- Written by Phil Berg
Written by guest poster Phil Berg
It's the money, stupid
There are two things involved in any transaction, the stuff and the money. It used to be that gas was five cents a gallon. Now it's three bucks. It's still the same old gas. So what has changed? The bucks have changed. The same goes for housing--more bucks chasing a fixed housing stock.
Let’s follow the money. But before I continue, I should say that almost everybody thinks that money is too complicated. It is much easier to make an emotional decision to just throw up your hands and blame greed. Blaming a broken market on greed is like blaming an airplane crash on gravity. Of course gravity is to blame, but the other reasons need to be investigated.
Following the money
One source of more money chasing housing is mortgages. The cash for mortgages largely comes from banks. Now, most people think that banks just recycle money from depositors. OK, this is right where most people stop listening and change the topic. But right here is the crux of the problem.
It is a little complicated. This is largely because we like to think that things work in a logical way. Honesty works in a logical. Fraud is more complicated. The machinery for creating more money for mortgages, or any other credit, is a fraud. That is a strong statement, but please just entertain the idea. Think about it for a while after you read this.
You will not be alone in being dazed by what I am about to write. No less a famous liberal economist, John Kenneth Galbraith, said that, “The mind is repelled by the notion of how money creation works.”
So here goes
We will start with a car loan, so as not to be distracted by the complications of real estate.
- Written by Marcy Berry
In the old days people used to call it “Using OPM.” Today the same phenomenon is called a “Voter Revolt.” Or at least that is what Jon Golinger calls it in his Opinion piece in the S.F. Examiner of March 15. Golinger was the driving force behind the wildly successful “No Wall on the Waterfront” campaign, which resulted in the canning of the Washington 8 luxury complex in San Francisco’s waterfront. Equally successful was Golinger’s Proposition B, which requires voter approval of any structure over existing high limits to be built on Port of San Francisco property (the waterfront).
In his Opinion piece, Golinger quotes the findings of a citywide poll of 602 likely voters conducted in February 2015 for the housing group TODCO, Tenants and Owners Development Corporation, focusing on South of Market. The findings state that the voters polled would overwhelmingly support ballot measures that would accomplish the following:
* Dedicate City-owned land to be used only for subsidized housing.
* Zone City-owned land only for subsidized housing.
* Enact a temporary moratorium on new projects in the Mission District, until the City adopts a policy to protect against the displacement of small businesses and arts groups.
Golinger excoriates the City for approving “a glut of luxury condos to occupy our increasingly limited land instead of prioritizing the affordable [subsidized] housing we badly need.” No mention in the article that Proposition C approved in 2012 would require that developers fork over the equivalent of 12% of those luxury condos in affordable housing. And Proposition K approved in 2014 would make the pressure to bump up the 12% to 33% unavoidable.
We Libertarians are 100% in favor of voter revolts. However, this revolt is starting to shape up as tons of expensive bonds (City IOU’s) and tax increment financing (future gains in taxes to subsidize current improvements). The City does not “earn” any money, so any money it may have to pay principal and interest on bonds needs to come from the pockets of those who do.
- Written by Marcy Berry
Libertarians are forever sounding alarms about the consequences of legislative decisions. Besides challenges to individual self determination, property rights, and voters’ ability to hold accountable via the ballot box individuals who make decisions on our behalf, Plan Bay Area is predictably contributing to the housing crunch.
As we noted in our article Priority Development Areas and Your Neighborhood, Plan Bay Area was designed to confine population, housing, and commercial growth to transit corridors, ostensibly in order to reduce travel distances to and from work and shopping (not much mention of schools, places of worship, or getting together with friends living outside of PDA’s). Therefore, San Francisco is doing a lot of construction in the eastern corridors. The Plan Bay Area map seen here shows the principal transit corridors highlighted in red, pink, and purple.
Apparently, the fallout has already begun. As Joe Fitzgerald Rodriguez says in his article Why Not Look to Westside to Build Homes?, the adage “Go West!” does not apply past the Panhandle; past the Panhandle it is more like, “Fat Chance!"
And the eastside residents are crying “Not Fair!” So, our legislators are retooling. Supervisor Eric Mar says that growth can’t just be on the east side. Supervisor David Campos may propose a moratorium on market rate housing development in parts of the Mission; which means no development at all unless taxpayers come up with boatloads of money to build even more subsidized housing than is already planned.
We Libertarians would like to remind our readers that Supervisors Mar and Campos were enthusiastic supporters of Plan Bay Area – and therefore its Priority Development Areas. Perhaps look under the cushions for more taxpayer money to develop transit corridors in the western parts of The City ASAP?
We recommend Joe Fitzgerald Rodriguez’ article in the San Francisco Examiner of February 17, 2014: On Guard: Why Not Look To Westside to Build Homes?
- Written by Marcy Berry
San Francisco is unquestionably a progressive town. All elected officials are Democrats. Compassion means rent control, subsidized housing, minimum wage, City mandated workplace healthcare and paid leave, free MUNI for students and seniors, and 17% of workers unionized vs. 11% nationwide. As for voters, they seem to revel in approving bond initiatives for all manner of spending.
Therefore, it might come as a surprise that the City and neighboring counties have lots of liberty-leaning folks who believe in the benefits to all of small government, free markets, personal liberty, and personal responsibility.
Liberty-leaning The Independent Institute thrives in nearby Oakland. This non-partisan non-profit organization sponsors in-depth studies of economic and social issues. Its website describes “The mission of The Independent Institute is to boldly advance peaceful, prosperous, and free societies grounded in a commitment to human worth and dignity.” http://www.independent.org/
Mountain View based Libertarian Futurist Society honors pro-freedom fiction writers with the annual Prometheus Award. From their website: “Do you love liberty and Science Fiction? Do you dream of a free future? Are you a fan of writers like Ayn Rand, Robert Heinlein, Poul Anderson, Vernor Vinge, James Hogan, Neal Stephenson, and Ken MacLeod? If so, then join the Libertarian Futurist Society!” Now, that can only be described as cool! http://lfs.org/aboutus.shtml
Libertarian (Big and small “L”) radio also thrives in the Bay Area. We recommend that you check out the websites of Bob Zadeck http://www.bobzadek.com/ and Freedomain Radio hosted by Stefan Molyneux https://freedomainradio.com/
There are several libertarian Meetup Groups, including ours which is sponsored by Starchild, our Outreach Director:
Free Exchange http://www.meetup.com/Free-Exchange/
Freedomain Radio http://www.meetup.com/Freedomain-Radio-Bay-Area/
Golden Gate Liberty Revolution http://www.meetup.com/RonPaulSF/
Libertarian Party of Alameda County Meetup http://www.meetup.com/libertarian-438/
Libertarian Party of San Francisco Meetup http://www.meetup.com/the-LPSF/
San Francisco Bitcoin Social http://www.meetup.com/San-Francisco-Bitcoin-Social/
So, if you think that the progressive approach to personal liberty and personal responsibility is not entirely to your liking, connect with people that feel as you do – check out the websites above.
- Written by Sonja Trauss
Guest contributor: Sonja Trauss
I don’t want subsidized, supervised affordable housing.
With a salary of $30,000 per year, I am low-income. Shouldn’t I be calling for more Below Market Rate (BMR) units to be built so that I can live in San Francisco? Don’t I appreciate the efforts of affordable housing advocates? They are working tirelessly to hold up and delay the creation of market rate units while negotiating for a higher percentage of units to be set aside as BMR rentals or condos.
Why aren’t I thankful? Don’t I want a Below Market Rate unit?
No, I want a Market Rate unit. I want the market to provide a unit I can afford.
Imagine the world that affordable housing advocates are trying to build for me: in their visionary utopia, in order to rent an apartment I would have to get my income certified. Next, I would go on a waiting list or enter a lottery. I would either wait years on the list for a unit or endure many rounds of lotteries before winning a unit. Once in a BMR rental unit, I would be discouraged from letting my income increase. If I were to progress in my career, or have some other financial success, I would have to move.
Maybe I could buy a BMR condo. That takes care of the possibility of being forced out if my income increases, but owning a BMR condo is false ownership. I don’t have the two main advantages of true ownership: I cannot pass the property onto my heirs, and I cannot take advantage of the full appreciation of the property. The resale price of a BMR unit is determined by the Area Median Income at the time of the resale. Unlike a true owner, increases in property values in my neighborhood do nothing for my overall wealth.
I want to rent on the open market. If I can buy, I want to buy and truly own. I want to consume housing the way I consume all other products: Buy used, old or out of fashion, buy scratched and dented, buy odd lots, split the cost with friends. Of course I’m not going to move into a new building. If you’re trying to save money on a car, do you buy this year’s model? No.
Every new affordable unit means another renter living under income supervision and perverse incentives. It means another “owner” robbed of the appreciation of his asset, and his children alienated from their inheritance.
There is a place for subsidized housing: people who are unable to work due to advanced age or disability should be entitled to a housing benefit along with their social security benefits. If you’re working, the market should be big enough to supply you with housing. If the supply is sufficient, and the lowest wage workers are still priced out, then the area minimum wage is too low.
In my utopia there would be zero working-age, able-bodied, sound of mind people in supervisory subsidized housing, zero hamstrung owners, ZERO WAIT LISTS. Zero supply constraints!
How do we get market rate housing for all markets? Step One: End the shortage. If we need 100,000 units, we have a lot of work ahead of us. If you’re involved in opposing a new housing project, stop, just stop.
Our need for housing at all price levels far outstrips our supply at any level. Are you preoccupied with whether the new units “match” the rest of the neighborhood? Matching is for your belt and your shoes. Housing supply is a serious problem. If you’re sentimental about the past, swallow your tears.
Sonja Trauss is the founder of SF Bay Area Renter’s Federation.Her views are her own and not an official position of SFBARF.
- Written by Marcy Berry
In November 2012, the Libertarian Party of San Francisco encouraged voters to vote “NO” on Proposition C, The Housing Trust Fund. Our statement on the Voters’ Pamphlet expressed our concerns:
“Proposition C would commit San Francisco to increasing payouts through 2042 and hundreds of millions of taxpayer dollars that won't be available for other priorities like schools, parks, infrastructure, or health care, plus an open-ended authority to issue bonds without voter approval!”
Proposition C passed by 65.15%. However, two years later in 2014, Mayor Ed Lee issued the “Findings and Recommendations by the Housing Work Group 2014,” which stated,
“When San Franciscans adopted the Housing Trust Fund two years ago, they put in place the most aggressive local funding stream for affordable housing in California. But given the steady decline of federal and state funding for affordable housing, the loss of Redevelopment, and the increasing cost of producing affordable housing, it became clear to Working Group members that our existing funding streams are still not enough.”
So, we are telling you once again, it will never be “enough,” because market forces simply cannot be legislated away. All that will happen is San Francisco piling up debt that will encumber our children and grandchildren for decades to come. This in addition to squeezing all that is possible from residents and businesses doing business in the City. Noted in the Working Group recommendations is the following,
“The Capital Planning and Budget Offices should examine the potential for General Obligation bonds for affordable housing development and rehabilitation over the next several years…The City should examine how best to use tax increment financing to provide affordable housing to a range of income levels, using tools such as the Enhanced Infrastructure Financing District recently enabled by the state…” “To leverage limited public dollars for housing, the City should pursue the development of an off balance-sheet Housing Affordability Fund…”
Wall Street high jinks pale in comparison to these plans, and as we noted in 2012, voter approval is not necessary.
A few statistics can clarify our point that there will never be enough. Median household income 2009 – 2013 is $75,604. Of those in the bottom half, 13.5% are below the poverty line. Average rent for a two bedroom apartment in San Francisco is $3,800. We ask, as we did in 2012, what distortion and damage are needed to keep pursuing the notion of “housing for all” in the most expensive city in the nation.
- Written by Marcy Berry
“Priority Development Areas” are a bureaucrat’s dream. Not just any bureaucrat, but one with lots of time and taxpayer money in his/her hands. Once upon a time, town and cities developed organically. People settled where it best suited their tastes, their imagination, their talents and abilities. As they settled, leaders rose to develop amenities and facilitate commerce – Romans built aqueducts, settlers built general stores, skilled folks provided factories to produce goods, others offered services. Then came “Planning.” As manual work and basic private services decreased, bureaucracy increased. Now we have reached the pinnacle of up-side-down bureaucratic meddling, when planning micromanages population flows.
This map shows San Francisco’s Priority Development Areas. Red and pink are "priority areas." Since around 70% of amenities, services and commerce are to be shoehorned into these two areas, good luck if you live outside of them. Of course, if you live outside of a Priority Development Area, you are not as done for as if you live inside a “Priority Conservation Area,” which will be the subject of another post later.
However, “Life is what happens to us when we are making other plans,” and that goes for bureaucrats too. The red and pink areas on the map indicate where bureaucrats wish to move the greatest number of folks, by building tall buildings and concentrating commerce. These areas also happen to be where the City’s most magnificent views are. Therefore, the bureaucrats are experiencing some unexpectedly strong push back from current residents and visitors.
The gray areas on the map, outside of the priority areas, will by necessity suffer neglect. What is not a “priority” is shoved aside. Residents in those areas can either lament their fate, or seize the opportunity to acquire greater autonomy for their neighborhoods. Obviously Libertarians encourage the latter.
We at the Libertarian Party of San Francisco have been talking for a long time about the negative consequences of Plan Bay Area. We will continue to point out how we the people abdicate control when we allow unelected bureaucrats to be placed in charge of where we live and how we live. We encourage you to think about how your neighborhood will be impacted by the Priority Development Areas. Then organize neighborhood groups that include property owners, renters, merchants, school teachers, parents, and other neighborhood participants to ensure the local neighborhood vision prevails.
Further reading on unelected officials:
- Written by Marcy Berry
The Housing Crisis and the City’s Miracle Workers:
We at LPSF have written and spoken ad infinitum about how San Francisco politicians are committed to performing the miracle of attracting folks with money that will pay high property taxes and astronomical business fees, while keeping the lower-income population in place. This is not an easy feat, since any rational human being would rather rent or sell at market rates to a newly arrived higher-income worker than keep a middle class family in a rent controlled space. It appears that the easiest path to accomplishing this feat is to encourage frequent use of a catchphrase, housing crisis, as if this economic event were the result of evil capitalism that just appeared, unwanted, on the scene, and then follow up with proposals on the November ballot to “strengthen renter protections.” One such proposal will be to encourage state legislators to place restrictions on the Ellis Act, since landlords of unprofitable rent-controlled housing are predictably evicting tenants in order to seek newly emerged opportunities. Perhaps Mayor Lee and the Board of Supervisors are counting on the newly arrived better paid workers to scoop up any formerly rent-controlled buildings abandoned by landlords who find themselves prohibited from making the most out of their investment? Of, course, if that is the case, we must ask how this scenario helps the lower-income families at all.
Income Inequality and Pretending to Fix it
When there is a rapid change in technology – say, automobiles replacing horse-drawn carriages – those who do not adapt to the new realities are left economically behind. The more disincentives there are to adaptation, such as long-term unemployment benefits, “job training” for activities that are one generation behind, and rental controls that render lower-income individuals fearful of moving in search of better economic opportunities, the more income inequality there will be. The progressive solution is to raise the minimum wage, which will affect a relatively small number of workers and will not affect those without a job at all. Mayor Lee and the Board of Supervisors are expected to predictably place such a minimum wage proposal on the November ballot. Their argument is that one can’t live in San Francisco on the current minimum wage. Indeed, one cannot.
Expect our Equally Predictable Response in November
The way we see it, politicians will buy votes in exchange for the illusion of safety. The subject of this post is the illusion of safety from displacement. When economic conditions change structurally and drastically, the only way safety from displacement can be guaranteed is to render individuals who do not adapt to the new conditions dependent on public assistance. Libertarians do not see that situation as real and meaningful safety. We would prefer that City government were honest about the consequences of giving tax and regulatory incentives to picked and chosen industries.