Over the last couple of years, there has been a noticeable increase in media coverage of gentrification and the rise of Bay Area urban real estate prices. Below is meant to be an explanation of what gentrification is and why the issue of affordability in cities has become such a high-profile topic lately.
I’ve been hearing a lot about “gentrification” and an increase in Bay Area housing prices lately. What’s all this about?
To put it in as few words as possible, gentrification is what happens when a neighborhood experiences an influx of people with more wealth than the current residents, thereby increasing the costs of living — such as rent prices — in the neighborhood. The resultant displacement forces out the poorest residents of a neighborhood, usually fixed-income retirees or those working minimum wage.
Even if this displacement is caused by “green-friendly” development, the goal of any successful redevelopment project is to increase the land value of the targeted area, which inevitably leads to higher rents, mortgages and so on. This brings us to the key puzzle at the root of gentrification: How do you increase property values in a given area without pushing out its native residents?
Malo Hutson, a UC Berkeley assistant professor of city and regional planning, told the High Country News in 2011, “You would get the Nobel Prize in Economics — or Peace — if you could figure out a way to keep the community that existed before the redevelopment project came along.”
Well, hold up a minute, doesn’t the quality of these neighborhoods go up along with the housing prices and land values? And doesn’t an increase in the aggregate wealth of an area lift the bottom up as well?
When new, wealthier residents move into a lower-cost neighborhood, it’s true that better services often follow them there, as some academics have shown. These improvements could be new municipal transit lines, renovated or recently constructed public parks and a whole host of other public services. This simultaneously increases the standard of living in a neighborhood while pricing out those who already live there.
Rising tides of wealth in America tend to lift all yachts. Though it’s true the 2000s Silicon Valley tech boom created massive economic gains in the Bay Area, little of this rapid economic growth went to the Bay’s poorest or rapidly collapsing middle class. It also doesn’t hurt that some of the most well-funded tech companies have received huge tax breaks for merely keeping their offices in Bay Area cities, even if they don’t employ that many people.
In a feature article for the New Yorker last year, George Packer detailed this increase in inequality and the tech industry’s response to it:
“Why has a revolution that is supposed to be as historically important as the industrial revolution coincided with a period of broader economic decline? I posed the question in one form or another to everyone I talked to in the Bay Area … Few of them had given the topic much consideration.”
Aha! So that’s what this is really all about — all of this gentrification stuff that’s been in the news is just because of tech and the Google buses and so on.
Not so fast. Gentrification and the displacement of the Bay Area’s poorest has been happening for decades now. After World War II, the passage of the Housing Act of 1949 enabled the federal government to engage in “slum clearing” and pass exclusionary zoning laws, which in effect devalued and demolished urban neighborhoods predominantly populated by people of color.
Hutson said the Bay Area was “hit hard by urban renewal.”
“In West Oakland, you’ve had the construction of BART, the USPS Distribution Center, the freeway — they all wiped out the old Victorian homes that used to be in West Oakland,” Hutson said. “In San Francisco, urban renewal policies destroyed the Fillmore district, which was historically an African American area.”
Okay, but what about today? If the influx of wealth and capital into these neighborhoods is happening, what can we do about it to keep housing costs down? And what can tech do to help fix the problem?
There are a number of options that leaders, communities and policymakers are pursuing to deal with the problems that come with gentrification.
In Berkeley, the municipal body that deals with issues related to housing and affordable rents is the Rent Stabilization Board. Commissioner Katherine Harr said in an email the city “has one of the strongest tenant protection ordinances in the state.”
Berkeley residents have some protections from evictions and sudden increases in rent, Harr said, pointing to how the board “requires landlords register their rents, and tracks them, sending out letters each year to inform landlords and tenants of the allowable maximum rent.”
For San Francisco, some argue the issue is a lack of vertical development. They believe that if the city, which is a 7-by-7 mile peninsula with few open spaces, were to increase available housing units, it should do so by building upwards. For decades, San Francisco zoning laws have stymied vertical construction, which critics argue have artificially inflated the cost of housing.
Others propose that San Francisco needs a land tax whereby property owners pay more in taxes as the value of their land increases over time with the revenue generated set aside for the poor and the middle class. It’s also worth noting that a number of different cities are experimenting with new methods of tackling gentrification-related displacement, such as adjustments to property taxes for longtime homeowners.
Still, some of these ideas are flawed. It may be impossible to build vertically out of poverty. Additionally, if the tech boom is actually a bubble, using a land tax to tether revenue designated for anti-poverty measures to bubble-induced price spikes may have long-term budget consequences, should land values fall significantly in a “tech bust.”