The California Housing Crisis: Beyond SB 827

Daniel Shimmy Li
May 15, 2018 · 13 min read

In January 2018, Senator Scott Wiener introduced a bill that stirred up controversy and discussion across California. Here’s a summary of the first draft of Senate Bill 827, also known as the Transit Zoning Bill:

Senate Bill 827 would usurp certain local building restrictions for new construction near transit hubs, setting looser state standards instead. It would allow residential developers to skirt local rules on height, density, and parking — if their buildings are within a half-mile of a train or subway station.

Although SB 827 was rejected in its first committee hearing in April, it’s important to analyze the discourse surrounding the proposed solution and the encompassing issue — the housing crisis. For this article, I’d like to spotlight the discussion on the most controversial idea proposed in SB 827: increased market-rate housing.

More Market Rate Housing

Wiener pointed to a McKinsey study to show the tremendous potential of increasing transit-oriented residential development in California. The state currently has 1.16 million housing units that can be considered transit-oriented. With SB 827, as many as three million new transit-accessible market-rate homes could have been built.

SB 827's push for more residential development on land that only allowed single family homes, also known as upzoning, made it the most aggressive bill recently pitched in California to address the housing crisis. The San Francisco Planning Commission said the bill would have effectively upzoned close to 96 percent of city parcels. With an interactive map, you can see that large portions of LA, San Diego, Berkeley, and several other cities would have been upzoned. Additionally, as Ethan Elkind pointed out, the map also highlights the battlegrounds in California where housing is desperately needed — prime transit-oriented spots, where residents can easily bike or walk to access transit. Alongside immediately practical implications, others have said that the bill also plays a role in dismantling the dominant hegemony of automobile and suburban individualism.

At first glance, passing SB 827 may have seemed like a crucial step in solving our housing shortage. But, with a closer look at the discourse surrounding the bill, I hope to show why tweaking the knobs in the simplistic model of supply-and-demand inherently falls short, though it is often thought of the panacea to this seemingly generic economic problem.

Surrounding Discourse

The proponents of SB 827 were mainly developers, who stood to profit from loosened zoning, and pro-housing and climate advocates. Going a step further in support, the pro-development left, consisting of YIMBY, or “Yes In My Backyard” groups— a crowd largely led by millennials frustrated at high housing costs — co-sponsored the bill. The YIMBY frame their activism for more housing production at all income levels in opposition to the selfish homeowner’s pleas of preserving “neighborhood character”. Attempting to rewrite local zoning controls across the state has been their most ambitious project yet. Previously they supported Wiener’s housing package, which streamlined various housing development processes. The YIMBY groups have been gaining momentum and support, even from tech companies — most recently California YIMBY received a $1 million donation from Stripe.

Their counterpart are known as the NIMBYs — the not-in-my-backyard residents. Though the term is more often used as a pejorative from the pro-development left than it is a proclaimed stance, the NIMBYs have indeed influenced many local governments in killing new housing. It is no surprise that the prototypical anti-development NIMBYism attitude is attributed to wealthy homeowners and landlords. The obstructing residents mask their interest of upholding their current property values with the guise of protecting neighborhood aesthetics, and preventing congestion and noise. Though not necessarily the case for new home owners, most NIMBY opposition to development is rooted in simply being a good capitalist and defending one’s major asset.

A perspective further left than the YIMBY has recently become more prominent in the housing debate. Advocating for “Public Housing in Your Backyard”, the anti-development left has joined traditional NIMBY groups, though for radically different ideas, in opposing both SB 827 and increased market-rate housing.

Enter PHIMBYs

The PHIMBY groups have coalesced in rejecting the notion that the real-estate market is designed to produce anything but profit. They believe that a world where decent housing provided to all is possible. But the first order of business is confronting the housing system without illusions and directly overcoming the current process that consistently produces residential and social crisis.

PHIMBYs’ position is not simply a ding on YIMBY’s ideology and pragmatism, but is grounded in insights drawn from history:

Ultimately, YIMBYism is an exhortation to unleash unfettered market forces to remedy the housing crisis, despite the evidence that the profit motive is what caused the affordability crunch in the first place. Mortgage lenders realized they could make more money selling subprime loans and defrauding home buyers than they could by ensuring homeowners long-term stability. As a result, many former homeowners have joined the renter nation, competing for an increasingly unaffordable rental-housing supply.

YIMBYs argue that zoning and other restrictions on development prevent the market from meeting people’s housing needs. But the housing market has never met the needs of the poor — in fact, while the latest housing crisis was caused by the mortgage market’s collapse, working people have been overpaying for substandard housing since at least the mid-nineteenth century, well before New York City pioneered zoning restrictions in 1916.

Karen Narefsky

The overarching critique from PHIMBY groups is that we already possesses the technical capacity and material resources to solve the housing problem.

“Necessary but Insufficient”

One undeniable truth, regardless of what you think should be in your back yard, is that scarcity of housing is indeed pushing up housing prices. A position many YIMBYs have taken comes from urgency and pragmatism:

Nothing about SB 827 implies, nor should imply, that it alone will solve the housing crisis. Building housing is a necessary but not sufficient strategy for solving our housing problems. …While new supply cannot by itself solve the housing crisis, there is no path out of the crisis that does not involve new supply. Building housing cannot be the only way we help low-income Californians. But not building housing will continue to hurt them.

The logic adopted by the pro-development left is that as the housing supply increases, rents will decrease and result in more affordable housing. There is truth to that claim: the San Francisco Planning Department found that SB 827 would likely result in the production of more affordable housing. More generally, Berkeley scholars found that both market-rate and subsidized housing reduce displacement pressures, although less than new affordable units. It is clear, then, that there is a need for building some housing, whether it be market-rate, affordable, or public.

Though the arguments for SB 827 from the pro-development left are practical and compelling, the strategy relies on private entities to provide desperately needed affordable housing. As Woocher and Singh point out, the real-estate market is designed to produce profits, not shelter. As a result of the profit motive, a basic tenet of capitalism, fundamental human needs cannot be entrusted to the market. More specifically, SB 827 is not designed to reverse historical patterns of displacement caused by real estate investment capital. It follows the long history of “progressive” policymaking that claims to be a first step in economically just housing policy, while only including the pro-development portion of the proposed strategy — the part attractive to real estate investors — and perpetually postponing equity concerns, leaving working-class renters by the wayside.

Additionally, we can point to numerous times in recent history where up-zoning directly harms people who need decent housing: in Brooklyn and Boston, time and time again, the upzoning of low-income communities driven by well connected real estate lobbies benefit of wealthy white residents, developers, investors and landowners at the expense of low-income renters, immigrant communities and communities of color. It would be naive to assume that we are an exception, that SB 827’s up-zoning will not produce similar effects in California.

The effects of SB 827 in low-income communities would have been devastating. It incentivized the destruction of “filtered” housing, in YIMBY parlance, which maintains that even luxury construction increases affordability: new luxury units attract higher income residents and decrease competition for existing lower-quality housing. The bill would have those soon-to-be destroyed units rebuilt at a much higher price transferred through rent. It begs the question: what does this bill offer a community that can’t afford the proposed housing units?

Beyond SB 827

A Right to Housing

The right to the city is far more than the individual liberty to access urban resources: it is a right to change ourselves by changing the city. It is, moreover, a common rather than an individual right since this transformation inevitably depends upon the exercise of a collective power to reshape the processes of urbanization. The freedom to make and remake our cities and ourselves is, I want to argue, one of the most precious yet most neglected of our human rights.

— David Harvey

The radical right to housing implies fundamental challenge to the existing system. It points to the activist conception of rights invoked by the idea and slogan “the right to the city,” first proposed by Henri Lefebvre in his 1968 book Le Droit à la ville. As Peter Marcuse interprets, “‘right’ is not used in its conventional legal sense, but in an ethical and political sense.” Much more than a legal demand, the right to housing must take on the form of an effort to democratize and decommodify housing. In the absence of these rights, housing is relinquished to the political and economic instabilities that come from market provisioning.

However, merely proclaiming the idea of universal access to decent housing is not the same as actually providing housing for all. The path forward is to hold on to the ideal of housing for all, and adjust current conditions towards realizing a world that more closely resembles it.

What type of adjustments, then, are to be made? Reforms that are simply designed to streamline existing practices, or aim to ameliorate only the most undesirable aspects of a policy without addressing implicit power relations are system maintaining. The necessary adjustments are transformative demands, or what André Gorz calls “non-reformist reforms”: attempts to improve present conditions while progressively enabling the building of a different world.

Although precise demands need to be tailored to the conditions of municipalities, the following are directions worth broadly pursuing.

Decommodify Housing

Decommodifying housing simply means preventing housing from being treated as a commodity. The goal is to prioritize housing that is a place to live, not an investment vehicle or an asset to accumulate wealth.

Completely decommodified housing is indeed an ambitious housing demand towards the advancement of truly universal housing, and it’s unlikely that we are able to completely dismantle the existing political-economic order and replace the dominant ideology at this point in time. However, it is worth making explicit the most obvious and eventual goal: halt and reverse the processes of privatization and deregulation that have been exacerbating the housing crisis.

Until the window of mainstream political discourse — the so-called “Overton window” — shifts, and decommodifying housing becomes a realistic possibility, we should support wide experimentation of housing alternatives and new forms of tenure that fight residential alienation.

Limited Equity Cooperative

A Limited Equity Cooperative is a non-speculative housing model that creates an autonomous and community-driven space. Members purchase and own shares in the cooperative that entitle them to live in stable, below-market rate housing and have a vote in the collective governance and control of the multiunit housing.

What distinguishes LEC from other, more commonly found market rate cooperatives is that the price of shares is not determined by the real estate market, but by a resale formula determined by the coop’s bylaws and subscription agreements. In a LEC, affordability is the primary concern. There are restrictions to whom and for how much a housing unit, or, more precisely, the respective shares, can be resold.

However, a model that is governed collectively isn’t always regulated equitably. While the LEC model may be a more democratic and possibly even anti-capitalist practice, they are inherently exclusive. As Amanda Huron points out in Carving Out the Commons, LECs often exclude the poor in large part because “the financial health of the commons as a whole is bound up in the financial lives of its individual members.”

Further, the model remains vulnerable to the pressures of capital as the cooperative accumulates value. Over time, especially in gentrified areas, when the market value of the cooperative’s share has grown substantially higher than the formula-determined price, there becomes a large economic incentive for members to change the coop’s bylaws to relax resale restrictions and to sell their shares for market rate, converting the building to market rate — an opportunity that does not benefit all members equally. Because of this vulnerability, a number of co‐ops that began as limited equity cooperatives have turned into market rate cooperatives.

Community Land Trusts

Community land trusts (CLT) are probably the most prominent alternative tenures today. The first attempt to set up a CLT goes back to the 1960s civil rights movement and have gained momentum within the last ten years. The model has many variations, but the basic model is that a nonprofit corporation acquires land in trust and offers permanently affordable, limited-equity, long-term leases to residents. The CLT is able to repurchase any improvement on the land through a resale formula, limiting resale value to maintain affordability. Additionally, the CLT is able to impose further restrictions to maintain housing quality and neighborhood stability — such as requiring that homes be owner-occupied, preventing absentee landlordism. This takes land off the commercial market and provides community-controlled affordable housing.

Unlike the co-op, the CLT is not only governed by its residents, but also by non-residents: its boards are usually comprised of one-third homeowners, one -third non-resident community members, and one-third public officials. Thus it tries to uphold long-term affordability through balancing the sometimes short-term interests of its homeowners with the larger community, and limiting resident control and emphasizing community and public control.

However, there is no guarantee that these alternative models will eventuate truly transformative endeavors. They cannot replace public investment in housing. Alternative tenures should be connected as much as possible to larger-scale efforts, to marginalized groups and to public housing authorities, so that they avoid being only interesting exceptions to an otherwise unchanged residential condition.

Expand Social Housing

Simply put, expanding social housing means constructing government-owned municipal housing. There are two significant benefits with directly providing government owned housing developments.

First, new rental capacity will be expanded directly where it is needed. By adding new supply where it is most needed, instead of where it is most profitable, cities can address affordability problems head on.

Second, the government can create a self-financing rental model by allowing city residents of all incomes to apply to live in the new developments. This diversity of income will prevent the concentration of poverty which is a condition associated with various social problems. Additionally, it will help defend against the transformation of these affordable units into a means-tested program, which renders the eventual lack of public understanding into alienation and malice towards distinct classes.

Funding for building new public housing can come through a variety of ways. The most direct way is to be funded by redirecting the hundreds of millions of public dollars given away as subsidies to corporate real estate. More tolerably in the current climate, money could be secured through capital grants from the federal government equal in value to whatever a private sector developer would receive from the Low-Income Housing Tax Credit program for a similar development. Alternatively, the money could be borrowed from municipal bond markets or the federal government. The initial funding strategy is to close the gap in the unequal level of public sector and private sector access to federal capital subsidies for housing construction.

This approach and eventual goal is hardly innovative — the Swedish government set a goal of building 1 million new affordable units in the 1960’s when the population was only 8 million (around the same size as New York City, or ten times the size of San Francisco) and achieved it in less than a decade. Several European cities and countries have followed this general housing policy for decades.

The Peoples Policy Project Paper suggest that 10 million new public housing units would be a feasible ten-year goal in America. Their policy proposal highlights several more concrete strategies for initial funding, self-financing rental models and long term effects of large-scale municipal housing developments.

Shift the Discourse

SB 827 may be dead, but it sparked national discourse and drew mainstream attention to the crisis of housing and development. More thoughtful and committed citizens have joined the conversation and have begun thinking about new directions to establish fundaments of a new community.

It’s natural to ask how one can expect even more progressive bills to succeed in the future when SB 827 was so quickly rejected. This question arises all the time: should we try to achieve what seems within reach, or demand something more. There is no general answer.

In the current situation, land has become the government’s bargaining chip with real estate capital. Since development mechanisms are chiefly for-profit, using height and land as a strategic concession becomes critical. More specifically, focusing on upzoning becomes a crucial negotiating chip to get financing for subsidized construction and acquisition when federal social spending is marginal. Market-rate housing, the predominant mechanism of housing constructions, should only be utilized insofar as the government creates significant below market rate housing, community land trusts, or other forms of public value capture.

These ideas I’ve mentioned outline directions and strategies, but not a solution. Addressing residential injustice and inequality to make the right to housing a reality will require a continual struggle. Under the unified vision that a world where decent housing is provided to all is possible, the question becomes whether all who have been poorly served by the status quo can unite to create a truly humane system, where housing is not an commodity but is, instead, home.

Other bills are at the forefront of the conversation with elections coming up. With strategic decisions and demands, it is possible to lay the groundwork for a community-sustaining and democratizing transformative change.

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