Leveling SF housing field could take 100,000 new units 

click to enlarge Mayor Ed Lee
  • mike Koozmin/2013 S.F. EXAMINER FILE PHOTO
  • While Mayor Ed Lee has proposed adding 30,00 housing units by 2020, the city economist says more than three times that amount is needed for a better overall marketplace.
Since the 1920s, The City’s housing stock has grown by about 100,000 units. That number also could be the benchmark for tempering the housing crisis.

Mayor Ed Lee’s plan for the construction of 30,000 housing units by 2020 rests in part upon his oft-mentioned belief in the powers of supply and demand to bring down or at least stabilize housing costs.

Yet at least one impartial believer in supply and demand, The City’s chief economist, has put the issue into numerical perspective: To noticeably impact prices, it would take the construction of 100,000 market-rate units.

At a time in which progressives and their moderate opponents are debating how to solve or at least lessen the impacts of a housing shortage, supply and demand is center stage.

Moderates argue that more housing of all kinds must be built to increase supply and at least stabilize prices after decades of underproduction. Progressives counter that The City is already chock full of market-rate housing and what is really needed is much more below-market-rate housing. Building our way out of the problem, part of the moderate argument, will not lower or even stabilize rents for the middle class and poor.

That notion has at least some backing in hard numbers from San Francisco’s chief economist, Ted Egan. And it’s been out there for a year.

The last time San Francisco officials took a close look at housing costs was in 2012, when The City commissioned a study. The results were presented at the beginning of that year at a Board of Supervisors committee at which Egan spoke.

“I’d like to comment upon what it would take to make housing more affordable in San Francisco on a grand scale,” Egan said at a Feb. 13, 2012, hearing at the Land Use and Economic Development Committee.

Egan offered three possible solutions to the housing shortage: down-payment assistance for the needy, subsidized below-market-rate housing and general market forces.

“There’s also the alternative of increasing market-rate housing construction, which does have an effect in the long run on housing prices,” he said, adding that 100,000 new units — equal to all the housing built in San Francisco since the 1920s — is “the level of housing that you would have to build in order to see a significant increase in affordability at large.”

Construction on that scale would have the same impact on affordability, he said, as giving every low-income household — about 56,000 households — $75,000 for down-payment assistance.

“In other words,” Egan said, “making a quarter of the market affordable to low-income houses.”

When asked recently about his 2012 testimony, Egan said, “I think what I said was that building 100,000 units would have a comparable impact on prices to a down-payment subsidy that would cost several billion dollars just to cover the entire low-income — 50 to 80 percent of the area media income — population in The City. Whether such a level of construction would ‘really impact’ prices is a matter of opinion.”

That opinion seemed to be his in 2012: “In order to have an appreciative effect on diminishing housing prices in San Francisco,” he told the committee, The City would have to build 100,000 units.

As for the mayor’s recent plan to construct 30,000 new housing units, Egan said, “It’s certainly fair to say 30,000 new units would be less impactful than 100,000, but it will have an impact.”

Others see Egan’s 2012 numbers as hoping for a miracle.

“One hundred thousand more units to impact prices? That kinda derails the argument that we can build our way out of the housing-affordability crisis with market-rate housing,” said Supervisor John Avalos, a progressive stalwart in City Hall.

Nonetheless, officials at the Mayor’s Office still think that market-rate housing production is one tool in reducing the affordability gap.

“These targets need to be realistic,” mayoral spokeswoman Christine Falvey cautioned.

“Building or rehabilitating 30,000 units by 2020 is achievable, and the mayor has outlined a comprehensive program to get there, including eliminating government red tape and prioritizing housing production. And the mayor’s seven-point housing plan puts San Francisco on a better road to get to 100,000.”

That said, Falvey added that market-rate production must be paired with new housing priced for low- and middle-income residents, along with stabilizing many of The City’s already below-market-rate units.

“Supply and demand is hotly debated in this city,” Sarah Dennis Phillips of the Office of Economic and Workforce Development said at an event Tuesday about housing construction costs. But the jury is still out on whether or not supply alone will noticeably impact housing prices, she said. “Supply [alone] isn’t going to fix our affordability problem.”

About The Author

Jonah Owen Lamb

Jonah Owen Lamb

Born and raised on a houseboat in Sausalito, Lamb has written for newspapers in New York City, Utah and the San Joaquin Valley. He was most recently an editor at the San Luis Obispo Tribune for nearly three years. He has written for The S.F. Examiner since 2013 and covers criminal justice and planning.
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