A lottery for limited affordable housing, part two

A story about a lottery for 95 affordable housing units in San Francisco discusses the technique of using a lottery to award limited goods and how the lottery happens:

Lotteries that allocate scarce resources are not set up to distinguish the neediest from the merely needy. Rather, they reward random chance, which is a distinctly different notion of what’s “fair.”…

For years, San Francisco conducted public lotteries in a bingo drum. But the raffle tickets were always getting stuck in the drum’s crevices. The city also tried a big box. People couldn’t see what was happening inside, however, and tickets got stuck under the lid.

This exercise — rolling the drum, shaking the box, inspecting for trapped tickets and repeating — lasted hours on a building the size of Natalie Gubb Commons. Ms. Torres would bus around town, picking up applications, dropping off applications. Lines would wrap around some developers’ offices on deadline day….

Last year, San Francisco moved the whole process online. Renters can now more easily apply, which means that more do, and the odds have grown longer. But the system is more humane. The parts of the process where it has been most awkwardly apparent that people in need are competing are now less visible. The city still holds public lotteries, but they are primarily pep talks.

Three things jumped out at me about the lottery process and how it is presented:

  1. On one hand, a lottery can seem fair in this situation. How else would would limited public goods be fairly split up? We know that in regular life, having more resources and better connections tends to lead to more opportunities. For people with fewer resources and fewer connections to powerful people, isn’t a lottery fair?
  2. On the other hand, having to go through a lottery for something as basic as an affordable place to live seems crazy. The documentary Waiting for “Superman” used the lottery for a good school very effectively in its plot. By starting and end with the image of honest American families simply trying to get a good education for their kids through a lottery, it all looks absurd. The lottery itself is an excellent argument for why more affordable housing is needed.
  3. The actual mechanics of lottery are intriguing. A public drawing has a lot of potential for drama, both with images of excitement and disappointment. (Again, Waiting for “Superman” played this up.) But, actually having a fair system of drawing names is more difficult than it looks. And how can the applicants be reassured that it is an effective process? The shift to online makes some sense and yet I could imagine the process now looks even less transparent. How do we know the online system isn’t rigged? Is it truly random? What if the algorithm is biased?

I know waiting lists are commonly used for housing spots – and this has the advantage that Americans often like that people should at least have to put effort into getting on the list – but a lottery has both strengths and weaknesses.

A lottery for limited affordable housing housing, part one

Affordable housing is in short supply in numerous American cities and an example of a lottery for 95 affordable housing units in San Francisco illustrates the issue:

Subsidized housing is often rationed this way, by lottery. Many apply, few win, most are disappointed. The process is meant to be more fair than first-come, first-served. But lotteries make literal a deeper unfairness. For homeowners, the mortgage interest deduction is available to anyone who qualifies. For poor renters, there is never enough housing assistance to go around…

Amid all the wealth in this neighborhood, a one-bedroom at Natalie Gubb Commons would rent for around $1,000 to $1,200 a month, a three-bedroom up to $1,700. Apartments next door were three times as much.

That discount is possible through a mix of resources. Mercy Housing, the project’s nonprofit developer, effectively got the land free as part of a city requirement that the neighborhood’s redevelopment include affordable housing. The market-rate developer next door was subsidizing the project, along with city funds. Revenue from the state’s cap-and-trade emissions program helped. And Mercy used the backbone of nearly every affordable housing project in America, federal Low-Income Housing Tax Credits

But the tax bill’s implications for poor renters will be more profound. The odds are likely to grow worse than these: Last year, 53 households applied per each new affordable unit at The Meridian in Los Angeles; 84 for every home at Parcel 25 in Boston; 391 for each unit at Stargell Commons in Alameda, Calif.; 979 for every home at Our Lady of Lourdes Apartments in New York.

This is a reminder of both the acute need for affordable housing in more expensive cities as well as the limited approach to the issue from the federal government. Places that are often held out as the promise of America for their cultural diversity as well as their economic potential – such as San Francisco, New York, Los Angeles, etc. – are often difficult places for those who are middle-class and below.

Additionally, the federal government has never wholeheartedly committed to helping provide housing for all. As the article notes, American housing policy subsidizes single-family homes. This has been an intentional policy choice for decades, beginning before the post World War II suburban boom and then continuing through mass suburbanization as well as into the twenty-first century. It would be difficult to have a direct national political conversation about this since it tends to happen through elected representatives who rarely discuss housing and through various government agencies. Also, it is hard to know whether all those people who have moved to single-family homes in the suburbs have done so because that is what they truly wanted among numerous equal options or they were pushed to some degree by the political and cultural leanings in those directions.

There is another intriguing aspect of this article: both how the lottery is discussed as well as how the lottery is conducted. More on this in a post in a few days.

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?

A downside of private streets: who exactly owns it?

There is a dispute about the ownership of a wealthy private street in San Francisco:

Tina Lam and Michael Cheng of San Jose said that in 2015 they were looking at parcels being auctioned online by San Francisco’s tax office when they saw a description of “this odd property in a great location.”

“Part of Pacific Heights, the right location, land in a good neighborhood. We took a chance,” Cheng told the San Jose Mercury News. He said they bought the land sight-unseen, beating out 73 other bidders and dropping $90,000 for the street and its common areas…

The Presidio Homeowners Association, which has maintained the space since 1905, blames a wrong address for the misdirected tax bills at $14 a year, bound for an accountant who had not worked for the association since the 1980s. The debt grew to $994, and the street was sold to recoup additional fees and penalties.

But the association did not know the back taxes threatened ownership of the street, the suit against Lam said. No notices were posted on the street, and no one on Presidio Terrace knew it changed hands until May 2017, when an investor representing Lam asked whether the association wanted to buy it back, according to the suit.

Is an odd case like this enough to suggest that having private streets is a bad idea in the first place? While the municipality does not have to pay the same costs to maintain the infrastructure, it seems like the private street is often an attempt by wealthier residents – whether homeowners or firms – to control their settings. And then there is a compelling reason for local government to make a claim to the street, there is a fight from the owners who felt that this property was theirs.

“Monster houses” contribute to San Francisco’s housing issues

An overview of the tight housing supply in San Francisco hints at the influence of teardown McMansions:

Its residents have had much to grumble about in recent years: an influx of “monster houses” built by the well-heeled who buy, tear down and rebuild on lavish scale; a gaggle of Google buses and other shuttles that take techies to and from jobs in Silicon Valley.

Many Americans don’t like teardowns popping up next door. They typically take one smaller home and turn it into one larger home. But, do such homes restrict housing supply? Perhaps indirectly: (1) they bring in wealthier residents who likely don’t want multi-family housing and (2) they increase the value of the property meaning it would be more difficult to convert the same lot into multi-family housing. At the same time, McMansions could later be converted into multiple units (as proposed by some).

Generally, I would guess being for McMansions likely means being against affordable housing. Yet, the two subjects don’t have to be mutually exclusive.

No to NIMBY, Yes to YIMBY

The housing issues of the Bay Area and other major cities has led to a new YIMBY movement:

The stubbornness of the NIMBYs has sparked a counter-YIMBY movement (“yes in my backyard”) among activists who believe the way out of the housing crisis is to build.

Trauss, the founder of the San Francisco Bay Area Renters’ Federation (SF BARF), is one of the more visible members of the growing YIMBY movement in the city. She began her activism shortly after moving to the city from Philadelphia…

The severity of the housing crisis is swinging public policy in favor of the YIMBYs. In May, Trauss and housing activists from around the state went to Sacramento to walk the halls and meet with legislators in the capitol to lobby support of Governor Jerry Brown’s latest “as of right” proposal that would streamline the permitting process for new development that meets affordable housing requirements to prevent NIMBYs from stalling proposed residential projects…

The growing organization of the YIMBYs was evidenced at their first national conference in Boulder, Colorado last weekend. The gathering included representatives from Austin, Boston, Chicago, Denver, Los Angeles, Minneapolis, New York, Oakland, San Francisco, Seattle, and several other cities, according to The Atlantic CityLab. An international conference is planned for August in Helsinki, Finland.

It will be fascinating to see if this group gets anywhere. How do you convince wealthier residents to voluntarily give up their locational privileges? It will take a lot of sustained political pressure to go against people who have resources and close connections to local officials and people involved in real estate.

If I had to guess, I would think the YIMBY groups are led by middle class people who say that cities should be affordable to college graduates and young families who are trying to start in life. It is a different conversation to push for truly affordable housing; when the average rent in San Francisco for a 1 bedroom is over $3,000, where is there actually room for lower income residents (let alone middle class residents)?

Can we have both protected open spaces and affordable housing?

Conservatives argue that the affordable housing issue is simple: stop protecting open space and let developers build more housing units.

But, beginning in the 1970s, housing prices in these communities skyrocketed to three or four times the national average.

Why? Because local government laws and policies severely restricted, or banned outright, the building of anything on vast areas of land. This is called preserving “open space,” and “open space” has become almost a cult obsession among self-righteous environmental activists, many of whom are sufficiently affluent that they don’t have to worry about housing prices.

Some others have bought the argument that there is just very little land left in coastal California, on which to build homes. But anyone who drives down Highway 280 for thirty miles or so from San Francisco to Palo Alto, will see mile after mile of vast areas of land with not a building or a house in sight…

Was it just a big coincidence that housing prices in coastal California began skyrocketing in the 1970s, when building bans spread like wildfire under the banner of “open space,” “saving farmland,” or whatever other slogans would impress the gullible?

When more than half the land in San Mateo County is legally off-limits to building, how surprised should we be that housing prices in the city of San Mateo are now so high that politically appointed task forces have to be formed to solve the “complex” question of how things got to be the way they are and what to do about it?

The argument goes that this is an example of supply and demand: open more space for development and housing prices will have to drive as supply increases. Is it really this simple? Here are at least a few other factors that matter in this equation:

  1. The actions of developers. Even if more housing units could be built, there is no guarantee they could build cheap or affordable housing. They want to make money and they argue the money is not in affordable housing.
  2. Is cheap suburban housing (what is typically promoted by conservatives in these scenarios – keep building further out) desirable in the long run? Opponents of sprawl might argue that having a cheap single-family home 30-50 miles out from the big city is worse in the long run than a smaller, more expensive unit close to city amenities and infrastructure.
  3. What exactly is the value of open space? Conservatives sometimes argue this is another sign of the religion of environmentalism but there are realistic limits to how much housing and development land can hold before you end up with major issues. (For example, see the regular flooding issues in the Chicago area.) If green or open space is simply about property values – keep my home values high by not building nearby housing – this is a different issue.
  4. There is a larger issue of social class. I’m guessing there are few Americans of any political persuasion that would choose to live near affordable housing. There is a stigma associated with it even if the housing is badly needed. Lots of people might argue affordable housing is needed but few communities want it in their boundaries and middle and upper class residents don’t want to be near it.
  5. Another option for affordable housing is to have denser urban areas. Think cities like Hong Kong where a lack of land and high demand have led to one of the highest population densities in the world. If a region wants to protect its open and green space, why not build up? Many city residents don’t want this – the single-family home urban neighborhood is a fixture in many American cities – and conservatives fear a government agenda pushing everyone into dense cities.

Opening more land to development might help lead to cheaper housing but it would take a lot more to get to affordable housing that is within a reasonable distance from job and population centers.