The evolution of "affordable housing"

Nov 14, 2016

 

As of this month, San Francisco’s public housing is now all privately run. 3,500 units have been transferred from the city’s ownership to various housing groups: some non-profit, and some for-profit.

The deal is a complex response to a problem that cities across the country face today: after decades of federal disinvestment, public housing projects built a half-century ago have fallen into disrepair—an estimated 26 billion dollars worth of disrepair. Cities can’t afford to rehab and maintain these buildings, so they’re selling them off. In San Francisco, private developers and banks will maintain the low-income housing in exchange for tax credits. Developers have also won the opportunity to build market-rate housing on the same land.

 

What follows is a brief history, from the creation of public housing projects, to the decisions that led to their demise—and brought us the modern, privatized affordable housing industry.

MALCOLM YEUNG: This was actually a Republican invention, and it was really motivated by the idea of creating a tax break. But, what ended up happening—and this is probably an unintended consequence—is it really in a sense revolutionized the affordable housing industry.

This piece originally aired in 2014.  

1940s

The first public housing projects were built to relieve two specific kinds of Americans: formerly middle class families affected by the Great Depression, and those coming home from the Second World War. The first projects west of the Mississippi River were the Holly Courts projects in the Bernal Heights neighborhood of San Francisco.

The year was 1940. There were African-Americans coming in to work on the shipyards, refugees from the Dust Bowl, immigrants from Mexico and China, and veterans coming back from Europe and the Pacific. They all needed housing. And the market was not providing it.

Adhi Nagraj of BRIDGE housing points out that it was hard times, but it was hard times for everyone. The country was actually unusually unified.

So, the Roosevelt Administration decided to do something the federal government had never done before. They would make housing a basic right, make it the government’s problem. Holly Courts went up on Bernal Hill, and other projects went up all over the country.

"In the 40s," says Nagraj, "the wealth gap was much less pronounced than it is now. So people and families could really move into public housing temporarily, and after they accrued a certain amount of savings they could move on to different housing options." 

Today, because the wealth gap has widened, the gulf between what upper and middle class city-dwellers spend on housing and the rents charged to residents in public housing, Nagraj says people rarely transition out of projects. Market rate housing goes to people on one side of the income divide. Long ago, the lower end of those prices were within reach for working class people. But, today, "those [working class] housing options don’t exist any more."

1950s

By the 1950s, the dynamics in American cities had changed. "White flight" had rearranged the demographics of the urban spread. As affluent whites drained out of cities, so did American popular support for inner city services.

"As populations became more mixed, and as the clientele living in public housing became more black and brown," says Nagraj, "I do think that did have an impact on politicians in DC — on how much they wanted to fund a lot of urban initiatives such as housing and transportation."

Housing projects were created in a bout of patriotism, and then once politics shifted, they began to be de-funded. They've continued to be de-funded every single year up until the present.

1970s

By the 1970s, the country had experienced several social rights movements. Then there was a conservative backlash.

Welfare and public housing were beginning to be termed “entitlements" by people like Governor Ronald Reagan of California. At the local level, affluent people were beginning to move back to cities, snapping up properties—sound familiar?

By a strange convergence of history, neighborhood activism in San Francisco and a Reagan tax break program came together to create a new era in affordable housing.

Malcolm Yeung, the head of the Chinatown Community Development Corporation says, "This was the time when San Francisco really started thinking about itself as a modern financial capital. The financial district was expanding."

The story of the International Hotel on Kearny and Jackson brings the era to life. The I-hotel was a dormitory style, single room occupancy building. Hotels like it were the cheapest way to get a roof over your head and they were all over the eastern and central part of the city. In 1977, he I-Hotel was being threatened with the same fate that had befallen so many SRO hotels.

"The buildings were being bought by developers, the residents were being evicted, and they were being demolished and rebuilt as high rises," says Yeung. "It was threatening the elimination of Chinatown. It was an incredibly frightening time."

This was actually the moment when we saw homelessness emerging on a real formidable scale. And the I-Hotel became the site of a particularly fierce battle between the Chinatown community and the police.

In order to protect the building, the community formed a human barricade. It lasted off and on for seven years, until midnight on August 4th,  when the police had everyone forcibly removed.

"The sheriff literally broke through the human barricade with horses and dragged the seniors out of the building," says Yeung.

Activists responded by taking affordable housing into their own hands. They began forming Community Development Corporations, or CDC’s. The city government worked with them, eager to help avoid another I-Hotel disaster.

According to Yeung, "The CDC movement really sprang out of the ashes of I-hotel."

Rather than doing new construction, which was way too expensive at the time, the way the activists started was they would use city loans to buy buildings and rent them out on the cheap, at no profit to themselves.

This was an altogether different animal from the old Federal Public Projects or other European and Scandinavian programs. 

1980s

Right at the moment the CDC’s came up, Reagan had become President, and he was building a strong conservative movement against government spending.

His idea of solving the problem of affordable housing was to create a tax credit program that allowed big corporations to invest in low-income housing.

"It was a Republican program," says Yeung. "It was really motivated by the idea of creating a tax break. But what ended up happening, and this was probably an unintended consequence, was that it really revolutionized the affordable housing industry because it started bringing large amounts of money into affordable housing."

In other words, while the CDC’s probably would have opposed Reagan’s cuts to public housing, they happened to be perfectly positioned to capitalize on the new private- and nonprofit-sector solution.

Today

The main point is that now we have a whole set of private stakeholders and middlemen that invest in and profit from the industry. It's an industry, remember, that is funded in large part with tax credits. Some argue that it would be a more efficient use of tax money to fund the housing directly through the government, like they do in some other developed countries.

In response to this, Yeung argues that the big risk with "putting all of our eggs in one basket," when it comes to funding, is that "the amount of housing that you can do is entirely dependent on the political whim of where the country is at that time. That’s true of the state, that’s true of the local jurisdiction."

"You could be flush one year, and then you could be dry the next ten years," he says. "And I think with individual entities who are able to leverage several different sources of funding, it puts you in a situation where if one source dries up you can find other pathways."

That’s today. But what ever became of all those projects we built a half-century ago?

San Francisco's Sunnydale Projects are a prime example.

"If you were to come out to Sunnydale, you would actually not believe that this place exists in a city that looks like San Francisco. It’s that stark in contrast, " says Tomiquia Moss, with the Department of Housing for the Mayor's Office. "You drive up the main drag here and you see a lot of abandoned looking housing projects."

In the time since they were built, public projects have demonstrated exactly what fails when we concentrate poverty. People get stuck. They get in trouble. Nearly half of the city's homicides this year have been in or around the Sunnydale area.

They also demonstrate what happens when the federal government provide enough money to maintain the habitability of buildings built decades ago. San Francisco can't afford to rehabilitate these buildings so they're selling them to nonprofits. The nonprofits will use tax credits from banks to upgrade the properties. They'll also build market rate housing on the same land—generating more profit to cover costs. Tomiquia Moss says it's not just necessary to make the rehabilitation pencil out, it's a better practice in neighborhood planning. 

“These are one and two story buildings on 50 acres of land. So we’re going to build up a little bit so that you can have affordable housing units, you can have workforce housing, and you can have market rate housing. And you build an integrated mixed income community that way," says Moss. "So you wouldn’t be able to tell an affordable housing unit from a market rate unit."

The theory is that it will transform the projects into a place where economic mobility is visible.

This is how affordable housing works now. There’s no standardized program from the federal government, and the state of California has disbanded its main source of funding, known as Redevelopment. So cities are innovating these kinds of programs along with industry. The partnership is resulting in better, safer, more community-oriented housing. But it also puts us at the mercy of the marketplace.