Outside City Hall: Are the poor better off when we build more housing for the rich?

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– a recent California study attempts to prove there’s less displacement in areas experiencing high growth

– it brings back the old adage “you’ve got to destroy the village in order to save it”

“San Francisco planning commissioners recently approved interim controls strictly limiting new residential construction in the Mission District in order to prevent displacement”

Here’s our critique of the study and more helpful approaches to understanding the problem and what San Francisco is now doing to prevent displacement

Councilmember Michael O’Brien recently circulated a guest opinion from the February 12th edition of the Washington Post entitled: “The poor are better off when we build more housing for the rich”. No it wasn’t a satire or written by Donald Trump.

The writer refers to a study from the California Legislative Analyst’s office (LAO) purporting to prove cities can reduce levels of displacement by more actively promoting market and higher end development in their communities. This conclusion is drawn from data purporting to show that census tracts with higher levels of new residential development have less displacement when compared to many areas of California including San Francisco where rates of new construction are lower.

After a close look at the study, I’m reminded of an old saying: “we had to destroy the village in order to save it”. The only way one could arrive at such a conclusion is by redefining away the problem which is exactly what the authors of the study have done.

Displacement and degree of it is narrowly defined in the LAO study as occurring in census tracts that have seen population growth over time (2000-2013) but a decline in percent of low income households. Census tracts where overall population was falling but more rapidly among lower income groups also were counted. Low income is defined to include those with incomes up to 80 percent of median. No difference is drawn between those below 30 percent of median, 30 to 50 percent of median and 50-80 percent of median.

By lumping these three income groups together, the authors can look at a census tract dramatically losing units and population at these lower income levels (up to 50 percent of median), but see no displacement. It’s often the case that an area or tract seeing an increase in populations at 50-80 percent of median and units affordable to them, will also see a drop in people and households with incomes below 50 percent of median.

Further, nearly all the studies and literature out there on displacement (see examples below) point to a multiplicity of factors that contribute to and define levels of displacement. Other valid and critical indicators include the number of households tossed from their homes due to development induced demolition, conversion, speculative turnover, increased land values, higher rents, a change in the racial composition of a community, rising land values, stages of displacement, and other displacement risk factors.  These multiple causal factors and rates of displacement also can vary widely from neighborhood to neighborhood, and especially from block to block within each census tract. None of this is addressed in the LAO study.

A census tract may have a lot of development induced demolitions, units lost to speculation, conversion – a high volume of households involuntary uprooted, loss of racial composition, and other high displacement indicators. But given the LAO study’s single statistical benchmark for displacement, these areas still could show little or no reduction in the percent of “low income” (up to 80 percent of median) across that tract.

This allows the authors to conclude that we’d get less displacement if local government encouraged still more market rate development in these areas meaning more of the stuff that caused all the demolition, conversion, speculation and DISPLACEMENT in the first place.

Academic studies of displacement, including within California communities, show that it’s often necessary to examine the problem at a micro-level since conditions and circumstances vary so widely at the neighborhood and block level and over time frames much longer than the LAO study’s 2000-2013 timeframe.

The LAO study also makes no distinction between areas (census tracts) where there’s a lot of available land – what may be occurring for example in a suburban areas and what may occur in a more built up urban areas where there is little vacant land and where a lot of new development requires removal of what’s already there.

A key point behind the case the Legislature’s LAO study is trying to make rests on the notion of a clean “filtering” process they describe and demonstrate with charts. If you’re adding more units each year, even though in year one or two or three, when they are new, they’re expensive, but as they age, relative rent on these units falls and eventually there’s more older affordable units to be found. You build more, even if they’re all expensive at first, eventually more will trickle down and be available to lower income groups… so goes the story.

But this theory, straight out of an Econ 101 textbook, breaks down – rarely does it apply in built-up especially high demand urban areas where as you increase levels of new construction it also increases the removal of the older more affordable stuff. Much of the existing lower priced stuff either is demolished or it’s lost to speculative sale and accelerated turnover. The new development also tends to drive up land values and rents across the area including surrounding older rental properties.

There is no filtering in theses tracts, not to a point where rents on the units ‘trickle down’ to the poor – to serve those with incomes at or below 50 or 30 percent of median. Rents actually are bumped up on the older stuff, kept higher, by the new stuff going up around them. (Again the LAO study doesn’t look specifically at changes in population of those below 50 percent of median – readily pushed out under these circumstances even though populations between 50-80 percent and above likely are rising in these areas)

Also, an area in the beginning stages of redevelopment (and displacement) could still hold a large number of lower income residents but now they’re paying 50-60-70 percent of their income on rent as a direct result of the dynamic I’m describing above. This is not accounted for in the LAO study.

Where to look for more thorough (and accurate) studies of Displacement and what’s happening in San Francisco’s Mission District:

It’s not too difficult to find far more valid studies of displacement that what has been offered and described here.

Some of the best work analyzing and studying displacement and its risk factors in California cities especially areas around and within San Francisco, comes from the University of California’s Center for Community Innovation. http://www.urbandisplacement.org/sites/default/files/images/case_studies_on_gentrification_and_displacement-_full_report.pdf#page=4

Interestingly, the data that was the basis for the LAO study was borrowed from a much larger data set collected by the Center. But unlike the LAO study, the Center’s work provides a detailed series of case studies and block by block analysis of communities at various stages of displacement. Numerous factors are considered.

There’s door-to-door block by block “ground truthing” going on to cross check whether the census and auditors data they collected was accurate. They found for instance that in many census tracts and blocks within those tracts, there was wide variance between what actually was there and occurring and the census and assessor data. (This is the data, again, that the Legislature’s LAO study drew upon but w/out the “ground truthing”).

The Center’s study identifies several factors playing a role in mitigating, slowing, or preventing displacement. Allowing redevelopment free rein is not one of those factors. Strong tenant protections, an active community organization working to prevent it, and

strong zoning regulations to prevent loss of existing low cost units are key factors they identify in preventing or limiting displacement in the communities extensively studied.

The Center for Innovative Change’s analysis of displacement identifies these communities either as undergoing displacement or displaying high risk factors where displacement has not yet occurred but likely will soon occur. The Center’s study also points out that studies with rely on 2000-2013 data sets, and only that 13 year increment of time, ignore substantial levels of displacement occurring before that window in many California and San Francisco communities.

Seattle’s 2035 Equity and Growth Analysis is one example. It includes a unique ‘vulnerability index’. Accelerated redevelopment is a major indicator of more displacement in this analysis. http://www.seattle.gov/dpd/cs/groups/pan/@pan/documents/web_informational/p2273984.pdf

Seattle planners commissioned what may be one of the nation’s first Displacement Studies as far back as 1979 and probably still one of the best. And the results directly link redevelopment and higher levels of market rate development to higher levels of displacement. It was a comprehensive study of amounts of housing the city was losing to demolition, speculation, condo conversion, and other market forces, as well as random interviews to survey Seattle residents. The data indicated that one in five Seattle households were forced to move over an 18 month period due to redevelopment and these market forces. The results led to a moratorium on condominium conversions, and passage of an anti abandonment law, and the nation’s first demolition control law. https://seattle.bibliocommons.com/item/show/724943030_seattle_displacement_study#bib_info

The Puget Sound Regional Council (PSRC) also has done displacement risk mapping of areas around rail stops that are susceptible to redevelopment/reinvestment and subsequent displacement. Here too accelerated rates of development including new residential construction are linked to more displacement. This has been going on under their banner of “Growing Transit Communities” effort since at least 2012. See especially recommedation #12 of PSRC’s “Growing Transit Communities Strategy Report” 2013 entitled “Minimize Displacement through Affordable Housing Preservation and Replacement” that is accessible here http://www.psrc.org/assets/9539/GTCStrategy.pdf?processed=true .

A detailed and extensive Portland Displacement Study identifies new expensive residential development as a key factor contributing to displacement: https://www.portlandoregon.gov/bps/article/454027

A state of Texas Senator has established a working group to examine displacement, factors contributing to it and solutions. A contributing factor is redevelopment and growth. And there is no solution calling for still more displacement-inducing redevelopment

https://texashousers.net/2008/06/09/recommendations-for-state-action-to-prevent-displacement-of-low-income-people-from-gentrifying-neighborhoods/

Also, here’s an interesting study of Displacement and housing costs in San Fran’s Mission District. http://www.sfbos.org/Modules/ShowDocument.aspx?documentid=54068 On its basis, in January, that City’s Planning Commission adopted interim controls limiting growth to prevent more displacement in that community. http://missionlocal.org/2016/01/planning-puts-brakes-on-sf-mission-development/ There’s also an interesting critique of the LAO study included here. San Fran Planners say it would be infeasible to increase annual residential construction by 500 percent in San Fran and double it’s population. That’s the amount of growth the State LAO study says would be needed just to moderate price increases in the city so they were comparable with price increases in other Calif cities.

And once again the link to the Center for Innovative Change Cal-Berkeley study:

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About John V. Fox

Director, Seattle Displacement Coalition
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