10 Reasons We Need California Public Housing
There are bills in the legislatures of California and Hawaii to create a new generation of public housing based on systems abroad. Here's why they're needed.
Here’s the big problem with housing in the United States: there’s not enough desire to build it. At least not among people who fund it: lenders. That’s a huge problem.
The recent amplification in housing woes we’re seeing is due to the post-Recession housing shortage in which many developers simply exited the business after the foreclosure crisis. Many suburban sprawl developments were left half completed and abandoned; many small developers dropped out of the business or collapsed; and wide swaths of American workers in the construction industry simply dropped out.
It remains fairly forgotten but during the Recession raising property values was considered a national priority. 23% of homes were underwater by 2008 and the clear remedy was to increase property values.1 Predictably, developers stopped building and lenders stopped lending.2
The few urban developers since have existed largely from backroom deals with local governments where a select few anointed developers were and are allowed to build megaprojects in a purposely noncompetitive market made that way by city governments getting payouts. The other developers are sprawl developers building single-family homes on the outskirts of hot urban markets. But the small contractor that used to build much of our urban infill apartments is gone — long gone. As a result, we built half as many homes in the 2010s than we did in the 2000s—3.8 million short of demand.3
In real estate, development carries the highest risk of all. Building housing within a reasonable timeline, expecting a profitable rate of return satisfactory to lenders, dealing with permitting, paying workers to build housing, and then selling said housing as soon as it’s finished is far more risky than simply buying up existing houses and apartments and extracting rent. Hence why speculators have largely opted to become landlords, not really builders since the financial crash. It’s the easiest way to make money.
So a few pals of mine thought up this old idea of getting the government back into the business of building housing in a practical way. It’s taken off and currently swells with support: Assembly Bill 2053 — the California Housing Agency (CHA). There’s a lot of questions that have been asked and I’ll give 10 reasons we need to revive publicly built housing, but in a different way than the past:
Reduce the cost of housing. Too many people are competing for a limited few number of homes in California. Increasing the supply of housing available will reduce the demand and subsequently the price of all housing in the market. This will reduce the bargaining power of landlords who will now be forced to compete (or be left behind) with public options for housing. Making public housing the most competitive option over the private market both in rents and the time to secure a lease, rather than a mere means-tested waitlist system, is the foundation of the most sucessful social housing systems abroad. In Japan for example, even a foreigner can walk into a public housing complex and rent a public home in a short period of time.
Reduce the wait time for subsidized housing: Vouchers and subsidized housing units take years, often decades to acquire. I should know, my first job in housing was programming those wait lists for an affordable housing nonprofit. In one case we had 11,000 people applying for 45 homes between $800 and $1,600 in monthly rent. Clearly there’s an unsatisfied demand for low rent housing and CHA would be contributing to ending that low rent supply defecit.
Create jobs. Constructing more homes means making home building an actual viable career choice for people. The number of jobs that California public housing construction creates will induce more workers into that field, which benefits all builders and will reduce the cost of construction because the construction worker pool is no longer so tiny and constrained. The potential to expand and grow union labor is why the State Building Trades has endorsed AB 2053.
Keep housing construction immune to investor fears. Housing construction should not have stopped in the Recession and it should not have taken years to recover. We did not have a sudden national oversupply of housing. We had evictions and foreclosures amid a credit bubble bursting despite a blossoming generation of Millennials entering the workforce which set us up for failure. A public housing developer will provide growth in homes based on need, not home values and rents. When private builders and banks shrink back at the first sign of an economic downturn, mixed-income public housing will step up.
Eliminate rural redlining. Inland and small cities are often overlooked in the California housing crisis for L.A. and San Francisco yet cities like Fresno ranked 3rd in population growth last year (CA Dept. of Finance) and a 39% increase in rents since 2017.4 This fueled higher than average overcrowding and agriculture workers living in largely dilapidated homes. Yet the city’s median income and rents are too low for private developer interest, so the community demand for more housing is not being met. This is a problem in low income neighborhoods where amid increasing overcrowding and housing demand, rents are not high enough for developers to invest despite high density zoning and favorable city councils. Developers (contrary to critical academics that think otherwise) choose to develop where rental income will be the highest. These are almost always wealthy neighborhoods, or more specifically, as close to them as zoning will allow. The CA public housing agency would come in and provide housing where private developers will not or cannot.
De-segregation. Public housing historically in the United States was a way to warehouse the poor and minorities into projects. This strategy was lobbied for by real estate groups to ensure it could never compete with private landlords and deprive Black people of the mass wealth-building movement occurring in White America. This made it so that no collective class interests would be invested in public housing by the working families and led to its austerity, ostracization and eventual dismantling. Social housing programs around in the world, from Singapore, to Vienna, to Japan, to the Netherlands, to American cooperatives, illustrate that long lasting, successful social housing systems adopt income integration as the key financial mechanism to make public housing both socially integrated and sustainable.
Provide Real Value Capture. The California public housing system will provide public options for middle class families as well as low income families. Rather than allowing the private sector to monopolize land rents and capture the incomes of everyone besides low income households as the projects of old did, CHA will cut in on their profit excess by providing public market housing and public commercial leases. Rather than the rents of these homes going into the pockets of shareholder, it will go into the public trust for the upkeep of public homes and the construction of additional mixed-income public housing. This is real value capture, capturing real land values back into the public sector. It’s not simply an inclusionary mandate such as “X percent must be affordable” that depends on private builders financial viability and is more often than not, not realized.
Immunity to austerity. Income integration is not just socially and financially important, but politically, any good social housing system in the U.S. must be sustainable enough that it will not be so easily dismantled with a Republican in control of HUD ever again. Despite it being unjust, our Senate and Electoral College skews center-right and depending on federal subsidizes to maintain a revenue-negative public housing will result in another inevitable collapse. Mixed income housing is key to avoid this from happening again by making public housing non-dependent on survival from Washington.
Provide homeownership. One of the impressive aspects of Singapore’s public housing developer is that in a country which is 80% public housing, 92% of residents own, not rent, their publicly-built homes. That’s made possible by a lease system in which the government builds housing and allows the owner to collect a portion of the equity built off it for generations. A similar system in the United States would close the racial wealth gap by providing home ownership to Black, Indigenous and Californians of color who would never have a chance at homeownership in high demand metro areas.
Lease, Acquire but Not Sell Public land. The key to a successful social housing system is the public ownership of land. Vienna’s housing system is empowered by widespread ownership of land which allows the government to generate revenue from its used, tamper land values when necessary, and save on land costs. Vienna gives land to private developers so they can feasibly provide 50% affordable housing in all their projects by cutting land costs, as well as to cooperatives and nonprofits. They don’t simply just mandate affordability requirements, they reduce construction costs to make those requirements possible. A California agency should lease surplus, non-nature lands for housing.
If the revival of public housing interests you, I strongly recommend you come to the panel with Paul Williams, public housing activist and myself at YIMBYtown in Portland on April 12th, 2022.