Housing crisis must be resolved through both subsidied and market-rate housing

Berkeley City Councilmember Jesse Arreguin’s recently published op-ed in the Daily Cal titled “Berkeley city must take comprehensive approach to housing crisis” was riddled with misstatements and obfuscations that detract from the real issues.

First, it is certainly true that Berkeley, and the entire Bay Area, is facing a housing crisis.  Housing supply — at all income levels — has not increased nearly fast enough in the face of rising demand. State law is in part to blame for the crisis, but counter to Councilmember Arreguin’s claim, Costa-Hawkins isn’t the culprit. It’s true it imposes vacancy decontrol, but we’d likely still have a shortage without it. Without Costa-Hawkins, you might have lower rent, but you would likely have to wait years to secure a spot, like with the lotteries for affordable housing for low- and very-low-income households we have today.

The state laws that actually contribute most to the housing crisis are Prop 13 and CEQA. Prop 13 passed in 1978 and drastically reduced taxes, placing a hard cap of 1 percent on annual property tax rates, as well as a cap of a 2 percent annual increase in the assessed value of a property. This can lead cities to prefer commercial property, which provides sales tax revenue, to housing. Houses in the hills are worth millions, but longtime homeowners are only paying 1 percent of a much lower assessed value, which leads quite directly to our city’s failing infrastructure (e.g. the closed pier, closed pools and terrible pavement) and indirectly to increased public university tuition. CEQA is well-intentioned environmental regulation that unfortunately allows anyone to sue to stall a project, potentially killing the financial viability. This is true even if the project is a dense transit-oriented project such as Berkeley’s 2211 Harold Way, which is LEED Gold and practically on top of BART, and obviously better for the planet than having the housing out in a far-flung car-dependent suburb.

Because repealing Prop 13 and reforming CEQA is sadly unlikely, what is the solution to our problem? Councilmember Arreguin proposes a straw man set of choices: “building lots more market-rate housing or also create more low-income units.” This is a false choice because essentially no one is arguing for market-rate units only. The groups I volunteer with, the SF Bay Area Renter’s Federation and East Bay Forward, strongly support both low-income and market-rate developments. The unfortunate truth is that some people, including Councilmember Arreguin, end up advocating for only low-income units.

UC Berkeley’s Urban Displacement Project, which Councilmember Arreguin cited, shows why market-rate construction can be helpful. It’s on the first page, in the executive summary: “At the regional level, both market-rate and subsidized housing reduce displacement pressures, but subsidized housing has over double the impact of market-rate units.” In other words, we need to build more housing. UC Berkeley economist Enrico Moretti agrees — his research shows our restrictive policies around housing are a significant drain on the economy and is quoted as saying, “People are marching against Google buses when they should be marching for more housing permits.” Affordable housing is ideal, but market-rate housing helps too.

Why does market-rate housing help? Relatively well-off people will continue to move to the Bay Area for the good jobs, weather and food. When those well-off people arrive, if we have built a shiny new apartment, they will move into it. If that shiny new unit doesn’t exist, they will buy an existing house, displacing its tenant, and renovate it to make it shiny.

Fortunately, market-rate and subsidized construction go hand-in-hand. Thanks to Berkeley’s inclusionary zoning policy, all new market-rate construction is required to help build more affordable housing — either directly onsite or by contributing to the Housing Trust Fund. It’s impossible to advocate purely for market-rate housing because all market-rate housing generates more affordable housing.

Additionally, because federal regulations prohibit dependent students from qualifying for (federally) subsidized affordable housing, most students are disqualified from affordable housing and have to compete for market-rate units. As a result, obstructing market-rate housing hurts students, especially at a time when the university is increasing enrollment before increasing beds.

The council member’s op-ed asks, “How much housing is needed to lower rents?” Thankfully, we have some idea. The California Legislative Analyst’s Office — the same organization that writes nonpartisan reports on the effect of ballot initiatives — estimates that the Bay Area should have built an additional 1 to 2 million housing units over the last 40 years to have kept prices relatively affordable. For comparison, San Francisco has fewer than 400,000 units today. The council member is right — “… we can’t wait 10 years to solve the problem.” Thus, it is disappointing to me that Arreguin himself has voted against more housing on numerous occasions, from opposing the 2211 Harold Way project that will pay $10.5 million into the Housing Trust Fund to just last month when he voted to encourage the preservation of the current retail structure at 2556 Telegraph Ave. and prevent it from being replaced by a 7-story mixed-use housing project, which will be marketed toward students.

So, contrary to Councilmember Arreguin’s words in his op-ed and his actions on the council, we need as much housing as possible at all income levels. Claiming to be a progressive but then standing in the way of actual housing proposals won’t solve the problem; building more housing of all types will help.

Garret Christensen is a research economist at UC Berkeley.