There are two issues I wanted to *very briefly* discuss today that greatly affect the development of affordable housing in San Francisco. I know that these are much larger topics than can be covered here, I just wanted to link these ideas to the cost of living here. The first category is limitations in zoning and planning laws. The second is the idea of rent control, and its unintended consequences.
The idea of restricting what can be done on private land have been around for about 100 years now, and are constantly being tinkered with. Zoning laws were created to separate residential neighborhoods from industrial areas. Now this differentiation has grown to include not just use, but also occupancy, height, bulk, setbacks, and appearance. Laws now restricting what can be built where. In actuality there are two types of zoning, inclusive and exclusive. Some say Use A is permitted, while other says anything except Use B. There is also the difference between being explicitly allowed, or being not illegal, it’s all a matter of context. To this extent, we have to realize more areas of the city need to be upzoned. Instead of requiring single family zoning, we can merely allow two (or more) units on a lot. The classic example of this is the in-law apartment. Reality has to be acknowledged as well – in law apartments exist all over, and quite frankly are desirable.
The other big issue is rent control. There are two different types of restrictions put on rent in San Francisco, and there needs to be a line drawn between the good and the bad. The difference between what we think of as rent control, and what we think of as tenants rights is the main problem. Originally they were one package, but there are economic rules, and quality of life rules. I understand that markets must be regulated to an extent, but arbitrary dates and shifting laws are anything but sane. When Chris Daly proposes even more restrictive and draconian laws, then the landlords really will pull a John Galt.
The moral restrictions on evicting people are a great theory, but sometimes end up as blackmail. In many cases a remodeling project is stalled or delayed because a tenant refuses to move, even if remdial measures are proposed. Current law requires a payment to the tenant to move out, but it almost always escalates. Obviously some controls are required, but the stigma of evicting a tenant is often enough to prevent a bank from issuing a construction loan, or to prevent the Planning Commission from approving the plan. The difference between the legally required moving fee of some $5,000, and the going rate of about $50,000 to vacate is only passed on to the new owner.
The main issue referred to as “rent control” is the artificial fixing of prices, contrary to market rates. When over 90% of economists agree that rent control actually increases the cost of living, shouldn’t we pay attention? These controls remove any motive for the repair or renovation of existing buildings, and more importantly, remove the motivation for building new rental housing. Landlords live in fear of the post-1979 buildings being roped into the existing laws, even though they’re currently exempt. I don’t want to be citing the CATO institute, but just look at what happened when Massachusetts removed rent control in 1994. Rents didn’t go up, elderly people weren’t kicked to the curb, but new construction and property taxes receipts went up. Of course there are good ways and bad ways of changing the restrictions, this is just an introduction.
The rules as stated are not doing their perceived duty. There is a well established system of getting around the rules, and it’s a very expensive compromise. Developers buy out tenants, have fewer lots to build on, and may be affected by development fees and restrictions. All of the uncertainty is what makes construction so costly. Make the process easier, allow for more to be built, and costs will come down.
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Chris on 08.14.2009
I’m certainly no fan of rent control overall, but I think it has relatively little impact on the amount of new housing built compared to other factors like the time it takes to get something approved. SF-style rent control is very different from that which was in place in Boston, or that which is in place in NYC, in that it only applies to pre-1979 buildings and has vacancy de-control to reset the market rate.
As we saw over the past few years, there’s still oodles of desire from builders to build in SF, the problem is that it takes years (or decades) to get all of the necessary permits and jump through all of the hoops that can be put in place by NIMBY concerns. If we had some type of by-right development (even just in areas with a neighborhood plan in place) and neighbors AND developers were basically told (through a statement as well as through what actually happens) that projects must conform to the standards set forth by the plan or they will not be allowed, we could see massive development very quickly. This means everything though – neighbors can’t complain about buildings that meet height and bulk requirements in the plan, and developers can’t ask for parking allowances over what the plan allows, etc, etc.
Until we get both sides willing to adhere to the plans completely that we spend millions on, we’ll never build the needed amount of housing.
Pedestrianist on 08.18.2009
Rent control in SF doesn’t artificially lower the rent a landlord can ask, it artificially extends the terms of a lease. As such it adds value to units, and rent-controlled units are more desirable to tenants.
Studies have shown that across SF, rent controlled apartments are not significantly lower than non-rent-controlled units. This is partly because landlords are allowed to ask market price when a unit becomes vacant, which is less than every five years on average.
But it’s also because rent-controlled units are more valuable to tenants, and so are often leased at the high end of the market rate.
Contrary to your arguments about rent control hindering development, I actually think better city policies promoting rent control as one kind of affordable housing would reduce the red tape Chris mentions.
Subsidized BMR condos eat more into developer profits than do subsidized rental apartments, and way more than market rate rent-controlled units.
If the city gave developers the option to meet their affordable housing requirements by building rental units and including them under rent control laws, I think it would be a good thing for the city as a whole and developers.