Tomorrow, the City Council Community and Economic Development Committee will hear a report from the Blue Ribbon Commission. Charged with creating a comprehensive affordable housing policy, the commission instead has a vague recommendation (PDF) for an IZ policy, two vastly differing condo conversion recommendations, and a laundry list of unexplored ideas (like a $200m housing bond). The commission failed the Council and the community by focusing exclusively on IZ, but that was apparent from the beginning. City staff assigned to the commission repeatedly pushed IZ to the detriment of other ideas, while one of the commissioners was the author of the failed IZ policy from last year and stated from the very first meeting that he believed that crafting an IZ policy was their only goal.
While I have expounded repeatedly about the dangers of a policy that amounts to a huge, regressive tax on condos (but not on mansions or single-family homes), the commission didn’t need to hear it from me: everyone else told them. Public comment was overwhelmingly opposed to any policy that would discourage market-rate housing construction in redevelopment areas, and the Just Cause “anti-gentrification” speakers complained that IZ offers nothing to low-income people (families making $83k/yr are eligible). Then the commission received a report commissioned by Council’s IZ backers, showing that the policy is completely infeasible.
The Hausrath report (PDF) broke development in Oakland down into five key types, which vary by construction materials, density, and location. For example, mid-rise condos built in North Oakland, around Emeryville, and Jingletown, are Prototype D, with a typical density of 80-100 units/acre, and constructed of wood above a concrete podium (by contrast, mid-rise condos downtown and in Jack London Square are concrete and steel construction, and much denser). The report broke down the development and land costs of each type, and looked at the feasibility of construction. To no-one’s surprise, high-rise downtown towers and low-end neighborhood townhouses were found infeasible under current market conditions, while other development types offered a decent rate of return. When the costs of complying with IZ were added into account, all development becomes infeasible, with mid-rise Prototype D condos the closest to breaking even. Notwithstanding decreasing requirements and phasing them in over time, the Hausrath report found the costs of compliance would represent a major burden on private development and would have very negative consequences for developer’s profit. What else would one expect from a mandate directing developers to give away a portion of their units below cost?
The non-profit developers and their allies on the Commission, who stand to gain a riskless windfall from developers handing them pre-built IZ units to manage, didn’t care that IZ would stop private-sector housing construction. Alan Yee cheerfully explained that “(IZ) won’t stop development forever, it will just delay it for several years.” Amie Fishman of the local non-profit developer alliance also concurred that it doesn’t matter if we have to wait for soaring housing costs to make up for the expense of providing low-income housing. The commission was instructed by ideologues and staff to treat the private-sector like a piggy bank, not as a vital part of supplying the city with housing. Private development is unlimited, and pays huge property taxes that go to low-income housing. Non-profit development depends on limited government funds. For-profit development is therefore more important than non-profit, but the commission saw it quite the opposite way.
Because everyone was so fixated on getting private developers to fork over funds (beyond the crippling property taxes that they and their customers pay), the commission ignored all other ideas. While San Jose State economist and Commissioner Benjamin Powell repeatedly tried to get agenda space to discuss market-oriented ways to encourage housing construction, he was thwarted by staff. Eventually he stopped attending the meetings, despite being an expert on how government policies impact the housing market. A broad-based housing bond, which would be a fair and progressive way of funding subsidized housing (since everyone, not just condo buyers, would pay) received only lip service. LA’s housing bond narrowly failed last year, as did our own library bond. The chances of a housing bond passing would have been greatly helped by a citizens’ commission hashing out ways that all sides of the housing debate could support it, but nothing was done. The Commissioners never addressed Section 8 or Housing Impact Fees, even though they were asked by the City Council. And of course, the condo conversion compromise the BRC was charged with didn’t materialize.
The Blue Ribbon Commission “recommends” an IZ policy. However, they do not present a policy, or grapple with any of its details. How will the price-restricted condos be monitored to ensure they’re not rented out for profit? How will developers receive the density bonuses they are entitled to under state law? Who will receive the units – people who already live in Oakland, or people who work in Oakland? What about the fact that African-Americans in San Francisco avoid that IZ program like the plague? How will we ensure that our IZ program goes to people that are needy? The BRC did not answer those questions, and so the City Council is left with nothing but a vague call for a small IZ program.
Just as prospective condo buyers will not stand for any affordable-housing program that does not also ask existing homeowners and those buying Hills mansions to contribute, non-profit developers are unable to support the BRC’s recommendations. Their greed prevents them from seeing the issue straight. In the Chronicle, a non-profit housing lobbyist said, “Of all the 170 inclusionary housing policies in California, this is the weakest one.” In the Trib, another non-profit developer lobbyist said the BRC’s proposal “would be among the weakest inclusionary-zoning policies in the state.” Both of the statements are flat-out lies. First, there are 800 jurisdictions in California – any IZ policy would be very extreme. Second, based on the non-profits’ own study of IZ in California, voluntary IZ programs, or ones where the government covers the cost of the IZ units, not only exist, but are by far the most successful. The BRC’s policy is neither – it is involuntary, unfunded, and inflexible. But if the non-profit developers are too greedy to take it, they’re not going to get anything. This experiment with setting up a panel to spin their wheels on IZ will not be repeated.
Of course, maybe people said that seven years ago.