The longer it takes to build housing, the more expensive it gets. How can we speed it up?
It’s no secret that San Francisco isn’t building enough housing for everyone. In 2014, San Francisco issued permits for 109% of the housing units mandated by the state for Above-Moderate Income earners. But when it comes to homes for low-income households, it permitted only 27% of its requirement, and 59% for very low-income. Worst of all, however, is the middle-income category. San Francisco fulfilled less than 18% of its state-mandated Regional Housing Needs Allocation (RHNA) requirement in 2014. For its current 2015-2023 cycle, it has built only 5% of its middle-income goals.
We can’t let the City become exclusively one for the very rich or very poor. It must shelter everyone.
While the region adds 4.3 jobs for every new housing unit since 2011, San Francisco’s median house price has shot up nearly 25% over last year’s price in the first quarter of 2018. The average home in the city sells for $1.665 million. San Francisco has the highest share of million-dollar-plus homes in the nation, at 66%.
With nowhere to live, middle-income families are fleeing San Francisco in droves, deepening inequality, locking middle-class children out of opportunities, and creating a walled-off playground for high-income tech workers and the children of venture capitalists.
Why has San Francisco so badly underbuilt homes for middle-income families? One reason is the permitting bureaucracy. In San Francisco it’s nearly impossible to build a new home without a public hearing.
Instead of permitting all homes that meet zoning requirements like most of the country, the city’s Planning Commission—a 7-member board appointed by the Mayor and Board of Supervisors—can review, judge, require changes of, or disapprove of any new development.
New research shows that this kind of excessive land use regulation entrenches historic segregation patterns.
In his study, Measuring the Length of the Housing Development Review Process in San Francisco, the city planning graduate student Brian Goggin examined 2,474 housing developments between mid-2009 and early 2017 to measure how much time new homes spend in each stage of the official permitting review and post-review construction process.
Goggin finds the median 10-plus unit apartment building takes about six years to get through the bureaucratic maze in San Francisco. One took 24 years, and a “sizeable amount” of multi-family homes have taken more than 10 years.
Goggin also finds that getting a new housing development through the permitting process takes longer in lower-density neighborhoods than higher-density neighborhoods.
Discretionary review is supposed to ensure new homes are safe, have a high-quality design, and cause little disruption to the surrounding community. But building codes and health and safety standards aside, are homes proposed on the Westside that much less safe, ugly, and disruptive than homes proposed in the Eastern Neighborhoods?
It appears that Westside neighborhoods like Twin Peaks, Bernal Heights, and the Richmond District use planning entitlement appeals to thwart, delay, and decrease new homes. This means that in San Francisco, luxury high rises have only one place to go: crowded into just five neighborhoods, all on the east side, and all majority minority.
Meanwhile, existing homes that are subdivided or renovated in lieu of the overwhelmingly capricious planning review process also flout necessary safety standards, leading to unsafe living conditions for vulnerable renters.
Discretionary review makes housing more expensive and scarce. It adds hundreds of thousands of dollars to the cost of new homes without adding any value. This adds to the cost of new home construction, spiking rents. And it makes building so-called “missing middle housing” prohibitively expensive. “When we add lots of costs, only the highest end housing will get through that gauntlet,” YIMBY Action’s Laura Foote writes.
Washington, D.C. conducted a experiment comparing a discretionary review neighborhood (Capitol Hill) with an adjacent by-right permitting neighborhood (Navy Yard). Regulatory red tape has all but stopped new home building in Capitol Hill and rents have increased by almost 20% in the past five years. In that time the by-right neighborhood has built lots of high-rises, and rents there have fallen by about 8%.
In Houston, a significantly more affordable city with just a 7% increase in home prices last year—up to a median of $179,4400—the slowest permit application in the last three years took just 28 days to process, according to research from Seattle’s Sightline Institute. Three years ago, Houston updated its data infrastructure so city bureaucracies can share planning data digitally and review permit applications at the same time.
Goggins’ study doesn’t even include the process before home builders officially submit their entitlement applications. This excludes community meetings and feasibility studies, which can add years to the process. For example, take the case of the Balboa Reservoir project, a 50% permanently affordable housing project slated for a vacant lot near public transit and San Francisco City College which recently held its 26th community input hearing.
While the argument for discretionary review is flimsy at best, it’s on especially weak grounds when it comes to mid-size multi-family homes. They face the same amount of review time as much larger developments despite having less community and environmental impact than larger buildings.
Smaller, wood-frame apartment buildings are cheaper to construct than steel-frame high-rises, making them ideal for creating middle-income housing across the city. That is, if we can get them permitted in a reasonable amount of time. There’s no compelling reason for the Planning Commission to not automatically permit every mid-sized development of 10 or fewer units.
“Even LA has by-right approvals for projects up to 49 units,” Foote wrote recently. “The rules should be the rules. Ministerial approval ensures that if you follow the rules, you get your permits.”
Nationwide, income equality is on the rise. Middle-income workers’ paychecks increased by only 42% between 1980 to 2014 while top 0.1 percent of American earners have seen their earnings increase 320%. But the Bay Area has earned the dubious distinction of having the third highest income inequality in the U.S. Wealthy Bay Area families earn 11 times more than their low-income counterparts.
San Francisco’s drawn-out permitting scheme makes new middle-income home developments much less profitable to construct than luxury high-rises. Failing to build enough middle-income housing to meet demand is pushing middle-income families out to other cities, leaving the highest and lowest earners behind.
If San Francisco doesn’t fix its permit process, it will cement its now likely future as a city of the Rich and Old. We’ll have our millionaire homeowners and high-earning new residents. And we’ll still have our poorest residents, either unsheltered or locked into rent control, living in fear of the next Ellis Act eviction. But everyone else will increasingly have to find somewhere else to live unless we can find the political will to streamline permitting for homes for the middle class.
Cathy Reisenwitz writes about software for a living, sex on the side, and policy for fun. Her column “Unintended Consequences” appears regularly in the Bay City Beacon. She’s pro-sex, pro-feminism, and pro-market. Sign up for her newsletter and follow her on Twitter.
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