Update — As Cody pointed out, it might be nice to link to the actual article. Also, the original version of this post misspelled Ms Cutler’s second name.
Last week, Techcrunch’s Kim-Mai Cutler published an excellent – and detailed – summary of the history of housing, affordability and the housing development environment in the Bay Area. You may not be aware, but in the Bay Area in general and San Francisco in particular there has been a growing movement of people who are unhappy with gentrification and rising rents that they believe has been caused by the tech industry. Protesters have been blocking and vandalising Google buses and have even been known to harass Google employees at homes (full disclosure, I work for Google in Seattle). I highly recommend the post, it’s truly excellent, and a few interesting titbits jumped out at me, and I thought I would share them.
The big advancement in thinking in the article is about how rent control and NIMBYism interplay and create a startlingly hostile environment that pushes affordability out of anyone’s best interest:
San Francisco has a roughly thirty-five percent homeownership rate. Then 172,000 units of the city’s 376,940 housing units are under rent control. (That’s about 75 percent of the city’s rental stock.)
Homeowners have a strong economic incentive to restrict supply because it supports price appreciation of their own homes. It’s understandable. Many of them have put the bulk of their net worth into their homes and they don’t want to lose that. So they engage in NIMBYism under the name of preservationism or environmentalism, even though denying in-fill development here creates pressures for sprawl elsewhere. They do this through hundreds of politically powerful neighborhood groups throughout San Francisco like the Telegraph Hill Dwellers.
Then the rent-controlled tenants care far more about eviction protections than increasing supply. That’s because their most vulnerable constituents are paying rents that are so far below market-rate, that only an ungodly amount of construction could possibly help them. Plus, that construction wouldn’t happen fast enough — especially for elderly tenants.
So we’re looking at as much as 80 percent of the city that isn’t naturally oriented to add to the housing stock.
More below the fold.
You’ll also end up seeing demonstrations like this one at 16th and Mission, which protest a proposed 351-unit condominium development that replaces a Walgreens and a Burger King. It does not remove any existing housing or directly displace anyone.
At face value, this might not make sense. But there are a couple reasons that this happens. One is that gentrification raises the gap between market-rate rents and rent-controlled rents, strengthening the financial incentive for landlords to evict longtime tenants.
Carter discusses the history of gentrification, the “great inversion” (where millennials move to the city rather than the suburbs) and how bad housing policy has made the entire region unaffordable:
So the wealthy voting classes of the peninsula are also strangling themselves of housing too. The median rent in Mountain View is $2,700 compared to $3,400 in San Francisco, according to Zillow. Once you factor in the cost of owning a car — estimated at slightly more than $9,000 a year by the AAA — it’s not that much cheaper.
If you look even closer to the Caltrain stations, rents go way up. The newly-opened Madera complex in downtown Mountain View rents out 1-bedroom units starting at $3,299 all the way up to 2-bedroom apartments at $8,000 per month.
Ironically, I am writing this post from a two-bedroom apartment in the Madera complex in Mountain View. The article is really long, and I don’t agree with everything in it, but I think as rent control and protectionism rear their heads in our area, it’s useful to see what kind of mess they have made of Bay Area housing.