Probably the single biggest challenge facing American cities today is the lack of affordable housing. We are just finding out the details of why this has become such a problem. A random guy decided to track San Francisco rent prices over the past sixty years through the methodology of a quality historical study: he went to microfilm and charted rental ads.
There are some ups and downs, but for the most part there is a very simple trend: 6.6 percent.
That’s the amount the rent has gone up every year, on average, since 1956. It was true before rent control; it was true after rent control. It wasn’t entirely true during the 2000 tech bubble, but it was still sort of true and it became true again afterward.
6.6 percent is 2.5 percentage points faster than inflation, which doesn’t seem like a lot but when you do it for 60 years in a row it means housing prices quadruple compared to everything else you have to buy.
The first thing that stands out is the important point that rent control has not negatively affected rental prices. May not have helped either but this is important evidence against those who demonize rent control. The second thing that stands out is that 6.6 percent over 60 years adds up to a lot of money and suggests that the roots of the housing problem in San Francisco run deeper than the tech boom. What would help solve these problems and make housing affordable?
It would take a 53% increase in the housing supply (200,000 new units), or a 44% drop in CPI-adjusted salaries, or a 51% drop in employment, to cut prices by two thirds.
OK, so this would mean the way to make San Francisco as affordable as (say) Portland would be to either cut everybody’s salary in half, or fire half of them, or rapidly increase the number of homes by 50 percent, which would let the population rapidly leap to about 1.2 million.
Oh. Well. That’s not good. Is there any way forward? Maybe.
1. Adding new units is mostly only going to keep shit from getting worse.
1a. That’s still a good thing.
2. Rent control does not seem to be a huge cause of the problem per se. Shit was bad before; shit was bad after; shit did not get notably better or worse for the median apartment seeker, at least if you start in 1956. (On the other hand, something odd is going on in Fischer’s early price data from the 40s. If you omit the 1950–1960 dip in rents, then everything before rent control in 1979 starts looking more like a plateau. Here’s his first chart again for good measure.)
2a. The way that rent control might matter indirectly is if it leads indirectly to fewer new units, for example because it gives people a reason to protest or sue to prevent developers from replacing little old rent-controlled buildings with big new market-rate ones. Which is pretty understandable on the part of the poor people but it’s still a shitty outcome, because (as Fischer’s formula suggests) every fancy new roof holds prices down a little bit because the rich people under it don’t push middle-class people out from under their middle-quality roofs, and so on down the line until someone ends up in a tent.
2b. Still, there’s no clear sign in this data that rent control has had this additional anti-new-housing effect on San Francisco. Again: shit was bad before. Shit was bad after.
3. Cutting infill development costs would help if there are ways to do that without screwing other things up too much.
4. If there is something stopping the housing market from building enough new homes for newcomers, then it’s probably got to be something that arrived around 1960 or earlier.
And the alternative, endless sprawl, is a completely unsustainable environmental disaster.
And as rental prices skyrocket around the nation (my own just went up $100 a month…) and with home ownership at a 48 year low, Rachel Cohen highlights a recent report demonstrating how new categories of subsidized rental housing actually encourage racial segregation by appealing to relatively affluent whites that force people of color into more segregated neighborhoods.
Amid this housing policy landscape comes a provocative new report from the Institute of Metropolitan Opportunity (IMO), a research and advocacy organization associated with the University of Minnesota, which looks at what they call a new category of subsidized housing—one catering to whiter and comparatively more affluent people than the typical residents of affordable developments. IMO says that while many of these projects, which rely on federal Low Income Housing Tax Credits (LIHTC), may advance public policy goals like historic preservation and economic development, they also worsen racial and economic segregation and likely violate fair housing laws. Coining these developments Politically Opportune Subsidized Housing, or “POSH,” IMO suggests that affordable housing development can create segregation not only within and between communities, but also within the subsidized housing system itself.
The report focuses primarily on the Twin Cities—the most segregated predominately white metropolitan area in the United States—but the authors also explore how similar subsidized development projects have proliferated around the country. While many of these projects are marketed specifically to artists, using a special exemption that developers lobbied for from Congress during the recession, other similar projects target teachers and veterans. Such projects carry decided political appeal, as millions of middle-class families struggle with housing costs, too.
But these POSH units, which come with a host of fancy amenities, are extraordinarily expensive. In the Twin Cities, IMO finds the average per-unit total development cost of a POSH project to be $347,500, compared with $266,000 per unit for traditional subsidized housing. For POSH projects specifically designated as artist housing, per-unit costs can reach as high as $670,000. POSH projects are, they say, likely the most expensive subsidized housing developments in Minnesota’s history.
The residents in POSH housing also look quite different than those who live in traditional subsidized housing. While more than 70 percent of residents in Twin Cities Low Income Housing Tax Credit projects are nonwhite, more than 65 percent of Twin Cities POSH residents are white. In some buildings, the resident percentages top 80 percent and 90 percent white.
IMO suggests that these POSH projects may violate federal fair housing laws. Some artist housing, for example, imposes screening mechanisms, many of which could create discriminatory hurdles for low-income minority applicants. IMO quotes a legal aid attorney saying, “You have to try really, really hard to find 80 or 85 percent white people in the poor population of Minneapolis. You have to have a really good sorting system.”
There’s no question that the affordable housing issue needs to be a top priority for policymakers. There are no easy answers, but whatever solution that comes forward is going to have to combine a lot of dense building, public transportation systems without large parking requirements for individual vehicles, and probably mandated public housing with rent control and a funding mechanism to maintain said housing for the very poor.