By Steven Hill, 48 Hills, January 9, 2020
European cities show how more than half the housing stock can be taken out of the private market — and it works.
State Senator Scott Wiener has reintroduced his housing bill, SB 50, which seeks to alleviate the housing crisis by forcing more density around transit corridors. But it doesn’t include any new state financing for affordable housing.
In the meantime, other progressive cities have used their regulatory powers to create the right incentives and conditions for affordable housing. In Vienna, Austria, a city twice as populous as San Francisco, a whole new strategy based on the concept of “social housing” has been deployed. Social housing recognizes that overreliance on the for-profit housing sector – which would be boosted by SB 50 – often produces perverse results in an overheated housing market like San Francisco’s.
In Vienna, there is plenty of what in the US is typically called “government housing” — the city owns outright about 25 percent of the housing stock. But this is not American-style government housing, since it is rented affordably to not only lower-income residents but also middle-income.
But the more interesting and innovative housing sector is run by private — but non-profit — housing developers. The city indirectly oversees another 25 percent of the housing stock by using public land and retaining regulatory control over development to build middle-income housing. A jury selects a private nonprofit developer which is provided a low-interest loan and extended repayment periods (50 years or more). Sometimes the developer is a housing co-operative. Rents are regulated so that no resident, regardless of income level, pays more than 25 percent of their income for housing.
Overall, nearly half of the housing stock in Vienna is this kind of public/private mix of “social housing” (i.e. either city-owned or non-profit-owned/city regulated). That dominant proportion makes this sector significant enough to create a large parallel market that acts as a brake on the free market forces that escalate rents and speculation in the for-profit housing sector.
Many EU cities and member states construct social housing as a way of holding housing markets in check. In addition, some European states have allowed legal rights for squatters of buildings that have been vacant for a long time, which discourages property owners from leaving their housing units empty. Also, many European cities sharply curtail Airbnb activity to preserve housing stock.
San Francisco’s efforts pale in comparison. Sixty-five percent of San Franciscans are renters, yet according to the SF Planning Department, the city has only about 34,000 units of “affordable housing.” Those units have been built under a variety of local, state, and federal subsidy programs, with some nonprofit housing and the San Francisco Housing Authority owning 5000 or so of those units. Given the city’s overall housing stock of approximately 394,000 dwelling units, the amount of affordable housing represents less than 9 percent of all available housing units. The City of St. Francis comes nowhere near the market-stabilizing 50 percent level of social housing seen in Vienna and other European cities.
And the future doesn’t look any better. While the SF Planning Department has approved the construction of over 73,000 new units, less than 20 percent are designated as “affordable.” Middle-income housing has been entirely neglected, and at this point it’s clear that the long time progressive strategy of mandating 20 to 25 percent set-asides for affordable housing is simply too low.
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And though San Francisco has passed laws attempting to rein in Airbnb, the short-term rental market is still riddled with loopholes that have allowed a number of absentee property owners to fraudulently claim they are living in their homes when in fact they have turned their houses into full-time hotels. One study found that nearly half of those applying to become new hosts in San Francisco include misinformation on their city applications regarding residency status. I live near one such sham Airbnb hotel, a three-bedroom house that its new owner has carved up into six short-term rentals. City officials have refused to shut it down, despite numerous neighbor complaints. Such activity steals badly needed housing from the local stock.
Berlin makes a stand for affordable housing
Berlin, the federal capital of Germany, stands out as a trailblazer for how progressive cities can cope with gentrification and international speculative pressures. Like San Francisco, Berlin has been exploding in population in recent years, driving up rents and housing prices. So recently the city government took the bold step of declaring a five year citywide freeze on rent increases (with heavy fines for landlords who violate the law).
Then this past July, city authorities stopped the sale of nearly 700 apartments to a mega-landlord, and purchased the apartments for $100 million and a guarantee of affordable rents. This was an important victory for housing rights activists, reversing longstanding trends that had sold off some of Berlin’s social housing stock. Suddenly the future of housing looks brighter. “Berliners should be able to continue to afford living in the city,” said Mayor Michael Müller. “It continues to be our intention to buy up apartments wherever we can, so that Berlin can regain control of its property market.”
Housing activists have seized upon this change in philosophy. When Google tried to open a headquarters in the working class, immigrant and hipster enclave of Kreuzberg, it was greeted by huge street protests over concerns that its gentrifying presence would drive up housing prices (like Big Tech has done in San Francisco). After a two-year battle, Google abandoned its plans.
Now activists and their government allies are waging theirboldest fight yet. They have launched a citywide referendum that mandates more buyouts of privatized housing, and will ban all mega-landlords that control hundreds of apartments. Early indicators show that the referendum has considerable support across the political spectrum. Berlin has become a laboratory for how to deal with an urban housing crisis that threatens the very fabric of society.
It is important to note that Germany and Austria are not “socialist” countries. They and other European Union member states are fully capitalist, with the EU having more Fortune 500 companiesthan the US (131 to 121), and more small businesses. But the EU states are practitioners of what I call in my book Europe’s Promise “social capitalism,” while in the US we have Wall Street/Silicon Valley capitalism. Social capitalism is more focused on harnessing the capitalist engine – which is undoubtedly the greatest wealth generator that humans have ever devised – to foster a more broadly shared prosperity.
How to pay for nonprofit housing on public land
OK, so how do we finance more non-profit housing, especially if we can’t increase Prop 13 property taxes?
First, deploy all available public land for housing development, including if necessary public golf courses. Land costs contribute over 20% of the $714,000 price tag for building each new unit in San Francisco, so this would greatly help affordability (see my previous 48 Hills article on this, “Golf courses or affordable housing?”)
Second, look for new sources of financing. The Dutch once taxed the width of houses; this March, San Franciscans will be voting on a proposition designed to cut down on storefront vacancies by charging a fee based on the length of a vacant storefront. So why not charge a fee based on the length of wealthy homes and apartment buildings too, and use that to fund the construction of affordable nonprofit housing on public land? Or how about basing the fee on the number of windows in a building, or on the square footage of concrete and timber?
Service fees and taxes on other large assets also could be levied, or on elite services like business-class air travel departing or arriving at the San Francisco airport (which would function as an eco-tax as well). Or how about passing a new Proposition C, but this time instead of focusing it on funding for homeless shelters, treatment and supportive services, use it to raise money for nonprofit construction of middle-class housing (2019’s Proposition A, which focused on affordable housing construction, was a bond that all San Franciscans will pay for, not a fee charged to the wealthiest companies and individuals). Those surcharged businesses will benefit too, by having more housing for their employees.
In Seattle, city officials, nonprofit housing developers and technology companies like Microsoft are working together to create a Housing Fund focused on mobilizing financing and loans for construction of housing for the “missing middle,” i.e. middle-class workers who are currently being squeezed out. Why can’t San Francisco officials organize a similar effort? Already Apple, Facebook and Google have committed – on paper, at least – to $4.5 billion in financing for housing. It is mostly targeted at Silicon Valley cities which have refused to build adequate housing for tech workers, preferring to offload that burden to San Francisco. But the city already is housing a lot of their workers, so the mayor and the Board of Supervisors should work together to access a sizable chunk of these funds.
If this proposal is refused by Silicon Valley, why not levy a “local housing for local jobs” fee on workers for large Silicon Valley companies who live in San Francisco and commute south? One way or another, these companies should be paying the city to house their workers.
Some of these proposals will be easier to enact than others, but there are many possible financing targets. In the past, San Francisco has found innovative legal arguments for justifying gay marriage, regulating the installation of telephone carriers’ wireless equipment, and more recently for a proposed takeover of the catastrophic utility, PG&E. This housing crisis calls for bold, creative vision. It’s time to think outside of the typical neoliberal box.
Certainly it’s true that San Francisco has not produced enough housing over the years, for lots of complicated reasons that progressives and moderates will continue to argue about. But going forward, the housing produced must be the right type: most of it should be built by nonprofit developers on public land with the goal of gradually ramping up the amount of social housing to somewhere near Vienna’s 50 percent level.
Housing, like health care, should be a human right. San Francisco now has the most progressive Board of Supervisors in its history, and the City of St. Francis has a choice of where to spend the public’s tax dollars. Over the years, not nearly enough of it has been spent on securing the most basic need of all – housing for a diversity of residents with a range of incomes. Local political leaders need to be determined and clever in figuring out how to reverse past failed policies. Social housing has worked in other cities, there is no reason that it can’t work here as well.
[Steven Hill (www.Steven-Hill.com) is a political journalist and author of seven books including Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers and Europe’s Promise: Why the European Way Is the Best Hope in An Insecure Age]