Zoning is Only One Piece of the Puzzle

Andre DeVito
Apr 13 · 11 min read
Comparison of Downtown San Francisco from 2012 to 2017

Recently I read the article by Alfred Twu on Medium about the many CA State Housing Bills [1] including bills regarding up-zoning, funding, data, tax policy, ADA’s, tenant increases, and ballot measure among many other topics that are aimed to address many aspects of our housing crisis. Much of the discussion and focus in the news and on social media is on the bills pertaining to zoning, specifically SB 50 and while zoning is a key enabler for additional growth, it’s actually only a specific component of the bigger housing issue. In fact reading through many of these bills made you think that yes we are headed in the right direction and are looking to make significant improvement. However, missing from all of these bills were also a couple specific measures to address the significant additional drivers to our current housing state. Listed below are some of the existing issues that should be addressed as well so if indeed many of these bills are made into law the housing policies can also be sustainable.

Housing for Investment
One of the main points that stood out and needs to be addressed is this point of housing for investment purposes which has made existing supply in high demand, enabled outrageous bidding wars [2], and drove the market to unheard of heights. Specifically the oligarch investors, foreign investors, and home flippers that scoop up properties in their bid to make a profit and this is not referring to the average home owner. The reason why this is so important is that if supply is injected into the market (Which we all agree is necessary), we need to ensure the people that need the housing actually have a fair opportunity to be able to live in it. Recently there was an interview on the recent NPR episode of Fresh Air Journalist: Kleptocrats’ ‘Ill-Gotten Fortunes’ Are Being Parked In U.S. Real Estate [3] where they discuss the point how these oligarchs are investing and how it affects our housing market.

“GROSS: So financially for, say, Russians parking their money in pricey real estate in the U.S., the Russians don’t have to pay taxes in Russia. If they want to, they can remain kind of anonymous in terms of the ownership of the properties, especially if it’s going through a shell company. But does that hurt the U.S. economy in any way?
FOER: It hurts the U.S. economy in that it artificially inflates real estate values and makes cities more unlivable for regular people because their rents end up getting dragged up by the top end. So economically, that’s, I think, pretty much the sum of the damage.”

The city of Vancouver has tried to balance the playing field by imposing a foreign investment tax [4] in response to foreign investors buying up existing properties, and has recently had a major drop in foreign buyers because of this tax and allowing for others to purchase those properties. Also Elizabeth Warren with her American Housing and Economic Mobility Act to address Wall Street and professional investors. From the article in Pacific Standard Magazine [5]- it states- “In Oakland, California, research by a local community organization in October of 2011 found that investors had acquired 42 percent of homes that were foreclosed upon since 2007.”

Finally, for the average home flipper that has been sold on this idea that home flipping is a path to riches by countless TV shows, radio programs, and podcasts dedicated to investing in real estate. Also don’t forget all of the weekend seminars at fancy hotels by your favorite motivational author or TV star promoting these same ideas. I know people personally that have gone down this route and while sometimes they might profit, in other cases they barely break even and might even lose money as the market plays a significant role.

On the flip side many of these profits and growth in the market might be because we have had all of these housing investment influences and people have made bunches of money so some would probably feel it’s beneficial.

Job Growth to Housing Imbalance
The second point needing to be addressed is the job growth to the housing imbalance. This is a pattern that is happening across the nation evident with home prices and affordability for rents being driven up. Many of the better paying jobs are located in the cities, while the affordable housing is located in the outskirts and suburbs miles away. While workers without families might be able to survive and live in the city by having roommates and making sacrifices to pay the high rents, families don’t have much of a choice and are usually the first ones to leave for lower cost of living. This point is especially evident in San Francisco where there are more dogs than children [6] and many of the middle class families have left and as someone that was born and raised in SF, I recognize and saw this with my own eyes. When workers are driving 2 to 3 hours each way just to survive it enables a difficult quality of life. Many have voiced a solution to move some companies out to where the housing is, but my question is why not rezone and build more housing downtown to actually where the jobs are? For instance instead of building more giant office buildings, how about some much needed giant housing towers right where people are working? The interesting thing is that in most of our work settings we are sitting in front of a computer and the idea of workers being mandatory to drive to the office is becoming less and less popular. It’s becoming more evident that in the future remote working will be an expectation for employees and would also assist in reducing some traffic according to this article by Naval Ravikant [7]. Not only does remote working provide the employee good work life balance, it also saves the company financially from office building rent costs. I’ve also felt this for a long time in that we can reduce some our traffic issues by companies allowing more people to work remotely as it will be beneficial for all. My recommendation would be to come up with out of the box solutions and assist these companies in recognizing these benefits through policy or other ideas.

Perception of the Rental Market?
If someone was to ask you right now how many apartments are for rent right now in your city would you be able to provide them a specific answer? Probably not right? Unfortunately we do not have concrete data showing what is the actual supply of the available rental housing in a given market? We do have estimates, small data sets[8], and occasional surveys, and can also estimate from Apartments.com, Craigslist, and Trulia, but this begs the question that if we don’t have actual numbers for available rentals in a market, is the rental market pricing based upon perception and not actual supply? This is a very important concept and the more I look into this I’d say yes, that the rental market is based upon perception on what the landlords think they can get for rent, and this is one of the immediate components that should be addressed. My recommendation is to create a Bill that mandates the utilization of a system like the MLS (or similar) for all rentals, the same way we do for homes for purchase. Currently some real estate agents do use the MLS to list their rentals but not all, and thus would provide the data we need to gauge what supply and demand actually is instead of perception. The bill AB 724 [9] looks to begin this process of collecting some sort of rental database which is exactly the starting point we need on this and once we achieve this we can move away from the perceptive market and go with the actual market and set the rents based upon real supply data. Finally having accurate rental data would also help with us in understanding how many people are actually coming and going in a given market which is essential for any community. [10]

Homes Vs Apartments
Are we building the right kind of housing for long term sustainability? We see information on new projects [11] that are for a big number of units but are these long term solutions? Are these 1BD/2BD apartments for rent or 2BD/3BD homes/condos for purchase?? What kinds of people do they imagine will be living in these new homes? The point is we need to understand more about what exactly is needed as far as what types of homes and meet the needs of the people that housing is for. Developers might have some good understanding but communities should also play a role in that assessment. Whether its market rate, low income, work force, student, family, or home for purchase we definitely need to have a good understanding to ensure that not only is the needed type of housing built, but also it makes sense for the developers and residents that will be living there. This will require more research and collaboration especially at the locality level, but this is essential to addressing the real issue.

The Right Type of Rent Control
The fifth was a revamped rent gauge index to address the out of this world rent increases that end up displacing and pushing people out. The consensus from the public and many economists is that rent control won’t solve the problem, yet nothing additionally gets proposed so we end up staying in the same cycle of frustration. However as someone that’s implemented various Quality and IT projects, it is commonly known that modifications and updates are needed on any implementation as first renditions usually have issues that need to be fixed. Think of the tech industry mantra “Move fast and break things and fix it later”, and an example of this would be the SF scooter roll out which needed quite a few tweaks as we remember. Landlords don’t want rent control since they feel it will it will limit their profits and they have to take the loss in a downturn. The issue with the free market push-back is that if the market worked as it should then it should work both ways, including for rent increases, but also more importantly rent decreases. Your landlord should come to you and actually lower your rent when the market goes down, but that never seems to happen. The only way to get a rent decrease is to move to another rental and that is not free in my opinion. One idea would be to utilize a rent index, gauge, or even a county assessor to assist in setting value and can be used as a guide for all. Recently here in CA, Prop 10 was defeated with great ease and the crazy thing is that the bill wasn’t even specifically for or against rent control. It was just to allow use of rent control as an option to deal with the problem. Now as most agree, flat-out rent control has downstream effects which are almost counterproductive to the cause. For instance the fact that San Francisco enables rent control for some units, yet also has the highest cost of rents in the nation at $3690 for a 1BD [12] shows that the current rendition is not effective in its current form. I think any solution of limiting these market increases will need to have an element or specific component of rent control, but in a different form and would address the issue of balancing this. In fact there was a recent innovative concept by Kevin Burke using an algorithm on how to tie maximum rents to assessed property value. [13] This is exactly the type of out of the box thinking we need to address this affordability issues in the rental market.

Income Disparity
It’s well known that certain industries have significantly higher paying jobs than the average middle class wages. San Francisco has always been high-priced and even in the financial crisis real estate was still higher than surrounding areas. When we began to climb out of the economic downturn the “Occupy” movement recognized this and stood up against the wrath of inequality and corporate income handouts as the top 1% received much of the assistance while the middle class was forced to figure it out. In 2010 Warren Buffet said “When it’s Raining Gold, Reach for a Bucket” [14] and as he recognized, we were witnessing the greatest wealth grab in modern history. However in some ways since 2010 with all of the bail outs and governmental policy spurring rapid growth in our economic rebound, it seems now we’ve created a monster where the top 1% have even more money and have grown significantly. The 99% have stayed stagnant [15], have not been able to touch any of that wealth, and are left to fend for scraps that trickle down. The issue is now in most major cities the average middle class family cannot survive with the current cost of living and are forced to move out to where housing is still affordable and thus longtime residents and standing communities have been ripped apart in a short time-span of a couple of years. This is a societal issue and one which will require a combination of political will, business involvement, education, and citizen engagement to work together if we can ever imagine in solving this.

A Big Opportunity
While many of the politicians talk about regionalism and working together there needs to be more coordinated efforts by both the state officials and localities to actually do this. This means regular scheduled meetings (Semi-Annual or even Quarterly would be a start) with Assembly members and Senators with all of the City Councils in their very own districts to work on regional issues but also receive feedback from the localities on the issues they are facing and discuss ideas and most important creating solutions. Think of it like an action team where the cities and counties come together and listen to each other’s concerns and leverage ideas for the greater good. I actually participated in a group like this in a medical office setting, where they had representatives from every aspect of the clinic and everyone discussed the issues in an open forum but specifically on an even platform. In fact some of the best ideas came from some of the lower ranking team members, and because the person’s title was meaningless, everyone had an opportunity to speak and speak they did. This created an immense engagement within the entire clinic and within months many of the biggest issues we were facing had been addressed head on with participation from all. We need to rethink the way our government is operating and starting with communication and working together for both the state and local levels and this needs to be done at a consistent level.

Thanks for staying with me this far as I appreciate your reading this and being a part of the discussion as this piece is a starting point for some of the additional areas/topics that are important in addressing this housing crisis. As a final parting thought I leave you with this 3 minute clip from the 1982 masterpiece Koyaanisqatsi [16]which I actually watched at the Roxie Theater in the Mission when I was 7 years old and if you’ve never seen the entire movie I highly suggest renting it. Feel free to email me at highwaysoul@gmail.com Peace!

Stay Tuned!

References

[1] https://medium.com/@firstcultural/2019-california-housing-legislation-highlights-787d0652bdbf

[2] https://www.mercurynews.com/2017/09/12/now-this-is-ridiculous-782000-over-asking-for-a-house-in-sunnyvale/

[3] https://www.npr.org/templates/transcript/transcript.php?storyId=694226853

[3] https://www.npr.org/2019/05/01/719001286/moneyland-reveals-how-oligarchs-kleptocrats-and-crooks-stash-fortunes

[4] https://www.bloomberg.com/news/articles/2019-04-09/chinese-real-estate-investors-wary-of-vancouver-head-to-toronto

[5] https://psmag.com/economics/elizabeth-warren-wants-to-break-wall-streets-stranglehold-on-the-rental-housing-market

[6] https://www.kqed.org/news/11669269/are-there-really-more-dogs-than-children-in-s-f

[7] https://angel.co/blog/why-naval-ravikant-thinks-remote-work-is-the-future

[8] https://www.upforgrowth.org/supply-units-price

[9] http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB724

[10] https://www.businessinsider.com/san-francisco-bay-area-residents-moving-away-increase-u-haul-rental-prices-2018-3

[11] https://www.smdailyjournal.com/news/local/first-glimpse-of-san-mateo-housing-office-plan/article_5d3bd710-5751-11e9-8e77-db8b0b416d9b.html
[11] https://www.smdailyjournal.com/news/local/two-towers-of-apartments-proposed-for-burlingame/article_e7e20c3e-5bea-11e9-a96f-fb357603e686.html
[11] https://www.smdailyjournal.com/news/local/housing-ok-d-at-waters-technology-office-park-in-san/article_bb27e49c-358f-11e9-86af-e724690688a6.html

[12] https://sf.curbed.com/2019/3/15/18267525/san-francisco-zumper-most-expensive-worldwide

[13] https://www.thebaycitybeacon.com/politics/a-better-rent-control-tie-maximum-rents-to-assessed-property/article_4671620e-fcaf-11e8-afa2-bb102b776690.html

[14] https://www.cnbc.com/id/35616702

[15] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

[16] https://www.youtube.com/watch?v=woSbHbHd-EY

Written by

Passionate about discussing big issues, life, society, music, technology and solving big issues. Background is in Quality Improvement and Media production.Peace

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade