By Michelle Frey, Executive Director, Urban Land Institute San Francisco
How do you solve the Bay Area housing crisis? This question has been driving the work of ULI San Francisco for the better part of the last year as the Bay Area continues to grapple with the effects of the area’s housing supply shortages, including skyrocketing housing costs and a homelessness epidemic. But the hand-wringing stage is moving towards the solution stage, and with it, to more innovative ideas for action.
ULI San Francisco’s Housing the Bay initiative has brought together a cross-section of constituents on all sides of the issue—a distinction of the Urban Land Institute’s “big tent” philosophy of convening stakeholders to promote leadership in sustainable land use.
We need to allow, approve and build more homes in every community and every neighborhood
“Our housing crisis has been thirty years in the making. The solutions we have adopted thus far have not reversed the catastrophic upward spiral of prices or increased our inadequate housing supply,” said Denise Pinkston of TMG Partners who kicked off the ULI San Francisco Housing the Bay Summit in March with an overview of the history of the housing crisis.
Under the Housing the Bay umbrella, ULI San Francisco members initially focused on three discrete issue areas: the cost of building, financing workforce housing and the public process for approving new housing. Through collaboration with other organizations, events, workshops, dialogue and research, potential solutions have emerged that are—inevitably—nuanced, diverse and complex. Yet the next steps forward are pointing in the direction of a few major themes.
Creating More Equitable Communities
The first theme to emerge is the overwhelming consensus that housing and equity are undeniably linked—we cannot talk about addressing the housing crisis without taking systemic inequities into account. There is a need for developers to acknowledge existing community context, as well as to be early and transparent with community engagement efforts. All of us should be advocating for a multiplicity of diverse ways in which community members are able to engage, making for a more truly democratic process.
Linda Mandollini, president of Eden Housing, a nonprofit housing developer, believes that there is considerable room for a shift in how communities interface with proposed projects, particularly proposed affordable housing developments.
“We need to shift away from talking about where we should or shouldn’t build affordable housing to how we are going to meet the pressing demand and address the severity of our current situation, particularly related to low and middle-income populations,” said Mandollini, adding, “The conversations about the height of affordable buildings raise the profile of the bigger issue that we must address, finding more solutions as soon as possible to expand housing supply for all Californians.”
In other words, the impacts of development and housing policy should be considered in terms of their effects on vulnerable communities, particularly as our cities continue to change and redevelop. Restricting housing stock to primarily single-family dwellings has had a detrimental effect on the amount of housing supply available to increasing demand, and specifically, to low-income earners.
We also need to be explicit in how we understand the series of events that lead to displacement of low-income households. The lack of supply to meet increasing demand means that what were once middle-income homes become homes for higher income households, pushing middle-income households to homes that were once available to low-income families, leaving our vulnerable communities with few options, ultimately resulting in displacement.
This is a vicious cycle that will take intentional effort to slow down or end, and any path forward must include the preservation of our existing affordable housing stock as well as a dramatic increase in our supply at all scales.
Solutions at Scale
Voices from all corners are making it clear that the housing crisis cannot be solved by working piecemeal, and individual cities should not have to bear the costs of providing housing and amenities when the need is truly regional. There is high potential for regional planning solutions and economic incentives—from regional transit to policies that promote density in our urban cores—to shake California out of the gridlock.
According to Pinkston, “We need bold, urgent, regional and statewide changes to how we plan, approve and build housing to counteract the diffusion of responsibility that has led to a statewide crisis that threatens our future. We need to allow, approve and build more homes in every community and every neighborhood.”
Consensus building at the regional level is spearheaded by leaders from CASA, the groundbreaking initiative from the Metropolitan Transportation Commission, which is addressing the needs to produce housing as well as preserve existing homes. This macro perspective combined with actionable vision is vital to addressing challenges at this scale.
At the state level, there are calls to rethink how the state tax system impacts city revenue and, as a result, development priorities and possibilities. While this discussion often centers around reforming Proposition 13, we need a systemic reconsideration of how cities pay for their growth, including local impact fees. With this, we could have a more equitable distribution of the costs and benefits of growth, while easing our ability to deliver more homes to more people.
Easing Soaring Costs
High construction costs are impacting markets across the country with the situation especially acute in the Bay Area. Costs to build are now so high that many projects are not going forward, leaving a big pipeline of projects but with very little actually being built.
Over the course of the last year, ULI San Francisco has held two forums on modular construction and the opportunities to use technology, in partnership with labor, to create more jobs while decreasing the time to build and the cost to produce homes, and more predictability in scheduling and budgets.
According to Bill Feyling, Executive Director of the Carpenters 46 Northern California Counties Conference Board, there is a need for more training programs, including training builders in modular construction, which is an excellent opportunity for organized labor and cost reduction.
“The residential building industry can address its costly labor shortages by reconnecting with training programs that successfully have recruited and retained thousands of Bay Area residents to the building trades in recent years,” said Feyling. “The Carpenters Union embraces a joint labor-management approach to developing skilled construction career ladders that lead to middle-class standards of living, both for on-site carpenters as well as for factory-built housing workers.”
Feyling added, “The pay-off is a more stable, productive construction workforce that has a stake in forging alliances to overcome well known challenges to developing new housing in the Bay Area.”
Creative Financing Tools
Due to the high costs of building, developers are often unable to secure financing for what is known as ‘workforce housing,’ or homes aimed at middle-income earners. This has created a ‘barbell’ in housing production in recent years at either end of the market: luxury units or affordable units for those making 60 percent of the area median income or less.
At the Housing the Bay Summit, ULI member and AGI Avant CEO, Eric Tao, spoke to how something as simple as reducing property tax rates for projects built specifically for middle-income tenants could make these developments financially feasible.
Tao also noted that there is room to explore how to attract more investment into workforce housing. With its nearly insatiable market demand, workforce housing makes an excellent risk-adjusted return. While it is starting to gain traction with social impact-oriented investors, right now it does not fit neatly into institutional investment portfolios and practices.
With these identified levers in-hand, ULI San Francisco is committed to collaborating with our members and partners over the coming months to develop next steps in our work to fight the housing crisis in the Bay Area. The key to the success of any solution is to be grounded by an understanding as to how the development—or lack thereof—impacts our society as a whole. Getting this right is essential to the long-term health, vitality and quality of life for the Bay Area—and ULI San Francisco is all in.
Michelle Frey is the Executive Director of ULI San Francisco. She has two decades of built environment experience, from planning through construction, and has worked with organizations around the globe to drive the development of healthy, livable, and sustainable communities and buildings.
You can keep up-to-date with ULI San Francisco’s Housing the Bay initiative at https://sf.uli.org/uli-in-action/housing-the-bay/.