Wealthy San Francisco residents may have their private street back but this may not bode well for the city

Remember that private street with wealthy residents in San Francisco that fell behind on its taxes and was sold at auction to some other California residents? The street is now back in the hands of the well-off residents:

For now, Presidio Terrace belongs to its residents again. Their victory isn’t cause for celebration, either. The city’s first-ever tax sale reversal smacks of preferential treatment. It’s hard to imagine elected leaders going to bat for, say, each homeless individual who has had property seized by the city. Farrell, the city council member quoted above, is also the author of Prop. Q, a controversial measure approved by San Francisco voters in 2016 that allows the city to clear homeless camps given 24 hours notice.

But the saga of Presidio Terrace may not be over yet. Although the city promised they’ll get their $90,000 purchase price back, Cheng and Lam have said they plan to sue. For progressive politics, San Francisco was once a city upon a hill. Now it’s rich people squabbling over one.

While New York City rightfully gets a lot of attention for its mix of world-leading buildings, residents, activities, and expensive housing, San Francisco may be a more fascinating case. A limited amount of land (both due to local policies and different topography) plus rapidly increasing wealth in recent decades (with the tech industry leading the way) plus consistently liberal politics yet sharp divides between the rich and poor makes for big housing problems. Kind of like how President Trump regularly uses Chicago as a case of how crime is not being addressed, San Francisco has become a common conservative rallying cry for how not to address housing and growth.

At the same time, many of the housing issues facing San Francisco also are issues for many other American cities: how to construct more affordable housing when few want to live near it? How to encourage jobs for many residents that provide good standards of living (which then gives people access to more housing)? How to encourage economic growth and development across the city rather than within particular trendy or desirable neighborhoods?

Increasing the density of London’s suburbs

The mayor of London recently released a new planning document for the city and it includes more housing in the city’s suburban areas:

Often, [suburbia] stays under the radar of urban theorists and policymakers. But it is emerging as a major untapped resource and, therefore, a battleground in the struggle to find somewhere, anywhere, to put new housing. Last week, the mayor, Sadiq Khan, revealed his draft for the new London Plan, the document that will guide the planning decisions of the city’s boroughs. He wants – and who wouldn’t? – more housing, more of it affordable, well designed and energy-efficient, complete with spaces that encourage walking, cycling and the use of public transport. He has limited powers – he can’t, for example, ordain the large-scale public housing programmes that even the estate agents Savills now thinks are necessary – but he can manipulate the planning system to promote some kinds of development over others.

His eyes alighted on the suburbs. Between the First and Second World Wars, while London’s population increased by 17%, its land area doubled, a reflection of its rapid suburban expansion at a much lower density than its historic centre. In theory, this means that if suburban densities could be nudged up, very many more homes could be accommodated within London’s boundaries. As Professor Tony Travers, of the London School of Economics, says, Greater London could house 20 million people if it was all built to the same density as the inner borough of Islington.

So Khan wants to encourage, within 800 metres of transport links, developments that provide more housing in the same space. In doing so, he hopes to encourage smaller-scale developers and lower-cost housing, in contrast to the luxury towers promoted by his predecessor, Boris Johnson, in the name of meeting housing needs. This might mean building on gardens or building at four storeys instead of two.

He has, say Tory opponents, “declared war on the suburbs” and will make them “overcrowded and harder to get around”. Yet making suburbs denser could make them better. In principle, having more inhabitants means more life in town centres and high streets, which makes shops and businesses more viable and makes it easier to sustain such things as local bus services.

It will be interesting to see how this plays out in one of the most expensive cities in the world. Building suburbs to higher densities is a popular idea among a number of architects, planners, and urbanists in the United States for many of the same reasons but opposition from established suburbanites can be fierce as increased density is perceived to threaten a suburban way of life (more land, more driving, more exclusivity in terms of class and race).

I wonder if the solution in the London area is in the part cited above: keep the higher densities to mass transit nodes. Plans do not necessarily have to include higher densities everywhere in suburbs; rather, transit-oriented development could concentrate more and cheaper housing in locations where new residents can easily access mass transit options for the entire region.

Portlanders turn conservative when cheaper housing is proposed near them

The Oregonian addresses housing issues in the Portland area:

As progressive as Portlanders like to believe themselves to be, there’s no issue like population growth and housing to bring out their inner conservative. As the city’s population has surged, established neighborhoods have sought historic designation to guard against change. Homeowners in wealthy enclaves are posting yard signs decrying demolitions. And longtime residents are bemoaning the loss of “neighborhood character” amid the growth.

So it’s not surprising that the Bureau of Planning and Sustainability is pulled in different directions, trying to calm irked neighbors while laying the groundwork for how the city will absorb new residents. Unfortunately, some of the proposals in the bureau’s draft “Residential Infill Project” – a plan for updating development rules in single-family neighborhoods – lean too heavily on ensuring the comfort of existing homeowners rather than helping create new ones…

But Tracy said the bureau felt it important to continue discussion about the challenges and opportunities that these narrow lots provide. The bureau’s right and deserves both credit and support for being willing to push forward the issue. Because for as much as people want to blame Portland’s housing crisis on greedy landlords or “McMansion” developers or rich California transplants, the problem boils down to the dispassionate laws of supply and demand. There are far too few homes and apartments in the city at far too few affordable price points for far too many people who need them.

I do not think it is easy anywhere in the United States to convince wealthier homeowners that cheaper housing should be built near them. It is one thing to suggest that wealthier residents should pay more taxes or promote affordable housing in the abstract. It is whole other deal to suggest that such homeowners should have to live near those people who need the affordable housing.

Another way to put it: if Portland with its well-known liberal politics and metropolitan planning boundary cannot promote affordable housing, who can?

(A side thought: it would be interesting to hear more from local experts how race plays into this. Portland may be a progressive city but it is also quite white – “the whitest big city in America.”)

Could the loss of SALT deductions lead to cheaper and denser housing?

Perhaps a solution to the affordable housing issue affecting many major American cities and their surrounding regions is in the contentious current tax cut debates: removing the SALT (state and local taxes) deductions. The consistent commentary on this is that it will hurt residents and homeowners in blue states where local property taxes and sales taxes tend to be higher. But, could this drive people, developers and builders, and local officials toward cheaper and denser housing?

The reasoning could work like this: larger homes and lots mean more taxes that cannot be deducted from federal taxes. To avoid this, people might prefer smaller and cheaper houses. Communities could balance out the reduction in property tax value per housing unit by building more units. (This leads to another issue many communities do not want to face: providing more services for more residents, particularly schools.) Or, communities could pursue other kinds of development that could pay those higher property taxes – businesses, for example – or pursue creative solutions (merging public services? revenue sharing?) to address funding issues.

Could this help break the affordable housing logjam in places like New Jersey or the Bay Area? Wealthier neighborhoods and suburbs would still resist.

(Perhaps this should be part of a series of creative ways to address affordable housing issues. It reminds me of an earlier post where I suggested the lack of affordable housing could lead to population growth in less desirable locations.)

Fighting over affordable housing in Cedar Rapids

Lest you think NIMBY responses to new housing are limited to expensive cities, here is a case of opposition to 45 affordable housing units in Cedar Rapids, Iowa:

Neighbors said they didn’t oppose affordable housing per se, but that they feared the burden of the construction on their area, citing issues such as an increase in traffic and car accidents, potential flooding, and a lack of walkability for incoming residents. The developer said it had selected the site because it would immerse residents in a middle-density community with access to family amenities, including a bus stop, parks, and an elementary school.

At first, it looked like NIMBYism had prevailed: The petition and complaints convinced the city planning commission to vote against the request to rezone the property at an April 2016 meeting. But a few months later, the proposal was revived, becoming a test of what it would take to defeat neighborhood concerns and develop affordable housing that was integrated into rather than segregated from low-poverty communities.

That’s when the real animosity started to emerge, according to Phoebe Trepp, the director of Willis Dady, the local homeless services organization that would provide assistance at the development…

City leaders are also interested in spreading affordable housing throughout the city, rather than clustering it in the poorer southeast quadrant. Susie Weinacht, a City Council member at large, says that city staff want “housing options available throughout the community.”

This sounds fairly typical. A decent-sized community has difficulty providing affordable housing as well as dealing with homelessness. The city wants to spread the affordable units throughout the city so that poorer residents are not concentrated in one area (and perhaps to limit political opposition if one area had to host more units). Residents are not happy about this. They raise all sorts of common concerns about new developments – traffic, too much density near single-family homes, water issues, negative effects on property values – while also hinting at issues of race, ethnicity, and class (not cited in the excerpt above but more details are in the full article). A public debate ensues, one side wins, and the other side is not happy.

Is there a better way to do this whole process? Toward the end of the article, an official says that affordable housing initiatives work best when the support is from the grassroots (rather than planned by local or larger governments). This is probably true. Yet, how does one convince working-class to upper-class residents that it is in their interests to live near affordable housing? This is an incredibly tough sell to make to many Americans.

It is also worth asking about how the neighborhood fares within five, ten, twenty years of the construction of affordable housing units. Are the fears of Cedar Rapids neighbors unfounded? Does a denser development significantly alter the character of the community and drive existing residents away? Having some of these facts may not matter to some residents but showing some data could help ground the discussions in reality rather than emphasizing possible negative effects.

Crossing the line into NIMBYism

Author Margaret Atwood is opposed to an eight story residential building that would back up to her home in pricey Toronto. In some exchanges on social media, Atwood was accused of a NIMBY attitude. This raises an interesting question: when does one’s actions move from normal concerns about a home or neighborhood and into NIMBYism? Here is a description of Atwood’s concerns:

As the debate escalated, Atwood threw shade at a prominent local urbanist, accusing him of being in the pocket of developers, and went toe-to-toe with the architecture critic of a major Canadian newspaper.

The exchanges were confusing because, historically, Atwood has championed urban issues. She fought cuts to the Toronto Public Library under Mayor Rob Ford and opposed a plan by the University of Toronto to cover one of its historic green spaces in artificial turf.

In actuality, the opposition Atwood officially registered with the city was muted compared to those of others, particularly her husband, author Graeme Gibson.

“[The condo] hover[s] close to a brutal and arrogant assault on a community that has been here since the 19th Century,” he wrote in an email to the local city councillor.

In her email, Atwood focused on potential damage to several trees with roots in the development area, and later insisted on Twitter she would prefer affordable housing and a community center in the building.

In really expensive markets, perhaps anyone opposed to new housing units could be accused of NIMBYism. In many cities, there is a shortage of affordable housing and, as the article notes, it seems like wealthier residents do not want to live near cheaper housing and they have the clout to contest development. Additionally, it is difficult to imagine how sufficient housing units could be provided without making major changes to neighborhoods and cities as a whole.

But, is there also a way that NIMBYism is particularly expressed? This particular article hints at three possible distinctions. First, her husband used particular language. Perhaps taking a haughty or dismissive tone does not help. Second, Atwood has fought for the people regarding other city issues so perhaps she is not the average, out-of-touch wealthy resident. Third, Atwood may be trying to make a more nuanced argument – not opposed to the building but opposed to its uses – but this is difficult to relay through social media and it may not matter in a city like Toronto where housing is a controversial issue.

For better or worse, NIMBY is in the eye of the beholder. When arguments about land use and personal property arise, they are often heated. Accusing an opponent of NIMBY and the related idea that they are trying to keep people away from what they already have is a common tactic. Whether this application of a label helps the process in the long run is another matter to consider.

No cheap homes left at the bottom of the housing market

One downside of increasing housing values is that the lower end of the market also rises:

More telling is that at the start of 2013, when home prices were just beginning to bounce off the bottom of the housing crash, the share of homes sold above $500,000 was just 9 percent of all sales. Today that share is more than 14 percent. The share of lowest-priced home sales today is less than half of what it was then as well.

“On the lower end, there is virtually no property at a very low price level anymore,” said Lawrence Yun, chief economist for the National Association of Realtors. “The same property has been moved up to a different price bucket just because the prices have been rising strongly, over 40 percent price appreciation in the past five years. We are not getting the transactions on the lower end because there is virtually no inventory on the lower end.”

In the wake of the housing crisis, investors bought thousands of low-priced, distressed homes, putting a price bottom on the market but also removing lower-priced inventory. The expectation at the time was that if prices jumped, the investors would sell. For the most part, they did not. In fact, investors continue to buy properties, even at peak prices today because both the rental market and the market to flip these homes are so lucrative…

Homebuilders are continuing to increase production and selling homes they haven’t even built at a historically fast pace. They are not, however, putting up low-priced homes, even though demand there is high. They argue they cannot make the margins work, given the high costs of land, labor, materials and regulation. The median price of a newly built home recently hit a record high.

Two quick thoughts:

  1. I thought letting this go to the markets would solve the problem. In other words, if there is a need for cheaper housing, shouldn’t the market correct? It does not appear this is happening as builders do not want to have smaller margins. Some interventions may be necessary if no businesses see an opportunity.
  2. This makes the issue of affordable housing even more difficult. Many big cities already have major shortages of affordable housing. If prices keep increasing and little is being built at the lower end, might be drastic consequences?