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Hyper-vacancy and Sacramento's Collusion with Speculators

The housing crisis is a worldwide phenomenon. Today in Germany Berlin citizens are campaigning for a public takeover of large rental properties due to relentless hikes in rent. While this may be constitutional under German law, it is not an answer to our problems here where little affordable housing is being built and rent control largely ineffective. However, a direct means for dealing with affordability would be to change state law allowing for rent strikes by tenants based on increases in rent.

Today rent withholding is allowed under state law mainly as a means of forcing landlords to maintain dwellings in a safe and healthy condition. This approach would deal with the crush of factors acting to make housing unaffordable. See an article in the Financial Times 23 March 2019 by Guy Chazan on the German proposals.

It is obvious that something has to give and a situation where rent is controlled in some way is a step before the type of proposals the Germans have arrived at.

The recent article by Matthew Pera (IJ Marin gets mixed grades on housing supply goals, March 3 2019) requires comment and context in this regard. The article cites a study by Beacon Economics and was commissioned by the "think tank" Next10 started by venture capitalist F. Noel Perry.

The report criticizes Marin for having too low goals for the production of housing. The report (Missing the Mark: Examining the Shortcomings of California's Housing Goals) faults not only the counties and cities for the low goals, but also ABAG for setting them. While the report refers to the establishing of the first housing element law in 1969, it ignores the fact that the law has had virtually no effect on building affordable housing since its passage, according to a study by the Public Policy Institute of California published in 2003.

The central fallacy of the Beacon report is the idea that the State of California or counties or towns can control the production of housing. Perhaps if we were the Peoples Republic of China that idea would work. However, we live in a capitalist country where there is still a modicum of free enterprise, and housing is built by investors who study the market and build the housing that will bring them profit.

The state and cities can set all the goals they want but unless the state wants to get into the business of financing, building and managing housing, the goals are rather a poor means to the end. But the real issue, one ignored by the

Beacon Report, is the fact that housing is in crisis everywhere across the globe. This has led to massive construction of squatter districts in cities from Nairobi to Mexico City (see Robert Neuwirth's Shadow Cities: A Billion Squatters, A New Urban World, Routledge 2006). From London to Moscow to Johannesburg and New York affordable housing is not available. Another symptom is emphasized in a report by the Lincoln

Institute of Land Policy in May of 2018 by Alan Mallach (The Empty House Next Door: Understanding and Reducing Vacancy and Hyper vacancy in the United States). The findings of this report are that the rate of vacancy has increased dramatically since 2000 due to a number of factors: speculation, financialization and an increase in second homes.

What is clear is few affordable units are being built anywhere, but if we are to see such dwellings added to our housing stock it is in the urban cores where they can most affordably be situated. This is because of the urban infrastructure. Large dense housing units are more efficient than small spaced units. Electrification and plumbing can be provided at a fraction of the cost in high rises than in small units, though at a diminishing return as over 20 stories the benefit disappears.

Yet even when we are considering “large” units of 10 to 30 compared to 100 to 200 the way an inner city core promotes efficiencies is still great.

But we have to ask why American cities have a glut of high rise developments and still little affordable housing? That is because builders and financiers are pursuing luxury buyers and planners and politicians are supporting them.

Most units built are not primary residences but are speculative investments (back to the commodification of housing). What we need is a housing policy that prevents the construction of commodified units and promotes affordability. So just beating up on cities and towns to allow more housing will not solve the problem, it will only reduce our democratic traditions and reduce the potential for real affordable housing by building up available sites with market rate and speculative units.

The real solution is state financing of community development corporations that will build actual affordable units.

Tags

vacancy, hypervacancy, housing costs, rent strikes, speculation