Airbnb and the Housing Crisis

Airbnb and the crisis in (Affordable ) Housing.  These two subjects often arise together today — in the media, where the story often goes, that Airbnb is having a deleterious effect on the available affordable housing, is causing the cost of housing to increase, is taking housing units off the market, and in general is exacerbating the housing crisis.  To hear some of the more hysterical versions, Airbnb is an alien life force, alienzooming in to planet earth with the ghastly mission of sucking all the affordable housing out of cities, expelling tenants and turn every house and apartment building into a hotel.

Housing crisis — we have a national housing crisis, which has been building for decades.  I want to describe this crisis, and some of its causes, and explain why short term rentals, such as those offered on Airbnb, have very little effect in adding to this crisis, but do actually provide a solution to the affordable housing crisis to many, as they allow people to afford their housing.

Airbnb and short term rentals are disrupting the housing landscape, and this upsets many people.  However, as we will see by exploring the dimensions of the housing crisis and its causes, housing in this nation is in great need of change — the housing crisis is serious, and it is growing, and we will not solve the housing crisis by continuing with the status quo.  Rather dramatic changes are needed in how we house people — and so if the entry of short term rentals on the landscape begins to lead many to have questions about such matters as zoning laws, occupancy limits, rent control,  property rights,  gentrification, demographic inversion, the limits of government regulation of what people do in/with their private homes,  building codes, neighbors’ expectations and their limits, housing for low income and homeless individuals, and one of the most important questions of all — just who is responsible for providing affordable housing for Americans.

The Housing Crisis Nationally

According to Andre Shashaty, author of Rebuilding a Dream: America’s New Urban Crisis, the Housing Cost Explosion, and How We Can Reinvent the American Dream for All , we have a national housing crisis. In this article he explains that in broad terms:

How dire is the affordable housing situation right now, nationally?

Andre Shashaty: I call the decreasing affordability of housing the silent crisis because it eats away at the wellbeing of families and, by extension, society as a whole, with little notice from policymakers or the press. It got worse during the recession, as stagnation of incomes proved a bigger factor than a short-term hiatus in the long-term pattern of rising rents. There’s been some improvement as the economy has recovered, but the problem is still serious.

There were 42,447,000 renter households in America in 2013, according to new data from the American Community Survey. Of that number, about 14 million paid more than 40 percent of their income for rent. That is one-third of all renter households, and that kind of a cost burden means there’s less money for other things, like nutritious food and education, and little chance to save for the future. However, this data doesn’t tell the full story. It doesn’t shed any light on the quality or location of the housing that these “rent-burdened” households occupy, which is often pretty bad. In addition, it does not reflect the plight of the homeless or the precariously housed who cannot afford to lease any kind of apartment. The precariously housed are people who share the homes of others or sleep in motel rooms. According to the Department of Education, there are 1.258 million homeless or precariously housed school kids in America, a number that has increased steadily in recent year.

 

Housing Crisis in California and the Bay Area

Let’s begin by looking at some data on housing from the San Francisco Bay Area, which is fast becoming the region with the most expensive housing  in the nation.  housing crisis imageAccording to the  December 2015 Zumper Report  , San Francisco has the highest rents in the nation, at a whopping $3500.00 median rent for a one bedroom apartment, (median rent in San Francisco was $3670 in  in November 2015 according to Zumper) which is about twice the monthly mortgage payment for a 2 bedroom home selling for $500,000 at purchase.  Oakland, once considered the dumpy sibling  city of its sister to the west,  is now the 4th most expensive rental market in the nation, with a median rent for a one bedroom apartment of $2190. These rents represent an increase of 10 to 12% in just one year, and  according to this article this article in the East Bay Express, rents in Oakland have doubled from 2011 to 2015.

But it is not just in the San Francisco Bay Area where rents are rising — this is happening in large cities across the nation —  rents are rising, and vacancy rates are falling.  The November 2015 Zumper report also states that:

According to a US Census Bureau report from the second quarter of 2015, the national rental vacancy rate dropped to 6.8%, the lowest seen in the past 20 years. Furthermore, a recent report conducted by the Joint Center for Housing Studies at Harvard University, found that the national homeownership rate declined for the 10th consecutive year in 2014, dropping to 64.5%. This softening was seen across the entire country, affecting both urban and suburban areas alike.

 

As rents increase, renters have to pay an ever larger percentage of their total income just for housing.  In his book Rebuilding the Dream, Andre Shashaty reports (pg 9) that more than 27% of renters paid more than 50% of their income for rent in 2012.  Incomes of renters actually decreased by 13% from 2001 to 2012, while rents increased — sometimes, as in Oakland, rents have increased 100% in just a few years.  A December 16 2015 issue of the East Bay Express has an article entitled Oakland’s Perfect Storm , in which an Oakland renter expresses her sadness that she cannot even afford to rent her own apartment in the city.

The median purchase price of homes has not increased as dramatically, but loans are more difficult to obtain since the mortgage meltdown in 2009.  Housing costs in California are particularly high, according to this report , which indicates that housing costs in California began to significantly exceed those elsewhere in the nation, as early as 1970.

Between 1970 and 1980, California home prices went from 30 percent above U.S. levels to more than 80 percent higher. This trend has continued. Today, an average California home costs $440,000, about two–and–a–half times the average national home price ($180,000). Also, California’s average monthly rent is about $1,240, 50 percent higher than the rest of the country ($840 per month). ….A shortage of housing along California’s coast means households wishing to live there compete for limited housing.

california home pricesed housing. This competition bids up housing costs.

 

Consequences of the Housing Crisis:  Finger Pointing

Rising costs of housing is causing more people to struggle in finding housing, or finding what is affordable, and is also leading to more homelessness across the nation.  There is a growing rift between the housing “haves” and the housing “have nots.”   About 64 percent of U.S. households own their homes, but only 54 percent of California households do. (Only New York State and Nevada have lower homeownership rates.)  So, there are more renters in California, and San Francisco in particular has a very high percentage of renters:  a recent census indicates that 63% of SF residents are renters .

The struggles and suffering caused by these housing problems, causes greater stress, tension and anxiety for many who struggle to find adequate housing.  These individuals may often seek someone or something to blame.  The greater the housing crisis, the more that each unit of housing is fought over, with the result that any phenomenon such as Ellis Act evictions or Airbnb rentals which is viewed as removing housing units, becomes the subject of intense debate and scrutiny.

In such a tense environment, I think it is particularly important that we do not “lose the forest for the trees”, and ignore the many complex factors at work in creating the housing crisis, while focussing narrowly on a few units which property owners seek to repossess, or which are being used as short term rentals (which, as I will argue below, is often done simply so that owners can retain control over their own property).  The more the entire context of the housing crisis is examined, I hope the more clear it will be that short term rentals are not a significant cause of the housing crisis, and draconian regulations on short term rentals will not be a solution.

There are two significant elements to the housing crisis which I see too little mention of in public dialogue on the subject.  The first has to do with some basic facts about supply and demand, and the second has to do with the kind of housing we are building — housing that is too expensive for too many people.

Supply and Demand

The cost of housing has risen most sharply in many areas, because there has not been adequate new construction to meet demand.  This problem has been particularly acute in California coastal areas.  As  this government report  summarizes:

…some of California’s most sought after locations—its major coastal metros (Los Angeles, Oakland, San Diego, San Francisco, San Jose, and Santa Ana–Anaheim), where around two–thirds of Californians live—do not have sufficient housing to accommodate all of the households that want to live here. The lack of housing on the California coast means households wishing to live there compete for limited housing. This competition bids up housing costs.

Rising home prices and rents are a signal that more households would like to live in an area than there is housing to accommodate them. Housing developers typically respond to this excess demand by building additional housing. This does not appear to be true, however, in California’s coastal metros. Building activity during the recent housing boom demonstrates this. During the mid–2000s, housing prices were rising throughout the country and, in most locations, developers responded with additional building. As Figure 4 shows, however, new housing construction, as measured by building permits issued by local officials, remained flat in California’s coastal metros. We also find that building activity in California’s coastal metros has been significantly lower than in metros outside of California that have similar desirable characteristics—such as temperate weather, coastal proximity, and economic growth—and, therefore, likely have similar demand for housing. For example, Seattle—a coastal metro with economic characteristics and average temperatures that are similar to California’s Bay Area metros—added new housing units at about twice the rate as San Francisco and San Jose over the last two decades.

california home construction

Part of the reason for the slowdown in housing construction in the California coastal regions, may be that it is more expensive to build housing in California.  The report indicates that

Building Costs Are Higher in California. Aside from the cost of land, three factors determine developers’ cost to build housing: labor, materials, and government fees. All three of these components are higher in California than in the rest of the country. Construction labor is about 20 percent more expensive in California metros than in the rest of the country. California’s building codes and standards also are considered more comprehensive and prescriptive, often requiring more expensive materials and labor. For example, the state requires builders to use higher quality buildingmaterials—such as windows, insulation, and heating and cooling systems—to achieve certain energy efficiency goals. Additionally, development fees—charges levied on builders as a condition of development—are higher in California than the rest of the country. A 2012 national survey found that the average development fee levied by California local governments (excluding water–related fees) was just over $22,000 per single–family home compared with about $6,000 per single–family home in the rest of the country.  Altogether, the cost of building a typical single–family home in California’s metros likely is between $50,000 and $75,000 higher than in the rest of the country.

In order to keep up with demand, this government report concludes that

….our analysis suggests that the state probably would have to build as many as 100,000 additional units annually—almost exclusively in its coastal communities—to seriously mitigate the state’s problems with housing affordability. Adding this many new homes, however, could place strains on the state’s infrastructure and natural resources and could alter the longstanding and prized character of California’s coastal communities. Facilitating this housing construction also would require the state to make changes to a broad range of policies that affect housing supply directly or indirectly—including many policies that have been fundamental tenets of California government for many years.

 

Due to the law of supply and demand, when demand is higher than available supply, costs for the desired commodities increase.  Many urban areas, including San Francisco and Oakland, have built very little new housing, yet these cities have growing populations.  The government report cited above provides several reasons for the failure to build an adequate amount of new housing, one of which is  that the city’s residents are often voting down proposals to build new housing.  Sometimes residents oppose housing developments because they are too large, too tall, or dont’ include enough affordable housing units.  In Berkeley, there has been tremendous contention about the city’s plan to build an 18 story residential development in downtown Berkeley (the “Harold Way” development) , including threats by some citizens to sue the city over the plan.   The planning stage for this project alone took 3 years and 37 public meetings, as detailed in this article .

In San Francisco in November 2015, there was actually a proposition on the ballot to prohibit the construction of market-rate housing in the Mission District: many were adamant that the only housing that should be built, was “affordable housing.”  In his book  (pg 49) , Shashaty pointed out that in two years 2011-2012 in San Francisco, 36,000 jobs were created in the city, while only 538 housing units were built during that same period of time.  There is a similar problem getting housing built in many cities — recently in  a letter to the East Bay Express an East Bay resident wrote:

It’s severely misguided, though, to assert that any significant part of our current crisis is due to a failure to mandate inclusionary housing in market-rate projects. Affordable housing mandates can be a powerful tool to bring much-needed affordable units into our community, yes, but the author ignored a significant detail which negates the argument.

We aren’t building any market-rate housing in Oakland.

In 2014, we built 788 units total, of which 72 percent were affordable housing projects. If each unit holds two people, you could fit everyone who has found a home in these units on a single BART train.

We could require market-rate projects to build 50 percent affordable housing, but 50 percent of zero units is still zero units.

Demographic Inversion

Meanwhile, as neighbors and city council members are arguing about what housing should be built, and where, but not really building any housing, people are pouring into cities like never before.  We are seeing what Alan Ehrenhalt calls a “demographic inversion”, where people are moving out of the suburbs and into urban areas. This is a reverse of the trend that began in the 1950’s, and earlier, when Americans fled the cities (often in what was called “white flight” ) and settled in the suburbs. Now the cities are being viewed as more desirable, so we have a reverse migration — white and middle class/middle income individuals are moving into the cities, while blacks and immigrants are moving to the suburbs.

In Atlanta, for instance, between 200o and 2010, the percentage of black residents fell from 61% to 54%.  The white middle class is moving in, but black residents are also moving out — in particular, to Clayton and DeKalb counties, which acquired black majorities, says Ehrenhalt in his book The Great Inversion and the Future of the American City.   Likewise, Washington DC has gone from being 70% black to now having only  50% black residents.   

Though many people use the term “gentrification” to refer to  the movement of white middle class into areas historically black and working class, Ehrenhalt points out that “gentrification” is actually an inaccurate term as this refers to patterns in an individual neighborhood, whereas what we are seeing is “a rearrangement of living patterns across an entire metropolitan area, all taking place at roughly the same time.” (pg 3) As well, “gentrification” gentrification cartoonhas been a term used in what at times appears an   offensive manner, suggesting that there is something undesirable about white newcomers.   I have even observed that on neighborhood comment boards in my neighborhood,  where the views of some neighborhood residents were dismissed simply on the basis that they had only lived in that neighborhood for 5 or 10  years, and so they were dismissed as “gentrifiers.”   These claims about the damages caused by middle class newcomers, have been coupled with statements suggesting that there is something romantic and desirable about crime infested slums and blighted neighborhoods, and that it is a negative thing when neighborhoods improve.  Clearly, people getting priced out of their cities is not desirable, but people are not getting priced out simply because there are white middle class people in the world who have as much right as anyone to choose where they want to live.  And just like “simple physics” and the law of gravity, those who have the most means, will have more options.  (What we want ideally is more options for everyone.  And homes for everyone!  )

Wealthy individuals originally moved out of cities due to the pollution and noise caused by industry and factories in cities.   As industry has moved out of cities, urban areas became more attractive to the classes of people who had originally left them, and the demand for urban housing is greatly outpacing the available supply.  Around September 2001, there were 15,000 people living in lower Manhattan, Ehrenhalt reports.  By 2008 there were 50,000 people living there.  But not only are Americans moving from the suburbs to the cities — the number of Americans, or individuals living in our nation, has increased greatly. According to Andre Shashaty in his book Rebuilding a Dream, the total US population grew 10% in only 10 years, between 2000 and 2010.  There are also 350,000 more people in California this year, over last year.

Building restrictions affect the supply of affordable housing

Andre Shashaty states in this article that government is largely responsible for our collective failure to produce adequate affordable housing:

Governments at all levels have been complicit in allowing housing costs to rise year after year, making it impossible for builders to produce housing affordable to working people without government subsidies. There are lots of reasons for this, from building codes to land use regulations that limit density. Most local governments keep driving up the cost of housing and very few of them do anything to mitigate those increases, and even fewer work to reduce the cost burdens they impose.

 

In a report on the effect of building restrictions on affordable housing ,  Edward Glaeser and Joseph Gyourko indicate that

zoning [regulations] are responsible for high housing costs….the affordable housing debate should be broadened to encompass zoning reform, not just public or subsidized consruction programs.

In  this article about the housing crisis in San Francisco, arguments are made which demonstrate that , as one commetner summed up, “government policy, driven by selfishness of all of us, for very different reasons, is the root cause of the high cost of housing.”

Indeed, government subsidies alone cannot keep up with need.   Given that the government is not able to provide adequate subsidies/support even for those who are exceptionally needy (the lowest income Americans), the likelihood of government support for those of middle income as well, who are having trouble finding affordable housing, is nonexistent.  Federal government assistance to those in need of housing, is unable to keep up with demand.  Between 2007 and 2011, Shashaty reports, the number of Americans eligible for federal housing assistance rose by 3.3 million, but the number of opportunties for assistance, remained the same.  In many cities, it is not possible to even add one’s name to the wait list of those seeking Section 8 housing, as the wait list is too long. Shashaty states that

Less than 25 percent of the people eligible for housing assistance actually receive that assistance. There is little prospect that federal spending can be increased enough to do more than keep that percentage stable. In other words, 75 percent of the folks who are eligible for help may never get it.

Another report states that 25% of the cost of any new home, is attributable to government regulations.   This report also covers regulatory costs in housing construction .  Governments have many requirements to build: site and soil tests, engineering studies, environmental impact studies,  feasibility studies, affordability studies, zoning hearings,  creating plans and studying the plans, costs of permits, and inspections. THis 25% cost attributable to government regulations does not even cover the costs implied by the zoning and building code regulations which prohibit individuals from building the kinds of simpler homes that would be entirely satisfactory places to live.    When building codes and safety requirements get more complex, housing costs continue to climb.  Many of those who demand housing to cost less, dont’ seem to have any answers about how we can produce the standard housing that we have been producing, for lower costs, when costs of everything only keep rising.

Unnecessarily High Housing Standards Drive up Housing Costs

I am convinced that a significant part of our problem in creating an adequate amount of affordable housing, is that we are insistent on creating ever higher standards for housing, and our building codes and zoning laws are actually the most significant obstacle to the creation of an adequate amount of affordable housing.

 

Because the plight of the homeless is the most extreme case of the housing crisis , it may be helpful to illustrate the problems for the homeless when we refuse to let go of unrealistically high standards for all housing.  In his book, Democratic Architecture, the architect Donald McDonald (no his name isn’t really Ronald!)  describes how little “camper” type structures called “City Sleepers” were being built for the homeless in San Francisco,

city sleeper
City Sleeper

where they could sleep indoors, out of the rain, with their belongings secure.  These were vastly superior to sleeping in a cardboard box on the sidewalk, or simply under blankets on the sidewalk, but due to city concerns about code violations, and the California Dept of Transportations’ concerns about liability, the “City Sleepers” were taken away and the homeless were left to sleep on the concrete sidewalks again.  McDonald points out (pg 24) that

…the labyrinth of codes that makes it very difficult, if not impossible, to build low-income housing. …For example, do we always have to have double walls with insulation, and double-glazed windows to save energy, even in a mild climate like California’s? Which is more important to health: a hallway between the kitchen and bathroom, or not having a kitchen and bathroom at all?

McDonald then asks,

The objection often raised to code modifcations is that in paring the codes down, the poor receive inferior housing, that they are deprived of the comfort and safety enjoyed by the wealthy, and that injustice is perpetuated.  But is that really the point of view of those who are homeless, of families who are forced to share apartments with relatives, or of young couples who cannot afford to buy a house?

nanny state protect you from yourselfIn addition to the increase in housing costs when we insist on building everything to the specifications of upper middle class values, there have also been losses of entire styles of housing, based on changes in zoning laws and code provisions.  In former times, as Andrew Heben points out (pg 17) in his book Tent City Urbanism: From Self-Organized Camps to Tiny House Villages:

An abundance of single room occupancy (SRO) hotels flourished in US cities of the early 20th century, ranging from rooming houses for the middle class to lodging houses for the lower class.  Just within lodging houses, accomodations ranged from private rooms to large rooms broken into cubicles, to bunk rooms.

Ironically, at the beginning of the 20th century, we were better able to house the very poor, than we are now.  As Heben points out, changes to the building codes made it impossible to continue to build the SRO housing small affordable roomwhich was one of the best options for the poor.  The minimum square footage for habitable space was increased, and it was then required for each unit to have its own kitchen and bathroom.  He writes,

This significantly drove the cost of development up, making it economically unviable to build very low-income housing on the private market.

Thus the theoretical improvement in the standard of living, as reflected in increased requirements in the building code and changes to the zoning code, actually has reduced the standard of living for many, as they now live on sidewalks instead of in  the now-prohibited bunk rooms in an SRO.  Additionally, since it is impossible to build private housing that is affordable for the very low income, housing for these populations is now dependent on government subsidies, which are in ever shorter supply.

Heben summarizes (pg 20) by saying that

The building code has come to mandate middle class norms and eliminate simpler housing options that are perceived to negatively influence adjacent property values.

In   this article on reasons why San Francisco doesn’t build enough new housing, author states that:

where zoning regulations create artificial limits on home production, the final prices to home buyers jump far above construction costs. In the 1980s and 1990s, they found that virtually all of San Francisco’s home prices were at least 140 percent above base construction costs.

 

I think you will have anticipated the point I am coming to, which finally brings the housing crisis issue back to Airbnb rentals.  I’m going to bring up the fact, that some have pointed out, that people (gasp!) are renting out yurts, RV’s, tents, tiny houses  and treehouses on Airbnb.  In cities across the nation, at City Council meetings where Airbnb hosts are addressing the councilmembers, explaining why they feel they should be allowed to rent out their “art studio” , they say that it is not suitable as a long term rental, because it has no bathroom. Or no kitchen.  People are aware that standard expectations/requirements for long term housing, don’t necessarily apply to short term housing, and are asking questions and thinking of possibilities.  Two forces are at work: tenants and homewowners are wanting to make additional income by renting out spaces that they dont’ need, and others are looking for a place to stay, that fits their budget.

So the situation of these short term rentals, brings up a question which cities should be asking as they try to address the housing crises ravaging the nation.  Which is, if someone can live quite contentedly in a “backyard studio” with no kitchen or bathroom, for 2 weeks, why can’t they live happily there for 2 years?  Or if someone can live in a treehouse, yurt or tent for a week, why not for a few months?  What is wrong with living in an RV parked off the street on private property, and what is the problem with a person renting out a “studio apartment” that doesn’t have a full 8 feet of ceiling height, particularly if they are a short individual?   Why can’t people build tiny houses, not only for short term guests, but for their own permanent occupancy, and live in those? Why is it that cities will permit 12 people who are all related to each other to live together in one single family home, but declares that it is impermisslbe for 10 people not related to each other, to live together in that same home.  Why do so many city regulations show biases towards nuclear family arrangements, something particularly anachronistic in a time of housing crisis when people have to come up with more and more inventive ways to live together.

The tiny house movement is producing zoning questions which cities need to explore.  Tiny houses are simpler, tiny houses are more affordable.  Tiny houses put the dream of home ownership within reach of many.  Tiny houses blur the distinction between homes and RV’s. Some municipalities are leading the way in terms of openness to regulatory changes.  In  Spur, TX  tiny houses are allowed as primary dwellings.  In Quixote Village in Olympia, WA, a former homeless tent camp has become a tiny house village of 30 homes with a central kitchen and shower/laundry area.  Emerald Village in Eugene OR and Community First Village in Austin Tx, as well as Om Village in Madison WI, SEcond Wind Cottages in Ithaca NY, and River Haven in Ventura CA and Dome Village in Los Angeles, offer residents a place to live with a buy-in cost of only $10-30k in many instances.  These are experimental solutions which have yet to be applied on a large scale, and to more municipalities, but I think they are very important examples of what can be done to provide more affordable housing.

Other examples of ways that housing costs can be decreased by relaxing building codes and zoning requirements:  eliminating the energy-savings requirements in building, such as use of double glazed windows and regulations on insulation.  Reducing minimum room size and unit size.  Reducing ceiling height requirements.   Eliminating the requirement that many cities have that there must be on-site parking spot for each unit.  Reducing permit fees and inspection requirements.  Relaxing regulations on grey water systems, and electrical and plumbing hookups.  Eliminating the regulations which require new housing in a residential neighborhood to be of a similar type to existing housing there.  Allow residents to live in RV’s , treehouses, tents or yurts, or unheated cabins lacking electricity or plumbing,  on their own properties, or rent out such space.  Revise city zoning laws so that SRO’s/rooming houses/lodging houses can be again constructed to provide housing for the lower income individuals.  Abolish “nanny-state” laws which prohibit individuals from renting out any space whatsoever  to use as a dwelling, and treat people as adults who are capable of making their own decisions about how they want to live.

 

Stop the Nannying

The fact is that a lot more housing would be available to many more people, at prices they could afford, if we didn’t build to “middle class values”, but simply allowed people to create the housing that worked for them.  Which brings me to my next point,  that of excessive government interference, really government nannying, nanny state standing on libertythat contributes to high building costs via excessive regulations and inappropriate zoning regulations.  These regulations in my opinion are at a level where they are no longer sensible and now amount to “nannying” —  telling people how they have to live, in what kind of structure or building they have to live, and what they can rent.  If governments get out of the way and “quit the nannying”, stop creating obstacles to affordable housing, many people who are currently unable to buy their own home, could afford to do so, since tiny houses cost markedly less than large middle class ones.  cabin on stiltsMany people who can’t afford to rent their own apartment, could afford to rent an “art studio” in someone’s backyard which has no kitchen or bathroom, but shares those facilities with the householder, or could afford to rent a room in a new version of the old SRO or lodging/rooming house ,and share bath and kitchen with many others.  As well, those currently homeless will be able to have homes —  municipalities can construct tent cities and RV parks where individuals can live in tents or in RV’s, and have showers and toilets and a common indoor kitchen and dining facility on site, and storage lockers to store their belongings — and how very badly so many homeless people simply want a little tent, their own site, where they will be safe from being shooed away by the police. Several regions already have set up legal, sanctioned campgrounds for the homeless, such as Tent City in Seattle, PInellas Hope in ST Petersburg FL, and Camp Hope in Las Cruces, NM.

The homeless do set up unsanctioned campgrounds, as well, and I do not advocate that these be permitted. THey are often set up in places that damage the environment, or trespass on private property, or appropriate public spaces as private , and there are serious problems with trash and sanitation at impromptu homeless camps.  However, most all these problems could be solved if cities worked with these individuals to set up sanctioned camps.  In my area, there was a homeless community “experiment” at Albany Bulb,  a local park.  For years, police had directed homeless people in that city to get off the sidewalk and go to Albany Bulb, where the city kindly (and foolishly) let them live. Over the years, more and more went to live there, where they built makeshift shelters, some quite elaborate, and fashioned art work.  But a homeless camp does not fit well in a public park, particularly when there are no trash cans or sanitation facilities (there was not a single portapotty in their compound) and the city eventually moved to evict them.  Sadly, an attorney representing the homeless sued the city to prevent the eviction, which immense waste of resources just goes to show that no good deed goes unpunished. Cities really should not let the homeless simply set up camp anywhere, because it could cost them a lot to get them out again.  Having clean sanctioned camps run by the city will help prevent filthy impromptu camps.

In addition to the blessing of providing the homeless with a space that is all theirs, permanent camps could offer other benefits to them.  Tenants at the camps could be required to do chores in return for the accomodations they are given, which could help build their sense of worth — it is so damaging to the sense of self -worth of individuals, when they can only be people who recieve handouts from others, and never are able to work and contribute to society.

cabin unusual typeAlso, housing the homeless, even in quite rudimentary housing, could drastically reduce the cost of caring for these individuals.  Shashaty reports (pg 39) that the chronically homeless people use 50% of available public resources, and that for instance, 15 homeless San Diegans used $1.5 million in medical services alone in 1.5 years.

So the great irony is that all those tenant attorneys, who are so eager to jump up and “fight” for tenants when their housing is missing some tiny item from the ever-growing-longer checklist of government requirements (even the lack of a cover plate on a switch is a “habitability” issue) , are in fact banking on the very things that are making housing more and more out of reach for those very tenants — more codes, more requirements, more safety features, more environmental studies, more expense overall.

If people don’t like their housing, if it doesn’t have something they need or want, they should move out, and find another place to live.  What makes that difficult now, is the dearth of housing, but there are  ways to build a lot more housing for less, rather than a tiny bit of housing for a lot more.

Rent Control Causes Housing Costs to Rise

One of the consequences of the housing crisis, has been an obsessive focus by some cities and some tenants, with rent control, as a means of providing affordable housing.  When area median rents rise dramatically, tenants and city governments tend to try to impose more controls and more regulations on property owners, whom they believe will experience greater temptations to evict  tenants, in order to raise their rents.  Some cities attempt to expand rent control laws, or impose heavier fines for violating them, and other cities without rent control contemplate having rent control.   In Oakland recently, the City Council, declaring a “housing emergency”, passed a   90 day moratorium on rent hikes and evictions…. in spite of the fact that Oakland has rent control, which already severely limits rent hikes and evictions. (No one bothered to explain how the “housing emergency” created by decades of failure to build adequate housing, might be solved in 90 days) .

San Francisco, taking a page I guess from Oakland’s playbook, then   ruled in April 2016 that it was no longer permissible to evict schoolteachers or students during the school year.  Also in  San Francisco in 2015,  A landlord was fined $276,000 for evicting a tenant via the Elllis Act and then turning around and offering the apartment as a short term rental.  The city council in Alameda ( a city without rent control laws) passed a  temporary moratorium on rent increases in that city in late 2015, during a heated city council meeting in which one person was assaulted.  Tenants had become desperate when many were being given no-fault eviction papers, or were seeing their rents increase as much as $500/month.

In the former article about the landords fined $276,ooo, city attorney Dennis Herrera said,

“Illegal conversions that push long-term tenants out of their homes diminish the availability of residential rental units for San Franciscans, and they’re a significant contributor to our housing affordability crisis.”

In fact, neither illegal evictions, nor short term rentals are a significant contributor to the housing affordability crisis, but they are definitely scapegoats for these things.  Nor is rent control a solution to the housing crisis.  In fact, rent control exacerbates the housing crisis, much more so than short term rentals.

Economists are nearly unanimous in agreeing that rent controls are destructive.  In this article on rent control the following points were made by Walter Block:

 

In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.”1 Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement.2 The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners milton friedman andfriedrich hayek on the “right” to their fellow Nobel laureategunnar myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”3 His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”4 That cities like New York have clearly not been destroyed by rent control is due to the fact that rent control has been relaxed over the years.5

Rent control is  a perverse type of law in several ways.  First, in a free market economy where we have almost no other form of price controls, it imposes price controls, setting the maximum amount that individuals may charge for accomodations that they are offering.  This amounts to forced charity, where private individuals are forced to provide charity to other individuals, who may have absolutely no need for such charity.  in fact there are no need requirements for tenants to benefit from rent control, and many benefit who are actually wealthy individuals.  We dont’ tell people that they have to sell their baked goods at such and such a price, and that they must give charity to everyone who buys them — we dont’ insist that people sell their clothing at set prices. ANd in fact, as Walter Block points out, it would make more sense to have price controls on all other products, except for housing.  Rent control scares off investors, developers and it scares off potential buyers — thus reducing the likelihood of investment in or construction of the housing that is so badly needed.  Thus Block writes:

The surest way to encourage private investment is to signal investors that housing will be safe from rent control. And the most effective way to do that is to eliminate the possibility of rent control with an amendment to the state constitution that forbids it. Paradoxically, one of the best ways to help tenants is to protect the economic freedom of landlords.

This article provides more info on the destructive aspects of rent control, and points out that rent control reduces the supply of housing:

When a community artificially restrains rents by adopting rent control, it sends the market what may be a false message. It tells builders not to make new investments and it tells current providers to reduce their investments in existing housing. Under such circumstances, rent control has the perverse consequence of reducing, rather than expanding, the supply of housing in time of shortage.

William Tucker in this report states that rents are uniformly higher in cities with rent control, because rent controlled tenants tend to hoard their apartments:

…data I have collected from eighteen North American cities show that the advertised rents of available apartments in rent-regulated cities are dramatically higher than they are in cities without rent control. In cities without rent control, the available units are almost evenly distributed above and below the census median. In rent-controlled cities most available units are priced well above the median. In other words, inhabitants in cities without rent control have a far easier time finding moderately priced rental units than do inhabitants in rent-controlled cities.

This is because tenants in the regulated sector tend to hoard their apartments, forcing everyone else to shop only in the shadow market. Thus, rent control is the cause of the widely perceived “housing crisis” in rent-controlled cities.

Even such a traditionally liberal -progressive paper as the SF Weekly ran an article entitled, “The Case For ending Rent Control” in August 2000.  See that article here:  The Case for Ending Rent Control .  Did you know, for instance, (as stated in this article) that

“Before the late 1970s, rent controls had been enacted in the United States only during times of war and economic crisis. Policy-makers considered the controls to be of temporary use in damping inflation. With the exception of New York City, controls were lifted when the national emergencies receded.”

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End Rent Control Now

 

Rent control removes many units from the housing market, thousands more than do Ellis Act evictions, for instance.   The  Anti Eviction Mapping Project reports that there were 4014 Ellis act evictions between 1997 and 2014 in San Francisco, a period of 17 years. This averages to 236 per year, which they label the number of “San Francisco Families forced out of their homes.”  Yet, since Ellis Act evictions are often done so that the property owner can move themselves or their family back into their property, Ellis Act evictions are just as likely to be oriented to a San Francisco family reclaiming their home.  While 236 tenants are evicted each year by the Ellis act, it must be pointed out that in San Francisco it is nearly impossible to evict a tenant through any means other than the Ellis Act.  Meaning that a property owner has to go to extraordinary lengths simply to have access to their own property.  Some property owners as the one in this story never actually are able to move into their own home.  This in my view is actually a more perverse situation than price controls on products.  THe fact that as a business person, one could be effectively imprisoned in a relationship with someone who one has long since lost interest in doing business with, is a feature unique to rent control, which makes the law particularly appalling.  This is most notable and egregious in cases where we see the property owner living on the same property as the tenant they cannot evict, and who may be bullying them, as occurred in this case . 

While Ellis act evictions removed 236 renters a year from other people’s properties, rent control laws themselves kept 31,000 units off the rental market in San Francisco, as reported in this article .   As well, the recent news about the “Panama Papers” in April 2016, has revealed that money laundering could actually be a significant contributor to San Francisco’s housing crisis.  THis article goes into that issue:  How Money Laundering effects SF’s housing Crisis .  We know as well that foreign investors, increasing those from China, are buying up apartments in US cities, and leaving them empty. This is happening in a significant degree in Vancouver, Canada, for instance — where the “vacancy rate” is reported to be 0.6%.  In fact the vacancy rate is likely to be much higher if these investor properties are considered — but as these owners are not renting out their properties, but instead hoarding them off the rental market, they deplete the supply of long term permanent housing in a quite significant manner.

All perversities of rent control as law set aside, let us consider the practicality of rent control as a means to provide affordable housing.  First, as we have seen, rent control actually decreases the available housing supply, due to the number of property owners who would rather keep their units permanently off the market, rather than have them filled with a rent controlled tenant.  Rent control causes tenants to stay in place longer than they would otherwise, resulting in less turnover of units.   While the tenants in a rent controlled unit do benefit from the artificially lower price they are paying (and what renter wouldnt’ want to pay the lowest price possible?) , the lower the rent they pay, the more the landlord has to increase other tenants’ rents to compensate for the loss involved in that low rent situation.  As well, the less rent paid, the less the landlord can afford to maintain that property, so it is quite common that rent controlled properties become more run down and blighted than those not subject to rent control.

Also, because a landlord has to assume that any given tenant might stay in place a long time, when there is a vacancy, he must increase the rent as much as possible, so as not to lose out over time when the tenant remains and remains.  Finally, those benefitting from rent control, can only benefit while remaining in the same place.  They are trapped in place, and cannot move.  This can cause stress and fear, if for instance the renter has needs arising which would make a move to a different apartment very desirable, but the tenant cannot afford to move because rents in the city have increased so much during the time she was in residence.

Rent control does nothing to make units affordable to newcomers to an area, but rather, for reasons explained above, tends to ensure that newcomers will see higher rents.

The solution to affordable housing cannot be that once you rent a place, you can never afford to move.  Rental agreements in the USA are of two types — month to month, and a year lease.  No one signs a rental agreement saying that they will be renting the premises for the rest of their natural life.  That isn’t how we do business in the US, and yet, that is the implication of rent control — that what was intended to be a business arrangement that could be ended in either 30 days or 1 year by either side, now becomes a form of imprisonment, once for the tenant, who increasingly cannot afford to move out, and secondly for the property owner, forced into a potentially lifelong business relationship with someone  they may very well not want to do business with for a lifetime.

The premise of rental housing contracts that are 1 month or 1 year, is that the renter can always find another place to live.  In a housing market where it is more difficult to find another place to live, desperate and frightened tenants increasingly view their apartments as their own property, encouraged in this entitled attitude by the rent control laws.  Often tenants and property owners alike will assert that “housing is a right” and that people have a right to their housing.  I would agree that people have a right to housing, but they do not have a right to stake claims on other people’s property.  I believe we can provide all people with a very basic level of housing, which we could say is their “right” — such as  tent in a campground, with shared access to common shower and cooking facilities, or a bunkbed in an SRO.  Beyond such basic housing rights, everyone can obtain the housing that they can afford. It’s my argument as well that we need to make it easier for more people to afford housing by offering many more simple forms of housing.

Landlords naturally resent rent control laws, and not surprisingly seek ways to get around rent control laws, such as by renting their units as short term rentals on Airbnb or VRBO.

In cities such as San Francisco and New York City, where housing is most expensive and scarce, there has been an exceptional and irrational fixation on property owners “taking units off the rental market” and renting them out as short term rentals.  The way the short term rental hysteria goes, cities seem to believe that without draconian regulations and massive fines in place, every apartment building in the whole city would be converted into short term rentals.  So, New York City has proposed $50,000 fines for those who violate its laws on short term rentals and rent out whole apartments, and San Francisco is fining similar violators, and has tallied up $400k in fines against STR violators .

If we pause and think about it, I believe we will realize that the demand for short term rentals in any given area, is not infinite.  There will never be more people seeking short term stays, than long term rentals.  For this reason, I believe that market forces alone would be sufficient to limit the number of property owners who “take units off the market”.  Some will do this, others will not. Many of those who try running their units as short term rentals will find that it is not profitable — the stories in the community of hosts indicate that it is not easy to make more money from a unit as a short term rental, in a setting which becomes glutted with other short term rental listings, as is the case as Airbnb hosting catches on and more and more and more people sign up to be hosts, (many of whom are absolutely unprepared for the task — see my other blog, “Dont’ be an Airbnb Baby”)

Certainly a few units will be “taken off the rental market”, but the accusation behind this question needs to be examined — why is it not the right, of anyone who puts a unit on the rental market, to take it back off that market again?  Why are property owners not permitted to do what they want to do with their own property? nanny state do nots It must be pointed out that insofar as many property owners are motivated to do short term rentals with their property precisely because they want to avoid being subject to rent control, the abolishment of rent control would result in many more property owners suddenly having much less motivation to do short term rentals.  And it is not as if they would also decide to raise the rent for a one bedroom apartment a few thousand dollars a month more, beyond the median price now in SF, $3500 a month.

De-Control instead of Rent Control

My argument through this article, is that more and more government control, rules, regulations, codes, is what is actually causing the crisis in affordable housing.  The solution to affordable housing is therefore most certainly not going to come from still more control, more laws, more fines, more punishments, and more expropriation of private property.  Rather the solution will come from de-control, and a relaxation of building requirements, a relaxation of zoning laws, and a relaxation of regualations on short term rentals as well as any other kind of rental.  With fewer regulations on property, particularly less rent control,  property owners would be more likely to stick to standard long term rentals, knowing that they can get renters out quickly if need be, regaining the right to no fault evictions.  In addition to the abolition of rent control, something else that would help provide more affordable housing, is to make the process of eviction one which no longer involved going to court, or at least eliminated the option of a jury trial.  It should be very simple and reduce time and expense, to have tenant and landlord in an eviction case, simply meet with a judge, as in small claims court, and obtain a result in a few days or at most a couple weeks, instead of the 6 to 8 months it can now take to evict a tenant who fights the eviction or requests a jury trial.  (In this case it took 274 days for the landlord to evict the tenant, who actually had never paid the landlord a dime since he first moved into the apartment)

Too many landlords have had to spend far too much money just to evict a tenant who isn’t paying rent, or who is vandalizing their unit, or harassing other tenants, or causing other problems.  It is incredibly ridiculous that someone could refuse to pay rent, vandalize your property, and then when you move to evict them,they could insist on a jury trial and delay the eviction and cause the property owner to have to pay thousands of d0llars just to remove a deadbeat’s heinie from their property.  This too makes landlords less interested in doing long term rentals, when they know that in the case of a problematic short term renter, they can just evict the person without going to court .

People who do Airbnb hosting do not do it just because they like to meet people from around the world.  They also do not do short term rentals just because they earn more money this way.  They often do it because they are fed up with tenants, or roomates, and the bad attitudes and problems they have with these people who lay claim to their property, and who can cost them thousands to get removed.  As well, many renters resent that they are the housing “have nots” and do not have as much as the property owner.  This resentment can lead to the “bad attitude” that many landlords report they experience from tenants, a problem that has enough landlords fed up, that they are turning to short term rentals so as not to have to deal with tenants and their bad attitudes any more.  If we can create a society in which there is plentiful affordable housing, and in which (as in the first part of the 20th century) anyone who wants to buy a home, (or build their own home) and works towards that, can afford to do so, then we can see less tension between tenants and landlords, because the tenant doesnt’ have to grab onto someone else’s property as if it is their lifeline, and the landlord doesn’t have to be anxious and fearful of taking on a long term tenant, if they will not be imprisoned in a business relationship with that individual.

Housing cannot continue to be both affordable and adequately available, and built to upper middle class values and specifications.  Homes need to be smaller, and more building options and choices need to be available.  Humans have lived for thousands of years in simple dwellings, cabins in woodsand in order to continue to keep people housed, we will need to return to simpler homes.  As well as removing government imposed obstacles and costs to building standard housing (environmental reports, feasibility studies, design reviews, zoning hearings, permit expenses, inspection expenses, and more) more standard housing needs to be built, particularly housing which maximizes use of space and is suitable for urban infill.  As well, we need to open the way to legally build and dwell in many more simple types of housing — yurts, treehouses, tiny houses, RV’s, one-room cabins, backyard “art studios” without kitchen or bathroom, clusters of individual homes centered around a common kitchen and bath facility, an expansion of lending options including more tenants-in-common home purchases, are the direction we need to move in to solve the housing crisis.

Small Private Property Owners are not responsible for solving the housing crisis

It’s my view that draconian regulations on short term rentals, often emerge from the misguided view that private individuals, property owners, even small property owners who only own one property (which may have 2 or 3 units) are responsible for providing affordable housing, or long term housing.  I strongly disgree with such a perspective, and I hope I have done something in this article to explain why I believe our housing crisis is owing more to government regulations, than any other cause. First, the government creates obstacles to development in the form of the costs for studies, reports, planning and zoning meetings, permits and inspections, all of which add up to 25% of the cost of construction, and then it creates even greater obstacles in terms of severe restrictions on the type of housing that may be built, and where, and imposes upper middle class values and requirements on those who cannot afford such housing and may not even desire it.

Secondly, the government responds to the housing crisis its own bureaucracy has created, by passing rent control laws, which in effect constitute a partial seizure of private property, by the government, for its own purposes of housing people.  Through rent control, government expropriates private property, imposes harsh and unrealistic limits on rent which do not keep up with increasing costs of property owners, and essentially imprisons property owners into business relationships with individuals they may have long since ceased to want to do business with, by prohibiting them from evicting tenants. In some cases, property owners are actually unable to move into their own home and live in their own home, or must pay enormous sums to do so, because the “right” of the tenant to housing is deemed greater than the owner’s rights to their own property.   Facing such ominous and indeed sometimes terrifying restrictions, many property owners understandably seek ways to avoid being subject to rent control, being imprisoned in relationships with bad tenants, and being unable to move into their own property when they wish, and consider doing short term rentals instead.

Third, the governments then pass short term rental regulations, which prohibit property owners from conducting the type of rental with their own property that they wish to conduct, insisting that these private property owners help solve the affordable housing problem that government regulations created.  And so the tale of government overregulation and nannying finishes its hideous cycle, with property owners enslaved into government labor.

I realize that it is not likely that in regions with the politics (and the housing crises) we see in San Francisco or New York City, that property owners will be allowed to rent out any number of apartments they own, as short term rentals — particularly the large landlords who own many buildings or large multiunit buildings.  I am not so concerned about restrictions being placed on these large landlords.  What bothers me are the restrictions placed at the same time on the small property owners, who may only own one or two buildings.  I feel that such small owners, should be given the liberty to use their property as they see fit, and not regulated into duty to the government, to help solve problems that government regulations created.

Affordable housing is, after all, not just a need that renters have.  Property owners too need affordable housing, and one of the ways that they attain this, is by renting out space in their home.  Particularly if the live in locales where rent control laws could result their inability to ever recover the space they rent, from a long term tenant, owners who may want to use that space, for themselves or for visiting family, naturally will view short term rentals as a perfect solution both for their affordability needs and their own desire to retain control over their own property.  ANd governments should support property owners making their own home more affordable in this way, rather than disallowing this.

Curb population growth

A final comment on the housing crisis — much of it, particularly in the most desirable areas of the country like the coastal areas of California, is caused by population growth. earth overpopulation image Overpopulation is a serious problem for not just coastal California, but the whole world, and may actually be the leading problem we face in the world today, at the root not only of housing crisis issues, but also a cause of environmental destruction, habitat loss, global warming, extinction and endangerment of species, natural resource depletion, and the increasing problems we will have in the future regarding water supply and availability of fossil fuels.

In the US, greater awareness of population growth and its destructive impacts can be developed, overpopulation cartoonand housing can be better built to be environmentally friendly.  This means emphasizing high density construction instead of outward sprawl into exurbs and suburbs, as well as considering the potentials available in urbanizing the suburbs. IT means recognizing the difference between building regulations which curtail environmental damage, and those which simply impose middle class values and protect area property values.   It means encouraging home designs which make intelligent use of space, and building smaller homes, reducing the overall space per person required for new home construction.

Problems can best be addressed when we know their causes, and when those who cause the problems are held accountable.  In the past, communities and tribes which lived in a given area, would experience the consequences of their own relationship to their environment. If a tribe cut down an entire forest of trees, or hunted all the deer in their region to extinction, then that tribe would be endangered by its own reckless behavior.  It is this kind of local accountability of people to their environment that I believe we need to encourage. overpopulation Communities should be encouraged to recognize and respect the limitations imposed upon them by their own local environments, rather than being permitted to deplete their environment and then migrate elsewhere, presumably to deplete someone else’s environment, or being permitted to live in settings that are not friendly to human habitation, because they are able to import resources from elsewhere to do so.  Globalization has weakened the valuable link between community and their local environment, since for instance people can now live in desert regions like Arizona, where there is a scarcity of water, because they are able to import water from other parts of the nation.  The population of Los Angeles came to depend greatly upon water taken from the Sierra Nevada, far to the north, something which ultimately endangered the existence of Mono Lake.  Similarly, in a world environment where the wealthier first world nations continually come to the aid of the poorer third world nations in emergencies, a dependency is created which mitigates against the ability of communities to live responsibly within their own means. The relatively free movement about the globe offered by immigration, mitigates against people’s commitment to and responsibilty for their own lands and environment, since migration simply allows people to go ever in search of new places to live (and perhaps to exploit), when their current circumstance has become unworkable.  When immigration is motivated by environmental degradation or natural resource loss caused by overpopulation, we see a problem trend occuring which cannot continue indefinitely.  THere will not continue to be new, unused and available land , housing and natural resources, for ever greater numbers of people.

A recent A recent New York Times article indicates that there are more young people in some parts of the world than previously — unfortunately, the article fails to indicate that this is at root a symptom of the global overpopulation problem.  People are having too many children — more so in some nations than others — for the environment and the planet as a whole to sustain.  The article does point out that when these children grow, and demand the same things their parents have had — a job, housing, resources to make a meaningful life — the situation will not be pretty when these young people are unable to get what they want or need.  We already see the start of this in the squalid refugee camps that refugees from Syria have built along the border between Greece and Macedonia, since Macedonia is feeling too full at the moment and will not allow any additional people in.  This problem of where to stick people when the earth is bulging at the seams, will not get easier.  If nations dont’ have room now for refugees who are fleeing desperate and intolerable , life-threatening situations, then it is not likely that they will have room for more such refugees in the future.

Living simply will become more necessary than ever — and so we come back to that Airbnb listing, which offers a tent in the backyard, or a treehouse in the redwood, or a yurt or tiny house.  And we say, good going, why not. Why can’t people live in the housing that they want to live in — why does the government have to meddle.  nanny stateStop the Nannying and start solving the housing crisis.

 

 

 

 

 

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