1. Investment without Displacement: Increasing the Affordable Housing Supply
Miriam Zuk, Ph.d.
UC Berkeley
Anna cash • paige dow • Justine marcus
The project aims to understand the nature of gentrification and displacement in the Bay Area. It focuses on creating tools to help communities identify the pressures surrounding them and take more effective action.

2. Bay Area on the Rise
The Bay Area is experiencing a period of profound economic growth and prosperity.
The Gross Regional Product has grown steadily in post-Recession recovery, consistently outpacing the national growth rate.
In the past 5 years (2010 – 2015), Bay Area per capita GDP has grown by 26%, while California GDP has grown by only 9%, and national per capita GDP by 5%.
2015 Bay Area per capita GDP is 152% that of California and 172% the national average.
Sources: US Bureau of Economic Analysis, MTC Vital Signs,
CA Dept. of Finance

3. Recent economic growth is not a neutral story
Declining poverty
Growth in high wage jobs
Income inequality
Low unemployment
Recent economic growth is not a neutral story
Rising rents
Jobs and housing mismatch
But, recent economic growth is not a neutral story. The Bay Area is plagued by some enduring problems of inequality and poverty.
Suburbanization of poverty

4. Homeownership Out of Reach
Home values in the Bay Area far exceed the U.S. median and even the California median
Home values in the Bay Area are also growing at a faster rate than the U.S. and California
In some parts of the Bay Area, home values have exceeded pre-recession values
Note:
* All home values are represented in 2016 dollars
* San Jose’s MSA includes: Cupertino Milpitas Mountain View Palo Alto San Jose Santa Clara Sunnyvale
* San Francisco’s MSA includes: Berkeley Hayward Oakland Pleasanton Redwood City San Francisco San Leandro San Rafael San Ramon South San Francisco Walnut Creek
Bay Area Average is the average of the 9 Bay Area Counties: Alameda, Contra Costa, San Francisco, San Mateo, Napa, Sonoma, Santa Clara, Solano, and Marin
Source: Zillow, ZHVI All Homes (SFR, Condo/Co-op) Time Series January 1997– November 2016
Source: Zillow, ZHVI All Homes (SFR, Condo/Co-op) Time Series January 1997– November 2016

5. Rent Over Time: Bay Area vs. California
Rents in the Bay Area have consistently been above those in California
The average rent in the Bay Area has grown by 30% in the last two years, though there are many neighborhoods where the rent has increased far more.
Note:
*San Jose’s MSA includes: Cupertino Milpitas Mountain View Palo Alto San Jose Santa Clara Sunnyvale
*San Francisco’s MSA includes: Berkeley Hayward Oakland Pleasanton Redwood City San Francisco San Leandro San Rafael San Ramon South San Francisco Walnut Creek
*Bay Area Average is the average of the 9 Bay Area Counties: Alameda, Contra Costa, San Francisco, San Mateo, Napa, Sonoma, Santa Clara, Solano, and Marin
Source: Zillow Rental Index Multifamily, SFR, Condo/Co-op Time Series, January 2011-December 2015
Source: Zillow Rental Index Multifamily, SFR,
Condo/Co-op Time Series

6. Economic Prosperity is Not for All
Median annual earnings in 2015 inflation-adjusted dollars.
While economic growth is happening in the Bay Area, the benefits of that growth are not distributed equally.
There is a substantial difference between high and low wage jobs – with educators and healthcare support professionals often earning close to $40,000 a year, compared to computer engineers who earned over $100,000 on average annually.
Not only is there a disparity between high and low wage jobs, but the rate of wage growth across different sectors is uneven. For example, between 2006 and 2015:
Computer related +25%
Doctors +7%
Construction +0%
Education and libraries -15%
Building and ground maintenance -11%
Food prep and service +11%
As cost of living continues to rise in the Bay Area, low and middle income jobs with relatively stagnant or declining wages are most severely burdened.
Source: American Community Survey, 1-year estimates by County
Source: American Community Survey, 1-yr estimates,,

7. Wages Have Not Kept Up With Rents
Increases in median rent in the Bay Area have outpaced the increases in income
While income experienced a dip during the recession years, rent did not experience the same dip
Note:
*Bay Area Average is the average of the 9 Bay Area Counties: Alameda, Contra Costa, San Francisco, San Mateo, Napa, Sonoma, Santa Clara, Solano, and Marin
Source: American Community Survey 1-year estimates, Tables DP04 and B25119
At CA minimum wage of $10/hr, you would have to work 89 hours a week to afford a 1BR apartment in California.
In San Francisco, you would have to work 109 hours/week to afford that 1BR
Source: Out of Reach”, National Low Income Housing Coalition,“ 2016,
Source: American Community Survey 1 year estimates
Note: All values adjusted to 2015 dollars

8. Not Enough Supply to Meet the Demand
Bay Area Renter Households 2015
Based on census data on housing costs as a percentage of household income, the difference between low income, very low income, and extremely low income renter households that are housing-burdened (spending 30% or more of income on rent) , and households at the same income bracket that are not housing burdened (spending under 30% of income on rent) amounts to a shortfall of about 480,000 affordable rental homes in the Bay Area.
Proxy for Extremely Low Income : <$20,000 (for Bay Area HH Median Income, precise figure (under 30% AMI): $23,513)
Proxy for Very Low Income : <$35,000 (for Bay Area HH Median Income, precise figure (under 50% AMI): $39,189)
The Bay Area needs 480,407 more affordable rental homes (shortfall).
Source: US Census Bureau, American Community Survey, Table B25106, 5 Year Estimates
California needs 1.54M more affordable rental homes.
Source: “Confronting California’s Rent and Poverty Crisis,” California Housing Partnership Corporation, April 2016,
Source: US Census Bureau, American Community Survey

9. Low-Cost Housing Production
Low-Wage Job Growth vs.
Low-Cost Housing Production
Low-wage jobs are outpacing low-wage housing the worst in:
Alameda - 21,000 new low wage jobs, 5,000 housing permits (difference of 16,323)
Santa Clara – 17,000 new low wage jobs, 6,000 housing permits (difference of 10,734)
Contra Costa – 12,000 new low wage jobs, 2,000 housing permits (difference of 10,340)
Note: Low-Wage = $40,000 or less, High-Wage = over $40,000, based on LEHD categories. (Low-Wage is Tiers 1 and 2, High-Wage is Tier 3).
San Francisco actually lost about 1,000 low wage jobs in this time period, and added 6600 housing units.
In the Bay Area overall, 63,000 low-wage jobs were added, and only 23,000 low-wage housing permits.
Source: US Census LEHD On the Map, Annual Housing Element Progress Reports (APRs).
Sources: US Census LEHD On the Map, Annual Housing Element Progress Reports (APRs)

10. High-Wage Job Growth vs High-Cost Housing Production
High-wage jobs are outpacing high-wage housing the worst in:
Alameda – 60,580 high-wage jobs grown, 16,305 high-wage housing permits (difference of 44,545)
Santa Clara – 78,554 high-wage jobs grown, 35,560 high-wage housing permits (difference of 42,994)
San Francisco – 43,306 high-wage jobs grown, 14,463 high-wage housing permits (difference of 28,843)
San Mateo – 30,557 high-wage jobs grown, 6011 high-wage housing permits (difference of 24,546)
Contra Costa – 25,359 high-wage jobs grown, 11,942 high-wage housing permits (difference of 13,417)
Note: Low-Wage = $40,000 or less, High-Wage = over $40,000, based on LEHD categories. (Low-Wage is Tiers 1 and 2, High-Wage is Tier 3).
While the jobs-housing mismatch in terms of job growth and new housing production in the Bay Area is worse by numbers at high-wage levels, both low-wage and high-wage categories are growing jobs at nearly 3x the rate of growing housing (2.7x for low-wage and 2.8x for high-wage).
-Low-Wage Job Growth = 62,764, Low-Wage Housing Permits = 23,130.
-High-Wage Job Growth = 263,326, High-Wage Housing Permits = 92,434.
Source: US Census LEHD On the Map, Annual Housing Element Progress Reports (APRs).
Sources: US Census LEHD On the Map, Annual Housing Element Progress Reports (APRs)

11. Majority of Housing Permitted is for Higher Income Groups
In every County, over 50% of the housing that has been constructed from 2007 to 2015 has been for households with above moderate income.
73% of the housing permits issued in the Bay Area have been for households above moderate income
However, in most of the counties there is about the same number of households in the very low income group as there is in the above moderate income group
In some Counties, like San Francisco County, there are actually more households in the very low income group than in the above moderate group
Households Per Income Group Per County (American Community Survey year estimates, Table B19001)
Alameda
Very Low (0-50% AMI): 179,861
Low (50-80% AMI): 95,301
Moderate (80-120% AMI): 95,410
Above Moderate (Above 120% AMI): 188,335
Contra Costa
Very Low (0-50% AMI): 112,107
Low (50-80% AMI): 67,367
Moderate (80-120% AMI): 67,445
Above Moderate (Above 120% AMI): 137,728
Marin
Very Low (0-50% AMI): 34,306
Low (50-80% AMI): 17,006
Moderate (80-120% AMI): 17,911
Above Moderate (Above 120% AMI): 34,446
Napa
Very Low (0-50% AMI): 14,755
Low (50-80% AMI): 9,481
Moderate (80-120% AMI): 8,371
Above Moderate (Above 120% AMI): 16,887
San Francisco
Very Low (0-50% AMI): 136,810
Low (50-80% AMI): 57,237
Moderate (80-120% AMI): 57,922
Above Moderate (Above 120% AMI): 101,317
San Mateo
Very Low (0-50% AMI): 81,150
Low (50-80% AMI): 47,628
Moderate (80-120% AMI): 47,933
Above Moderate (Above 120% AMI): 83,000
Santa Clara
Very Low (0-50% AMI): 177,965
Low (50-80% AMI): 99,742
Moderate (80-120% AMI): 113,258
Above Moderate (Above 120% AMI): 230,498
Solano
Very Low (0-50% AMI): 38,684
Low (50-80% AMI): 25,520
Moderate (80-120% AMI): 26,586
Above Moderate (Above 120% AMI): 52,822
Sonoma
Very Low (0-50% AMI): 56,440
Low (50-80% AMI): 36,014
Moderate (80-120% AMI): 34,872
Above Moderate (Above 120% AMI): 60,456
Note: Income Limits are from 2015 Tax Credit Advisory Committee Income Limits
Sources:
“San Francisco Bay Area Progress in Meeting Regional Housing Need Allocation (RHNA),“ Association of Bay Area Governments,
“2015 Income Limits,” Tax Credit Allocation Committee,
American Community Survey year estimates, Table B19001
Source: Association of Bay Area Governments

12. Affordable housing production lags behind
From , region has permitted < 1/3 of the units allocated for low and moderate-income >99% for above-moderate
While the region has built less than 1/3 of the required units for very low, low, and moderate income households, the region has met 99% of its RHNA requirements for above moderate households from the period of
Source:
“San Francisco Bay Area Progress in Meeting Regional Housing Need Allocation (RHNA),“ Association of Bay Area Governments,
Source: Association of Bay Area Governments

13. Subsidized Housing Cannot Keep up with Demand
Affordable housing developments in the Bay Area have large waitlists:
San Leandro Marea Alta development:
18,000 interested in 115 affordable units
Fremont MidPen Housing:
7,000 interested in 64 units
Oakland MacArthur BART and Lake Merritt developments:
10,000 interested in 176 total units
After an affordable housing development is leased up, waitlists can still have thousands of people on them.
East Bay Asian Local Development Corp. properties waitlists often range 2, ,000
This translates to:
BRIDGE Housing’s Marea Alta (San Leandro) : 156 people / unit
Fremont: 109 people / unit
BRIDGE Housing’s MacArthur BART (108 units) and Lake Merritt (68 units) (Oakland): 56 people / unit
Source:
Devin Katayama, “In San Leandro, 115 Affordable Units and 18,000 Lined Up to Get In,” KQED, February 9, 2016, .
Source: KQED News

14. What are some of the barriers to creating new affordable housing?

15. Barriers High land and construction costs
Construction labor in CA metros = 20% higher than the rest of the U.S.
Tax policy – fiscalization of land use
NIMBYism
Entitlement uncertainty, timing and costs
Construction materials and labor costs higher in California (“California’s High Housing Costs,” 2015)
Construction labor in CA metros = 20% higher than the rest of the U.S.
Regulations require more expensive materials
CA coastal metro areas have land costs more than 7 times as expensive as the average U.S. metro (Legislative Analyst’s Office, 2015)
Residential land in average U.S. metro = $20,000/acre
CA coastal metro areas, $150,000/acre
San Francisco, $400,000/acre
NIMBYISM
People think that having affordable housing in their neighborhood might lower the property value. It has been shown in the literature to have no effect on housing values, and in some instances, it can even raise property values (Young 2016; Wardip, Williams, and Hague 2011).
Sources:
“California’s High Housing Costs,” Legislative Analyst’s Office, March 17, 2015,
Cheryl Young, “There Doesn’t Go the Neighborhood,” Trulia, November 16, 2016,
Keith Wardrip, Laura Williams, and Suzanne Hague, “The Role of Affordable Housing in Creating Jobs and Stimulating Local Economic Development,” Center for Housing Policy, January 2011,
Source: California Legislative Analyst’s Office

16. Loss of Funding Source: California Housing Partnership Corporation
Source: “Confronting California’s Rent and Poverty Crisis,” California Housing Partnership Corporation, April 2016,
Source: California Housing Partnership Corporation

17. Why is it important to create new housing affordable to low income households?

18. Why not just build more market-rate housing?
Some argue that we should focus on building market-rate housing and allow the process of filtering to bring “naturally affordable” housing to the market.
But…

19. The limitations of filtering
It doesn’t work in gentrifying neighborhoods:
Changes in housing preferences to architecturally significant property has disrupted the filtering process
More likely to see “reverse filtering,” also known as “filtering up” in hot neighborhoods
It can take decades.
Rent of a typical unit only declines 0.3% each year
15 years before units filter down to 80% median income
50 years before units filter down to 50% median income
In gentrifying neighborhoods:
Older units often redeveloped into high-end housing (Immergluck 2016).
Changes in housing preferences to architecturally significant property has disrupted the filtering process (Zuk and Chapple 2016).
It can take decades : rent of a typical unit only declines 0.31% each year
15 years before units filter down to 80% median income
50 years before units filter down to 50% median income (Zuk and Chapple 2016).
Bay Area units filter down at a slower rate
Bay Area units filter down at 1.5% per year compared to national average of2.2% per year (Zuk and Chapple 2016).
Sources:
Miriam Zuk and Karen Chapple, “Housing Production, Filtering, and Displacement: Untangling the Relationships,” Institute of Governmental Studies, May 2016,
Stuart S. Rosenthal, “Are Private Markets and Filtering a Viable Source of Low-Income Housing? Estimates from a ‘Repeat Income’ Model,” American Economic Review 104, no. 2 (February 2014): 687–706,
Dan Immergluck, “Filtering doesn’t work in hot, gentrifying neighborhoods,’ in “How To Make Expensive Cities Affordable for Everyone Again,” The Washington Post, February 19, 2016,

20. Subsidized housing is more effective
Market rate housing production in 90s resulted in lower median rent today, but also higher cost burden for low income renters
Subsidized affordable housing produced in ‘90s had twice the impact as market rate housing in mitigating displacement
Now we’ll look at some of the solutions

21. What are some of the tools to build affordable housing?

22. Creating New Affordable Housing
Generating Units
Density bonus
Community Land Trusts
Accessory Dwelling Units (ADUs)
Public housing
Permit streamlining
Public land disposition
Tax exemptions
Land banking
Reduced parking requirements
Leveraging the Market
Inclusionary zoning
Public Investment
Land value capture
Commercial linkage fees
Bonds for affordable housing construction
Impact fees
Housing trust fund
Housing levy
Generating Funds

23. Success Story: Commercial Linkage Fee in Redwood City
City Council passed Affordable Housing Impact Fee Ordinance in 2015
Includes both residential and commercial linkage fees
Commercial rates:
$20/sq.ft. office
$5/sq.ft. hotel and retail
Impact fees go to new City Affordable Housing Fund
Utilized San Mateo 21 Elements Nexus Study
Notes:
Redwood City was first San Mateo City to adopt the linkage fees after participating in the San Mateo 21 Elements Nexus Study
Source: Redwood City Community Development Department,

24. Success Story: Tax Incentive for Affordable Housing in Portland, OR
10-year property tax exemption on new housing projects with at least 20% below market rate units
Targeting areas close to transit, pedestrian infrastructure, and in areas with limited affordable housing
$3 million/year cap on tax break
Exemption only applies to the residential portion of structural improvements
During the term of the exemption, a minimum of 20% of the number of units must be affordable to households earning 60% or less of the area median family income (MFI), or to households earning 80% or less of the area MFI when the project’s market rents are at or exceed 120% of the area MFI levels or a market study supports rents of similar units in the same geographic area at or above 120% of the area MFI.
Sources:
City of Portland,
Steve Law, “County, city agree to triple property tax break for affordable housing,” Portland Tribune, September 24, 2015,
Example:
Burnside Street Tower, 57 workforce housing units (<60% AMI)

25. What are some success stories and challenges in the Bay Area?

26. Today’s Panel Rick Jacobus Street Level Advisors Gloria Bruce
East Bay Housing Organizations
Kristy Wang
SPUR
Lewis Knight
Facebook