The Housing Crisis

Why has the real estate market failed to serve the people of San Francisco?

The chattering classes proclaim that the San Francisco real estate market is "excellent," "healthy," and "strong" because the market has enriched owners of real estate.  Yet it has also failed the majority of San Franciscans, who must pay exorbitant rents that are currently the highest in the country.  More significantly, the real estate market has failed an alarming number of San Franciscans whom it has left many without any place in which to live at all.

One can hardly take seriously the idea that free markets provide goods and services efficiently, balancing demand and supply automatically, in the face of this failure to supply one of the most fundamental -- and universal -- of demands:  shelter.  The reality for most of us is that this particular "free market" is infecting the whole life of the city with envy, rancor, rage, resentment, and an explosive degree of social tension.

Driving a cab, I hear or over-hear the opinions of people from almost all segments of our society.  Riding buses, living in an SRO Hotel, shopping at thrift stores, and walking the streets, I hear or over-hear the rest.  I have heard an attorney complain that she and her architect husband, both hardworking and fully employed, cannot find an apartment that they can afford.  People who have service jobs, such as bartenders, retail clerks, house painters, mechanics, and hair stylists, share their homes with roommates not always to their liking.  And the rich say, "Don't blame me.  My taxes pay for all the poor people's social services, and I'm the one creating jobs anyway!"

I certainly cannot blame any person or group of people.  The enemy here is clearly institutional, historic in origin, and susceptible to remedy only through legislation.  I cite these examples of discontent to make the point that what many consider to be an economic problem is in fact the source of dangerous animosities, among individuals.  People are feeling pressured at every level and are increasingly angry at other people, those "above" them on the social scale and those "below."  Their anger frequently erupts in little sparks of violence, verbal and physical, and it is building so rapidly that it may erupt in large scale mayhem before long.  If the real estate market functioned efficiently and supplied housing that met the demand, most of what San Franciscans find wrong with their city would disappear overnight.

These animosities bear no relation to the healthy competition among athletes or among rival businesses that may spur each on to greater achievements by adding the secondary motivation of pride to the original motivation to perform the task well.  No, these animosities are the beginnings of hatred, of class warfare, and potentially of violence.  The social friction caused by the failure of the real estate market is wholly destructive.

The ideology of "Free Market" capitalism must be seen for what it is:  a myth.  While the markets for ordinary consumer goods function adequately, such is not the case in markets for the most important aspects of our economic life:  employment, housing, and medical care.  In functioning markets, one finds a range of goods of the same type.  Some people buy Porsches and Mercedes, others buy Camrys or Passats, and still others buy Kias and Fiestas.  At the supermarket one finds luxury brands, name brands, store brands, and generics.  In San Francisco, however, the real estate market is creating only "high end", i.e., extremely expensive luxury housing.

As recently as the 1960s and 1970s, people like John Daly John Foster were mass-producing housing priced for blue-collar workers.  Fifty years later, no one is developing supply to meet similar demand.  So what has gone wrong?  [Note:  Although Daly and Foster built their eponymous cities outside of the city limits of San Francisco itself, most of the people who bought those houses were the middle and lower-middle class people who worked in San Francisco and regarded themselves as San Franciscans.]

Is it a matter of space?  Daly and Foster, and the Stone family as well, were able to purchase large tracts of land that had been in agricultural use and convert them to neighborhoods (or "subdivisions") so that they realized economies of scale in producing hundreds and thousands of homes at once.  Mass production brought down the cost of construction as surely as it had the cost of an automobile.  Now, since everything but the rightly-preserved parks and open spaces that dot the cityscape, the entire northern end of the peninsula is developed.  Are housing costs high because mass production is no longer possible?

I think not.  First and foremost, while the last agricultural enterprises disappeared from the city and its environs in the 1960s and 1970s, the same period saw the collapse of the Port of San Francisco and of the light industry and warehouse services that had surrounded the waterfront, resulting in acres of unused industrial and warehouse structures comprising South of Market area.  This is surely enough land for a Daly or Foster City.  Instead, the vast railroad yars that stretched from Mission Bay to Potrero Hill have become the China Basin and Mission bay developments -- luxury housing.  So the question remains:  why does the real estate market not supply the demand for lower cost housing?

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For a time in the 1960s and 1970s, when the wealthy had not yet decided that they wanted to own the inner cities once again, an ad hoc real-estate market whose legality was sketchy did develop organically, meeting the needs of people who wanted to live in the urban core and who made homes and neighborhoods and communities of their own without attracting much attention from government and the press.  As in every other major urban center at that time, the decaying buildings of the inner city were occupied by squatters, musicians, homosexuals, artists, sex workers, and other marginalized people and businesses.  Dance clubs, gay bars and sex clubs, and inexpensive living quarters were created by people to meet their own demand for affordable spaces in which to live and work.  These marginalized people made use of a decaying but nevertheless existing infrastructure.  Theirs was a truly free market response to the demand for housing and not a matter of banks and developers chasing profits for the purpose of their own enrichment.

Eventually the city government, like the governments of London, New York, and other major cities, tried to prevent the squatters from taking over these unused resources, and even after the squatters had fixed the up the empty buildings tried to take the homes they had made from them by legal force.

I remember living in New York in the late 1970s and hearing about the "fixture fees" that people paid when they moved into a loft in SoHo.  The landlords who owned the empty buildings, which they had neglected entirely, leaving them to fill up with garbage, rats, used needles and filthy mattresses, went to court fighting to evict the squatters who had rehabilitated these buildings, installed kitchens and bathrooms, cleaned and painted and created huge, light-filled interiors in which to live.  While the legal battles went on, any squatter who decided to move out of the home that she or he had created charged the person who wanted to move in for the improvements, the "fixtures," such as electrical wiring, plumbing, toilets, tubs, sinks, and kitchen appliances.  They could not sell the real estate because they did not hold title, nor could they transfer a lease because none existed.  But in a fair, orderly, and reasonable way these people developed a civilized real-estate market without benefit of courts, police, or any of the other apparatus of control exercised by governments.  In the end, the courts for the most part sided with the squatters and "legalized their property rights, because the law recognized that the landlords, in neglecting to maintain the property, had forfeited their right to claim ownership.

Again, these were marginalized people to begin with.  And at the time, people of the upper middle and upper classes had no interest in living in the inner cities.  Content in their far-flung suburbs, untroubled by the poor, the "colored", and the immigrants, the well-to-do were happy to let the cities decay, burn in race riots, and, as in the case of New York, go bankrupt.

The history of the period is interesting, but the creative efforts of those who took possession of those properties did not amount to the production of a housing supply such as that which is needed today.  We are talking about the ad hoc appropriation of abandoned resources by people unable to afford participation in the regular market.

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At the same time, individual builders were producing housing on a small scale in many parts of the city.  For example, you can find this house  

all over the Mission and in Bernal Heights.  Apparently a General Contractor found that he could buy run-down houses, demolish them, and build a new house on the property and sell it at a profit.  He saved the expense of an architect by reusing the plans he had already paid for, building the same house again and again in these neighborhoods.  Since he may in fact have built fewer units than he demolished, I cannot cite the houses as a proof of the market efficiently providing supply, but I can point to them as proof that demand, i.e. buyers, did exist even in the midst of the white middle-class exodus to suburbia.

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The brave souls residing in the no-man's land beneath the elevated roadways that braid Bayshore Boulevard, Potrero Avenue, Cesar Chavez Street, and U.S. Highway 101 were lodging, until about a month ago, in lean-tos constructed of cardboard, plastic sheeting, and shopping carts, or they took their rest in sleeping bags under -- well, not the starry sky -- under those elevated streams of roaring traffic, of tons of steel and glass hurtling along at lethal speeds, spewing noxious fumes.

You may remember my description of this wasteland, for it is where the rats used to come out of the ivy and run alongside my bike when I pedaled through in the dark of the early morning.  In the year or so since I last rode through "La Calle de Raton", I have noticed that the police came through and cleared out the encampment.  That is, they rousted the people living there and then swept those people's homes and possessions into garbage trucks and took it all away from them.  The few things that these people owned were stolen from them ("stolen" is not a strong enough word) by the state which, no doubt, justifies this outrage with sanitary and aesthetic reasons.  Rage is the only humane reaction one can have to this injustice.

Lately, however, I have noticed that the residents of this neighborhood are returning, and this time they have tents.  Well over a dozen large, attractive, and clean tents are spread across the site.  I grin and practically laugh aloud each time I pass those tents, for to me they are proof that in the darkest and most powerless corners of this city's life, the human spirit remains indomitable.

If the City cannot or will not (the latter being, I believe, the case) provide real housing for these folks, then why not let them live in peace in the place that they have chosen, a place that is not anybody else's neighborhood, not "my back yard" or yours.  And as for public health "concerns", why not truck in a dozen portable toilets and have one of those trucks with showers come round three times a week.

The land itself must be property of the state since it is a freeway right-of-way, and if it belongs to the state, doesn't it belong to all her citizens?  Doesn't that land belong to those urban campers as much as to anyone -- and more so by right of possession.

I say that if a building stands empty, people who need homes should move into it and make it their own.  If land stands empty -- those vacant lots surrounded by cyclone fencing or old parking lots similarly fenced -- people should build on it.

Title to land is nothing but a monopoly for use granted by the state to an individual it favors.  If that individual is not making use of this government handout, then the title should be considered forfeit and the land be free to anyone who will use it.

Shame on those who would dispossess the poor of what little they have.  Shame on those who would drive them from their homes.

And to hell with those who hold land unused in hopes of selling it later for a higher price without making any use of it for the benefit of the community.

Read Henry George!  Read Tolstoy's last novel, "Resurrection"!  Awake!