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So Many People, So Little Housing

When you block new developers from responding to high demand in a housing shortage, don’t be surprised when prices shoot up.

What happens when a lot of people want a good—say, housing—that is in short supply? As even elementary schoolers learn, prices go up. Now, what happens when you increase the supply to keep up with the demand?

San Francisco may never know, for, as in many other American cities facing housing crunches, a bloc of local politicians has made it their mission to block any new construction if it fails to satisfy a list of must-haves that could put the most ravenous child’s Christmas list to shame. If it earns less than rave reviews in environmental impact reports, is too expensive (whatever that’s supposed to mean in a city where the average one-bedroom apartment goes for over $2,700 a month), smacks of “gentrification,” or otherwise fails to honor “neighborhood character,” it’s a goner. This might explain why from 2012 to 2016, only one housing unit was built for every 6.4 jobs added. A 2015 survey showed that residents recognized the problem, and a majority backed boosting the housing supply by 10 percent—but far fewer supported that new housing being located in their neighborhoods.

Permitting and construction rates have increased since then, thanks in part to a recognition by some officials that the situation was untenable, but it’s not enough, with new development frequently running into opposition from local politicians. Dean Preston, a card-carrying DSA member who holds a seat on San Francisco’s Board of Supervisors, has become the bête noir of Bay Area YIMBY (Yes, In My Backyard) activists who long for more housing. “Dean Preston’s Housing Graveyard,” a new report by several such constituents, outlines a slew of construction projects which Preston opposed: “Preston has blocked or opposed almost all new housing in his district’s wealthy neighborhoods,” the report fumes. Much of the proposed housing would have replaced vacant buildings or parking lots.

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By the authors’ count, over his 23-month tenure, Preston has opposed the construction of over 28,700 homes, including nearly 8,500 designated as affordable, and has personally blocked the addition of 8,587 units, almost a quarter of which were to be affordable. (Bear in mind that Preston blames“the market” for the housing crisis.) For his part, the Supervisor has dismissedthe report as “Alice in YIMBY Land” and faulted the authors for not mentioning the 5,000-plus units he hasn’topposed, as well as contending that he didn’t blockhousing so much as he fought for developers to make improvements. After the San Francisco Chroniclecommended the report, he lashed out further, accusingthe publication of being a neoliberal shill for developers, although curiously failing to point to a single falsehood within their reporting.

It’s not just Preston, though. The Board of Supervisors as a whole has shown enmity towards an array of building projects that could have created union jobs and generated hundreds of new homes for low-income San Franciscans. Just last month, they voted eight to three to oppose a new, 495-unit tower to be constructed on a valet parking lot for Nordstrom’s. Rather than simply voting “no,” which could have unlocked an appeals process, they instead requested a new environmental impact report, which could take two years to complete. The vote went against the recommendation of the Planning Commission and even the wishes of the board member in whose district the development was to be built. (The majority said the environmental impact report fell short in addressing earthquake and shadow concerns, and some criticized the proposed development for not being affordable.)

It is common knowledge in the real estate business that if your property or area has a vacancy rate of below 5 percent, the rental market is good for landlords and rents will go up. And this fact has played out over the last 18 months; as remote work became the norm for many employers, workers moved away, vacancies increased, and rents fell to their lowest levels in years. Real estate investors weren’t pleased; when the vacancy rate rose from three to 8.5 percent, the median rent declined by 8 to 12 percentage points. Those lowered rents provide a window into what might have been if housing had kept pace with demand over the years.

As it is, the trends are reverting. Says one property manager from San Francisco:

I think we’re going to see the market rebound pretty quickly because we still have a significant shortage of available housing […] Demand will surpass what it was before Covid within a year, I think, and rents will quickly return to the levels they were, if not higher. (Emphasis added)

One wonders how Public-Housing-or-Nothing activists and development foes, while bemoaning the plight of cash-strapped residents, could conclude that the status quo is preferable to simply stepping back and giving consumers more choices. (To be fair, left-NIMBYs aren’t the only ones enamored of restrictive zoning policies.)

Objections on the grounds of “affordability” of new housing overlook the fact that a vast body of research indicates that adding housing does lower overall housing prices, and slows displacement at both the neighborhood and city-wide levels. Adding affordable housing to higher-income areas is, of course, the quickest route to benefiting lower-income residents, and an increase in housing options might attract some new residents in addition to housing existing ones, but the vast majority of development boosts competition and lowers prices.

This shouldn’t be surprising; when less of a good exists, the price increases. As a friend recently observed, the housing crisis mirrors what we’re now seeing with cars. Production flagged, supply fell, prices skyrocketed, and poorer motorists got squeezed out. Now imagine if the government permanently restricted vehicle production, or banned cars they deemed insufficiently “affordable.”

But even as Bay Area battles rage over housing, there are glimmers of hope for a trans-ideological YIMBY movement out West. A couple of weeks ago, voters in Boulder, Colorado, only narrowly rejected Ballot Question 300—nicknamed “Bedrooms are for People”—which would have overhauled the city’s zoning to permit any house to be resided in by as many bedrooms as it has, plus one. Presently, the city prohibits more than three or four non-relatives from living in the same house, regardless of how many bedrooms it contains, unless residents can get it approved as a co-op.

At first blush, its roster of endorsements—from Out Boulder County to the local DSA chapter—might make conservatives squirm. But it also created some fascinating trans-ideological alliances, among them a litany of unions and the Boulder Chamber of Commerce, each rightly observing that the measure had the potential to offer residents a greater range of housing options. A boosted supply is sorely needed in Boulder, where in the last decade the median home price has nearly doubled and the rental vacancy rate has mostly hovered around 4 percent, according to a Community Profile report.

The measure was no panacea. A variety of residents, not least of all families, might balk at the idea of sharing a house with several non-relatives, and a city memo noted that, if residents took advantage of the new option en masse, public service costs might increase. But new housing is being added at a slow rate: The city saw a net gain of just 28 units in 2018. Although they promisingly approved over 1,000 new building permits that year, more needs to be done to address the housing crunch.

Even back in San Francisco, there is hope. Scott Wiener, an unflinching lefty who represents the city in the state senate, fully recognizes the damage wrought by inhospitality towards new construction, and has fought to slash red tape and incentivize new development—public, private, anything, as long as it gives residents more choices. And voters seem to approve; last year, he cruised to re-election against a development-agnostic opponent. Like Ballot Question 300, Wiener’s prescriptions acknowledge the reality that ill-conceived government intervention is at the heart of today’s housing shortages, and that granting homebuilders more leeway needs to be part of the path forward. Here’s hoping that that’s the outlook that prevails in the years to come.

Nigel Becker is a university student in Ohio, majoring in political science and communications, with an interest in housing policy.