The Affordable Housing Conundrum

Housing costs are out of control in San Francisco. Unless you play for the 49ers or have disrupted something besides study hall, good luck living in a non-hovel. Even Peter Thiel is taking note:

Let me give a Silicon Valley—and New York City—focused answer. We have to figure out ways to make housing more affordable in these places. When people start companies they are typically getting paid in equity and not a large salary. The way rent and housing costs have gone through the roof in a number of cities where people go to start companies is a tremendous problem.

San Francisco, a place where real estate is limited by the ultimate barrier to entry (an ocean), is by any measure inefficiently laid out. Aside from the highrises of the Financial District and Union Square and the gritty boxes of the Tenderloin and Mid-Market, much of the central city is blanketed by neat rows of two or three-story Victorian homes. This type of housing stock may have been perfect for Danny Tanner, who raised three girls with the help of a live-in uncle and friend on the healthy salary of a morning TV host. It’s not ideal for people doing working-class jobs around the city, young folks trying to get a start in a creative field, or aspiring entrepreneurs who did not attend Stanford Business School and therefore don’t have a $10 million Series A round with which to live off of.

The most efficient way to add the greatest amount of housing units for the lowest cost is by building dense, highrise multifamily complexes. However, tightly packed ultra-low-income residential blocks almost always turn into unsafe slum, whether they are named Cabrini-Green or the Old Nichol.

The city of Chicago attempted to deal with the alarming level of crime originating in and around Cabrini-Green and the Robert Taylor Homes by tearing down the projects. Today, Chicago still has a high level of crime relative to other American cities (albeit down some from the 1970s and 1980s, but the entire country has experienced that decline), but it has just dispersed geographically.

When there isn’t enough affordable housing for people of modest incomes, it makes sense to build highrises. If the highrises become saturated with the lowest level of earners, they become slums. In order to improve the neighborhood, the logical move is to tear down the highrises, which removes affordable housing supply from the market and drives rents up.

There are certainly cities that are artificially unaffordable because they are inadequately vertical (D.C., with its height limit relating to the Capitol, is an obvious one. Large swaths of Southern California also apply), but clustering people of scant, uncertain or no income together in highrise fortresses traps them all. People commit crimes of necessity when the combination of market earnings and government or social support is not enough to cover basic needs. Criminals tend to prey on those closest and most accessible to them, and communities on the edge tend not to trust the police who have been known to prey on them too. This is why highrise projects often become law enforcement no-go zones, again, whether they are in 1980s Chicago or 1880s East London.

San Francisco needs very few things more than affordable housing for the working class and young singles that is clean, safe and not constructed as an inevitably self-isolating fortress. Relaxing zoning laws will help, but this is ultimately a creativity challenge. The standard-issue soulless highrise can’t be the only way to build new housing that can be rented out (because homeownership isn’t something we should push on people who don’t know what taking on that mortgage truly entails and scumbag banks need to stop doing this) for a rate that is both affordable and can cover the cost of construction at a decent level of quality. Maybe a partnership between a private developer and a charitable organization can figure out a structure. Maybe the answer lies in a more creative form of mixed-use development. Regardless, the affordable housing conundrum is polluted with old ideas. It’s time for a disruption.