I came across http://kumu.io recently. As someone who dabbles in systems thinking for my job I wanted to test it out on some wicked problems. What better problem than our bay area housing market, and it’s attendant social ills. I enjoyed it’s power at drawing the relationships between entities in complex systems. As the saying goes, all models are wrong, some are useful.
My interest is grounded in a few personal experiences. For the high cost of health care, I had a $25,000 trip to the ER for a stitch on the lip from a bicycle accident, unnecessary MRI’s, opaque third party billing, and they didn’t put my tooth back in like they said they would. Unbeknownst to me, at the same time as my trip to the ER, a friend of mine was hit by a car by the King St station in downtown San Francisco. He ended up getting liability payout, but all of it went to his > $100k hospital bill. We are both gainfully employed professionals. What about those without insurance? What happens to them?
Then, I see the daily epidemic of people living in tents on my bike rides through San Francisco on my way to drop my son off at school in the Western Addition. Row upon row of people, bikes, survival gear, and seattle public works who cleans up their tents, sprays off the sidewalks. My son was troubled by the sights of people living in tents. I started doing small things, giving Clif bars to them if they were holding signs. I volunteered once a year at homeless shelters, at the food bank a couple times a year, packing lunches once a year, giving some money to my church that would then give a portion to our breaking cycle of poverty partners (SF Achievers, Raphael House, Boy’s and Girls Club, New Door Ventures)…I didn’t want him to become callous to this human suffering.
My mom sent me an article a year ago about a grade school friend, Erik Tars who works at the National Law Center on Homelessness and Poverty who is a human rights attorney and has had some success in lawsuits against my native Boise who were cleaning up city streets of the homeless. Instead, he advocated for putting them up in hotel rooms as they are required to do by law in NYC.
And, while these are necessary, I started wondering if they are sufficient to address the root cause of homelessness in the bay area. Is it lack of affordable housing? Is it AirBnB? Is it restrictive land use policies? Greedy tech workers. The land use policies? The geography of the bay? Otis Redding luring people to come and “sit by the dock of the bay”. Our sanctuary city status?
I read a few articles on our high cost of housing. And then this Economist article opened my eyes on how we’ve promoted housing ownership as a universal good since WWII. My neighborhood was the product of that postwar housing boom (built in 1948 for returning veterans who sacrificed enormously to beat the Axis powers). Homeownership is a gift from Uncle Sam. It’s also a stabilizing force. Homeowners are more likely to improve their homes, their communities. This may have been true 70 years ago when housing was a smaller share of your middle-class income. Now, it’s unsustainably costly. The impact also limits our total GDP growth.
“If just three big cities—New York, San Francisco and San Jose—relaxed planning rules, America’s gdp could be 4% higher” – Leaders, Economist, January 16, 2020.
Homeownership reduces the mobility of people who live in places where there are less jobs. I have to wonder if the 2007 recession would have been so bad if so much of people’s net worth was tied up in their homes. Being underwater on your mortgage, losing perceived values, people’s nest eggs in their homes. Dual incomes also tends to limit mobility.
It also might cause greater radicalization of your population. Relative Deprivation is one theory of revolutions. You will fight for what you lost relative to where you were, not what you could get. During the financial crisis, people lost a lot of their perceived wealth. And now, with housing out of reach of so many millennials, it is no wonder Bernie Sanders did so well for so long in the Democratic Primaries. The goalpost of American Adulthood keeps moving further away, as housing increases more than inflation, along with college costs. No wonder the millennials eschew home ownership as-an-end-in-itself. Maybe its sour grapes. Maybe it’s them facing reality. Buy a tiny house, live in a rental. Live with Mom. Home ownership is not within reach of so many in this country.
So, the theories above might be true. And yet, for me, it hit home shortly after I had my son 10 years ago, shortly after I wrote my last blog post. You see, my wife and I were prepared to live in our apartment at least through our child’s elementary school. We loved the Potrero Hill Neighborhood, our friends, the school down the street. We knew neighbors who lived their with three children and both adults in a one bedroom apartment. Surely we could do it in a two bedroom condo, 750 square feet? With beautiful parks nearby, great restaurants, views of the city…And then our landlord raised the rent twice in 3 months, it went up by 70%. The place wasn’t worth that much. So, we moved out to a place that was 100% more than what we were paying – brand new condo in Dogpatch, never lived in. A local couple who lived in the East Bay, bought it before they had a child, then got pregnant, and kept it as an investment property. It had nice new appliances.
I was fortunate to be able to afford that luxury apartment. And yet I felt extremely unstable. Would housing go up again that much? Where would I move then? With what I was paying in rent ($4950 a month for a two bedroom condo), if I could save up enough for a down payment on a house, I could afford to use that as a mortgage for a home. All my “rent” that I was throwing away would go to my principal (after paying the bank’s interest). So, I saved up 11%, was fortunate to have RSU’s from Yahoo that I could apply to my down payment, and Wells Fargo (who didn’t collapse in the previous subprime housing crisis) loaned me the rest of the money on a 30 year fixed mortgage. So, 4 years ago, with my son about to go to Kindergarten, I closed on my home in the south part of the city. My son got into a bilingual bicultural japanese american elementary school (Rosa Parks Elementary) courtesy of 4 rounds of the baffling SFUSD lottery process. I did it.
After I moved in, I was puzzled why two blocks from my house, there was a derelict greenhouse down the street. I wondered about this, but, I had many things to do to improve my house, and I was commuting daily to the South Bay, so I didn’t have much time to devote to civic matters.
Then I saw signs popping up in my neighborhood, to save that parcel. Why would they want to save broken down greenhouses from the 1930’s? Sure, it’s the last vestige of our neighborhood as the flower growing part of SF. And they wanted to make it into an urban farm. That seemed interesting, who would object to a farm. And then I got a call from someone at YIMBY. He wanted to interview me to understand my views on the housing crisis in the bay area. I went to coffee with him. He was a college student during summer vacation, working for a political action group, funded by the housing developers who purchased 770 woolsey. They wanted to double the number of houses on that lot from 70 to 140, to make it economically viable for them to go through the long and contentious permit change process to increase density on that lot. Part of this was a series of community meetings the developers needed to have. I was on the front lines of this, as someone who lived in the neighborhood.
When I met with the student, I was skeptical. And yet, the more I listened to his arguments, I found it difficult to defend building an urban farm on a lot right beside the second largest park in San Francisco.
I did some research, and found out that worldwide, the areas with the largest housing crises are those that make it most difficult to build new housing. Hong Kong, whose housing stock is controlled by oligarchs, makes it very difficult to build new housing. Singapore government, in contrast, owns its land and releases housing when the cost of housing gets too high.
Our beautiful green spaces are also not harmless. Urban Growth boundaries correlate with high housing costs. While no one loves the urban sprawl of Beijing, LA, Tokyo, the alternative is the eye-watering prices of housing in London, San Francisco and Boulder Colorado and their attendant social ills. In Tokyo, they improved their public transit, high speed rails to enable citizens to get to the mountains. Let’s keep nature in nature, and let cities be cities.
I want to understand the forces at work. How does one of the richest cities in the world, with the most opportunity, have one of the most visible and worst homeless problems in the US? LA, Portland, Seattle are also up there. High cost of housing seems to correlate with rising homelessness. My idea is that if we understand the root cause of the housing crisis, we can do something about it. What is mentionable is manageable, as Fred Rogers said.
Later on, I actually met up with the woman behind saving the urban farm at a Christmas Party. She was nice, and I brought up my concern. Her point was, she is not antidevelopment. She wouldn’t oppose the construction if they built affordable housing on 770 Woolsey. It’s true, that given the tremendous delay in building for so many years, when developers build now they can afford to build 100% luxury units. Unlike in days past when developers could only afford a small % of luxury units. So, regulators step in to mandate affordable units. And yet, I hear many of those units sit empty.
So, what specifically can be done about this? There are a few things. First, we need to stop propping up the real estate market. We’ve started already by reducing the mortgage interest deduction. Stop promoting housing as the path to financial independence and a status symbol. Start making it easier for developers to densify and build, especially where the jobs are. Support politicians like Scott Wiener who is looking for ways to make more housing for the young families who want a slice of the Bay Area economic success.
Why does Palo Alto look the same as it did 50 years ago? The markets are saying that the value of the land is worth enough to put 10x the amount of people currently on the land by transit. And yet our policies that enable anyone to challenge their neighborhood housing development discourage densification.
Why do people oppose this kind of growth? In SF, we see ballot measures every year trying to limit shadows, other restrictions for the purpose of making living in the cities better for children, residents. These might be good reasons. A less laudable reason is the homevoter hypothesis. That says homeowners tend to oppose policies that would hurt their housing resale value. More housing would increase the supply, which would reduce the value of their house.
However, I don’t think it is that cold and calculated. Loss aversion says that people are more likely to do things that avoid losing something, than gaining something. What do home owners stand to lose by local construction? Who knows who will move in? Who knows what will happen to my easy parking? What about my view? When you buy a house, you are looking for some stability, security. Change in the form of high rise apartments represents the opposite of that.
So, I think, like me, the YIMBY’s have it right. You need to address the loss aversion at the source in addition to the policy changes that limit housing stock and drive up demand. I’m less likely to resist change as a new homeowner, than someone who has lived there 30 years. Target them, get them to see themselves as someone who supports affordable housing by increasing the overall stock of housing.
I haven’t covered another side of the map, which is the demand side. It’s no mistake that the city has experienced another form of loss. Artists, restaurant workers, teachers, firefighters, teachers, waiters, policemen, security guards, bus drivers can no longer afford to live here unless they are lucky enough to have roommates or marry a rich tech worker. Even doctors and lawyers are having a tough time. High tech, which I’m a part, has driven up the price of housing. One east bay resident, I met skiing in Tahoe, frustrated with how long it took to get into the city over the bay bridge. She said, “I wish we had a recession to ease the traffic.” Unfortunately for us, with COVID-19, she got her wish.
Long term, I wonder what else COVID-19 has taught us. Why do well paid tech workers need to live in a place that is so expensive. If we figure out how to Zoom and Slack our way to productivity, why would companies keep their policies to locate workers in expensive urban centers. Sure, it’s better to live in cities to make connections, face to face, meetups, etc. Now that COVID-19 is forcing us to stay at home, that benefit seems muted at best.
Many of the young tech workers at my company, for instance, have returned home during the shelter in place. They would rather live with their parents than in cramped apartments with roommates. As Matt Mullenweg talked about in his podcast with Sam Harris and I summarized here, soon the big expensive office spaces will be converted to We Work lofts, and will become empty as tech workers search for a better quality of life, better schools, while retaining their high salaries.
What do you think? What factors am I missing on my map? Feel free to create a free account on http://kumu.io and comment. Or ping me on twitter at https://twitter.com/ekraay. Or you can leave a comment here, but I don’t read them so much anymore, too much spam.