Prop K - Affordable Housing [1 Attachment]

Hi All. Here's my argument against K, a declaration of policy that The City will try to have 1/3 of its housing be "affordable." Word count also came in at 298, so no room at present to add SF Libertarian Campaign Committee. I don't think I changed anything from what I brought to Saturday's meeting, but my paper got lost in the mountains of paperwork I brought on Saturday, so not sure if my argument was looked at. Please review.

The current lack of affordable housing was caused by overly
restrictive zoning and bureaucrats granting special tax breaks to high tech
companies to lure them to The City. Now
the bureaucrats are at it again trying to fix the problem they created by
proposing more involvement in housing. They want to create a Neighborhood Stabilization Trust, which sounds
great, but in fact it’s a plan for The City to purchase small and large
buildings to make housing “affordable.”
Just one look at the SF Housing Authority will give you an
idea of what “affordable” housing will look like with The City as your
landlord: broken and deteriorating
buildings, rampant crime and violence, vacant units even though waiting lists
are long, a lack of accountability, and a history of corruption.
Where will the money come from to subsidize those who cannot
afford market rate housing? One clue is
mentioned in the text of Prop K: “Special Use Districts,” which is another way of saying unelected
bureaucrats raising taxes without a vote of the citizens. If the money doesn’t come from increased
taxes (or they might call them fees), then it will have to come from reduced
basic government services like police, fire protection, and road maintenance. It has to come from somewhere.
If city officials really want to help make housing more
affordable, they should consider staying out of the housing market completely
and granting tax breaks to all businesses, not just large ones. Loosening up on zoning regulations will also
go a long way towards increasing the supply of housing. Let individuals, and associations of
individuals, not bureaucrats, decide how much development they want in their
neighborhoods through deed restrictions and covenants.
Vote NO on K. It’s a
promise the bureaucrats cannot fulfil.
Libertarian Party of San Francisco

Thanks!
Aubrey

Hi Aubrey,

Good points. I got confused about the last part when you say, "If city officials really want to help make housing more affordable, they should consider staying out of the housing market completely and granting tax breaks to all businesses, not just large ones." I can't tell if you want give tax breaks or not. Maybe just leave the part about the granting tax break out to save you time? But, if others can understand, then leave it in.

Marcy

Hi Marcy. Thanks--I was not entirely happy with that sentence but wanted to make a point about Libertarians wanting lower taxes overall for all businesses and not special tax breaks for certain players in the game. I have revised my argument slightly by dropping it in the last main paragraph and adding a clause in the first paragraph. I italicized the change. Improves word count so I can add SFLCC!

The current lack of affordable housing was caused by overly
restrictive zoning and bureaucrats granting special tax breaks to high tech
companies (rather than lower taxes for all businesses) to lure them to The
City. Now the bureaucrats are at it
again trying to fix the problem they created by proposing more involvement in
housing. They want to create a
Neighborhood Stabilization Trust, which sounds great, but in fact it’s a plan
for The City to purchase small and large buildings to make housing “affordable.”

Just one look at the SF Housing Authority will give you an
idea of what “affordable” housing will look like with The City as your
landlord: broken and deteriorating
buildings, rampant crime and violence, vacant units even though waiting lists
are long, a lack of accountability, and a history of corruption.

Where will the money come from to subsidize those who cannot
afford market rate housing? One clue is
mentioned in the text of Prop K: “Special Use Districts,” which is another way of saying unelected
bureaucrats raising taxes without a vote of the citizens. If the money doesn’t come from increased
taxes (or they might call them fees), then it will have to come from reduced
basic government services like police, fire protection, and road maintenance. It has to come from somewhere.

If city officials really want to help make housing more
affordable, they should consider staying out of the housing market completely. Loosening up on zoning regulations will also
go a long way towards increasing the supply of housing. Let individuals, and associations of
individuals, not bureaucrats, decide how much development they want in their
neighborhoods through deed restrictions and covenants.

Vote NO on K. It’s a
promise the bureaucrats cannot fulfil.

Libertarian Party of San Francisco

San Francisco Libertarian Campaign Committee

Thanks for your careful reading!
Aubrey

Much more clear now to me.

Marcy

Do we really want to blame tax breaks to high tech companies for the lack of housing and then say taxes should have been lower for ALL businesses? Logically, if tax breaks for high tech companies made it more desirable to live here and thus contributed to the housing crunch, lower taxes for ALL companies would've made it even MORE desirable to live here, making the housing crunch even worse!

  I think we're painting a big target on ourselves if we make that argument. Besides, it's unfair to tech companies -- lack of affordable housing in this town is a problem that has been many years in the making and long preceded the current tech boom.

Love & Liberty,
                               ((( starchild )))

On the bright side Aubrey, I love your 2nd paragraph!

Just one look at the SF Housing Authority will give you an idea of what “affordable” housing will look like with The City as your landlord: broken and deteriorating buildings, rampant crime and violence, vacant units even though waiting lists are long, a lack of accountability, and a history of corruption.

  Great stuff! :slight_smile:

Love & Liberty,
                                ((( starchild )))

This is an old article but it makes the point clearly....land use regulation is expensive. And there's no place in the US that is more expensive than SF.

Mike

Michael F Denny
Mike@DennyConnect.com
(415) 750-9340

HOUSING AFFORDABILITY LINKED TO LAND-USE REGULATION

A recent (March 2002) study published by the Harvard Institute of
Economic Research demonstrates the effects of zoning and other
regulation on housing affordability. "The Impact of Zoning on Housing
Affordability," by Edward Glaeser and Joseph Gyourko, uses census
data to compare the effects of zoning on housing prices in twenty-six
U.S. cities.

Glaeser and Gyourko, who are with the Wharton Business School of the
University of Pennsylvania, used data from the Census Bureau's
American Housing Survey to estimate the value of a quarter acre of
land in two different ways. First, they compared the sales prices of
homes on quarter-acre lots with the prices of similar homes on
half-acre lots. This represented the value of the extra quarter acre.

Second, they subtracted the cost of constructing a home from the
sales prices of homes on quarter-acre lots. This represented the
value of a buildable quarter acre.

In short, the first value is the amount people are willing to pay for
an extra quarter-acre of land in their yard, while the second value
is the amount that it costs to own a quarter-acre of land on which
you can build a house.

Without zoning and land-use regulation, the two values would be
nearly identical. If someone had a house on a half acre, and the
value of developing the extra quarter acre grew to be more than it
was worth to the owner as a part of their yard, they would subdivide
and develop it.

However, zoning and regulation can prevent or increase the cost of
such subdivisions. In this case, the second valuation will be more
than the first, and the difference represents an "implicit tax on new
construction."

In some cities, the differences between these two values are small.
In Kansas City, the first value is about $18,000 while the second is
about $21,000. This suggests that it only costs about $3,000 to get a
permit to subdivide your half acre and build in Kansas City. Other
cities in which the difference was less than $30,000 include
Baltimore, Cincinnati, Houston, Milwaukee, Philadelphia, Pittsburgh,
and St. Louis.

In many other cities, the differences are huge. In San Francisco,
having an additional quarter acre in your yard is worth $85,000, but
a buildable quarter-acre lot is worth nearly $700,000. The value of
buildability on a quarter-acre lot is more than $200,000 in Anaheim,
Los Angeles, New York City, San Diego, and Seattle. In these areas,
only a small percentage "of the value of the lot comes from an
intrinsically high land price"; the rest is due to restrictions on
construction.

Unfortunately, Portland (the nation's model for smart growth) and Las
Vegas (the nation's fastest growing yet still affordable urban area)
were not among the cities studied by the researchers. The cities
studied and their implicit zoning taxes are listed in an appendix
below.

Glaeser and Gyourko checked to see if other factors, such as
densities, incomes, and climate, could account for these differences
in values. But density and income had little effect on the analysis,
while warm winters did not raise the value of land "by much."

In the previous Vanishing Auto update (#29), I suggested that someone
should develop an index of land-use regulation. Glaeser and Gyourko
relied on a 1989 "Wharton Land-Use Control Survey" to develop such an
index for 45 urban areas.

The index was the length of time required to get a permit to rezone
an area of land for a subdivision of less than 50 homes. An index of
1 equaled less than three months, 2 = 4-6 months, 3 = 7-12 months, 4
= 13-24 months, and 5 = more than 24 months.

Even after controlling for regional growth and median incomes, they
found a strong correlation between this index and the share of homes
in an area selling for more than 140 percent of the construction cost
of those homes. Increasing the index by 1 -- going from 1 to 2, 2 to
3, etc. -- increased the share of high-cost homes by 15 percent.

The researchers admit that zoning may have some benefits, but say
that if affordable housing is the goal, zoning reform is the place to
start. "Building small numbers of subsidized housing units is likely
to have a trivial impact on average housing prices," they say.
"However, reducing the implied zoning tax on new construction could
well have a massive impact on housing prices."

Glaeser and Gyourko's paper can be downloaded from
http://post.economics.harvard.edu/hier/2002papers/HIER1948.pdf.

Appendix One: Implicit Zoning Tax on a Quarter-Acre Lot
City Zoning Tax
Anaheim 385,942
Atlanta 38,115
Baltimore -8,494
Boston 137,323
Chicago 149,955
Cincinnati 24,067
Cleveland 42,362
Dallas 56,737
Detroit 50,639
Houston 29,948
Kansas City 2,940
Los Angeles 303,178
Miami 116,414
Milwaukee 22,760
Minneapolis 92,129
New York City 334,432
Newark 191,664
Philadelphia 26,463
Phoenix 54,450
Pittsburgh 14,919
Riverside 68,825
San Diego 270,399
San Francisco 608,533
Seattle 200,703
St. Louis 18,186
Tampa 59,133

Calculated from Glaeser and Gyourko, table 4, by taking the
difference between the "imputed land cost from means data" and the
"hedonic price of land log-log specification." The prices in table 4
are in dollars per square foot, so for this appendix I multiplied
them by 10,890 square feet (a quarter acre).

Yes, Mike! I've referred to this study before, when running for office, and maybe in a ballot argument or two, I forget -- perhaps you first brought it to my attention Mike, I don't recall that now either. But it is a terrific bit of data to throw down. If we take out the other part, maybe there's room to refer to it?

  Some possible language:

"Over a decade ago, regulations had already dramatically reduced the affordability of housing in San Francisco. A 2002 Harvard study by Edward Glaeser and Joseph Gyourko found that the effective cost of regulations on the price of a home on a quarter acre lot in The City was over $600,000, whereas in Kansas City, by contrast, regulations added only $3,000 to the price of a home on a quarter acre lot."

Love & Liberty,
                               ((( starchild )))