Legends in Our Own Minds

A new report shows the housing shortage wasn't caused by the dot-com boom -- but by lack of housing construction

In the San Francisco of the Dot-Com Legend, one could criticize public housing projects, welfare, subsidized health care, or programs for the homeless without drawing much attention. The city government was run in such an obviously inefficient manner that even liberals felt free to criticize the management of poverty-relief programs. But rent control was taboo; one couldn't point out that nearly all economists believe stringent, San Francisco-style rent control exacerbates housing shortages without being branded, in S.F.'s so-called "progressive" circles, a cruel, illiberal philistine who didn't care about the poor.

But judging from the statistical nuggets uncovered in the new Housing Data Book, San Francisco's rent-control law is a far cry from being the palliative to the poor that proponents portray it. In fact, it is, in great part, a sop to the rich, and of only spotty help to the needy.

More than one-quarter of San Francisco rent-control beneficiaries have a household income of more than $100,000 per year. Meanwhile, only 19 percent of rent-controlled apartments' occupants have a family income of less than $15,000.

Rent control in San Francisco appears to discriminate against families with children; units not covered by rent control are twice as likely to have two or more children living in them as rent-controlled units are, according to the Housing Data Book. This is true even though children are among San Francisco's neediest residents.

San Francisco rent control bypasses many of the elderly; around one-third of San Franciscans over age 65 are unprotected by rent control. The survey didn't even consider the 12,000 homeless San Franciscans who receive no rent-control benefit at all.

It's not unusual for a well-conceived poverty-relief program to miss some of the needy. But rent control is the grossly polluting factory of entitlement schemes; it harms, rather than merely neglects, everyone outside its walls. The new Housing Data Book does not go just one way. It debunks some of the most hyperbolic criticisms of San Francisco rent control; the report shows, for instance, that it's not true that S.F. landlords keep their apartments empty for fear of locking in rent-control tenants. Rumor once had it that some landlords lived in cheap, rent-controlled apartments, then used the money they saved to buy up apartment buildings; the Data Bookshows this isn't true. A negligible number of San Franciscans are both landlords and renters.

But judging from the drastic rent increases experienced during the 1990s housing shortage, economists' basic understanding of the price-gouging effects of rent control remains in place. Apartments are like any commodity in the sense that when they are subjected to price controls, the "controls" actually end up increasing prices in the long run by discouraging production. The original rent-control law sought to address this scarcity effect by excluding all housing built after 1979. But the effect lingers, not least because builders and their bankers fear that San Francisco may someday include new housing under rent control anyway.

Lenders need only look to San Francisco's political twin, New York, for an example of a city where newer buildings were included in a revised rent-control law after city fathers had sworn this would never happen. And the construction industry is well aware that supervisors such as Chris Daly and Matt Gonzalez believe newer buildings should be put under rent control. This scares off construction financing, driving up financing costs and making all new housing more expensive.


By applying real factual analysis to the housing debacle of the 1990s, perhaps our city fathers will be freed to repair some of the damage wreaked by the fanciful legends perpetrated during the dot-com boom. Old, oft-repeated falsehoods about the local housing market allowed San Franciscans to blame outsiders for their housing problems, rather than themselves. Perhaps, as they read their copies of the new housing report this week, supervisors, Planning Commission members, and others in positions of influence will realize that we're still in the throes of a housing shortage, and that the only way out is to loosen the choke hold that NIMBY neighborhood associations have on the planning process.

Perhaps, with help from this new report, political leaders will see that rent control has strayed far afield of its original aim, and consider phasing it out by allowing controlled rental units to become market-rate units when tenants leave. Perhaps these newly unrestrained units will become subject to a special gross receipts tax, earmarked to subsidize housing for poor families and elderly. Perhaps the city government will use some of this money to build public low-income housing -- which economists say is a far more effective solution for reducing poverty and homelessness than rent control. Perhaps this new, sober assessment of our city's 10-year-old housing disaster will serve as a sort of addict's intervention, and San Francisco will wake up from the denial of the dot-com, build-no-housing years. Perhaps San Francisco will begin to live up to its potential as a liberal, caring city, to become, in reality, the stuff of legend.

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