See part 1 here.
Hong Kong, October 1997. 3 months after the historic handover of the former British colony to Chinese rule, the Hong Kong Government is about to tackle Hong Kong’s biggest problem- lack of affordable housing. A booming economy driven by trade and banking and a scarcity of land in the built up areas has left Hong Kong one of the most unaffordable cities in the world in terms of real estate. The Government announced that it would (for its population of 7 million people) aim to build 85,000 flats every year every year for ten years (35,000 by the private sector, 50,000 for public flats). The goal was to make home ownership attainable for the average Hong Konger. Unfortunately, the Government took this step with some bad timing. The economy tanked soon afterwards from the Asian financial crisis, and together with some of those flats that had started to be built, caused a crash in housing prices. Nevertheless, housing did become more affordable – from 1997 to 2003, housing prices in Hong Kong fell by 61%.
Today, in 2014, Hong Kong is facing another housing bubble. Wealthy investors from mainland China have been buying up Hong Kong property. That, together with the recovering economy, is causing housing prices to go up again. The Government, once again, despite the scarcity of land, is looking for under-utilized plots like parking lots, and re-developing them to cope with the housing demand. It has also introduced a new 15% residential purchase tax on foreign and corporate property buyers, and higher taxes on quick property re-sales to dampen property speculation. According to PropertyWire, as a result, already, “the proportion of mainland Chinese buyers has dropped from around 30% in October 2012 to only 9.4% in January 2013 in the Hong Kong luxury market.”
Do these problems sound familiar for us San Franciscans? It should. San Francisco has a scarcity of land to build new housing, and yet it is a highly attractive place to live thanks to its urban culture and location near Silicon Valley. The ever increasing supply of people who wish to live in San Francisco is driven by the economic dynamics of the Bay Area as a whole – tech, banking, biotech, and two world class universities in Stanford and UC Berkeley.
So I’m surprised that recent public attention of the increasing unaffordability of San Francisco has focused on tech shuttle buses from tech companies like Google and Ellis Act evictions, and not enough on how we can alleviate the problem of housing unaffordability for real.
Having an economic engine in the Bay Area is desirable for all of us. Imagine if the Bay Area did not have the industries and universities that we have, and instead San Francisco was in a Rust Belt state. We would have higher levels of poverty, of crime. More people would struggle to make ends meet. The best and the brightest coming out of our local schools would leave the region, looking for places with better employment options like New York and Los Angeles.
Imagine a world without Intel, Apple, or Google. The world, let alone San Francisco, would be much worse for it. There is a unique entrepreneurial culture in Silicon Valley that has created these companies that no other region in the world can re-create, much as they might try. Sure, without Silicon Valley, we would still have computers, but we might be 10 or 20 years behind where we are now. Imagine a world where we’re still using computers as slow as those from 20 years ago, and we were all using the equivalent of Windows 98 on these computers. It’s not just the innovation that we would lose; the tech industry in places outside the Bay Area would be further behind from the lack of competition.
So let’s go back and focus on how we can make the housing problem better. I’m sure we can do more to protect renters’ rights. I’m sure we can do more to ask industry to contribute solutions to the gentrification of our neighborhoods. But let’s take Ellis Act evictions as an example. The number of Ellis Act evictions in a year is low compared to how many new housing units we could be building – we should be building tens of thousands of new units. That’s where the impact can be made. There are some who believe market forces do not apply to San Francisco. It's true that because of the high demand for housing in San Francisco, a relatively high amount of housing supply would have to be built to make a difference. But San Francisco doesn't sit on another planet. The fluctuations in house prices seen in Hong Kong, as described above, shows that market forces do indeed affect housing prices, even in the rarified land of real estate that is Hong Kong.
It’s here where we run into conflicting interests. There are interest groups in the city that are opposed to building more, building higher. There are some of us who believe that if we didn’t build at all, the character of our city can stay the same. It will not stay the same. We need to have a thorough re-evaluation of what we believe in.
I believe we need to aggressively look at how and where we can build new units. Mayor Ed Lee has announced a plan to build tens of thousands of new housing units in the next five years. We need to hold his administration to the fire and make sure they are accountable for making this happen. We may need to raise building heights in some places (again, many of us do not want our city to become denser, but we really need to consider the trade-offs carefully, and ask ourselves if we value low density more, or do we value affordable housing more).
We need to put pressure on our elected representatives to more quickly figure out how we can convert illegal in-law units into legal ones in a safe manner. We need to pressure them to move more quickly towards freeing up under-utilized pieces of land and getting those pieces of land built out (one particularly egregious example is the 17 acres of unused land at Balboa Reservoir next to City College and one of the most highly utilized public transit stations in San Francisco- Balboa Park BART). We need to hold developers accountable for making sure the new housing they are building isn't shoddy, and that there are setbacks where appropriate so that we don't turn our city into a mini version of the Kowloon Walled City. We should consider requiring developers to integrate a higher percentage of below market housing in every new development. We need to continually demand better public transit infrastructure in our city to accommodate a population that will continue to rise no matter what. We should look at ways to dampen property speculation- should we be looking at increasing city property transfer taxes for repeat or non-local buyers?
If we put our political energy towards increasing our housing stock by 5 to 20% (there are an estimated 375,000 units now), while clamping down on speculation, this will have a true meaningful impact towards helping our citizens stay in San Francisco. I can think of no way that could be more effective or realistic.
See part 1 here.
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