How to End the Bay Area Housing Crisis

The San Francisco Bay Area is in the midst of a complex and multifaceted housing crisis. In 2015, the average Bay Area rent rose roughly 10 percent compared with the year before. An average San Francisco Bay Area studio apartment (one room in total) costs an average of $2,120 per month. For comparison, a studio apartment in Manhattan is $2,351 per month.

That’s right: the Bay Area average is almost equal to the average in the single most expensive part of New York City. If people are to follow the Department of Housing and Urban Development’s definition of housing burdened (spending 30 percent or more of their monthly income on housing), the average Bay Area resident would have to make $76,320 per year to live in even a studio apartment. For comparison, the starting pay for a teacher fresh out of college in San Francisco public schools, one of the most expensive of Bay Area cities, is about $53,000 a year. Think about that for a minute. San Francisco teachers just aren’t going to have trouble affording a tiny apartment in San Francisco, they are going to have trouble affording a tiny apartment in an average part of the Bay Area.

The Bay Area housing crisis can be best described as the collection of three interrelated challenges: (1) an overall shortage of housing that inhibits our region’s full economic potential and leads to spiraling housing costs, (2) a particular acute shortage of affordable housing that threatens the character of culturally rich communities and increases homelessness, and (3) a mismatch between the locations of jobs and the locations of housing that contributes to some of the worst commutes in the nation.

Is this crisis mind numbingly large, incredibly complex, and deeply entrenched? Yes. Does this mean we can’t solve it? No. So how do we solve it? We’ll get to that, but first it’s time for a little context.

There is a very important organization called the Association of Bay Area Governments (ABAG). ABAG is responsible for figuring out how the Bay Area is supposed to grow, or, more precisely, where that growth is going to be. ABAG assigns municipalities a quota of housing (including affordable housing) that they are supposed to build as part of ABAG’s regional planning efforts (the Regional Housing Needs Allocation, or RHNA). Remember RHNA, it’s going to be important later on even if it it doesn’t really roll off the tongue (pronounced REE-na). RHNA is part of the bigger regional planning initiative, the Plan Bay Area. This is when ABAG gets together and decides where the Bay Area should develop more and where we shouldn’t, at the big picture level.

The bad news is that ABAG lacks effective enforcement tools and most municipalities are currently on track to fall abysmally short of their housing quota. This is extremely unfortunate because adherence to the Plan Bay Area would have considerably increased the quantity of overall housing and affordable housing available. As you probably remember from Econ 1, the greater the supply, the lower the price, generally speaking. No big surprise then, the prices for housing are so high.

Furthermore, as the Plan Bay Area encourages the development of housing near public transportation, adherence to the plan would reduce traffic and enable regional transportation planners like the Metropolitan Transportation Council (MTC) to accurately decide which transit projects best fit the needs of the Bay Area. Under our current unpredictable system, they pretty much have to wing it.

I think you will agree with me that this is bad.

In order to solve the Bay Area’s housing and transportation problems, the state legislature, using the Association of Bay Area Government’s RHNA as a baseline, should introduce a version of a cap-and-trade system (“house-and-trade”) that will allow municipalities to trade the minimum housing quotas amongst themselves in return for money.

By way of illustration, imagine that Berkeley and Oakland were both assigned 100 housing units of growth. Oakland feels that it cannot grow further without seriously harming the character of its community while Berkeley loves the new construction jobs associated with new housing. Oakland and Berkeley could strike a deal in which Berkeley builds all 100 of Oakland’s housing allocation in addition to Berkeley’s original 100 housing units. In exchange, Oakland pays Berkeley a million dollars for Berkeley to spend on whatever Berkeley thinks is important.

In order to make sure that deviations from the ideal set forth in the Plan Bay Area do not result in increased congestion or pollution that harms municipalities not involved in the particular trade, the municipality paying for the trade should be required to pay a “surcharge” that covers the cost of offsetting transportation and pollution measures.

Continuing with the same example, imagine that all the residents in all 200 housing units work in Emeryville, and that the resultant increase in commuters from Berkeley to Emeryville will negatively impact the commuters between Emeryville and Richmond. In that event, Oakland would need to pay for traffic prevention improvements that will protect Richmond commuters from suffering (for example Oakland could pay for increased bus service between Berkeley and Emeryville). And remember, if Oakland or Berkeley don’t want to trade, no one will force them to. Any city can always say no to trading.

The creation of such a system would be accompanied by changes in how compliance with RHNA is counted, how regional land use planning and transportation funding in the Bay Area is conducted, and most importantly, in how municipalities are punished for failing to comply with the trading-modified RHNA. Under the new system, municipalities would be judged in compliance with their trading-modified RHNA only if the actual number of housing units constructed matches the target set. Under the existing system, a municipality can be in compliance if it zones for enough housing units regardless of whether such units are built or not. Under the new system, funding from the surcharge on trades would be expended through the body administering the house-and-trade system. This is inherently connected with the existing function of the MTC to make regional transportation spending decisions. As this house-and-trade system is inherently linked with the design of the Plan Bay Area in the first place, this proposal would fold this new house-and-trade system, the Metropolitan Transportation Council, and the Association of Bay Area Governments’ state-granted authority into a single, directly elected regional governance body.

Finally, in contrast with the current toothless enforcement mechanism for enforcing the RHNA under the existing system, this new directly elected regional governance body should have the power to levy a meaningful fine on municipalities that recklessly refuse to promote new housing or trade with other cities in order to meet their RHNA requirements. Such authority could be granted by the State Legislature.

Mindful that even sometimes good will efforts to reach housing quotas fail, this regional governance body should also have the power to negotiate consent decrees with cities instead of levying a fine (for example, the city may agree to respond faster to affordable housing permit applications if this is the main reason they fell short). This regional authority would have the ability to amend or revise the ABAG RHNA as it deems necessary to account for changing conditions.

This proposal addresses and resolves all three aspects of the region’s housing crisis. By introducing real consequences for municipalities that build less housing than they are supposed to, regional planning authorities can finally guarantee that an adequate supply of housing is built. Compliance will have to be across the different income levels established in the ABAG RHNA, so an adequate supply of low-income housing will also result from this proposal. And finally, by installing a surcharge to offset the transportation effects of deviating from the Plan Bay Area, this proposal will fund the improved transportation necessary to account for unexpected development patterns.

This proposal is bold, but it is entirely doable. Previous efforts to establish a regional governance body capable of confronting the regional problems we face have been thwarted due to the opposition of local governments. By introducing the brand new house-and-trade mechanism, this proposal actually grants local governments stronger local control over their growth and planning decisions than they have today. Communities that adamantly believe that further growth in their housing stock will imperil their quality of life will finally be able to legally keep their community stable without harming other Bay Area residents by using the house-and-trade system. I believe that strengthening home rule control over growth while decisively ensuring the Bay Area sees an adequate supply of housing will be a win-win scenario for local communities and the region as a whole. With this opposition from local governments neutralized, I believe this proposal has the potential to pass the state legislature.

At Stanford, we have a responsibility to not just develop good policy but to implement it as well. If you are interested in working with me to end this housing crisis now, I invite you to reach out to me so we can work together to convince the state legislature to take action.

---

Caleb Smith, a junior studying public policy, is a staff writer at Stanford Political Journal.