Let’s try supply-side housing policy

A moratorium on building won’t solve the affordability issue.

Wknow that San Francisco is booming, but it’s still stunning to see the numbers. According to the Census Bureau, in just 20 years, from 1995 to 2015, the city added 100,000 people for a total population of almost 850,000. For comparison’s sake, Washington, D.C. — another boomtown — added 78,000 people over the same period. More dramatic is the growth of the labor force, which increased 25% over the last five years.

For the overall economy, this is good. Population growth fuels jobs and opportunity. But not everyone benefits equally. The workingclass residents of San Francisco are straining under the weight of explosive housing costs. Taking into account luxury rentals as well as older developments and rentcontrolled units, the Furman Center for Real Estate and Urban Policy at New York University found that, in 2013, the median rent in San Francisco was $1,491, the highest in the nation.

Limit your view to newer, market-rate units, and the numbers are even more discouraging: According to the real estate start-up Zumper, median rent for a studio is $2,650, while a one-bedroom goes for $3,500. For landlords, these high costs make renovations attractive, leading to more and more evictions. A 2013 report from the city’s budget analyst found a 38% increase in all evictions and a 170% increase in Ellis Act evictions — a state law allowing landlords to force out rent-controlled tenants so long as they sell or demolish the building, convert the units into condominiums, or let the property sit vacant for at least five years.

The bulk of these evictions have been in the Mission District, a historically Latino area of the city. Desperate to stem this displacement, area leaders, including Supervisor David Campos, have tried to limit luxury condominiums — the most visible sign of the change — with a 45-day moratorium on construction.

On Tuesday, the Board of Supervisors voted 7 to 4 in favor of the moratorium. But the measured needed 9 votes to pass, so it failed.

This was the right outcome. For as much as it may calm fears — one backer said it was about “saving the Mission District, saving San Francisco and saving the heart and soul of our city” — a moratorium doesn’t solve the problem at hand.

Let’s go back to the city’s population growth. Since 1995, San Francisco has grown by 100,000 people, and almost half that growth has been since 2010. Nonetheless, according to a recent report from Paragon Real Estate, the city has seen just 7,500 new housing units since 2010, and just 33,000 since 2000.

What happens when demand outstrips supply? Prices go up, of course. And that’s what we’ve seen in the city. Contrary to what some advocates seem to believe, San Francisco can’t escape this axiom.

It’s the same in D.C., where there are more people and tough building limits. The result is explosive gentrification.

At just 45 days, it’s hard to say that the San Francisco moratorium would have mattered, one way or the other. Still, that approach — placing new limits — is counterproductive.

There are really only two ways of dealing with high housing costs and subsequent evictions. You can try to make San Francisco less desirable, or you can accommodate demand, which has to mean more building, and greater density in high-income and desirable neighborhoods.

Not that letting the market do its work is a panacea. The sad fact is that high demand housing markets aren’t too keen on affordable units.

To make headway, cities will have to use the fruits of new buildings and new residents — more tax revenue — to preserve a place for low-income residents.

With more revenue, the government can move on new or stalled public housing plans, purchase vacant units for affordable housing and strengthen the city safety net. And it can enhance those efforts with new mandates, like affordable set-asides in luxury buildings. In short, it can throw the kitchen sink at the housing problem.

Some may argue that this solution is a form of trickle-down economics: Let the rich get their condos, and eventually the poor will get shelter, too. But it isn’t. It’s about local government using the market as a tool to help low-income people preserve a place in their cities. New York City’s populist Mayor Bill de Blasio understands that concept, which is why he has committed to a program of new construction.

Many European countries apply a sales tax — called a valueadded tax — to almost every transaction. On its face, this is regressive: Because working people spend most of their income on goods, they’re hit hardest. But so long as these countries divert revenue to assist the needy, they can achieve progressive goals.

Likewise, when it comes to housing policy, government can harness means that may not seem progressive for ends that benefit everyone.

Slate.