San Francisco Forgets Housing Lessons of Dot-Com Boom

by on October 29, 2019

South Bay Jobs Boost SF Evictions, Rents

One year ago, the University of California Press released Generation Priced Out: Who Gets to Live in the New Urban America. My book outlines the causes of the urban housing crisis and offers strategies for increasing housing affordability in over a dozen progressive cities, including San Francisco.

Unfortunately, last week’s Board of Supervisors committee vote to increase housing/office linkage fees showed support in San Francisco for repeating the failed policies of the past. The problem is not raising the linkage fee, which has broad support (the full Board vote is today). Rather, it was the debate over whether the new fee could deter future projects and/or reduce jobs.

Backers of the fee argued that “if the city stops adding new jobs it might help the housing crisis.” According to them, San Francisco does not need to build more market-rate housing because “current construction is meeting the needs of ‘higher wage workers.”

The city has been down this misguided path before. The 1997-2001 dot-com boom proved that not adding jobs and not building market-rate housing does not improve San Francisco’s affordability. To the contrary, the city’s failure to build housing in response  to the Silicon Valley boom proved catastrophic for the city’s low-income, working and middle-class.

The Dot Com Boom

The 1997-2001 dot com boom triggered San Francisco’s extreme affordability crisis. Many neighborhoods had already undergone gentrification and displacement, but the sudden influx of tens of thousands of Silicon Valley tech workers into San Francisco caused no-fault evictions and rents to skyrocket. Unable to secure housing near their jobs—South Bay cities used “local control” to stop new housing—these high-wage workers moved to the Mission, Noe Valley and other San Francisco neighborhoods.

San Francisco could have built housing to serve these high-wage workers. I argued at the time that new housing would reduce owner move-in and Ellis Act evictions and slow the spiraling rents caused by tech and other high-wage workers seeking housing. The city needed to give tech workers alternatives to evicting tenants and bidding up vacant rent controlled-units in their own desperate search for homes.

But many activists opposed new market rate housing. As a result, the only housing that emerged during these years was live-work lofts, which were allowed as an industrial rather than housing use.

Although activists attacked live-work lofts for fueling gentrification, the real problem faced by Mission tenants was the conversion of rental units to tenancies a common—a point made in my July 1999 New Mission News column “Lofts and the TIC Infestation” discussed in the book. Lofts were built on vacant industrial zoned sites and they displaced no tenants. There was no geographic connection between loft construction and nearby owner move-in or Ellis Act evictions.

Among the first acts by the “progressive” Board majority in 2001 was to kill live-work lofts. Although they sold for far less than a new condo or single-family home and were the greatest new source of middle-class housing that San Francisco had seen in decades, the Board only wanted “affordable” housing built in the city.

Homeowner profits have soared by restricting new housing, as San Francisco as median home prices now exceed $1.6 million. The idea that high-wage workers employed outside San Francisco would not impact the city’s housing market was conclusively disproved during the dot-com boom. Yet that discredited view still controls the city’s “progressive” housing agenda.

Rents and home prices have never declined in San Francisco by stopping housing. Instead, they have skyrocketed. Yet those still clinging to anti-development politics think that if we just keep the high-paying jobs and market rate housing out of San Francisco all will be well—notwithstanding the past 25 years of contrary evidence.

Stripe Relocates to South San Francisco

Stripe announced last week that it was moving its 1000 employees out of San Francisco to South San Francisco. The move should open up several hundred San Francisco vacancies as employees move to South San Francisco, right? And Stripe’s future employees will live in South San Francisco so they won’t impact San Francisco’s housing stock, correct?

It’s foolish to even ask such questions. We know the answer: many higher wage workers in the South Bay have few housing options near their jobs and will choose to live in San Francisco. By not building housing for these workers San Francisco guarantees they will price out what’s left of its working and middle-class.

In this week’s SF Business Times (subscription only), Blanca Torres’ front-page story “Why is the Peninsula so afraid of housing”  notes that from 2010 to 2017, San Mateo County added 83,000 new jobs, but only 7,100 new housing units — a 12-to-1 ratio. And this jobs/housing imbalance within commute distance from San Francisco will soon get a lot worse: Genentech is set to double its space to 9 million square feet, Kilroy will add 2 million at Oyster Point,  and YouTube plans nearly 2.5 million square feet in San Bruno.

Many of these workers will seek housing in San Francisco. And as long as supervisors block market rate housing for these workers, owner move-in and Ellis evictions will rise. A virtual “Hunger Games” competition for vacant San Francisco apartments will drive rents further into the stratosphere.

The Need to Build Housing

Opponents of increased density routinely insist that cities can’t “build their way out of the housing crisis” (ignoring that few make such a claim). But San Francisco became a national cautionary tale for unaffordability by not building housing.

From Seattle to Boston to Denver to cities in between, prices decline when housing inventory increases. In contrast,  San Francisco’s failure to meaningfully boost supply has consistently raised prices.

San Francisco has never even tried to significantly boost housing supply. Instead, its “progressive” majority—today and in the past—ignores that stopping jobs within the city and barring new market-rate housing do nothing to improve affordability. These “progressives” favor “affordable” housing so long as it is exclusively built by nonprofits, can be challenged via discretionary review, and does not alter zoning restrictions on the Westside and other single-family home neighborhoods.

I’ve been excited over the past year since my book was released to see cities from Austin to Minneapolis to San Diego to Portland joining with Oregon to increase housing density.  The 3P’s of tenant protection,  rental housing preservation, and housing production now dominate California politics. Infill housing has become a central part of the essential Green New Deal; opposition to exclusionary single-family home zoning is now backed by national progressive leaders like Bernie Sanders, Elizabeth Warren and Alexandria Ocasio-Cortez.

San Francisco is out of touch with the national progressive movement when it comes to urban housing policy. And if housing opponents get their way, the city’s unaffordability will get worse.

Randy Shaw is Editor of Beyond Chron. He is the author of Generation Priced Out: Who Gets to Live in the New Urban America

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Randy Shaw

Randy Shaw is the Editor of Beyond Chron and the Director of San Francisco’s Tenderloin Housing Clinic, which publishes Beyond Chron. Shaw latest book is Generation Priced Out: Who Gets to Live in the New Urban America. He is the author of four prior books on activism, including The Activist's Handbook: Winning Social Change in the 21st Century, and Beyond the Fields: Cesar Chavez, the UFW and the Struggle for Justice in the 21st Century. He is also the author of The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco

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