By David M. Greenwald
Executive Editor
Davis, CA – I saw this comment on social media as I got up this morning and it piqued my curiosity.
The commenter wrote: “The Vanguard is so pro-growth that rich developers will likely bail it out.”
It got me thinking, I would not think of myself as pro-growth. Pro-growth to me implies that the end result of policies’ goals is to grow in some sort of unfettered way as quickly as possible.
Instead, I would characterize myself as pro-housing. The current situation is such that the housing crisis is affecting the ability of the average person to live in our community, purchase a home or rent affordably.
That growth will be a natural outgrowth of a pro-housing policy is undeniable, but it’s incidental to the policy aims rather than being the goal of the policy aims.
Some might be tempted to respond? So what and, perhaps, what’s the difference? I’ll 
explain the answer to that in a moment.
But before I get there, the comment implies that a “pro-growth” policy benefits “rich developers” at the expense of the average person.
That inherently implies that there is some sort of zero-sum world where the average person and “rich developers” are diametrically opposed to each other and any benefit to the “rich developer” comes at the expense of the average person.
The problem is that the status quo is not helping the average person.
I recently had a conversation with a real estate person in Davis. They related a recent property that came on the market. Because it was in a state of disrepair the asking price was about $600,000. That’s a low price of course for Davis and as a result they got a whopping 32 offers.
That should give people an idea of just how depressed the market is. But worse yet, whoever purchased that property did so in cash and that means the typical family who would benefit from a relatively low price of a home probably wasn’t the one who purchased the property. More likely it was an investor.
This is the problem. The people benefiting from the status quo are the wealthy investors. This week I got to interview State Senator Nancy Skinner who is introducing a bill that would bar hedge funds from snatching up single-family homes.
Skinner explained that California since the Great Recession has seen the number of owner-occupied homes drop to the lowest level in decades.
“We’re at the lowest number,” she said. “What with the hedge funds and other large investment firms having now decided to look at single-family homes as an asset class, they have the capability because they can pay in cash because they can outbid to outcompete a family who’s trying to buy a home.”
She added, “It’s just furthering the inability for California families to reach home ownership, which is the essence of the American and the California dream.”
In a report to the Berkeley City Council, “city officials said large financial companies like BlackRock are some of the largest real estate owners in the country and may have a detrimental influence on the Bay Area market.”
The report found “private equity-backed landlords are 18% more likely than corporate landlords not backed by equity to evict tenants,” and “who are themselves more likely to do so than small landlords.”
“Redfin data shows that 13% of homes in Oakland were purchased by an institutional investor or business in the fourth quarter of 2021, a 16.9% increase over the year before. In San Francisco, 18% were acquired by institutional investors,” the report noted. “This follows a concerning nationwide trend where large institutional investors have since the beginning of the pandemic purchased an enormous number of homes; over 75% of these offers are in all cash, and many without any inspections, pricing prospective homeowners out of the real estate market.”
Vice, in December, reported that “hedge funds have invaded the housing market” and noted, “A sweeping new bill introduced in Congress would essentially ban hedge funds and private equity firms from buying single-family homes.”
Why are they doing this? Because it’s a great way to invest, hold the property, rent it out, and eventually sell at an inflated rate.
Who is being harmed by this process? The average person, the family.
That is one of the big reasons I have moved from largely opposing housing in Davis to being a strong supporter of the need for more housing. The people who are harmed by the status quo are not the real estate developers and investors, but rather the young families with children.
With that said, I am not pro-growth in the sense that was attributed to my position.
I have supported, for example, Measure J because I saw what was happening in Davis in the 1990s with largely unfettered growth policies. I don’t want to see Davis expand without any sort of control.
My preferred policy would not be to eliminate Measure J, but to modify it. I would support a managed policy that allowed a certain number of homes to be added over a given period of time and then if we want to exceed that number, we would then go back to a Measure J vote.
Whether that’s an amendment to Measure J or some sort of General Plan provision or an urban limit line—we need to address our housing needs without allowing runaway growth.
One thing I am clear on—the status quo is benefiting wealthy investors at the expense of the average person and that is not a progressive policy.
Dear David,
You wrote; “My preferred policy would not be to eliminate Measure J, but to modify it. I would support a managed policy that allowed a certain number of homes to be added over a given period of time and then if we want to exceed that number, we would then go back to a Measure J vote.”
An overall cap is sill needed per year.
I might agreee with this option but for me it would come down to clarifying a breakdown of a “certain number”.
Within that certian number would be 25% nonprofit rental for low and very low income
10% for housing cooperatves and singe family homes priced to be permantly affordable to 80-120% AMI.
My opinion is not representative of either Neighborhood Partners, LLC or the Twin Pines Cooperatiive FoundationAMI.
One possible Measure J waiver would be a high affordable project in exchange for an exemption.
The problem with that solution David is the housing built under the exemption would not be affordable for young families with children, nor would it be unavailable for purchase by investors.
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There is a fatal flaw in your logic … specifically the solution you propose also harms the young families with children as well. Why is that?
1) Because the builders/developers are avoiding like the plague building affordable housing. There isn’t any profit in it. There is profit in building housing that young families with children can not afford.
2) Because your solution does absolutely nothing to address the issue that State Senator Skinner illuminates. There is nothing in what you propose that prevents or even inhibits institutional investors (or investors of any kind) from buying the new homes. In many ways a new home is a better investment for an investor because it is in much better shape and the upkeep will be much more predictable and manageable.
Not all that long ago you wrote an article that highlighted Governor Newsom’s signing of a bill that streamlined the processes for government entities to designate parcels of government-owned land for affordable housing. That article piqued my interest, because here in davis there is some land that would be ideal for development into affordable housing under that program. The land I believe would be ideal that way is the UC Davis-owned land just south of Russell Blvd from Arthur Street to Lake Blvd. Building housing on that strip of land that is 100% affordable to young families with children, and is not available for purchase by investors would be a step in the right direction.
So it’s not available.
” Because the builders/developers are avoiding like the plague building affordable housing. There isn’t any profit in it. There is profit in building housing that young families with children can not afford.”
Seems to me that there is a way to resolve that tension. You set the Measure J exemption so that a way to bypass the Measure J vote is to provide 25 percent of units (or whatever you deem appropriate) affordable for families with children. We have leverage here, might as well use it.
Affordability of housing is not solely an issue for those with children. I suggest the policies should focus on affordability as an end in itself, not who is going to occupy the units. Benefits to the school district are ancillary and shouldn’t be a primary focus of any development policies. Also, affordable housing in Davis is rental housing. The ownership is pretty much a moot point.
Policies would best address the provision of rental housing of various types, or the types of projects David Thompson has mentioned, if the goal is to house those who work here but cannot afford to buy here. If the desire is to limit the number of students occupying those units, that will naturally happen in those furthest from campus.
Anecdotally, the young adults I’ve known who sought rental housing locally, including those in the Davis work force, sought to be as far from campus as possible.
I can tell you some of the housing preferences of young adults seeking to live in Davis while they work here, over the last couple of decades.
Rental units need to allow pets. Outdoor space for pets is very much preferred.
Rent needs to be stable. The typical 5% annual rent increase in Davis is not sustainable for those in long-term employment here.
Most live here for several years, are often from local families. They strongly prefer to live here, not to commute in.
Most don’t want to live in housing that has a lot of student renters.
Best if there is grocery shopping nearby. Restaurants aren’t crucial nearby; those places all deliver.
Most don’t eat downtown very often. Nor do they seek entertainment there. That’s for students.
This demographic is not well served by the current Davis housing market.