San Francisco cannot solve the Bay Area’s affordable housing crisis on its own

In the Follow the Money column published April 29, I argued that over the next 20 years the greater Bay Area must increase its existing housing stock by approximately 50 percent to bring housing costs down to an acceptable level. San Francisco cannot by itself build enough housing to address the affordability crisis.. Only a concerted effort by the entire Bay Area is sufficient to the task.

San Francisco’s population is approximately 885,000, and while that is only 11 percent of the nine-county Bay Area population of 7.73 million, our population density is over 18,800 people per square mile. This makes us second among US cities (behind New York City, with 28,500 people per square mile), and well ahead of third ranked Boston (14,150 people per square mile). While there are some nice large cities around the world that are much denser (e.g. Paris has 55,000 residents per square mile), San Francisco is very dense by US standards and already struggles to build the infrastructure we need to grow further. Meanwhile, no other Bay Area county is even one eighth as dense as San Francisco. Therefore, the majority of the residential construction needed to bring down housing costs both in San Francisco and throughout the Bay Area must take place in the other, far less densely populated counties.

(Still, I want to be crystal clear that The City must continue to do its part and say “Yes, In My Back Yard!” to more housing. For example, I support building more transit-friendly housing in the Sunset District where I live. Within five blocks of our house are two large apartment buildings along the Irving Street commercial corridor. Both flatter our neighborhood character; we should be building more like them.)

The table shows the number of new housing units for which permits were issued in calendar year 2015-2017 compared to the state-issued target of how much new housing each county should create. In my opinion these Regional Housing Needs Allocation targets are too low, but they provide a useful benchmark. No county issued permits for even half the targeted level of housing over the three year time period, yet super-dense San Francisco came closer than most.

What can be done to improve our region’s housing production?

The Metropolitan Transportation Commission (MTC) convened a blue ribbon “Committee to House the Bay Area” (CASA) from Summer 2017 through Fall 2018 to develop a Regional Housing Implementation Strategy to answer that question. (Disclosure: I have been a member of the MTC Policy Advisory Council since November 2017, but I have not been involved in CASA.) CASA will soon issue its final report. Below is a summary of its current draft recommendations for state legislation:

Tenant Protections

1. Determine “just cause” eviction standards to protect against arbitrary evictions 2. Establish a 15-year cap on annual rent increases of CPI + five percent 3. Provide a right to legal counsel for eviction proceedings

Housing Inclusion and Capacity

4. Remove regulatory barriers blocking accessory dwelling units and Tiny Homes 5. Develop a next iteration of SB 827 (Scott Wiener’s proposed bill from earlier this year) to loosen local zoning restrictions on multi-unit housing along transit corridors 6. Establish “good governance” standards for the entitlement and permitting of zoning-compliant residential projects, and require transparency and consistency in residential impact fees

Approval Process and Timeline

7. Improve SB 35 (Scott Wiener’s bill, which became law last year and created a mechanism for streamlining the local housing approval process when cities are not meeting their state-mandated housing creation goals) by adding certain targeted economic incentives and providing a clear California Environmental Quality Act statutory exemption 8. Promote increased utilization of public land for building housing

Funding and Coordination

9. Raise $1.5 billion in new revenue annually to fund implementation of the CASA Compact 10. Create a regional entity (without regulatory or enforcement authority) to shepherd the CASA Compact through the legislature, track and report progress, and provide incentives and technical assistance.

There are many good ideas here, but at the same time, I fear that CASA missed an opportunity to put forward something sufficiently bold and creative to meet the magnitude of the challenge. In my opinion, the most important root cause of the long-standing underproduction of housing in California is a misalignment of fiscal incentives. Approving the construction of residential units is generally a money-loser for the budget of a city or county because the costs of more services provided to a larger population outweigh the increased tax revenue that can be raised. The reverse is true for the construction of commercial units, which is generally a money-maker. As long as the efforts to build more housing consist of a state government trying to cram a money-loser down the throats of cities and counties, the cities and counties will forcefully resist.

But what if, instead, a different allocation of costs and revenues changed the fiscal incentives? What if a reformed tax code incentivized Bay Area counties to compete vigorously to build housing to attract more residents?

Is that too crazy to contemplate? It is even crazier that the Bay Area – as well as most of the state of California – keeps refusing to build the housing its citizens need.