Skyrocketing Rents in California Are Part of a Broader US Housing Crisis
In California and across the country, housing is growing increasingly expensive. Since California's housing crisis is the most acute, the fight for rent control is heating up across the state. But social housing systems in places like Singapore and Vienna, along with community land trusts provide different solutions for expensive housing.
Three of the country's most expensive cities are located in the San Francisco Bay Area. As of July, median rent for a one-bedroom in San Francisco is $3,450/month, according to Zumper. Median rent for a one-bedroom in Oakland is $2,100/month, while San Jose's median rent is $2,390/month. As usual, San Francisco remains the most expensive city in the country. San Jose is third most expensive and Oakland is sixth. Concord's median rent is $1,620/month, which is a 5 percent increase from last year. In Los Angeles, median rent for a one-bedroom is $2,100/month.
It is also increasingly difficult to find affordable housing in Sacramento, the state's capital. Median rent for a two-bedroom in Sacramento is now $1,161/month and rents in the city increased 7.4 percent since 2016.
The Bay Area is so outrageously expensive that its "middle class" has become "low income." A family of four in San Francisco, Marin or San Mateo with an annual income of $105,350 is now considered "low income," according to a Department of Housing and Urban Development (HUD) report, which helps determine who qualifies for subsidized housing.
Throughout the country, rents are also rising to dangerous levels. Median rent for a one-bedroom in New York City is $2,950/month. In Washington, DC, it's $2,210/month; in Boston, it's $2,200/month; and in Seattle, it's $1,910/month.
According to Census and HUD data, the median monthly asking rent for all new, unfurnished apartments hit $1,478 in 2016, a 5.8 percent increase since 2015. For one-bedroom apartments, median rent is $1,372/month, for two-bedroom it's $1,544/month, and $1,758/month for three or more bedrooms.
As housing prices increase, wages and income are not keeping up. A recent Harvard study said that in 2015, 38.9 million US households were cost-burdened, meaning they spent over 30 percent of their income on housing; and 18.8 million were severely cost-burdened, spending more than 50 percent on housing.
On average, to afford two-bedroom apartment rent in California, one needs to make at least $30.92/hour, according to a National Low Income Housing Coalition study. For cities like San Francisco and Oakland, it's $46.37/hour and $22.98/hour in Los Angeles. In New York, Illinois, Colorado and Virginia, one respectively needs to make $28.08/hour, $20.87/hour, $21.97/hour and $23.29/hour. A renter's average hourly wage in the United States is $16.38. In fact, there are only 12 counties in the country where a low-wage worker can afford a modest one-bedroom apartment without spending more than 30 percent of their income on housing. Those counties are in Washington State, Arizona and Oregon, and are mostly rural, far away from job centers. Meanwhile, over 76 percent of renters live in counties or metro areas where they need more than 60 hours per week of full-time, minimum-wage work to afford a decent one-bedroom.
California's Rent Control Fight
As rents skyrocket throughout California, the fight for rent control strengthens. Rent control regulates how much rents can increase so that landlords cannot raise rent on a whim. This practice mitigates displacement and helps tenants stay in their homes.
Not everyone is a fan of that policy. Rent control opponents, such as the California Apartment Association (the country's largest statewide landlord and developer advocacy group), argue that rent control stifles housing construction, thereby lowering the supply of housing and, thus, increasing housing prices. Instead, opponents argue for building more market-rate housing with no rent control.
It is harder for a landlord or developer to profit off a building if they cannot raise rent whenever they want or sell an expensive, new unit. One Los Angeles columnist who blamed rent control for the lack of affordable housing wrote, "Obviously, no one with any sense is going to buy or build rental property in California while state lawmakers are proposing to unleash rent control. The conversation alone could reduce the supply of housing."
However, rent control does not actually hurt housing production. San Francisco has had rent control since 1979 (per state law, post-1995 housing is exempted) but continues to build more housing. In fact, San Francisco built 5,114 new housing units at an average of 1 unit per 1.82 new residents, which is twice as fast as the state's average (1 per every 3.76). It often takes decades for market-rate housing to "trickle down" and decrease housing prices. Moreover, according to a UC Berkeley study, subsidized housing reduces displacement pressures at "double the impact of market-rate units."
The fight for rent control has been intensifying throughout California, thanks to tenant-led activist efforts. Recently, rent control measures passed in Richmond and Mountain View, while Santa Barbara is exploring the idea of rent control. Richmond City Council passed a rent control measure in 2015 but landlords fought against it. As a result, rent control was put on the ballot and won by a 65-35 margin.
However, rent control passing in Richmond and Mountain View has made California's real estate industry fearful of it spreading elsewhere -- and it is pushing back. Through a well-funded campaign, real estate interests defeated rent control in Santa Rosa. Last month, Santa Rosa residents voted in a referendum to reject a rent control law passed by the city council. On August 30, 2016, Santa Rosa City Council passed a rent control ordinance. The next month, a local property manager aligned with the California Apartment Association (CAA) quickly challenged it by gathering 12,543 signatures on a petition -- more than enough to force the law to a citywide referendum. Last March, the city council put rent control on the ballot as Measure C, which would have established 3 percent cap on annual rent increases for certain residential properties and "just cause" evictions to protect tenants from frivolous evictions.
Real estate groups shelled out recording-breaking amounts of cash during the campaign, raising $334,000 in just one week to defeat rent control. Measure C's opponents were able to raise $834,941 total, while its less-wealthy supporters raised $169,498. In total, more than $1 million was spent during the Measure C campaign, which is a record for the city.
After Mountain View passed rent control, in December 2016 the CAA filed a lawsuit challenging it. This prompted a Santa Clara County judge to temporarily halt rent control through a restraining order. However, in April of this year, a Santa Clara County judge rejected a CAA-requested injunction against rent control, which put the law into effect. In May, the CAA dropped its lawsuit.
Dean Preston, executive director of Tenants Together, a statewide renters' rights organization in California, told Truthout that the industry fights so hard to defeat rent control in smaller cities like Santa Rosa because "if it passes in Santa Rosa, it'll pass in other cities."
Indeed, despite this defeat, the momentum for rent control grows elsewhere across California -- including in the state legislature. Democratic Assembly member Richard Bloom proposed a bill (AB 1506) that would repeal the Costa-Hawkins Act, a state law that prohibits rent control for housing built or first occupied after February 1995, for single-family units and condos. Repealing Costa-Hawkins would allow cities to pass new rent control laws and strengthen existing ones.
At a town hall meeting in Oakland's Fruitvale neighborhood, dozens of residents asked California State Sen. Nancy Skinner and Assembly member Rob Bonta tough questions and demanded rent control and affordable housing. Most of the people present were working-class Blacks, Latinos and Asians, while advocacy groups like Tenants Together and Causa Justa: Just Cause also attended. Both Skinner and Bonta support AB 1506.
State legislators have proposed other housing bills to support lower-income Californians. For example, Assembly Bill 71 eliminates mortgage interest deductions for second homes, while Senate Bill 2 adds a $75 fee on real estate transactions. Each of these bills is aimed at raising $300 million per year to fund housing.
Land Trusts and Public Housing
Aside from rent control, another housing solution that advocates are proposing involves expanding community land trusts. A community land trust works by separating the price of the actual building from the land it sits on. The community land trust, a community-controlled nonprofit, acquires and owns the land permanently. It then provides long-term renewable leases to prospective homeowners or tenants. These leases are usually around 99 years, and since most people don't live that long, the leases almost never expire and prevent tenant displacement. According to Community-Wealth.org, a project of the community development organization the Democracy Collaborative, "When the homeowner sells, the family earns only a portion of the increased property value. The remainder is kept by the trust, preserving the affordability for future low- to moderate-income families." This approach protects the building from market forces that increase housing prices, thus, keeping the home perpetually affordable for low and moderate-income residents.
Cities like Cleveland and, recently, Philadelphia have seen successful community land trust projects. Activists are pushing for community land trusts in Baltimore, New York City and Austin to make housing affordable and fight displacement. San Francisco also has a few community land trusts. One prevented an eviction.
Additionally, one overlooked solution is expanding public housing. Other cities and countries have successful models from which to draw inspiration. In Singapore, for example, public housing is managed by the Housing and Development Board (HDB). HDB flats range from two to five rooms and are leased for 99 years. Almost 80 percent of Singapore's population lives in public housing.
Vienna's public housing is very robust. The city of Vienna owns or controls 420,000 housing units out of the city's nearly 900,000 homes. Vienna owns and manages 220,000 housing units, known as council housing. Meanwhile, 200,000 units are privately developed and owned through a process "heavily influenced by the city," according to Governing magazine.
Vienna's public housing system traces back to the "Red Vienna" period (1919-1934) when social democrats controlled the national Austrian government and Vienna City Council. Before Red Vienna, many Viennese residents lived in cramped, uncomfortable, decrepit housing where rents could be increased at any time. Once socialists achieved power in Vienna after World War I, they made affordable housing a priority, expanded public housing and decided that housing is a human right. Vienna remains committed to that mission today.
Council housing is mainly for lower-income residents. Income restrictions ensure that the housing goes to those who truly need it. However, if a resident's income increases while they live in council housing, they do not have to move out. This prevents the ghettoizing of Vienna's public housing, in contrast with the United States. As Governing points out, this "is only possible because the stock of city-owned units is so large that middle-income residents typically don't crowd out others who need housing."
Additionally, Vienna works with limited-profit private developers to build subsidized housing through a city-regulated process. According to Governing, "The city government maintains a fund that aggressively buys up land throughout the city to be used for subsidized housing." In the Governing piece, one housing official explained that "if an area is suitable for residential development, the city already owns the land, which essentially gives Vienna a monopoly."
Once the city decides to build housing on its property, it seeks proposals from developers. Once a developer is chosen through a jury selection, the city "agrees to sell the land at an affordable price" and gives the developer "an extremely favorable loan." These typically "cover 35 to 40 percent of a project's cost at an interest rate of just 1 percent. Developers have 35 years to pay the loans back, but the clock doesn't start until the last private loan has been paid off." In return, developers "provide half their apartments to the city for rent." Those apartments go to lower-income residents, like those in council housing. Meanwhile, the "other half goes to tenants selected by the developer, who are generally middle-class."
Vienna spends 600 million euros a year on public housing, 450 million of which comes from federal housing funds. Moreover, Vienna subsidizes developments rather than residents, so there is no mortgage interest deduction, such as in the US. Since mortgage interest deduction allows home-owning taxpayers to reduce their taxable income, it benefits richer -- predominantly white -- taxpayers. According to a Center on Budget and Policy Priorities study on mortgage interest deductions, in 2012, "77 percent of the benefits went to homeowners with incomes above $100,000." US Census figures show that, in the beginning of 2017, the homeownership rate for whites is 71.8 percent, while Black homeownership lags at 42.7 percent, even after the end of the 2008 recession.
Vienna's public housing is not dilapidated, either. Its public housing projects include nice parks, tennis courts, bicycle parking, indoor and outdoor swimming pools, spas and other amenities. Since public housing in Vienna is so plentiful, this means private developers must provide high quality housing with affordable prices in order to compete with the city's housing. This helps keep overall housing prices affordable. In addition, Viennese renters have strong rights and protections, such as rent control, being able to renovate their units against their landlords' wishes, and a sense of ownership of their buildings, since they pay a portion of building construction costs upfront.
As housing prices are increasing in California and throughout the United States, activists can look to places like Vienna, Singapore and Cleveland for inspiration -- and for affirmation that real affordable housing is wholly possible.
Copyright, Truthout.org. Reprinted with permission.