Myth vs. Fact about SB 827 - Unintended Consequences

In California, a new housing bill has become a lightning rod for public controversy. Current zoning laws exacerbate suburban sprawl and housing scarcity restricting vast swaths of land next to train stations and bus stops for detached single-family homes, and mandating more parking than market demand.

State Senator Scott Wiener’s Senate Bill (SB) 827 prevents local governments from prohibiting mid-rise apartment buildings close to mass transit hubs. The law would permit multi-family homes between four and eight stories tall within a half mile of every rail hub, and a quarter mile from frequently used bus stops.

This pro-density, pro-transit bill would create more affordable housing, according to a study by the SF Planning Commission, as well as remove 1.79 million metric tons of greenhouse gas emissions from the air per year.

The opposition to SB 827

Many groups still vehemently oppose the bill. Los Angeles City Councilman David Ryu said it would displace renters and create "a housing boom for a privileged few and eviction notices for everyone else." The bill has made for strange bedfellows, as Beverly Hills city councilman John Mirisch described SB 827 as “Soviet-style master planning with raging crony capitalism.”

Objections rest on the assumption that upzoning increases land values which drives displacement.

But the data shows that SB 827 isn’t likely to disproportionately impact land prices in vulnerable neighborhoods, and would ease displacement pressures by creating more affordable housing, especially in wealthier, low-density neighborhoods.

How density leads to displacement

In Dissent Magazine, anti-gentrification activists Jacob Woocher and Shanti Singh write that gentrification happens when home builders find an area they want to build in and “want the current residents gone.” But why are homebuilders choosing to develop in low-income neighborhoods of color in the first place? One answer is that those are the areas that get zoned for density.

Anti-gentrification activists are correct when they assert that upzoning causes displacement. But not in the way they think. Upzoning doesn’t increase land values. Instead, it concentrates demand for land.

The first thing to understand about upzoning is that, historically, it’s usually accompanied by simultaneous nearby downzoning.

Take New York City’s experiment with rezoning in the early aughts. Between 2003 and 2007 New York rezoned 188,000 lots. It upzoned 14% of those lots, but downzoned 23%. (Most lots only changed in kind and not density.) The first reason this rezoning didn’t lower rents was that it only produced a miniscule increase (1.7%) in new homes.

The second reason this rezoning didn’t lower rents is that rezoning acts like a funnel. Zone everything up, and developers will build throughout a city. But if you upzone poor areas of color, and downzone richer, whiter areas, developers only build in the poor parts of town.

Downzoning rich neighborhoods while upzoning poor ones means the only way to make money as a developer is to displace poor residents. This is what Woocher and Singh refer to when they write that rezoning schemes mean developer profits “depend on moving the color line.”

One huge reason that developers have stuffed the Mission and SoMa with multi-family housing is that those neighborhoods were upzoned in the early aughts. But there has been no such plan for more housing in wealthier westside neighborhoods, which were successfully downzoned in the 1970s, despite similarly frequent transit service.

How would broad upzoning impact land values?

So how do we know that if we zone everything up, developers will build throughout a city? One way to test the theory is to look at the impact of the City of Los Angeles’ 2017 Transit Oriented Communities Affordable Housing Incentive Guidelines (TOC Guidelines). It’s one of the few instances where a city upzoned across neighborhoods regardless of color or income without simultaneous downzoning to keep apartments from being built in rich, white areas.

In some ways, the TOC is SB 827-lite. Like SB 827, it legalizes higher-density multifamily development near transit, and it requires projects to provide between 10% and 20% of their units for low income households. These affordability requirements would be retained for SB 827 projects in TOC zones if the bill were to pass. Therefore it offers a case study in what SB 827 might do in LA and beyond.

Shane Phillips, Director of Public Policy at Central City Association of Los Angeles, compiled the following map showing where developers have proposed TOC homes in Los Angeles. Red icons represent mixed-income buildings, blue icons represent subsidized developments that are 100% affordable. The small dots represent preliminary inquiries by property owners that may or may not lead to actual projects.

Phillips found that TOC projects are disproportionately showing up in more affluent Westside neighborhoods and in Central LA along the city’s two heavy rail subway lines.

“There’s been a concern that SB 827 would specifically target low income communities with redevelopment, but most of the interest with TOC projects has been in the areas with lots of jobs and top-tier transit service,” Phillips said.

He added, “SB 827 goes further than the TOC guidelines by protecting rent-stabilized housing and allowing new homes in single-family neighborhoods, so we would expect development activity to move even further in the direction of high-income, jobs-rich communities — which is exactly where we think it should go.”

Similarly, the parts of San Francisco that will see the greatest increases in affordable housing due to SB 827 are the approximately 72% of San Francisco parcels that are zoned RH-1 or RH-2, which correspond to single-family and duplex housing, respectively.

This map by Mission resident Steven Buss shows SB 827 having no impact on Chinatown and the Tenderloin, and very limited impact in the Mission. Most upzoning will occur in the less-dense, often pricier westside neighborhoods.

This is part of what makes SB 827 so radical. It actually upzones entire regions without any attendant downzoning, including high-income, majority homeowner neighborhoods. This means a net increase in the supply of homes, which is empirically demonstrated to slow the rise in the cost of rent. And it means developers have less incentive to further gentrify already-comparatively dense areas.

Opposing upzoning because the Mission and Bayview/Hunters Point are currently more profitable for developers misses the crucial point that this is precisely because they’re zoned for multi-unit housing, whereas the westside isn’t. SB 827 is the only option currently on the table that legalizes new multi-family homes in Forest Hill and West Portal. In other words, it’s the only way to actually build affordable housing outside of the neighborhoods that are already building more than their fair share of homes.

There’s a reason Supervisor and mayoral candidate Jane Kim rallied against SB 827 in West Portal instead of in her own neighborhood of SOMA.

What about eviction via demolitions?

San Francisco city law makes it very difficult to demolish existing affordable units. According to the City’s Planning Department, SB 827 does not impact those regulations. The bill also states that projects using SB 827 incentives can’t tear down rent-stabilized housing unless a local jurisdiction passes an ordinance that spells out when and if demolition will be allowed.

Further, Wiener has included anti-demolition provisions and other tenant protections into SB 827, including relocation payments and right of first refusal, unprecedented at a statewide level. Kim claimed to be working with Weiner on amendments, but a public records request revealed no such communications.

Supervisor Aaron Peskin has led the charge to oppose SB827 on the Board, mostly citing concerns about displacement. It’s worth noting that Peskin not only collects over $10,000 in rental income annually as a landlord, but he also he voted unanimously with the Board in 2008 to upzone the Mission District, without any of the protections SB827 includes. San Franciscans should be especially skeptical, given that Peskin has consistently supported legislation that city staff notes would hinder the production of affordable housing, while opposing legislation that the Planning Department says would produce more of it.

SB 827 is the best option for low-income renters

What low-income renters need more than anything is more affordable housing. Woocher and Singh claim that if we allow for more market-rate development, no affordable housing will get built because the “rapidly expanding reach of globalized real-estate investment capital” has “no discernible interest in building housing for the working class.”

But Woocher and Singh themselves cite a paper showing that “both market-rate and subsidized housing reduce displacement pressures.” Not surprisingly, activists admit how much supply and demand matter when they criticize Airbnb for taking homes off the rental market.

The truth is that what stops affordable housing isn’t “market-driven housing policy,” an oxymoron if there was ever one. It’s the exclusionary zoning regulations that SB 827 would override. You can tell because anti-gentrification activists also opposed SB 35, which reduced community hearings and made CEQA abuse harder.

Yet it passed anyway, and now Cupertino getting a fivefold increase in their affordable housing stock with zero displacement. Clearly someone has an interest in building housing for the working class, if only government would get out of the way.

To the extend that SB 827 incentivises owners to sell their single-family homes for redevelopment into multi-unit homes that will actually mean more affordable housing, as apartment and condos are on average far more affordable than single-family homes and are subject to the city’s Below Market-Rate inclusionary housing requirements.

“This really does target the single family owned whiter wealthier neighborhoods in San Francisco and Oakland,” said Laura Foote Clarke, executive director of YIMBY Action. “They are there ones that will actually see a change in their zoning.”

San Francisco has some of the longest commute times in the country, creating pollution, illness, lowered worker productivity, and hampered economic growth. Teachers, retail workers, first responders, and other middle-income professionals often have crushing commutes as they increasingly cannot afford to live near their jobs or public transportation.

Kim claimed about SB 827, “It’s a giveaway to developers without anything in return.” But that’s simply not true.

SB 827 creates more affordable housing on net than is possible without the law, and those homes will mostly likely spring up in neighborhoods that would otherwise continue to shirk their responsibility to house low- and middle-income residents. Again, there’s a reason Marin County is losing their shit over it.

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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