Public Comment

Who Should Be Blamed for the Housing Crisis? Some Wrong Answers from Author of New Book

Thomas Lord
Friday November 30, 2018 - 04:06:00 PM

Randy Shaw is promoting his new book called "Generation Priced Out: Who Gets to Live in the New Urban America?" Recently, he was interviewed on In a Nov. 26 interview by Frances Dinkelspiel, With zoning and neighbor veto power, Berkeley is pricing out the non-rich, says author of new book, Shaw reveals his thinking about housing policy in Berkeley. [Quotes in boldface are from that interview.]

I care quite a bit about housing policy in Berkeley. I even asked to be appointed to the Housing Advisory Commission where I try to work hard on these issues. (I represent District 2 and was appointed by Council member Cheryl Davila.) I read the interview with keen interest.

Frankly, Shaw's reported opinions disappoint and anger me. We have some very serious housing crises. In my opinion, we need less, not more, of the junk economics and false narratives Shaw is pushing. Just about everything he is says or is quoted as saying in this interview is wrong: 

"During his 40 years as a housing activist, Shaw has also watched as governments punted their obligations to ensure there was housing for all residents, not just those who can afford to pay the highest rents."  

That is ahistoric - the government has always favored private investors over public provision of housing. Every public investment in housing has been limited, as a result. Housing insecurity and poor quality housing for poor people have been the U.S. norm throughout the development of industrial capitalism and still to this day. It is disgraceful. But it is also not some recent, generational conflict. 

YIMBYs sometimes do favor a false narrative in which the current housing crisis supposedly originated in the 1960s and 1970s. Presumably this is Shaw's stance: 

In the YIMBY story, some changes to zoning law, in some some cities, caused today's crisis. For example, Berkeley's 1973 Neighborhood Preservation Ordinance is often blamed—and Shaw later joins that chorus—for today's housing crisis in Berkeley. Similarly, a modest increase to setback and light requirements on Manhattan, in 1961, is in YIMBY-world blamed for the effects of massive white flight from Manhattan in the 1960s and 1970s. It sounds funny when you lay out it out that plainly but this is their seriously-meant claim. 

What they tend not to mention is that the NPO was itself, in part, a response to an ongoing, serious housing crisis. The NPO was not merely about the nostalgic preservation of brown-shingles. It was also about the preservation of affordable housing stock that was being torn down and replaced with housing that was not only ugly and cheaply built, but expensive to rent. (Similarly, what they tend not to mention about 1960s Manhattan is that demand contracted so much that one point apartment buildings were being abandoned at a rate of about 10,000 units per year.) 

Shaw is quoted as saying: 

"When did it become acceptable for America's politically progressive and culturally diverse cities to price out the non-rich?"  

That is vicious, manipulative nonsense. Logically, it comes in two parts. 

First, Shaw asserts that "cities" set market prices when he says "for ... cities to price out the non-rich". As if cities have a policy lever on market prices. 

Second, Shaw asserts that his policy prescriptions ought to be adopted unless progressives want to be (according to Shaw) hypocrites. Hey, you're a progressive, aren't you? I mean, you say you are and yet I don't see you following Shaw's orders here.... He may as well say "The people of Berkeley really intend to be kind people but, frankly, if they were actually kind they would deregulate land-use!" 

YIMBY rumors and the heated claims of a few prominent economists aside, theories that land use regulation created present housing unaffordability are poorly supported. Empirical research shows that where "compact city" policies have made the most progress, housing affordability and the quality of housing available to lower income households tends to be worse, not better. 

What is generally true of these dense cities? For one thing, these days, they are great playgrounds for the rich and there is a lot of money to be made in real estate there. What else do they have in common? Some of the largest ecological footprints on the planet — utterly unsustainable — at least in the affluent cities. 

Berkeleyside summarizes a few of of Shaw's policy prescriptions this way: 

"Cities must allow the construction of more housing and must mandate that new complexes contain a percentage of affordable units. (Berkeley currently requires that 20% of the units in any project be set aside for affordable housing or that developers pay a $37,962-per-unit in lieu fee.)" 

In fact, YIMBYs are currently asking state legislators to limit inclusionary unit requirements to no more than 15%. Meanwhile the inclusionary units system, and the in lieu fee alternative, are shams: 

On the one hand, adding stock with only 20% priced below current market prices guarantees that Berkeley will become less economically diverse. Today's market prices are unaffordable to a majority of the incumbent population. Even a whopping 20% inclusionary requirement amounts to a plan to thin out and disperse the current community. 

On the other hand, the lucky few in those inclusionary units are not so lucky after all. The prices of these units are tied not to costs — but to area median income. The more gentrified the region becomes, the higher grows the allowable price of these so-called "affordable" units. 

(When in lieu fees are spent on traditional, HUD-style affordable housing, the outcomes are similar.) 

Berkeleyside further summarizes Shaw's recitation of YIMBY party lines: 

"Cities must also push for new housing aimed at low-income residents. Permit regulations must be streamlined so new projects don't face years and years of delay."  

Shaw would be hard pressed to point to any recent "years and years" of delays for low-income housing projects. Even the infamously contentious senior housing project at 2517 Sacramento Street was quickly approved — twice. It was not delayed by the City but by private lawsuits. 

The long-delayed BRIDGE housing project on Berkeley Way is another example. The City, as directed by Council, is throwing money and staff at that project trying to get it built ASAP. The delays have resulted not from City obstacles but from lack of a definite program for the building, lack of a viable funding and business model, slipped deadlines by the developer, rapid and large cost increases, and the slow funding cycles of county and state financing programs. (It appears we will also get terrible leverage for City money if the project is eventually built but that's a tale of woe for some other day.) 

"Single homeowners should not be able to block a project, as they can in San Francisco, writes Shaw." [Berkeleyside 11/26] 

Surely Shaw knows that in neither San Francisco nor Berkeley law can a single homeowner unilaterally block a project. If perhaps he means that homeowners should not sue, well, perhaps or perhaps not, but in any event their right to sue is not subject to City override. 

"There also must be stronger protection for tenants, including providing public funds to fight off Ellis Act and unjust evictions."  

I wonder if Shaw is aware that Berkeley has significantly increased its budget for tenant legal defense. It was one of the first things Council proposed, and we at the Housing Advisory Commission endorsed, after the 2016 passage of measure U1 (the tax increase on residential rents). 

"Zoning laws need to be changed to allow higher density in single-family-home-zoned neighborhoods, Shaw says." 

Again, empirical evidence shows that greater density is associated with worse, not better affordability for low-income households. There may or may not be good reasons for greater density, but density won't promote the outcome Shaw says he wants. 

Meanwhile, my envelope assumes 1 household per 5000 square feet for a Berkeley R-1 district. At 2.3 people per household, that works out to 186% as dense as the Tokyo metro region, and about 80% as dense as metropolitan Tokyo itself. Sure, Berkeley is no Manhattan but it is plenty dense already. 


"Shaw believes that neighborhood preservation groups — such as the ones that formed after Berkeley passed its pioneering Neighborhood Preservation Ordinance in 1973 — must assume some of the blame for the rising housing prices that are squeezing out artists, teachers and others." 

This is a quite extreme accusation. Since Shaw is basing this on false ideas about density and housing affordability, and false ideas about the reach of City policy, Shaw is making a baseless, harsh, personal attack on particular Berkeleyans. 

I understand it might sell books but this is nothing more than economic scapegoating—attributing the failures of capitalism to an out-group whose influence must somehow be demonized so that it can be purged. 

I am all for neighborhood groups stepping up to help mediate the housing crises but to blame it on them goes beyond the pale. 

More accusations from Shaw: 

"Neighborhood activists routinely fight against the construction of apartment complexes because they say it will change the character of an area. But since cities are mostly made of up neighborhoods, that approach means not much housing can be built, argues Shaw." 

What comes to my mind as a recent example of neighborhood resistance to multifamily construction is the project at Adeline and Russell (a project to build apartments on the former AW Pottery site and an adjacent parcel). 

For years, neighbors in this area were told that their input to a planning process was needed and valued. Unequivocally, at the top of their demands: a need for affordable housing in this area. 

The proposed project had already caused displacement before the first permit application was submitted. And the proposed project will deliver next to no affordable housing. 

Public resistance in this case did not delay a project. Public enthusiasm for the construction of affordable housing got steamrolled by a City Council that was eager to approve a project that is a poor fit for community housing needs! 


"Those who already own homes benefit as their property values soar. But people trying to break into home ownership are squeezed out of places like Berkeley when the home prices are so high." 

Shaw's nostalgia for mid-20th century housing markets is simply reactionary. What is going on today? 

Ownership of urban residential real property is becoming increasingly consolidated. A scattering of data points: 

  • In 2006, a single company (Page Mill Properties) bought up the majority of apartment units in East Palo Alto. (The eviction rate subsequently skyrocketed.)
To this day, even through a bankruptcy and multiple sales, the entire portfolio remains under a single owner. 

  • In the aftermath of 2008. thousands of single family homes in the flats of Oakland were scooped up by a handful of real estate equity firms. (Eviction rates subsequently skyrocketed.)
  • A recent report from financial research firm Prequin confirms that private equity real estate firms focused on North America have $70 billion in "dry powder" — cash equivalents ready to go to buy up properties. The amount of reserve has grown year over year and continues to grow.
That means that at today's inventory levels and prices, these firms collectively can afford to buy every single residential property that becomes available for sale in Berkeley and it would make but a minor blip on their balance sheets. 

The point is this: the prospect of home ownership as the American dream is not in retreat because some homeowner in Berkeley enjoys the sunlight in their yard. The dream is receding from sight because real wages are have become so meager in relation to the amount of money accumulating to capital. 

Shaw's looseness with even recent history is displayed when he says: 

"Berkeley puts housing developers into a labyrinth of public hearings and appeals that either kills projects or makes them less affordable. I describe in the book the senior housing on Sacramento Street, and the three-unit Haskell Street project on a site zoned for four where neighborhood opposition subjected the developers to years of costly delays." 

"Years of costly delays"—no. Shaw is misrepresenting the record. As I said above, the senior housing project on Sacramento was quickly approved— twice— by the City. It got delayed by private action. 

What about those three units on Haskell Street? 

The applicant completed his application in January 2016 and the project was initially approved in March of 2016. An appeal was quickly heard and Council attempted to remand the project back to ZAB with strong encouragement to make some concessions to the neighbors. 

After a lawsuit and settlement, the project was finally approved in February 2017. 

Even that extraordinarily contentious example took a mere 13 months, not "years" to approve. As for its costs, it was the applicants' choice to stiff-arm neighbors when preparing the application, and to react to the remand not by finally trying to work with the neighbors, but by suing the City. 

As the interview goes on, Shaw pulls out all the stops and unleashes a full on theatrical level of bull: 

"I see boomer homeowners dominating the opposition to new housing, and a new millennial generation finally offering a long overdue pro-housing counterbalance. Groups like East Bay for Everyone are equalizing what has long been a one-sided, boomer-dominated debate." 

To summarize, per Shaw: 

  • Boomers (born between between around 1946 and and 1964) — the parents, uncles and aunts of most millenials — are greedy mean people who created the many crises of capitalism.
  • Progressives are hypocrites because they don't like to sell out to multi-billion dollar real estate funds. This proves they hate racial equity.
  • A plucky group of lobbyists based in Oakland, known for mentioning people's age as a form of insult while spouting the same kind of nonsense theories about density Shaw likes, they are the future, man.
  • P.S.: Give more funding to tenant assistance organizations like Shaw's.
Classy, Shaw. Classy.