To YIMBY Action’s Laura Foote: SB 50 Needs TIF For Affordable Housing
This blog post started as a Twitter exchange between myself and YIMBY Action, the advocacy group in favor of increasing housing density in San Francisco. Since it’s hard to really understand what someone is getting at in a complex policy discussion via social media, I suggested that we talk on the phone. So we did.
To my surprise, the person I was talking to wound up being Laura Foote herself. In my first interview with her and Sonja Truss, she went by “Laura Clark”, which was actually “Laura Foote Clark” but I didn’t know that – this one:
Anyway, what I was explaining to her, and have said to California State Senator Scott Weiner repeatedly, is that his SB50 legislation that aims to cause the building of dense housing and affordable housing will not work without a true financial incentive: tax increment financing. Otherwise, we will just have more high rental units and more gentrification and homelessness.
Tax Increment Financing, or TIF, works like this: an area of land in a city is selected to have its property tax collected such that their is a first year, or “base year” assessed value. Then, the estimated assessed value for each following year is subtracted from the “base year” assessed value – that difference is called the “increment” and times the tax rate gives us the tax increment financing revenue for that year.
Now, if you think about it, over a 40-year-period, that revenue stream can be used as a bond issue to finance the development of affordable housing. In fact, California did that regularly when we had California Redevelopment Law (CRL). But what I’m calling for is not CRL here, it’s very simple: amending SB50 such that the transit zone is also, automatically, a TIF zone where the money is used to finance the development of the affordable housing the SB50 law calls for.
Without that, it’s pure pie-in-the-sky to think more affordable housing will materialize only with regulation. Indeed, there are examples of developers paying their way out of compliance with current affordable housing laws in San Francisco – to think SB50 will be any different is foolish, to say the least.
There’s a dynamic borne of the 21st Century that has had a dramatic impact on real estate: the ability to invest in San Francisco buildings from anywhere in the world via the Internet and the federal EB-5 program, which gives green cards to foreign investors and their families who invest $500,000 into a US project that creates at least ten jobs.
That has not only driven financing of many real estate projects, it has served to drive up rents and make building affordable housing less desirable – why have a lower rent, when one can afford to build a mutlifamily structure that commands the highest rents? Moreover, the foreign buyers of the condominium units tend to pay with cash. The result: higher costs of living and the reduced monetary demand for housing – which is far different from the actual non-monetary demand for affordable housing. That is, a person needs a home, but can’t afford the high rent – so they’re forced onto the street or out of the region.
The answer is to have an incentive to build affordable housing in a market that’s hostile to affordable housing. The only way to do that is to have both a regulatory command and a financial incentive to meet that regulation: SB50 with TIF.
That’s the idea.
Stay tuned.
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