A L ?

• Cities often make their own land-use decisions without regard for other surrounding communities.

• Wealthy neighborhoods make decisions that protect property values and impact lower-income communities. There is almost no recourse for this.

• Cities compete against each other to attract employers through tax incentives.

W H Y D I D W E N O T A N N E X ?

• Once streetcars and zoning came into existence, cities now had tools to control their population and community make-up and no longer felt the need to be absorbed into a larger municipal body. (Fischel)

D I R E C T D E M O C R A C Y

• The initiative, referendum and recall were added under Progressive Governor Hiram Johnson at the turn of the century to combat the power of the railroads.

• Initiatives were not widely used until after Proposition 13 in 1978. Now, an entire industry of signature gatherers.

• California constitution has been amended 521 times in the last 100 years.

F R A G M E N TAT I O N M AT T E R S

When suburbs don’t build housing, the pressure moves to:

T H E P E R I P H E R Y, W H E R E I T C O N S U M E S G R E E N F I E L D L A N D

T H E U R B A N C O R E , W H E R E I T D I S P L A C E S L O W - I N C O M E C O M M U N I T I E S I N H I S T O R I C A L LY R E D L I N E D N E I G H B O R H O O D S

R E G I O N A L O U T M I G R AT I O N T O T H E S U N B E LT, PA C I F I C N O R T H W E S T

T H E S E PAT T E R N S F O L L O W O L D I N E Q U I T I E S

Redlining in the 1930s

8 0 Y E A R S L AT E R , I T ’ S T H E S A M E M A P

—UC Berkeley Displacement Risk study

T H E R E G I O N I S T I E D T O G E T H E R

PA L O A LT O D O W N Z O N E S

• Birthplace of Silicon Valley

• Now Palantir has absorbed commercial space across 23 buildings, crowding out startups.

• 3:1 to jobs-to-housing ratio.

• Voters kill Maybell senior affordable housing project.

‘“She said a woman came up to her after a community meeting where the same concerns had been raised by a real estate agent. “Her lips were quivering and she was physically shaking from how angry she was,” Ananthasubramaniam told me. “She was like, ‘You come back to me 20 years from now once you have sunk more than $1 million into an asset, like a house, and you tell me that you’re willing to take a risk like this.”’

— T H E N E W R E P U B L I C , D E C . 1 3 , 2 0 1 5

U B E R I N T O O A K L A N D

• 47% percent of Oakland’s tenants are African American.

• Median tenant income is $30,000.

• Affordable housing fees from Uber real estate deal are $1 million.

• Costs ~$500,000 per to construct a new housing unit

T R A N S I T F R A G M E N TAT I O N

• More than 20 transit agencies.

• None with more than 45% market share.

• MTA has 94% market share in NYC.

• MTA: 800+ miles of track. BART: 107 miles.

T R A N S I T F R A G M E N TAT I O N

D I F F E R E N T D E C A D E S , D I F F E R E N T B U S E S

“Furthur,”1964

Google Shuttle, 2014

TA X AT I O N A N D P U B L I C F U N D I N G

• Proposition 13, passed in 1978, caps property taxes. After this, property taxes can rise by no more than 2% per year.

• Super-majority vote required for new taxes and major bonds.

L O S S O F P R O P E R T Y TA X M A K E S O U R S Y S T E M M O R E V O L AT I L E

P R O P E R T Y TA X E S A R E M O R E S TA B L E

“Each dollar decrease in property taxes appeared to increase property values by seven dollars.”

— K E N N E T H R O S E N , U C B E R K E L E Y, “ T H E I M PA C T O F P R O P O S I T I O N 1 3 O N H O U S E P R I C E S I N N O R T H E R N C A L I F O R N I A ”

L O W E R P R O P E R T Y TA X E S A L S O J U S T G E T C A P I TA L I Z E D I N T O H I G H E R P R I C E S .

I N E Q U I T I E S I N A S S E S S M E N T S

Housing purchased after 1999 is supporting 78 percent of Santa Clara County’s property tax

assessments.

P R O P O S I T I O N 1 3 C A U S E S C I T I E S T O FAV O R C O M M E R C I A L , O F F I C E D E V E L O P M E N T.

R E S I D E N T I A L D O E S N ’ T P E N C I L .

— C I T Y O F S A N J O S E R E P O R T, A P R I L 1 0 , 2 0 1 5

C A L I F O R N I A N C I T I E S R E S O R T T O F E E S

I N C R E A S E D P R I VAT E F U N D R A I S I N G F O R P U B L I C K - 1 2 S C H O O L S

– “ C A L I F O R N I A C R A C K - U P, ” 2 0 1 0 J O E M AT H E W S A N D M A R K PA U L

“Next to the shrunken property tax bill on Prop. 13's trophy shelf sits a gold-plated public

pension.”

P U B L I C P E N S I O N U N F U N D E D AT R E C O R D L E V E L S

$175.1 billion for 2014-15 budget —Sacramento Bee, March 18, 2016

C A L I F O R N I A’ S U N U S U A L L A N D - U S E R E G I M E

F R O M FA S T G R O W T H I N T H E 1 9 6 0 S T O S L O W G R O W T H I N T H E 1 9 7 0 S

G R O W T H C O N T R O L S P R O L I F E R AT E I N C A L I F O R N I A I N T H E 1 9 7 0 S

G R O W T H C O N T R O L S

• Outright limits on housing construction at the municipal level. (Petaluma, 1972)

• CA Supreme Court says cities don’t have to compensate property owners for downzoning.

• Single-family zoning adopted in many Bay Area cities in the 1970s. Downzonings in SF in the 1970s and early 1980s.

• CEQA environmental impact reviews mandated for private projects.

W H Y ?

Stagflation and high interest rates in 1970s, 80s shift housing from being perceived as a

consumable good to an investable asset.

— “ Z O N I N G R U L E S ” , 2 0 1 5 D A R T M O U T H E C O N O M I S T

W I L L I A M F I S C H E L

The 1973 Oil Crisis and environmental movement prompt a re-consideration of unmanaged growth.

After the Fair Housing Act passes a week after Martin Luther King Jr.’s 1968 assassination, zoning arguably replaces racial covenants as a coded strategy for controlling the make-up of a community.

Fair Housing Law passes

Minimum Lot Size: One acre. Median Home Price: $4 million.

Example: Los Altos Hills

Y B A R R A V S . L O S A LT O S H I L L S ( 1 9 7 3 )

As flatlands in both Northern and Southern California get filled out, new development stalls

T H E N , T H E L A S T C Y C L E

SF adds 105K more employed residents from 2010-2015 five years, but just 8,290 more units.

I M M E N S E P R E S S U R E O N T H E T I N Y S L I C E O F S F ’ S M A R K E T- R AT E H O U S I N G S T O C K

L O T S O F Q U E S T I O N S

W H AT A R E T H E C A U S E S ?

• Wealth inequality?

• Restrictive land-use policies?

• In-flows of external or overseas capital?

• Inadequate public funding for low-income housing?

Probably all of the above.

A N D W H E R E S H O U L D T H E F U N D I N G T O S U P P O R T T H E R E G I O N C O M E F R O M ?

• Property and land taxes.

• Personal income tax.

• Capital gains tax.

• Corporate taxes.

• Fees.

• Bonds.

T H E PA R T W H E R E I G E T T O S U G G E S T P O L I T I C A L LY I N F E A S I B L E I D E A S

R E G I O N A L G O V E R N M E N T

R E G I O N A L F U N D F O R A F F O R D A B L E H O U S I N G

R E G I O N A L TA X S H A R I N G

R E C O N S I D E R I N G S I N G L E - FA M I LY Z O N I N G F O R A D U S , “ M I S S I N G M I D D L E ” H O U S I N G A N D B E Y O N D

S I G N I F I C A N T I N V E S T M E N T S I N B A R T, M U N I A N D R E G I O N A L T R A N S I T

S T R O N G E R T E N A N T R I G H T S O N T H E P E N I N S U L A

A R E - C O N S I D E R AT I O N O F P R O P O S I T I O N 1 3

S H O R T E R - T E R M I S S U E S

VA L L C O S H O P P I N G M A L L

Proposed: A $3 billion rooftop park. Offices for 8,000 jobs. 800 housing units.

W H Y N O H O U S I N G ?

“Save our schools. Stop Condotino.”

I N S A N F R A N C I S C O• Affordable Housing Bonus Program

• New inclusionary laws, which bring the standard from 12 or 20 percent, to a minimum of 25 percent. Needs to be carefully implemented.

I N O A K L A N D

• New affordable housing fee structure. • “Tech-quity.” (Yes, it’s cheesy. But people are really

working on it.)

E X T R A O R D I N A R Y A C T S O F P U B L I C W I L L

1 8 1 1 G R I D O F M A N H AT TA N

1 8 9 8 A N N E X AT I O N O F O F N E W Y O R K C I T Y

R E D V I E N N A A N D S O C I A L H O U S I N G