Okay, let’s go over this again. Some people just can’t seem to lose that funny attitude they got from High School economics that the “law of supply and demand” always works. They keep trying to bamboozle us with those old sound bytes and abstract generalities: “There’s a housing crisis,” “We have a housing shortage,” “We need to build housing.” Build, build, build.
There is no “housing crisis.” There is only an “affordable housing crisis.”
To be sure, abstract generality has a certain flair. It appeals because it hides the collateral damage. Don’t get me wrong, abstract generality has its place – like on a mathematics department blackboard. Some mathematicians have quit that discipline, however, once they realized that what they discover abstractly could someday be used to build new weapons.
That “build” mantra actually constitutes a knowledge crisis because it is already a weapon. These days, it gets fired at random, to the detriment and destruction of truth, and historical experience, and real economic process.
After all, for whom is there a crisis? It isn’t a crisis for developers. It isn’t a crisis for the banks. And it isn’t a crisis for the high income people coming into town, bidding up the price of a home. It is only a crisis for low income families who suddenly find themselves looking for a affordable place to rent, and can no longer find any because it has been bid out of reach. Building market rate housing will not resolve their situation; indeed, it is its very cause.
Why doesn’t the supply-and-demand concept work?
The “S&D law” doesn’t work because there are two forms of demand, and they are contradictory.
There is an external demand, people coming into the area looking for housing. They are the ones willing and able to pay $4000 a month for an apartment. If we assume they are paying 30% of their income for rent (the HUD standard for affordability), it would imply that they are earning $160,000 a year. They are the ones jacking up the “market rate.” If they did not exist in large numbers, we wouldn’t be seeing the exorbitant elevation in rent levels.
But wait a minute. Did I just say “affordability” means 30% of income maximum? Yes, that is the HUD standard. “Affordable” housing is housing that rents for up to 30% of the tenants income, whatever that income might be. Remember that. It replaces “markets” with a principle of livability. And it falsifies the dogma of supply-and-demand thinking.
The second form of demand is the internal demand. It is composed of people who live in the city and have been displaced from their housing by nefarious landlord machinations. At the new rent levels, they find other housing now unobtainable. The real name for the affordable housing crisis is “displacement.”
The cause of nefarious landlordism, which is the cause of displacement, is the external demand. The promise of six-figure-income tenants is what has led many landlords to drive out low income tenants in order to rent at higher rates. They do this legally and illegally – for instance, by doubling or tripling the rent, by cutting off electricity and water, by abandoning maintenance and then blaming the tenants for squallor. Et Cetera. Profit-hunger is often rich in its ability to humiliate and torture the unwary.
Here’s the contradiction. The external demand, those six-figure-income arrivals, not only jack up rent levels, they are the contingent cause of low income families being displaced. This is what has created an internal demand of crisis proportions. It continues to do so. The “S&D law” serves as its political weapon, hiding the fact that massive displacement is the collateral damage wrought by building for that external demand.
The external demand will always be able to satisfy itself. It has enough money to find a place to live whenever it wants. It can touch down temporarily, and move on quickly to other more permanent digs. The turnover in new buildings like the Avalon on Third St., or Parker Place on Shattuck (being run as a hotel now) is evidence of that mobility.
The “internal demand” can never be satisfied because it is not created not by a shortage but by changes in price levels (rents). The people forming the internal demand already live here. Building affordable housing will not increase supply but replace units given over to wealthier inhabitants. The crisis they represent is an imposed crisis.
If the real name for the affordable housing crisis is “displacement,” the real name for displacement is “injustice.”
Some low income people succeed in maintaining themselves. They live in places they can afford, and no one harasses them. Nevertheless, though in no immediate crisis, many undergo the secondary trauma of their own uncertainty, sometimes with displaced friends sleeping on their couch, or a family they know moving into their garage.
How do we know that the people forming the external demand are wealthier? Precisely because they are driving up “market rate” rent levels? Only high income people can do that. People who already live here are not going to go out looking for more expensive apartments to live in to an extent that would actually affect the “market rate.” Not even an S&D fundamentalist could make sense of that.
What brought the new arrivals to Berkeley?
Who are these six-figure-salary people? Where do they come from?
They must already have high paying jobs in this area if they can afford $4000 a month? If they didn’t already have such jobs, they could not sign such leases. The fact that they do means they are already part of the Bay Area economy, while living somewhere else.
Why are they moving here now? Okay, lets go over that again. This is the crux. [Cf. http://tinyurl.com/jy82bok]
To set the stage, we have to go back to the 50s, when the first city dwellers started moving to the suburbs after the war. It accelerated during the 60s as tempestuous struggles for equality and justice spread over the nation. There were civil rights uprisings, youth anti-war movements, women demanding their place in the economy, and a recognition that we had to stop planetary despoliation. In their struggles to democratize this country, they changed the face of daily city life. So some people decided to move out of town, to escape the hurly-burly. It was called “white flight.”
What we are seeing now is the inverse process. The project to bring them back into town was first broached in the halls of ABAG (Assoc. of Bay Area Governments) ten years ago. It came to fruition two years ago with the creation of Plan Bay Area, which has been written into California environmental law. ABAG presented its plan as “environmentalist,” since it would eliminate the hours all these high-paid employees spent in traffic-jams on the freeways, thereby reducing the state’s carbon footprint. Thus, it was actually a plan to make “white flight” a round-trip ticket.
But bringing the white flight “prodigals” back into town is not a “housing problem.” It is a “housing proposal.” The “housing problem” is what happens to others as a result of the proposal. Hundreds of families have been pushed out of town, impoverished by the process, and divested of cultural roots. They have had to relocate to other cities, like Martinez or Modesto or Stockton. Wherever they move, they then commute back to their old jobs, filling the freeways in place of the prodigals. ABAG’s environmentalism does nothing. It turns out to be a zero sum scam.
Building more market rate housing won’t help those already pushed out of town. And it won’t stop those landlords still trying to get rid of low income tenants so they can make a bigger buck off the prodigals. Private institutions are raising money to assist those threatened with eviction and exile. But that is just a band-aid. The injustice persists as long as the ideology of “the S&D law” hides the root of the suffering.
The real taproot of the suffering is the plan (Plan Bay Area). The plan allotted housing unit construction to Bay Area cities to house the people being brought in from distant suburbs (like Napa and Sonoma). It was the “magic incantation” that transformed a vacant apartment (from which the former tenant had been expelled) into gold. ABAG’s plans rapidly became a predatory political operation.
If there had been better controls on what landlords could do, there wouldn’t have been so many people forced out of their homes by increased rents or turned-off utilities. But rent control is illegal in this state. So landlord greed went for the jugular, reinventing an “inner city” for the children of white prodigals.
Why do we focus on renters?
Renters are the substance of this crisis, just as home ownership was the substance of the 2008 predatory mortgages crisis. The supply problem is not a shortage of housing, but a shortage of affordability. That is why it is such an insult to simply repeat the idiotic mantra: build, build, build. If you don’t specify “what” and for “whom,” you are part of the problem.
Two thirds of all residents in Berkeley are renters. And the vast majority of them are low income, or very low income (according to HUD). HUD categorizes people according to their relation to the Area Median Income (AMI). For instance, you are low income if you earn less than 80% of the AMI. The AMI for Berkeley is around $65,000 a year. That means that half the population of Berkeley earn less than $65,000 a year.
Ironically, HUD uses Alameda County AMI for its calculations. The AMI of Alameda County is $93,000. $65,000 is 70% of $93,000. That means that considerably more than 50% of the people of Berkeley are low income (on HUD’s calculations). The majority of Berkeleyans are renters, and the majority are low income. (The two overlapping categories do not totally coincide.) Yet the city continues to prioritize market rate housing. It can see its way to only requiring 10% of any new development to be affordable.
Here’s an indication of how bad things are. People living in “rent controlled” apartments pay, on the average, 70% of their income for rent. That means that many pay more than 70%. The implications of paying (for instance) 90% of your income for rent are astounding, and often unmentionable.
Poverty is not a trait or characteristic of a person. It is something done to people. Developers and banks and ideologues who chant “build, build” are all impoverishing people. To just say “we need more housing” is to make a destructive statement.
The destruction happens to real people, though it is invisible because it happens in private. The stress of uncertainty, the worries about children uprooted, the income loss to sudden expenses, and the sense of powerlessness. Even the destruction of neighborhoods occurs out of sight – it is slow and unannounced. When small stores close, survival implies driving to distant shopping malls, increasing the cost of living.
Eventually, the silent disintegration of a neighborhood even leads homeowners to sell and move – getting an unexpected price from speculators, perhaps. They lose community and friends. In the ironic limelight, however, the city council begs off, citing state law, penury, and a need for studies. They hire more police to hide their inability to protect their own constituencies politically.
What’s the solution?
At present, Berkeley has satisfied its ABAG requirement for market rate housing. When all the projects in the pipeline are built, that requirement will have been met twice over. That means the city can totally prioritize the internal demand, the people who already live here, the people who should have had priority all along. It can build 100% affordable housing.
1) Pass a zoning law for the city that states that new development must contain 100% affordable housing units (divided among low income, very low income, and extremely low income units as defined by HUD).
2) To insure that developers will put these affordable units in their buildings, institute a mitigation fee of $200,000 for each unit. The idea is to make the fee large enough to dissuade a developer from buying his way out of building affordable units.
(The “in-lieu” mitigation fee was originally designed to permit developers to buy their way out of including affordable units in their building. It was a response to the Palmer Decision of 2009 [California Supreme Court], which held that cities requiring low rent units were liable for any loss of income for the developer. With the fee in place, the inclusionary requirement became voluntary. There is also an “impact mitigation fee,” which developers must pay to offset service disruptions or complications their buildings might incur.)
3) If the developer decides not to build, he can sell the land to one or another existing Affordable Housing developers (SAHA, Resources for Community Development, or others that might form). They could build affordable housing. Its been done. The building on the northwest corner of Fulton and Kittridge is just such a building.
If the crisis was spawned by political intention, only political intention will resolve it.
(Courtesy of Mike Zint)