Luxury Development for the Rich, Displacement and Dispossession for the Poor

The Democratic Socialists of America (DSA) Los Angeles, San Francisco, Sacramento, and San Diego oppose the proposed state-level legislation Senate Bill 827. Despite the most recent amendments (as of March 1, 2018), the bill continues to put forth a flawed market-based, trickle-down approach to housing production and allocation — predicated on the actions of developers and landowners whose profits depend on scarcity, class inequality, and racial injustice. We believe that this bill will intensify gentrification and displacement, and thus we join a growing movement of progressive grassroots organizations across the state that criticize SB 827.

We support building denser, greener cities for the many, not the few. We agree that apartment construction in affluent single-family- home neighborhoods would be a step in the right direction, especially if such development were truly affordable to low-income people. But this is not what this bill will accomplish. Instead, SB 827 will result in luxury housing exclusively for the wealthy while displacing and dispossessing the poor and working class. We are glad that Senator Wiener has acknowledged concerns about displacement with his recent amendments. We are especially heartened to see the provision to ban demolition of all renter-occupied housing for SB 827 projects unless a Right to Remain guarantee is provided, which includes moving and rental costs throughout the construction period.

However, it is imperative to understand that destroying units is not the only way individuals and families are uprooted from their communities, and the recent amendments do not address this. Luxury developments in low-income neighborhoods lead to indirect displacement by incentivizing nearby property owners to raise rents to levels that are unaffordable to existing tenants. The key phenomenon remaking cities across America is that formerly redlined neighborhoods are now overrun by a flood of racialized investment capital meant to redevelop those areas for affluent, predominantly white residents. New housing is built at the high end of the market not to bring working-class people of color in, but to shut them out.

We need policies that match the scale of the crisis and that guarantee housing as a human right. One major priority must be repealing Costa-Hawkins and expanding rent control and other tenant protections. This would provide immediate relief for millions of renters across the state, prevent thousands more from being forced into homelessness, and stabilize vulnerable communities of color. We also demand the decriminalization of homelessness and immediate shelter for the 118,000 unhoused residents across the state, whether it come via emergency housing construction or rental subsidies. Finally, we demand aggressive state and local investment in public housing.

Ultimately, any actual solution to our crisis requires a radical redistribution of land and resources, facilitating the construction of decommodified housing on a massive scale. Let’s move beyond the trickle-down approach of “Yes In My Backyard” (YIMBY) to policies that truly guarantee housing as a human right, demanding “Public Housing In My Backyard” (PHIMBY).

Analysis

California’s developer lobby, real estate lobby, and their supporters in YIMBY groups have hailed SB 827’s sponsor, real estate-funded California State Senator Scott Wiener, as a visionary, and his proposal has generated enormous buzz from those involved in housing policy debates. The bill relies on a popular but simplistic conception of housing markets in which the foremost solution to California’s housing crisis is to remove land-use regulations in order to make it as easy as possible for private developers to build housing. The logic goes that as the housing supply increases rents will be forced down, resulting in adequate and affordable housing for all.

The bill’s supporters correctly identify one major contributor to the housing crisis: California’s history of rich white property owners utilizing local zoning control to restrict development and segregate themselves by race and class. They are also correct to point to onerous parking requirements as an impediment to cheaper and denser construction. We are not allied with Marin County homeowners and Beverly Hills politicians who co-opt the language of gentrification in order to maintain their segregated, wealthy communities.We agree with the bill’s supporters that significant densification in affluent, predominantly owner-occupied single-family- home-zoned areas would represent real and necessary progress in California and would decrease regional displacement, especially if such development were explicitly built for low- income renters to spur truly “mixed-income” community integration.

But this is not what SB 827 does. Instead of promoting the production of affordable housing in rich areas, it uniformly loosens zoning restrictions in all neighborhoods adjacent to mass transit without requiring affordable housing or providing rent control. This clears the way for intensified gentrification and displacement of low-income communities of color — precisely the people who use public transportation the most.

Intensified Displacement, Segregation, and Racist Policing

Affluent neighborhoods, especially in Los Angeles, mostly escape the upzoning of SB 827 because they are less likely to have implemented public transit in the first place. This is the case for some of the richest and whitest areas in California, like Bel Air, the Pacific Palisades, Palos Verdes, large swaths of Marin County, and exclusive Silicon Valley enclaves not immediately close to Caltrain, which all remain completely unimpacted by SB 827. Furthermore, the rich areas that are up-zoned are unlikely to experience significant development as profit-driven investors seek out the poorer areas with cheaper land to redevelop.

Neighborhoods suffering from decades of racialized exploitation and neglect continue to be the prime targets for neocolonial seizure, dispossession and banishment, as well as the increased policing and criminalization that accompanies gentrification.

Market-rate developments in low-income neighborhoods are not meant for existing residents and result in localized increases in property values, incentivizing owners of nearby housing to evict tenants in favor of richer, whiter incomers. SB 827 still has nothing in it to prevent this sort of indirect displacement.

For example, a recent report published by Human Impact Partners estimated that The Reef, an enormous proposed development in South Central L.A. built on empty lots, would place 4,445 renters within a half-mile at a high or very-high risk of displacement. We saw massive displacement occur in Hollywood, where upscale redevelopment purged the Latinx population by 12,878 from 2000 to 2010. L.A. County has lost over 100,000 Black residents over the past few decades because rents have become unaffordable to those with low incomes, not because all their homes were destroyed. San Francisco’s Latinx and Black populations have similarly declined by the tens of thousands in the past decade alone as developers, landlords, employers and public officials cater housing and development policy to an influx of wealthy white residents so as not to “lose out on tax revenue.” 3,200 evictions were filed in SF in 2017 alone, in addition to the thousands that go un-filed each year, as the city overbuilt housing at the top end of the market by 211% over its goal from 2007-2014 while failing to reach its middle- and low- income goals.

Studies of similar upzonings in Brooklyn and Boston have shown how, time and time again, the upzoning of low-income communities driven by well connected real estate lobbies redounds to the benefit of wealthy white residents, developers, investors and landowners at the expense of low-income renters, immigrant communities and communities of color. We should not assume that we are the exception, that SB 827’s up-zoning will not intensify these processes in California. Instead, it would further empower capitalist real estate investors who have always profited off of segregation and segmentation in the housing market. Low-income renters will first be displaced and then banished from the urban core.

As prominent urbanist and USC urban studies professor Dr. Lisa Schweitzer points out, SB 827 is not crafted to reverse or counteract historical patterns of racialized displacement and dispossession by real estate investment capital. In doing so, SB 827 follows a long history of so- called “progressive” policymaking that claims to be a first step in racially and economically just housing policy, while only including the pro-development portion of the proposed strategy -- the part attractive to those who invest in real estate -- and perpetually postponing equity concerns, leaving working-class renters by the wayside. This is why The Crenshaw Subway Coalition’s Damien Goodmon has called the bill “a declaration of war on South LA.” Like Dr. Schweitzer, the San Francisco Planning Department notes that SB 827 will provide “huge additional value to property owners throughout the state, without concurrent value capture.” Until California makes a true attempt to recapture some of the value created by public investment, which would likely require reforming or outright repealing Prop 13, these policies will continue to offer windfalls to private developers with no value returned to be used for public good.

Finally, this bill represents a death spiral for transit, the publicly funded backbone of city life on which a vibrant, diverse city is absolutely dependent. Transit is the lifeline of our working class, not of affluent condo buyers and landowners. As Tracy Jeanne Rosenthal of the L.A. Tenants’ Union notes, increasing density around transit has been correlated with a decrease in transit ridership in Los Angeles, where the newer, wealthier residents of transit-accessible communities opt for cars after displacing the working-class residents who had previously relied on public infrastructure. This is likely to lead to a net increase in greenhouse gas emissions. In this way, SB 827 disincentives future transit development and continues to send the signal that environmentalism is at odds with poor and working class communities.

A Trickle-Down Approach Based on a Shallow Analysis

Even the most cursory look at SB 827 reveals that it is not the progressive bombshell its supporters claim it is. It is fundamentally a deregulatory, market-based measure that is built on the same trickle-down theory that has failed to provide for low-income individuals again and again. The strategy relies on private actors to provide desperately needed affordable housing supply despite the obvious facts that most new construction is of luxury units and that profit- seeking investors and developers will not be incentivized to build new housing when rents at the top begin to fall even modestly, as Seattle is learning the hard way. We will never provide healthy housing for all by tweaking how we regulate the capitalist real estate market.

The bill’s proponents insist that greater housing construction, even if it’s all luxury, filters down to the lower end of the market and brings costs down for everyone. However, a team of Berkeley economists found that this filtering process could take “generations,” especially for market-rate development and especially in tight housing markets. Historically, filtering worked in cases where housing deteriorated to substandard conditions or was subsidized by the federal government to backstop such deterioration. In a just society, slum conditions should not be held up as a model to house our most vulnerable citizens.

We must have a more nuanced understanding of housing markets and move past the inaccurate belief that “more supply of any kind leads to lower prices.” There are different spatial scales we must consider. Development in a particular neighborhood could marginally bring down prices across the region while sharply increasing rents and risk of displacement in the areas immediately surrounding, as explained by this analysis from the Lincoln Institute. Furthermore, as scholars who study the Global South have pointed out, an excess of luxury units can, and often does, coexist with housing scarcity for the poor. California, for example, currently has a surplus of 300,000 units for renters with above-moderate incomes.

If SB 827 was actually likely to lead to lower rents, we doubt the California Apartment Association would support it.

Ultimately, this bill does not address the structural problems of the capitalist real estate market. Instead, SB 827 is a handout to the multinational investors that are driving up, and then profiting from, the high costs of California housing. Real estate capital and its YIMBY apologists ignore the Wall St. firms pouring billions of dollars into single-family home rentals and securitizing rental payments, as they did mortgages before wrecking the global economy in 2008. They ignore AirBnB’s role in increasing rents by taking scores of units off the market -- over 7,000 units in L.A., nearly the number that will be built by Measure HHH. There is a fundamental contradiction between housing as a speculative profit-making commodity and as shelter for human beings, but the YIMBYs miss this in their flimsy diagnosis of our current crisis.

Conclusion and Recommendations

SB 827 has been improved with these amendments as of March 1, 2018.

SB 827 can be improved further with the following additions:

● Add measures to ensure that new development occurs in affluent single-family neighborhoods and not exclusively in low-income communities with a history of racialized divestment.

● Mandate that a high percentage of the new transit-oriented development be designated affordable at extremely low-income, very low-income, and low-income levels.

● Mandate that new units built from SB 827 accept housing vouchers.

● Include value capture provisions such that value created by public transit development is returned to the public in taxes.

● Impose a temporary rent freeze on buildings surrounding new development enabled by SB 827.

● Pass legislation to raise funds from short term rentals and to mitigate the impact of short- term rental services, like AirBnB, taking units off the market.

● Develop programs to ensure ownership opportunities of new housing in communities of color in order to combat the continued existence of redlining.

● Target funding from the upcoming $3B November housing bond to be allocated for land acquisition and the construction of 100% subsidized, deeply affordable housing in low- income neighborhoods and communities of color targeted by upzoning. Allow not-for- profit and public development proposals a first right of acquisition on upzoned parcels.

● Amend the companion bill, SB 828, to study and analyze the racialized impacts of high- end development. Factor race and class impacts into regional housing needs allocation (RHNA) goals.

Beyond this particular bill, there are much better options for solving our housing crisis than unrestricted for-profit development.

First, we must expand rent control and other tenant protections. We need to ensure that the 1.5 million households across California spending more than 50% of their income on rent are not forced to uproot their lives or join those that are unhoused simply because their wages have not kept up with the cost of housing. We call on SB 827 supporters to join the efforts of grassroots tenant organizations across the state and work to repeal Costa-Hawkins and expand rent control and other tenant protections. We must also repeal the Ellis Act, which facilitates massive losses of rent-controlled units, and support Assemblymember Rob Bonta’s AB 2925, which would extend just cause eviction protections to tenants across California.

Next, we should look to the hard work being done by grassroots organizations to create community plans and pass local legislation that helps low-income renters. Creating dense housing near transit is an important and necessary goal and must be paired with strong protections for the renters who would be affected by such development. Grassroots organizations have offered clear policy visions that protect existing affordable housing and ensure that new developments serve the existing community rather than displacing them for a more affluent demographic. Seeking out the opinions of those most affected by the housing crisis must be a priority when drafting legislation, not an afterthought.

Ultimately, we must fight for a massive redistribution of land and resources. This is an enormous crisis that deserves a radical response. California contains a huge number of extremely wealthy individuals and corporations, some of the most valuable land in the world, and a state budget surplus. Taxing the rich to spend on housing for the poor, especially with the loss of affordable housing funds due to the elimination of redevelopment agencies statewide, must be a central feature of any housing platform that seriously intends to address our crisis. Despite the hollow protestations of officials like State Senator Wiener, who insist loudly that “we will never — and I truly mean never — produce enough [subsidized affordable] housing to satisfy all, or even most, of our housing needs” as a pretense to avoid the hard work of trying, we can— and must— do better.

The problem is one of politics, not economics. We must end the neoliberal conception of urbanism that clears the way for and subsidizes profit-oriented development while spending enormous sums of public funds on policing and prisons. Instead, let’s work to repeal Proposition 13, vastly increase taxes on wealthy individuals and corporations who are benefitting from a massive transfer of public wealth at the federal level, and invest this money into providing safe, secure, decommodified housing for all, whether provided by the government (PHIMBY), cooperative ownership, local land trusts or local community organizations.

If you are moved by this analysis, call your California state representatives and tell them to oppose SB 827 unless amended. Join DSA to fight for housing for the many not the few.