Can the tech boom solve our housing crisis? No, but it can make it worse

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HAC's mantra.

 San Francisco Housing Action Coalition and San Francisco Magazine posed an intriguing question at a forum they sponsored last night in the W Hotel: “San Francisco’s Housing Crisis: Can the Tech Boom Help Us?” Unfortunately, it wasn’t a question they ever really addressed at an event of, by, and for developers and their most ardent supporters.

Instead, the event was mostly just pro-development boosterism supporting HAC’s goal of building 100,000 new homes in SF over the next 20 years, and the discussion seems to show that the tech boom will exacerbate the housing crisis without ever addressing it, particularly given the local tax breaks and subsidies Mayor Ed Lee keeps giving the industry.

“San Francisco must radically increase its anemic housing production,” HAC Executive Director Tim Colen said during the introduction.

The pro-development cheerleading was slightly offset by the dose of reality offered by panelist Peter Cohen of the San Francisco Council of Community Housing Organizations, who noted that market rate developers aren’t building for today’s San Franciscans, 61 percent of whom make less than 120 percent of the Area Median Income. 

“We don’t believe the market will ever touch the 120 and lower,” Cohen said, later offering, “How do we build for the kind of San Francisco we have now?”

San Francisco Magazine Editor-in-Chief Jon Steinberg, who moderated the panel, said this event grew out of an important and widely acclaimed story that David Talbot wrote for the magazine last fall, “How Much Tech Can One City Take?” that raised critical questions about the wisdom of the big bet that San Francisco has placed on an industry driven by speculative bubbles.

“We got more responses from readers than anything we published in our history,” Steinberg said of the article, before shamefully expressing second thoughts on publishing it. “I felt the writer had been a little hard on our friends in the tech industry.”

He introduced UC Berkeley Economics Professor Enrico Moretti, whose 2012 book “The New Geography of Jobs” argues for reducing regulations that hinder housing production in cities, by saying that if he’d read it before publishing Talbot’s excellent article, “I think it would have had a little different tenor.”

Yet Moretti’s presentation was an overly simplistic Economics 101 argument that housing prices go up when demand is strong and supply is weak. “It doesn’t take a degree in economics to know those workers will bid up the price of housing,” Moretti said after noting San Francisco added 21,500 job but just 2,548 new housing units last year.

That’s the basic line we hear a lot these days, that only a massive housing construction boom will keep housing prices down and prevent mass displacement. “The only answer is to radically increase the supply,” said SPUR Executive Director Gabriel Metcalf, noting that means tossing out many of the city’s historic preservation and height and density restrictions. “All we have to do is get out of the way and allow housing to increase to make it normal again.”

Metcalf confidently predicted that housing prices and rents would drop if the city pursued that kind of unfettered housing boom, offering to buy Cohen a beer if he was wrong. Yet even Moretti’s research shows that Metcalf would probably lose that bet.

Moretti compared San Francisco to Seattle, which is also experiencing a comparable high-tech job boom that exacerbated a housing supply shortage, which Seattle responded to by following the prescription of HAC and building thousands of new condos in the downtown core.

The result was that rents in Seattle have increased 31 percent less than San Francisco’s, which he called significant, despite the fact that rents are still on the rise there even with a massive influx of new people and condos and all the infrastructure challenges that presents (it’s widely accepted that new development in San Francisco doesn’t pay for the full cost of infrastructure needed to serve it, which is a huge issue in the transportation sector alone).

Nobody had a good answer to Cohen’s point that building tons of market rate housing won’t actually do much to prevent the displacement of a majority of current city residents. As he put it, “What’s missing is who is that housing for, who is it actually serving?”

Metcalf welcomes the wholesale transformation of San Francisco – “It will be a change, a total change, and guess what? That could be great.” – but even he argues for the importance of policies that protect those on the bottom half of the economic scale, from rent control to more government-subsidized affordable housing production.

As Metcalf, one of the biggest market rate development cheerleaders in city, said, “If it were not for rent control, I would have been forced out of the city by now.”