Monday Morning Thoughts: Anything to Avoid Building Housing

Photo by Kimson Doan on Unsplash

By David M. Greenwald
Executive Editor

In the past week we have seen data that show that not only is there a shortage of single-family housing, there also is a national shortage of rental housing, particularly apartments.  But despite the affordability crisis and housing shortage, local authorities as well as citizens look for ways to avoid building new housing.

In his latest column, Dan Walters notes, “Resistance was especially stout in small cities containing mostly single-family homes occupied by affluent families because the state’s orders emphasized building more multi-unit projects for low- and moderate-income families.”

He added, “It would, residents and officials in those cities complained, undermine local control and change community character.”

Santa Monica, it seems, has figured out a way around new state laws—and I can only describe it as “brilliant.”

The state is requiring a whopping 8895 units, much of which is to be designated for low- and moderate-income residents.

Walters describes the council approval as “very reluctant.”

He quotes Mayor Sue Himmelrich saying, “I am appalled by the state’s approach to this whole process and I still believe that they shouldn’t be allowed to do this and that there should be controls on this and there probably ought to be a lawsuit.”

There’s of course a work-around, proposed by two of their council’s vocal opponents of the quota.  They drafted an amendment to the city charter that would establish a new pay scale for workers on projects approved by the council.  It would be 2.7 times higher than local prevailing wage for construction work.

It’s intended as a poison pill for development, but it puts the state in a bind because, on the one hand, they want to ease the housing crisis, but on the other, they don’t want to oppose a measure that would increase wages for union construction workers.

Speaking of work-arounds for housing, the latest has been a focus on vacant housing.

Tom Elias, in his latest column, calls for a crack down on owners of vacant homes.

“There is no doubt California has a housing shortage,” he acknowledges, but he also continues to argue the exact figures are “unreliable” and thus it makes “it hard to know the actual extent of the shortfall.”

He argues that “we definitely know some of the causes and at long last, a few cities are beginning to figure out ways to at least reduce whatever shortfall exists. The most commonly proposed tactic is to force vacant homes onto the market via a tax or a fine on places that go unused for long periods.”

He cites the California Association of Realtors who estimate there are as many as 1.2 million units that are sitting vacant including some entire apartment buildings.

He notes, “Berkeley recently reported 141 vacant multi-unit residential buildings, at a time when students are scrounging for housing and controversy surrounds plans for new University of California-owned student quarters.”

Elias concludes, “One thing for sure: even if there are enough vacant units now held off the market to solve most of a housing shortage estimated at 1.8 million units by Gov. Gavin Newsom, they won’t resolve the need for more affordable housing.”

Local communities are looking at taxes, fines, and even, in the case of Berkeley, changing the definition of blight to include vacancies for more than four months (120 days).

So what is going on here?  Is this process driving the housing crisis?  Probably not.  Part of what is happening is that the pandemic has disrupted life as a whole, so that people all of sudden did not have to live where they worked.

There is also speculation going on here.

Elias cites the citizen group United Neighbors, which claims that pension funds and Wall Street investment banks “spent a record $77 billion on single-family homes in the last six months of 2021. Many of these stay off the market while land values rise, in the hopes that increasing housing demand will spur future sales to apartment and condominium builders, now authorized by new state laws to build high rises in areas formerly reserved for single-family homes.”

The owners of these units are looking for “big-money returns on their investments and those will not be forthcoming from renters except in a very few places.”

Cracking down on these situations may not solve the problem.

For one thing, determining which homes are in fact “vacant” would involve government intervention into ways that are unseemly at best.

The San Francisco Chronicle noted one group: “It’s an invasion of privacy to require every homeowner to certify they were home enough, every year.”  What about people who have multiple homes or who are snowbirds going from warmer to cooler climates depending on the season?

Moreover, it appears that what is driving this trend is the housing shortage itself.  The shortage is driving people to purchase homes as a form of speculation.  And that suggests that the vacancy issue is not the driver of the problem but a result of the problem—though it may exacerbate the problem.

When the Chronicle discussed this issue earlier this year, they quoted Sarah Karlinsky, a senior adviser to the regional urban planning group SPUR.

“First and foremost, we just need to produce way more housing at all income levels, and we need to be doing it all across the Bay Area,” Karlinsky said. “We’ve chronically under-produced housing for decades, and we are now reaping the results of our terrible housing policy.”

Karlinsky doesn’t oppose cracking down on vacancies, noting that such measures could help discourage speculation if “well crafted.”

Meanwhile, Elias is probably using a high figure.  The Chronicle points out that “calculating vacancy isn’t as straightforward as it might seem.”

For example, “San Francisco’s Budget and Legislative Analyst’s Office prepared a vacancy report at Preston’s request using 2019 Census data. It identified 40,458 vacant homes — about 10% of the city’s total number of homes — including temporary reasons like more than 7,200 units for rent and 2,400 units that were rented but currently unoccupied.”

But researchers believe that “San Francisco’s rental vacancy rate was more like 3.9% in 2017, when adjusted to show only vacancies that ‘a given renter might actually be exposed to.’

“It’s not merely a shortage of low-income housing: It’s an overall housing shortage that matters,” the authors write.  And that overall housing shortage is probably driving speculation.  There is one way to solve that of course—build more houses.  But that’s what many seem to try to be doing everything to avoid.

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