Can Regional Governance Solve the Bay’s Housing Crisis? We’re About to Find Out.

The Metropolitan Transportation Commission convened a veritable Council of Elrond from the nine-county region to craft a grand bargain to fix our crushing housing crisis. It remains to be seen just what is being bargained, and how much will be gained. Ultimately, every interest group is getting less than what they want, and may ultimately concede to something they abhor—in other words, it’s politics.

The MTC’s Committee to House the Bay Area (abbreviated as CASA in a nod to the Spanish word) released its much-anticipated CASA Compact this month after a grueling series of meetings and negotiations among elected officials, labor unions, city planners, tenants’ rights groups, industry leaders, and equity advocates churned out a loose policy framework to guide state legislation, some of which has already been drafted. Its Steering and Technical Committees feature a staggering array of leaders from the public, nonprofit, and private sectors.

The Bay Area’s housing crisis is more than one problem, so solving it has always been a bit like dismantling a bomb while herding cats. It’s a raw supply shortage amid historic job growth and rising construction costs, a displacement epidemic, a poverty trap, a culmination of entrenched historic racism, and an environmental crisis—all spread across nine counties and 101 municipalities. The region haas seen job growth outpace housing construction by roughly a 7:1 ratio since 2010, and the Compact calls for 35,000 new housing units per year to amend the resulting shortage. But that’s not all.

Ultimately, the proposal contains ten broad policies grouped under the alliterative “Three Ps” of Protection, Production, and Preservation.

The CASA Compact contains elements of rent control, eviction protections, and union labor programs along with transit-oriented development and permitting reforms, policies long sought after by competing political players that seldom see eye-to-eye. Moreover, the MTC is attempting to coordinate between cities that otherwise may have widely varying development fees and other building standards that muddle regional planning efforts. And for the first time, the region as a whole could be raising taxes for a nine-county Regional Housing Enterprise (RHE) to fund affordable housing construction. The proposal is as ambitious as it is embattled.

“We need to do something to cope with the level of emergency we have,” said MTC Executive Director Steve Heminger. “On housing, we’re a lot worse…than just about anywhere else in the United States. And I think that justifies taking bold action to try to address our problem.”

Protection.

The first three policy recommendations aim to strengthen tenant protections amid ever-rising housing demand in urban areas. The first element, a region-wide Just Cause policy would prohibit landlords from evicting tenants without a stated reason, and would be modeled after legislation already in place in San Francisco and Oakland, as well as a statewide policy in New Jersey. A statewide Just Cause bill by Asm. Rob Bonta (D – Alameda) failed to pass through the State Assembly last year.

One of the more controversial policies proposed is the second element, a statewide rent cap modeled more after emergency price-gouging prohibitions, such as those immediately following wildfires, than standard rent stabilization. The CASA Compact proposes capping annual rent increases at a maximum of 5% plus that year's Consumer Price Index (CPI), a standard measure of inflation.

Rent stabilization laws in Oakland and San Francisco, meanwhile, prohibit annual increases higher than two-thirds of annual inflation. In real dollars, rents in rent controlled apartments in San Francisco technically go down every year.  The proposed CPI + 5% rent cap is a particularly contentious compromise that elicited strong criticism from tenant advocacy groups and elected officials. Steering Committee member and Oakland Mayor Libby Schaaf, for example, said that she “would probably like the rent caps to be a little tighter.”

Critically, many areas under the MTC’s “Communities of Concern” designation, with higher concentrated poverty and racial segregation, fall in cities with some degree of local just cause and rent control laws. But CASA’s Racial Equity Analysis notes that other “sensitive” areas such as Pittsburg and Vallejo allow no-cause evictions. The Compact offers a rare opportunity to extend these tenant protections throughout the entire region.

At the MTC’s final meeting on CASA, authorizing chairperson Jake MacKenzie to sign the Compact, several landlords testified in opposition to the rent cap proposal, often citing the failure of Proposition 10 in November as evidence that voters opposed rent control. (Prop 10 did pass in San Francisco and Alameda counties, the only counties with a majority in approval.) But ultimately, rent stabilization was among the least controversial elements for the Commissioners.

The third element under the “protection” category pairs emergency rental assistance with legal counsel to prevent evictions. This already been proposed under Senate Bill 18, introduced by State Sen. Nancy Skinner (D – Berkeley). The conflict over this policy has largely centered on how to balance paying for rental assistance and legal protection.

“I think we should take care of the lawyers last,” said Mayor Schaaf, noting a vast majority of tenants evicted in Oakland had simply fallen behind on rent payments. “And I say that as a recovering lawyer.”  

Production & Preservation: either/or vs. both/and

“The protection policies need to be in place before the production policies are implemented,” said Steering Committee member Ellen Wu, Executive Director of the environmental equity group Urban Habitat. “We don’t know if this doesn’t do any harm.”

The region’s compounding shortage of new housing is a matter of general consensus, but the policy solutions are far from straightforward. One central goal of the Committee is to redress historic underproduction in urban centers while preventing disruption in poor neighborhoods that historically faced displacement during periods of both decline and growth.

In the “production” category, too, state legislators have already presented bills essentially following the CASA framework. The fourth element, encouraging the production of Accessory Dwelling Units (ADUs), is modeled after a bill by Asm. Phil Ting (D – San Francisco) that seeks  to allow streamlined approvals and looser density restrictions for backyard cottages.

By far the most controversial element is the fifth element, reforming density restrictions around public transit, which has been introduced by State Sen. Scott Wiener (D – SF) as Senate Bill 50. Wiener’s previous density bill, SB 827, elicited concerns that removing density restrictions in one broad stroke would displace lower-income renters throughout the state. In response, both the CASA Compact and the SB 50 framework propose delaying the density increases in “Sensitive Communities,” modeled after the MTC’s measures of concentrated poverty and racial segregation. The MTC developed these latest measures of “communities of concern” its Plan Bay Area 2040 proposal.

The CASA Compact combines the MTC measures with those from the San Francisco Bay Conservation and Development Commission (BCDC) to cover areas with more than 50% of households with incomes less than 200% of the the federal poverty level , and over 70% people of color.

Areas identified as “Sensitive” would be granted more autonomy in the planning process in a multi-year grace period, during which local residents would petition local governments to increase density on their own terms. Much like SB 50, the CASA Compact recommends a minimum of 36 feet (3 stories) allowed for apartments near bus stops, and 55 feet (5 stories) near train stations and ferries, with little to no density restrictions. Some areas like San Francisco’s Mission District, however, are already zoned for densities implemented by Senate Bill 50, and would likely not need to undergo such a process at all.

But key to both proposals is the measure of “High-Opportunity Areas,” or in SB 50, “Jobs-Rich” areas. While the latter proposes increasing density around areas with high employment, but not necessarily reliable public transit, the CASA Compact also identifies High-Opportunity Areas and “Exclusion Areas” that have a great  access to jobs and education, but disproportionately little housing supply. 

 

Tenant organizers and social equity advocates based in San Francisco and Oakland have bristled at the MTC’s mapping of “Sensitive Communities” because, while San Francisco does contain some sensitive areas, virtually the whole city is also a High-Opportunity Area. Some neighborhoods historically upended by gentrification, such as the Mission District, have fewer than 30% of households with incomes less than 200% of the federal poverty level, so many parts don’t qualify for the Sensitive Community Areas grace period.

One counterproposal to the final Compact’s map, presented just days before the Steering Committee’s final vote, came from the Geography Working Group’s Equity Caucus, one of many breakout subcommittees in the CASA process. This appended new criteria to the “Sensitive Communities” measures, namely: “over 25% below twice the federal poverty level and over 55% people of color in 1990.” Consequently, this map included higher-income areas such as Oakland’s Temescal neighborhood and Alamo Square in San Francisco.

 

The back and forth produced results. Though representatives from Urban Habitat still express reservations, the final version Sensitive Communities map now includes more neighborhoods than previously considered, such as parts of the Inner Richmond and East Palo Alto.

In a December 12th letter to the MTC, Urban Habitat asked again for the final CASA compact to include the Geography Working Group’s Equity Caucus’s more expansive maps, and urged the Committee to note a “lack of consensus” for the Production portion of the compact. The letter criticized the Compact in part because “policies harmful to low-income communities are still included in the draft compact,” additionally alleging that “it is still unclear how substantive feedback from the public and committee members is incorporated[.]” Rather than the deferred grace period included in the final document, Urban Habitat requested that Sensitive Communities under the more expansive definition receive an “indefinite exemption and opt-in period” for new planning requirements.

The controversy over Sensitive Communities contains two discrete debates: the definition itself, and subsequent proposals that development should be postponed or discouraged in Sensitive Communities, or even entire cities surrounding them.

“While new construction certainly has the ability to disrupt communities…not building also has a gentrification potential,” said Technical Committee member Adhi Nagraj, San Francisco Director of SPUR. UC Berkeley’s Urban Displacement Project released a research brief in 2016 outlining this view, finding that production of both market-rate and subsidized housing reduce gentrification pressures.

Steering Committee members Schaaf and San Francisco Mayor London Breed were at odds over the issue. Schaaf argued that three years could be too short, while Breed disputed the idea that all Sensitive Communities are the same. 

“I am concerned about the three-year planning period for the sensitive areas, particularly because more than half of Oakland is a sensitive area, and to actually execute the planning process in a three-year period—I’m not sure we have the bandwidth or resources to deal with that,” Schaaf said.

“The problem I have is delay, because oftentimes, delay means denial,” Breed countered. “Waiting three years…doesn’t necessarily work for all communities. It could potentially have worked for what we’re dealing with in the Mission District in San Francisco, but not necessarily in the Western Addition or the Bayview.”

Some housing activists fear that the legitimate and serious concerns of low income communities are being brazenly co-opted by ordinary anti-housing conservatives. Comments from the Council of Community Housing Organizations (CCHO) Executive Directors Peter Cohen and Fernando Marti generally reflect this trend.

In a recent op-ed for the San Francisco Examiner, Cohen and Marti argued that other neighborhoods in the three urban “hot markets” of San Francisco, Oakland, and San Jose should be exempted from higher density requirements near transit. The letter from Urban Habitat similarly requested that the whole CASA Compact “should also apply deferrals of at least four years in hot markets outside of sensitive communities.” In a monthly email update from CCHO, the authors added that “if the CASA development policies are too aggressive in our already hot urban cities, instead of targeting historically exclusionary suburbs, there is a real risk of alienating San Franciscans’ generosity at the ballot box”—but meanwhile, others contend that this amounts to an effort to exempt affluent neighborhoods within those very cities.

“The vast majority of San Francisco, outside of eastern neighborhoods like the Tenderloin, the Mission and the Bayview, among a few others, is an exclusionary suburb,” said Darrell Owens, Co-Executive of housing advocacy group East Bay For Everyone. “Outside of those places, affordability is on par with Marin, which means low- and middle-income residents cannot move there. The data on low-income renter populations shows major disparities in the relatively smaller amount of low-income renters in San Francisco versus wide swaths of Oakland.” Owens added that the call to exempt the three major cities was “comically inequitable.” 

(Disclosure: the author is a former volunteer for an organization later incorporated as East Bay For Everyone, but has not been affiliated since before that incorporation and the founding of this publication.)

But other “hot markets” outside of major cities in the Bay Area, particularly affluent suburbs in Santa Clara County, have also asked to be exempted. Palo Alto, for example, now contains the most expensive zip code in the entire country. Much like CCHO’s call for the Compact to “respect existing local plan areas,” Palo Alto Mayor Liz Kniss also wrote to the MTC asking for the Committee to delay implementation pending more input from local governments. So, too, did other suburbs such as Cupertino and Los Altos, which all enjoy median incomes well above $100,000.

Excluding broad swaths of “hot markets” would mean that high-opportunity urban areas like much of Western and Northern San Francisco—which have relatively high incomes and access to opportunity—would remain untouched. Ironically, hypothetical policies focused on “cooler markets,” which in the Bay Area would focus growth on suburban cities far away from the urban core like Stockton and Tracy, which have large populations of low-income residents and much less housing construction. This would essentially continue a policy of suburban sprawl, and greatly restrict growth in neighborhoods shown to have much greater income mobility. Children raised in San Francisco’s Western and Northern neighborhoods have some of the highest likelihoods of moving from the bottom to top quintile of incomes, compared to the rest of the state. San Francisco and San Jose overall have some of the highest income mobility rates in the country.

 

Social justice nonprofits in CASA such as Urban Habitat arguably sacrificed their biggest stated policy goals after a “no net-loss” provision, in many ways a skeleton key connecting the Three Ps, was scrapped from the Technical Committee’s considerations early on. While SB 50 prevents new density minimums from applying of any renter-occupied housing in otherwise qualifying areas, many advocates were disappointed that the CASA Compact would not explicitly prevent any “net loss” of housing threatened by demolition or renovation. Nevertheless, it is unlikely that these requested deferrals would further efforts to prevent displacement. 

Regional Community, Regional Rules.

The sixth and seventh elements, respectively, propose good governance reforms and financial incentives to streamline housing production, particularly for “missing middle” options of medium density, and housing geared toward the middle class. For good governance, the Compact proposes establishing statewide standards and requiring cities to document fees and other “impositions” on new housing each year, while preserving existing local requirements for affordable housing.

These elements contain both carrots and sticks: for example, new building permits would expire after 24 months if no construction begins. As for the carrots, projects with at least 20% of its dwellings reserved for middle-income households and below would have a streamlined permitting process and could qualify for a fifteen-year property tax abatement, similar to Seattle’s affordable housing incentives.

 

In an interview, Mayor Schaaf indicated that she would be pursuing policies within Oakland to encourage missing-middle density and affordability for median incomes, including as-of-right approval for triplexes. “The city, through its zoning power, can create more density and income diversity in existing neighborhoods,” Schaaf said. “The other thing I’m really interested in is trying to get the private sector to finance missing-middle housing. It is an extremely low-risk investment. Employers have got to be part of the solution.”

The eighth element proposes stronger statewide standards for developing affordable housing on publicly-owned land. The Compact would urge the state to require Bay Area cities to submit a full inventory of its public lands, and an annual progress report on housing construction, plus stronger punishments for violating the State Surplus Land Act.

Crucially, public land would serve as an incentive to “expand the trained labor pool available for housing construction including requirements for trained apprentices and prevailing wages.” Skilled construction labor faces many challenges in the Bay Area, including a dearth of apprenticeship programs, and unskilled contractors in areas that allow more renovation than new construction.

“Real wages for carpenters have gone down 40% in the past forty years,” said Technical Committee member Scott Littlehale, Senior Research Analyst for the Northern California Carpenters Regional Council. “The typical construction worker in California, on a cost of living basis, is 46th in the country.” Added Littlehale, “I believe that business as usual approaches…will perpetuate harm to those who actually construct buildings.”

Finally (thanks for sticking with us so far), the ninth and tenth elements of the CASA Compact propose an ambitious funding package to fund its various mandates, to be coordinated by a herculean Regional Housing Enterprise. This body would be governed by the MTC and the Association of Bay Area Governments (ABAG), with a board member comprised of the various public and private sector representatives serving on the CASA Committees.

Of the estimated $2.5 billion CASA policies would cost annually, the Compact proposes raising $1.5 billion through a smorgasbord of taxes and general obligation bonds, including taxes on vacant homes and large employers, development fees, sales taxes, and revived Redevelopment Agencies. More critically, the Compact proposes sharing the revenue among the nine counties, in a method similar to the Minneapolis-St. Paul metro region.

This, too, comes with its fair share of debate. While the Compact currently calls for a minimum of 60% of RHE funds to be spent on affordable housing production, Urban Habitat’s letter calls upon the Committee to allocate more funds to preservation and tenant services.

The 18-month odyssey of CASA is merely the beginning of the challenge to define the Bay Area’s urban future. Its skeletal policy framework will ultimately be fleshed out by the State Senate and Assembly, where bareknuckle political power struggles are a daily feature.

“Affordable housing is not about the traditional definition of affordable housing. Affordable housing is about what people can afford,” said Steering Committee member Tomiquia Moss, CEO of the nonprofit Hamilton Families and former Chief of Staff to Mayor Schaaf. Moss also noted that many people who use Hamilton’s shelter programs have full-time jobs.

“I encourage us to show up in our best way possible,” Moss added, “because if we don’t, then the Bay Area is not as resilient as the poor people in our city and our region who are making it happen every day. I encourage us to be at least as resilient as them.”

The Association of Bay Area Governments (ABAG) will hold an Executive Committee vote on the CASA Compact on January 19th, 2019.

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