The Russians tried it many years ago. The Chinese have tried it recently. Affordable housing: mandated and built by a central government in or near an existing town – when the town was a productive village surrounded by fishing or farming areas. Private enterprise and private markets did not build these thousands of “affordable housing units,” the state did based on an agenda. The units don’t have the latest appliances or even some modern conveniences. Each unit is the same boring, obsolete configuration. Consequently, a decade or two after they are built to solve a housing crises, many are vacant and residents who can afford to do so, leave. Will California Senate Bills like SB50 or SB9 deliver the same result?
Making housing affordable doesn’t offer easy solutions. The problem took years to create and it will take time to solve without creating unwanted consequences. In cities like San Francisco, where demand for affordable housing is strong, newer residential areas (like SOMA) must continue to add needed housing and, more significantly, the necessary infrastructure to service the new population. SB9 destroys single family “hyper-low density” homes replacing them with multi-story apartments. Older neighborhoods, where many want to live, don’t have the properly sized services (sewer, water, transit, wider streets, traffic controls, parking and shopping) to support this new mass housing regardless of how much state bureaucrats jump up and down. San Francisco being landlocked on three sides has its own additional reason causing housing un-affordability.
Trying to force affordable, high-rise housing into every neighborhood – suddenly becomes very unaffordable. Traditional neighborhoods will become defaced with constant construction. Established families, seniors and tenants will be driven out, as will the retail stores and businesses that serviced them – there is no way to replace housing on a mass scale without destroying these sensitive communities. Suddenly, those well-paid employees searching for urban housing at any cost, don’t want the now-unattractive neighborhoods under construction. What is thought to be a simple solution – turns out to be California State Senator Scott Wiener’s very own nightmare. Legislation like California SB50, SB9 will backfire. Land costs that are already high, will double and triple. Developers are all for it until they learn the new infrastructure will have to come out of their profits.
Good products and solutions take time to create. Local planning and building departments, working with the local building industry have a better understanding of what housing will work and where – they, not the state, are in the best position to create it because they use the best tool available – the free market. What will it take to speed up affordable housing construction? Fewer inspections and local building codes? Fly out-of-area contractors in to the job site each day to eliminate the traffic congestion, the commute time and cost of gas? A 2008 style recession is the most efficient answer, but we don’t want to hear that. The cost to build in many neighborhoods today has become unaffordable for even moderate and market rate housing. The square-foot cost-to-build in much of California has doubled or tripled in the last two years, mainly because of two reasons: one – the demand to rebuild created by the devastating fires of 2017 and 2018 (over 24,000 homes lost in 2017 and 2018) and, two – the number of licensed state contractors is half the number we had before the 2008 recession. Unless you are in the industry, you may not understand how this makes housing more unaffordable. When there are fewer contractors, the remaining ones in a market get more calls and requests to build. They can pick and choose what jobs they want, or quite often they add $100,000 to the cost and if the owner accepts, they work on that job. Great for contractors, but not so great for families looking for affordable housing.
The recent supply problems haven’t helped either. What cost $300/SF to build in 2016, now costs $600-$800 per square foot in many areas. The timber market now has a restriction placed on it so that the cost of lumber will not skyrocket above $1,000 per hundred board feet. But this only closes the market. Contractors check the market each morning to see if there is any lumber for sale. Until these markets can increase (slowly) the supply of more affordable housing, the wages paid workers that live there (not arbitrary minimum wage increases) will have to increase to meet the higher cost to house these necessary employees. Some markets like San Francisco, because of restricted land area cannot expect to solve this problem anytime soon. Workers and employers may just have to relocate to more affordable markets. Once either of these happens, housing may become strangely affordable again. Large companies that have added the new tech jobs must help solve the imbalance that they have helped to create by including apartment housing in their new high-rise offices they build in the future.