There's a raging debate over what to do about it. Traditionally, many affordable housing advocates have viewed market-rate housing developers with suspicion. In their view, developers make things worse by building luxury condos that are too expensive for ordinary San Franciscans. This kind of thinking is behind a recent proposal to freeze market-rate housing development in a neighborhood called the Mission.
But a new generation of affordable housing advocates have a different view. For example, Sonja Trauss leads a new group called the San Francisco Bay Area Renters Federation — "SFBARF" for short — that believes promoting development, rather than stopping it, is the key to making the region affordable again. She hopes to remove legal barriers to housing construction in order to unleash a major building boom in San Francisco and throughout the Bay Area.
This is a fight with national implications. The Bay Area has become the center of American innovation, yet strict housing regulations in San Francisco and Silicon Valley have stunted job creation there. Other big coastal cities are struggling with similar problems. A recent study suggests that relaxing housing regulations in the San Francisco and New York metropolitan areas along could boost the American economy by hundreds of billions of dollars.
But the politics of this are tricky. Everyone supports more housing somewhere, but hardly anyone wants housing to be built near them. People like their neighborhoods the way they are and worry that development will change them for the worse. Ultimately, then, the Bay Area housing fight is about culture as much as it is about economics. Solving the region's housing crisis will require convincing ordinary voters that long-term benefits of more plentiful housing will be worth the upheaval that would result from a building boom.
Why long-time Mission residents hate luxury condos
On June 2, the Board of Supervisors, San Francisco's city council, met to consider a proposal by supervisor David Campos to freeze market-rate housing construction in the Mission, a neighborhood Campos represents. The supervisors heard comments from constituents for more than seven hours.
Most of the speakers favored the moratorium. The Mission has traditionally had a large Hispanic population, but surging demand for housing there has led to a steady attrition of Hispanic residents over the past 15 years. The neighborhood's strict rent control laws mean that it's not easy for landlords to force out existing residents. But when longtime renters move, landlords can boost rents to market levels, which means the new residents are likely to have little in common with the old ones.
Writing for San Francisco Weekly, Julia Carrie Wong described how many longtime Mission residents feel about the changes in their neighborhood — and why so many are hostile to the construction of new condos there:
These new glass and concrete edifices contribute to the alienation of the neighborhood's old residents. As do the fancy new restaurants and boutiques that working class residents can't afford. As do the giant tech shuttles lumbering through the narrow streets. For some, these are neighborhood improvements that provide jobs and improve the economy. But for those who will never enter them unless it's through the back door to wash dishes, deliver food, or clean rooms, they are just another reminder that they no longer belong.
Advocates of the Campos moratorium conceded that it wasn't a long-term solution to the neighborhood's affordability crisis. But they hoped the measure — which would have lasted for at least 45 days and been renewable for up to two years — would focus the city's attention on the issue and give it time to buy land for subsidized housing projects before private developers get it.
The Board of Supervisors voted for the development freeze by a 7-4 margin. That was short of the nine votes required to put the emergency measure into effect. But the issue isn't dead — advocates have vowed to put the measure to voters this fall.
San Francisco's "very deep hole"
The stakes in the Mission moratorium fight are actually quite low; the neighborhood isn't exactly having a construction boom. In recent years, the Mission has been adding around 100 units per year (it gained 85 units in 2014), which works out to a third of 1 percent of the 25,000 units in the neighborhood.
The pattern is similar in the city as a whole: rents are surging, but development has been sluggish. "For the last decade, we've been growing by about 10,000 people a year," says Scott Wiener, a San Francisco supervisor who voted against the Mission development freeze. Yet the city has only added about 2,100 units per year over the last decade. In a city with 380,000 housing units, that's an annual growth rate of less than 1 percent.
When population growth dramatically outpaces housing construction year after year, "you start digging yourself into a very deep hole," Wiener says. "We've been doing that for about a decade."
Last year was better than average, with the city adding 3,500 units. "We've finally turned in a positive direction," Wiener says. "The last thing we need is to shut down housing production when we have a housing shortage. This moratorium will increase the pressure on our inadequate housing stock."
How housing regulations hold back the American economy
San Francisco's housing fight has implications for the American economy as a whole. The reason San Francisco is experiencing such a severe housing shortage is that the Bay Area is home to dozens of innovative technology companies that are desperate to hire more workers. They've been bidding up technology workers' salaries, and those workers are using their higher salaries to bid up the region's scarce housing.
This is a crisis for San Franciscans who can't afford the spiraling cost of housing. But it's also a problem for the American economy as a whole, because a shortage of housing is stifling the growth of some of America's most innovative companies.
In a more flexible housing market, the growth of Google, Twitter, Airbnb, and other companies would have triggered a massive housing boom and rapid growth in the Bay Area's population. And this wouldn't just create more jobs at technology companies. The region's growing wealth would also create a lot of jobs for other professions — schoolteachers, nurses, chefs, and nannies — that provide services to high-tech workers. As workers moved to the Bay Area to take advantage of opportunities there, workers in the rest of the country would find it a little easier to find jobs and get raises.
Housing shortages are having similarly detrimental effects in other major metropolitan areas like Boston, New York, and Washington, DC. These are all areas with high wages and a shortage of qualified workers. In a more flexible labor market, they'd all be experiencing a building boom as people moved there to take advantage of these opportunities.
How much are housing regulations holding back the American economy? It's impossible to put a precise number on the costs, but a recent study by economists Chang-Tai Hsieh and Enrico Moretti suggest that the costs are easily in the hundreds of billions of dollars. They estimated that if cities built enough housing to allow 10 percent of Americans to move to higher-productivity cities, this would increase US economic output by 3.4 percent, which is more than $500 billion. They find that the New York and San Francisco Bay areas are responsible for the lion's share of economic losses due to housing shortages.
So every American worker has a stake in San Francisco's housing debate. A building boom in the Bay Area there would not only boost some of America's most innovative companies, it would also create hundreds of thousands of new jobs and help reverse America's recent economic slump.
Not in my backyard
Development advocates believe that for San Francisco to really get a handle on its affordability crisis, it needs to add a lot more housing. One particular site in south San Francisco seems to offer an opportunity to do that. The long-retired Balboa Reservoir now serves as a huge parking lot for the City College of San Francisco. The 17-acre site is owned by the San Francisco Public Utilities Commission, and city planners want to build affordable housing there.
The site is less than a 15-minute walk from the Balboa Park BART station, so residents who work downtown would be able to get there without a car, limiting the need for parking. And with a college campus on two sides and a four-story apartment building on a third, there are few neighbors next door to complain about having tall buildings towering over their yards.
Pro-development activists see this as an opportunity to build thousands — not just dozens or hundreds — of housing units. Here's one conceptual sketch by artist Alfred Twu of how the site could be developed to provide homes for 3,500 low- and moderate-income residents. That's about as many new housing units as the entire city added in 2014.
The city organized a May 5 meeting at the community college to solicit public input on what the project should look like. Sonja Trauss, the head of the pro-development group SFBARF, attended along with several of the group's members to press for an ambitious, high-density project.
But they were vastly outnumbered by the locals, who had a different agenda. Development advocates use the phrase NIMBY ("Not in my backyard") to describe people who resist change in their neighborhoods. NIMBYs were out in force at this Tuesday-night meeting.
Dozens of neighborhood residents packed the large classroom, writing their views on enormous Post-it notes city officials had posted around the room. People could endorse another person's view by placing a colored sticker next to it.
The majority view was that the project should provide housing for as few people as possible. By the end of the night, "100% open space" had dozens of brightly colored stickers next to it. A lot of people also wanted buildings that were no more than one or two stories tall because taller buildings would destroy the "character" of the neighborhood.
Parking was a concern for many residents. At one point, Trauss was confronted by a resident who appeared to be in her 60s. She demanded to know if Trauss lived in the neighborhood, and Trauss admitted she lived in West Oakland, on the other side of San Francisco Bay.
"Then you can't know what it's like here," the woman replied. "It's like a parking lot every day." She blamed the parking problems on previous development projects that hadn't provided enough parking spaces.
If you want more housing, you have to put it somewhere
This kind of scene — which has played out again and again around the Bay Area — is a big reason for the region's housing crisis. Almost everyone agrees that the San Francisco Bay Area as a whole needs more housing. But the region is heavily developed, so any specific site developers choose is likely to be located near somebody. And those somebodies almost always find reasons to say, "Not in my backyard!"
In many ways, the fight over the Mission moratorium and the fight over the Balboa Reservoir project are mirror images of each other. In the Mission, low-income renters are organizing against development projects that they fear will bring in a new crop of more affluent homeowners, transforming their neighborhood in ways that will make them feel out of place.
In the Balboa Park neighborhood, affluent and predominantly white homeowners are organizing to stop a development that will provide housing for less affluent residents. While their stated concerns had more to do with parking and green space than changing demographics, the practical result of converting the site to "100% open space" would be to freeze the current demographics of the neighborhood.
People move to neighborhoods they like, so it's natural that longtime residents of a neighborhood would be resistant to change. But in the aggregate, this kind of conservatism has been a major factor behind the city's affordability crisis. Because no one wants housing built in their own neighborhood, San Francisco isn't building housing anywhere — at least not at a rate that can keep up with demand.
Sonja Trauss hopes to convince renters in San Francisco that they have a shared interest in making housing more affordable — and then organize them to lobby for more development. On paper, renters should be a potent political force. More than 60 percent of San Francisco households rent. So if they were well-organized — and convinced that more development would lower housing costs — they would be an unstoppable political force.
And Trauss believes that the intensity of recent debates is helping to galvanize the city's renters — especially relatively affluent newcomers — into becoming more politically active.
"There's actually a very nasty tone to the conversation from the NIMBYs," she says. "People say, 'Tech assholes, go home.'"
How developers make neighborhoods boring
While Trauss's political project is pro-development, she blames developers for some of the friction between newcomers and longtime residents.
"Developers are part of mainstream America," she says. "And mainstream America is pretty racist."
What she means is that major real estate developers use their wealth and influence to change the culture of the neighborhoods where they build. "If you have some neighborhood that's marginal or unusual and has any kind of street life that is technically illegal but generally not enforced," she says, developers will lobby to change that.
"They call it awful things," Trauss says. "They say 'cleaning up the neighborhood.' And what that means is getting all kinds of laws like loitering enforced, making street life difficult and illegal."
Trauss sees this kind of cultural friction as an unfortunate side effect of development projects. But she doesn't see it as a reason to block housing projects. Instead, she wishes traditional housing groups would focus more on these issues. "If you're organized anyway, don't organize to stop the new building, organize to stop the accompanying integration problem."
"Aaron Peskin is a legendary hater"
Right now, SFBARF is pretty small. Besides Trauss, the group has only one other paid staffer — a part-timer working on a contract basis. Trauss also has a handful of active volunteers and a mailing list with around 300 people.
So far, Trauss has focused on getting her supporters to meetings like the one in Balboa Park, to ensure that elected officials always hear a pro-development perspective to counter the NIMBYs. And she says the next big step is getting involved in electoral politics.
This fall, Aaron Peskin, a former president of the Board of Supervisors, is running in a special election to unseat recently appointed supervisor Julie Christensen. Trauss says the race provides an ideal opportunity for SFBARF to flex some political muscle.
"The Board of Supervisors is split between 'yes we can build' people and people who are like, 'No way,'" she says. "Julie Christensen and Aaron Peskin are on opposite sides of that spectrum. Aaron Peskin is a legendary hater. He would be terrible."
So SFBARF hopes to mobilize thousands of relatively new San Francisco residents who haven't become politically engaged yet with an issue that all of them care about: the sky-high cost of housing. If the group helps Christensen beat Peskin in November, it could demonstrate that there's a substantial constituency for pro-development politics.