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New study challenges Wiener’s approach to housing

Eminent economic geographers say that deregulation and upzoning will make gentrification in cities like SF much worse.

By Tim Redmond

Pretty much everybody who’s paying attention to the housing crisis in San Francisco – except, apparently, the Chronicle – is talking about the new study by eminent economic geographers Andrés Rodríguez-Pose and Michael Storper that argues against looser zoning rules as a solution to the housing crisis.

Even Richard Florida, who used to love the idea of cities attracting the young “creative class” (before he discovered gentrification) says the study is important. It’s the latest in a series of studies that challenge the notion that allowing the private market to build more housing will bring down prices.

Wiener-bill-effect-in-SF
The Wiener bill would upzone 96 percent of San Francisco

In that sense, it’s a direct challenge to Sen. Scott Wiener’s SB 50, which seeks to deregulate housing in large counties.

Storper and Rodríguez-Pose start by debunking the proposition that the solution to economic inequality is to encourage more low-skilled and underpaid workers to move to vibrant, growing cities where they can find work:

According to this dominant view within economics, relaxing zoning and other planning regulations in the most prosperous cities is crucial to unleash the economic potential of cities and nations and to facilitate within-country migration. In this article, we contend that the bulk of the claims of the housing as opportunity approach are fundamentally flawed and lead to simplistic and misguided policy recommendations.

They describe the mainstream economic argument that there’s no value to place, and that struggling cities can’t be save so everyone should move to somewhere like San Francisco, which should grow as necessary to accommodate that migration.

And they say that it’s fundamentally flawed:

The basic set-up here derives from spatial equilibrium theory, which holds that city size and population growth are the only important factors for economic growth, because once the conditions are in place for population growth, jobs and output growth will follow (Glaeser, 2008). This model explicitly rejects using income, per capita income, or the wage structure as measures of urban performance.

Then they get into the SB 50 argument, which relies on the old-fashioned economic assumption that supply and demand are the only real factors that affect price, and therefore more housing supply will automatically bring prices down.

But:

housing markets are not like standard markets, so that aggregate increases in supply do not translate in any straightforward way to decreases in price, because the internal plumbing of housing markets – succession, migration, and occupation patterns – are full of frictions, sunk costs, barriers and externalities that make the effects of aggregate supply increases highly uneven, and in many cases involve unintended or contradictory effects.

In fact, they argue, in a city like San Francisco, relaxing zoning controls to allow more density will likely have the opposite effect: Existing vulnerable communities will be displaced to further suburbs, while housing prices will remain high in the city.

That’s the exact opposite of what a strange article in The Nation says. In the story, Benjamin Schneider suggests that the only opposition to SB 50 comes from rich homeowners who support exclusionary zoning. Actually, in San Francisco, pretty much the entire organized tenant movement and nearly every social-justice organization in the progressive community opposes Wiener’s bill. Those groups say, like Storper, that the Wiener approach will make the housing crisis worse.

The main reason: The housing that the market will provide is not going to help lower-income people who face the pressures of gentrification.

we now argue that policies such as blanket upzoning, which will principally unleash market forces that serve high income earners, are therefore likely to reinforce the effects of income inequality rather than tempering them … There is virtually no evidence that substantially lower costs would trickle down to the lower two-thirds of households or provide quality upgrading of their neighbourhoods, but it undoubtedly would enhance displacement in neighbourhoods currently at the boundary of higher-income inner metropolitan areas. Indeed, according to Zillow data reported in The Washington Post (August 6, 2018), rents are now declining for the highest earners while continuing to increase for the poorest in San Francisco, Atlanta, Nashville, Chicago, Philadelphia, Denver, Pittsburgh, and Washington, noting that a boom in luxury construction in these areas has failed to ease housing market competition for cheaper properties.

They argue that increased market-rate housing drives up land values and brings higher-income people into one-inexpensive neighborhoods:

In any event, all types of lower-income households in prosperous regions pay the price of ‘displacement’ in competing with higher-wage workers who benefit from upzoning to gentrify neighbourhoods, as they occupy its newer, higher quality housing.

The two authors suggest that public policy aimed at increasing housing affordability require public subsidies and regulation – and a process for funding the subsidies. In California today, Gov. Newsom is sitting on a $25 billion budget surplus, while the housing crisis and homelessness are among the most pressing issues facing the state. That kind of money could make a huge difference: Even half of the surplus, targeted for affordable housing in major cities – could be used with local and federal matches to create tens of thousands of new social housing units, enough to make a serious dent in the crisis.

Combined with the repeal of the Ellis Act and Costa-Hawkins, which prevent effective rent-control and eviction protections, and commercial rent control, which would protect existing community-serving businesses, California could move strongly to reduce gentrification and displacement.

But those are regulation-and-subsidy moves, that don’t seem to have much support in what has become the mainstream of policy thought in this state.

Storper and Rodríguez-Pose also worry that all this focus on growth in prosperous cities ignores the regions that are left behind –places that, with some government assistance and economic development, could once again be successful communities.

In the end, they directly take on the Wiener approach:

It is our view that too much is being promised to policy-makers about the supposed potential benefits of housing market de-regulation. At the same time, in the rush to promote an oversimplified vision of “densify near transit stops”, too little consideration is being given to the policies that would promote affordability for the right people in the right places.

SB 50 is moving forward in the state Legislature. Critics all over the state (including tenant groups and economic justice advocates in cities, not just the rich suburbs) are organizing against it.

This article first appeared on 48hills. It has been reprinted with permission of the author.

Comments

Ron O

What a great article! Makes sense.

Roberta L. Millstein

It's worth noting that SB 50 would have a huge impact in Davis as well.

Rik Keller

I think the most succinct critique of SB50 I’ve seen is that it is a “real estate bill, not a housing bill.”

Ron O

By the way, I posted a link directly to the article above, and quoted some pertinent sections on the Vanguard.

I would have mentioned that I became aware of this article via the Davisite (where one can read the entire text), but I suspect that the Vanguard moderator would have deleted it. (The Vanguard moderator has already deleted another general reference to the Davisite today, without explanation or any apparent support - e.g., via written policy.)

I have requested clarification, regarding the Vanguard's moderation policy. So far, I've only been notified that the moderator does not wish to be quoted.

Nancy Price

I am so glad to read this post and agree with the comments. SB50 is a developers' dream, but so is the current plan for "revival" of our downtown.

Similar to SF, downtown Davis is being sold to us as the central place in the economic hierarchy (though in SF many are leaving because they can't afford to live/work there). Why should our downtown be drastically rebuilt as "the central place," when, in fact, we've got "regional" shopping centers that can be "developed" as economic nodes to which people can walk, bike, scooter etc., meet their neighbors? We keep focusing on bringing people into the downtown to live and thus work (how many really work downtown?) and play, but a different economic development plan could envision making our shopping center areas really attractive walkable, living and work places. We need a plan that assists in the development and support of small businesses, co-ops, work-live spaces in the regional shopping centers. We can make all areas of Davis vibrant, but we keep focusing on the downtown, which is becoming more impossible...if not for cars, also for pedestrians at night. A continued focus only on the downtown perpetuates the "parking problem." Isn't if true that a dollar spent anywhere in Davis goes into the city's coffers?

Ron O

Nancy: I agree entirely, regarding Davis' downtown.

One of the "fake" arguments seems to be that retail is dying, so let's "shovel more people" toward it. In fact, Davis has already grown considerably, but this fact hasn't "saved" local retail in Davis (or San Francisco, for that matter). I recall previously posting an article on the Vanguard, which showed that a new mall is struggling in the mid-Market street area of San Francisco. I think the following article (titled "SF’s empty new mall on a Market Street full of challenges")
refers to the same mall:

https://www.sfchronicle.com/politics/article/At-SF-s-Mid-Market-6X6-mall-street-life-is-an-13170003.php

Adding more residents directly downtown will make it that much more difficult to retain existing customers, and will create conflicts with existing businesses (via noise, traffic, parking, etc.).

The entire effort seems to be driven by those trying to make money, at the EXPENSE of downtown. It's a fake argument, put forth by development interests.

Colin Walsh

Something that needs to be considered in relation to the push for mixed use buildings in the downtown is the 2008 "one Percent Growth Resolution. This resolution that directs the City to grow at 1% excludes mixed use from consideration. So, Davis can grow much faster than 1% a year, so long as the growth comes as mixed use.

From the 2017 state of the City report:
“One Percent” Growth Resolution Housing/growth resolution #08-019 adopted in 2008 establishes an annual one percent growth cap (approximately 260 units) not counting affordable housing, accessory dwelling units, and units in mixed-use buildings. The City Council may grant exemptions for projects providing extraordinary community benefits. It is understood that multi-family rental developments may require units to be “rolled over” and accumulated because of construction and phasing constraints. Consistency with the growth cap is evaluated each year by the City Council.
https://cityofdavis.org/home/showdocument?id=7985 page 36

Rik Keller

Ron O.: good luck getting your comments past the Vanguard moderator! I have screenshots of many many on-topic comments that have been deleted there in recent weeks merely because they have offered critiques of the article.

The Vanguard’s guiding principles state that: “Users are free to comment and express any opinion they wish to, so long as they avoid the use of profanity and avoid making unnecessary personal attacks. The Vanguard will never edit or remove a comment for content, criticism, or disagreement with a stated position.”

But as you and others have found out, it’s clear that they don’t follow this—or many of their supposed principles—at all.

In contrast, the Davisite only moderates comments for personal attacks and name-calling. And it means it.

Getting back to the subject of SB50, it’s is notable that earlier this week the Vanguard deceptively repurposed the writing and research of a San Francisco Chronicle article on the subject without permission. The reporter was completely shocked when he found out, and now the editor is investigating. In contrast, the Davisite sought and received permission from the author of this article to republish it here.

Ron O

Thanks, Rik.

I'm not actually trying to get comments past the Vanguard's moderator. I'm trying to find out what the policy actually is in the first place!

I haven't found anything in writing on the Vanguard's website, prohibiting links to the Davisite. At one time, the Vanguard seemed to allow general references to the Davisite. (No longer, it seems.)

I realize that some of your comments (regarding various subjects) have met the same fate, for unknown reasons. I recall seeing a few of them, before they "disappeared". (Glad to hear that you've saved some screenshots.)

The moderator has declined to comment, regarding my inquiry as to the location of any pertinent policy.

I may write an article at some point, regarding what appears to be a lack of policy at the Vanguard. Not sure what guidelines the moderator is using, when making decisions.

On a related note, I noticed that the Davisite sought out (and received permission) to reprint the article, above.

Nancy Price

Who IS the Vanguard moderator(s)? Seems to me that the name Vanguard” is a misunderstanding of the historical use of this word.

Ron O

Nancy: As far as I know, Don Shor is the only moderator for the Vanguard. However, I doubt that he has made the decision to delete references to the Davisite, on his own. (Again, there seems to be no written policy regarding this.)

In reference to your question regarding the historical use of the word "Vanguard", one definition is as follows:

"A group of people leading the way in new developments or ideas."

https://en.oxforddictionaries.com/definition/vanguard

(So, perhaps it is "appropriately-named".)

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