San Francisco’s Latest Affordable Housing Bond Isn’t the Answer to the City’s Housing Crisis
© Dreamstime.com

Commentary

San Francisco’s Latest Affordable Housing Bond Isn’t the Answer to the City’s Housing Crisis

Proposition A would spend $600 million to build 2,800 units of subsidized housing, which wouldn't make a dent in the problem.

The San Francisco housing crisis is devastating. For decades, the city has grown more and more unaffordable for average citizens. According to Zumper, the median rent for a one-bedroom San Francisco home was $3,720 in June 2019. Against this backdrop, city leaders have offered Proposition A, a proposed bond measure that would raise $600 million to build 2,800 units of subsidized housing.  Proponents of Prop. A argue that it would help alleviate the housing crunch middle-class San Franciscans are feeling. Unfortunately, the history of San Francisco’s affordable housing plans shows that it is unlikely to do anything of the sort.

Progressives often argue that the housing crunch is due to a failure of the market and that the solution must be some combination of rent controls and subsidies. However, San Francisco is already one of the most rent-controlled cities in the United States, with over 60 percent of all rental units under some type of rent control. And around a quarter of all housing built in San Francisco is subsidized. Past affordable housing bonds have also disappointed. The 1996 Affordable Housing Bond produced 2,125 of 3,000 promised affordable units. The 2015 Affordable Housing Bond was estimated to fund 1,600 new units in 2016 but in June 2019 that estimate was downgraded to 1,400 units. Thus far, only 11 percent of the promised units from that 2015 bond have finished construction.

Part of the issue with these subsidized housing bonds is the extremely high cost of land in San Francisco. Even shacks in the city can sell for millions due to the value of the underlying land. San Francisco is so expensive, in part, due to its restrictions on new apartments. Land prices are also exacerbated by the artificial restrictions on density placed upon new development. In 76 percent of the city, it’s illegal to build apartments due to outdated zoning codes. This isn’t due to environmental or safety concerns. In fact, the only area where it’s legal to build densely, downtown San Francisco, is also the area most vulnerable to earthquakes.

San Francisco sees one unit of housing built per eight new jobs created in the city. A solution to rising housing prices is not to have the government ration out a small amount of housing, but to create the conditions for abundant housing for all. Former Mayor Willie Brown championed a $100 million affordable housing bond in 1996 but rents in San Francisco still rose. In 2002, then-Mayor Gavin Newsom started the city’s ‘Care Not Cash’ to help the homeless but rents still rose. Former Mayor Ed Lee created a Housing Trust Fund of $50 million in 2012, and rents still rose.

There’s no reason to think that Prop. A would produce different results or prevent rents from rising for middle-class San Franciscans. The proposition would be financed by increases in property taxes, and the bond makes clear that “landlords would be permitted to pass through up to 50 percent of any resulting property tax increase to tenants,” meaning the increases in property taxes would cause rents to rise.

A better option would be to allow increased density to help meet market demand. Changing zoning rules would allow apartments or housing to be built near transit, for example.  San Francisco needs to build significant amounts of new housing in order to keep prices from continuing to soar and pricing out larger and larger segments of the population. Prop. A promises only 2,800 subsidized units of housing and, realistically, is likely to actually produce fewer than that.

For San Franciscans, a better solution is to fix the city’s broken regulatory system for approving housing. Historically long delays can raise the cost of housing by up to $400,000 per unit. San Francisco is well known for innovation in tech. Why not start innovating in housing?

Alix Ollivier

Alix Ollivier is a policy analyst at Reason Foundation, where he primarily works on pension reform.