Why allowing more housing makes property more expensive

By Tim Redmond : 48hills – excerpt

Loosen zoning restrictions and you get higher land values — but there’s another approach, and it’s not really all that crazy

Every time a big market-rate housing project is dropped into a working-class community, she noted, evictions and rents go up all around it. After the Monster in the Mission was proposed (not even built), she said, tenants from all over the area were in her office complaining about rent hikes and eviction threats.

“If we get ten affordable housing units, and 100 people are displaced, we didn’t get shit,” she said.

Pretty simple.

The rally in support of a measure by Sups. Aaron Peskin and Eric Mar that would allow more density all over the city – but only for truly affordable housing – came a couple of days after I got into a big Twitter debate with Kim Mai-Cutler, she of the burrowing owls and vomiting anarchists, over my suggestion that big market-rate projects in the Mission and the Tenderloin won’t do much good for anyone except the developers and the wealthy…

I argued that, in fact, if done right, restrictive zoning brings down property values – which ought to be the point. And I had a two-word solution to the money problem: Tax Zuckerberg…

Zoning is a tool that communities can use to direct what types of land uses go where. It’s also, potentially, a way to change land values.

Let’s look, for example, at the Eastern Neighborhoods of San Francisco. Until fairly recently, much of that land was zoned only for industrial use; in the 1980s and 1990s, housing – presented as “artist live-work” housing – started to get approved.

That made the land more valuable: Production, Distribution, and Repair – the PDR that planners talk about – typically can’t afford the same rent per square foot that people looking for market-rate housing can. So warehouses and print shops and small factories found that the rent was going up so high that they had to leave, at which point those buildings were demolished and turned into housing.

Then the city planners created what’s known as Urban Mixed Use, a zoning category that allows housing, offices, and PDR. Guess what: Offices, particularly tech offices, command rents as much as ten times as high as PDR can pay, and condos are at about the same level.

So the owners of every site that could be offices or housing saw their land values increase dramatically. No surprise they got rid of PDR tenants in favor of higher-paying uses…

If you zone areas exclusively for PDR, and you don’t allow any exemptions, and you enforce the law, then you suppress the increases in land values that you see under the current zoning. If you are forbidden by law to rent your space to anyone who can pay more than $4 a square foot, your land is worth less than if you can rent it for $40 a square foot.

Let’s remember: We were never talking about taking high-value land and downzoning it. All of those landowners bought the property under the old, more restrictive zoning, and paid a price that reflected that.

So by changing the zoning, we increased land values and drove out one sort of use in favor of another…

Suppose we take zoning more seriously.

Suppose the Planning Commission creates a new category of zoning – Below Market Rate Housing – and defines it to mean housing that is priced for people making between 20 and 70 percent of the neighborhood median income. Then the commission applies that zoning to every vacant site in the city, and every site that is occupied by an abandoned business.

In a sense, in a much more limited way, that’s what the Peskin-Mar legislation does: It allows more density, but as part of that bargain limits the use to 100 percent affordable housing.

In my broader scenario, the land where the new BMR zoning applies can no longer be used for luxury condos. Its value drops…

So how the hell do we pay for that? It’s a question that we ought to be demanding that Bernie Sanders and Hillary Clinton answer. Because the housing crisis in SF is not unique – Los Angeles has tens of thousands of homeless people, New York is a disaster, Portland and Seattle are seeing problems … urban housing is a serious problem all over the country…(more)



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