The San Francisco Bay area is envied worldwide not only for its spectacular scenery and diversity, but also for its low unemployment rate. In the wake of spectacular economic growth, however, the region has developed a number of problems that threaten future success, including a housing supply/affordability crisis and an overburdened, underfunded transportation system.
Regional cooperation is necessary to address these issues, agreed the mayors of three Bay Area jurisdictions who spoke at a 2015 ULI Fall Meeting general session: Mayor Edwin M. Lee of San Francisco, Mayor Sam Liccardo of San Jose, and Mayor Libby Schaaf of Oakland.
“The housing crisis has been decades in the making,” said Lee. “A decade ago, our unemployment rate was 10 percent and everyone wanted help getting jobs. We supported industries like health care, construction, manufacturing, and tourism, not realizing that the unemployment rate would drop so quickly to 3.6 percent. The problem is that everyone wants to live close to work and we need 30,000 new housing units by 2020.”
Jim Wunderman, chief executive officer of the Bay Area Council, also spoke, tracing the housing crisis back even further, to the 1950s, when “people came to San Francisco for its cheap rent. Since then, some areas have been unwilling to support new housing, and our supply began to fall behind; we are now 20,000 units behind our own regional housing need estimates. More than two-thirds of the Bay Area’s population live outside the city; a one-bedroom apartment can rent for $4,000 per month; and homelessness is a huge issue.”
Liccardo said that fast-growing San Jose is “still a bedroom community for Silicon Valley, with the worst jobs-to-housing ratio in the U.S. We have to expand housing and do it in a way that is environmentally and fiscally sustainable. So we are doubling down on our high-rise strategy; we approved one high-rise development in just 66 days.” He added that San Jose approved 4,500 new housing units last year.
“In Oakland,” said Schaaf, “we are having a huge surge in quality development, which is causing a gentrification issue. We are developing strategies to protect our current residents, create new housing at every income level, and strengthen tenant protection. It’s not just about building more affordable housing. There are ways to bring affordability to where people live now, including converting market-rate housing and making it easier for homeowners to add secondary units.”
Noting that Oakland is attracting many “refugees” from high-priced San Francisco, Schaaf went on to say the following: “We don’t want to be a barbell city for the very rich and the very poor. We think that market-rate conversions can benefit people at 80 percent of average median income.” Liccardo agreed that the Bay Area should not be economically segregated, saying, “We should not be content with the idea that those who can’t afford to live in the city will just live out in the Valley and commute.”
To finance more affordable housing, these three municipalities are taking a variety of approaches. Witte pointed out that San Francisco, which already had a commercial development impact fee, recently passed one for residential development impact. San Jose has a similar housing impact fee, and Schaaf said that Oakland will adopt one soon. Asked Witte: “Can we ‘fee’ our way out of this problem? Where does it end?”
Schaaf answered: “We are looking at a menu of options to address the housing crisis, so that we don’t kill the golden goose of development.” Thanks to a ULI member, she noted, Oakland may take advantage of a section of the California tax code that allows substantial tax breaks for owners who lease to nonprofit affordable housing organizations for 35 years. Lee said the city will start providing downpayment assistance for first-time homebuyers in the workforce, and will ask the state government to allocate cap-and-trade funds to affordable housing.
Also promising, said Lee, is how the city has negotiated with developers of new mixed-use communities to obtain increased subsidized housing in return for greater density. Forty percent of the housing at the new Pier 70 mixed-use community will be subsidized, including some units set aside for residents earning 120 percent of area median income. “Just concentrating on low-income won’t help us keep our workforce here,” he cautioned.
In addition to a lack of affordable housing, the Bay Area’s jurisdictions share another challenge: transportation. “It is frustrating that state gas tax funding sources decline while our transportation needs increase,” said Schaaf. “A great case [is] to be made about why this is the investment for government, because only government can build roads and bridges. We have to get over partisan gridlock and invest in America.”
Joking that he likes to call potholes traffic-calming devices, Liccardo chided Congress and the federal government for abdicating their responsibilities in funding critical infrastructure. Added Lee: “We have the center of innovation here and we are competing with cities all over the world. What we need to do will cost billions; we need to get the federal government to realize the economic engine that this region represents.”
Wunderman pointed out that the Bay Area, like so many other metropolitan areas, could benefit from a more regional approach to solving its problems. In addition to its three major cities, the Bay Area has nine counties and over 100 municipalities. There are several regional agencies, but none, according to Wunderman, with “real teeth.” In this leadership vacuum, mayors are supporting each other stepping up to the plate because, as Schaaf concluded, “we get things done.”