FABLE: Two Ducks and the Fox

Once there were two ducks that always walked along the same road each day to go to the pond. As they went along, one of the ducks quacked to the other, " Why don't we go on a different path today. There are lots of other roads that lead to the pond?"

      "No, no, no. I have always gone this way and I am not about to change my ways," said the biggest duck.

      As the ducks walked along they came upon a very sly fox. "Hello ladies, how are you doing?"

      "Oh we are just on our way to the pond." The ducks continued to waddled quickly to the pond.

      The next day the duck that had wanted to go to the pond another way said, "Please, lets go the other way. If we go the same way that fox will surely eat us."

      "Oh don't be such a worry wart," snapped the biggest duck.

      So they both had gone the same way that they always had, and there was the fox waiting for them with a sack in his paw. As soon as the ducks walked by the fox pounced on them. The ducks ran screaming back to their house.

      The next day the ducks took another road to the pond because they were both still in shock over what the fox did to them the day before.

Moral: Sometimes it is best to change your ways

Forced Upzoning is Bad Policy, But Here’s How We Can Mitigate Its Impacts 

A number of bills in the legislature would attempt to “solve” the state’s housing challenges by overriding local municipal zoning ordinances and statutorily allowing developers to build up to Sacramento-mandated levels of density. The most notable of these bills is SB50, which has no provisions to make any of the housing built affordable, but espouses a “trickle-down” theory which suggests that market-rate (i.e. luxury) housing will “filter” down to create more affordable housing.

This “theory” not only has its foundations in Reaganomics, but is both opportunistic and false. Building more Porsches won’t bring down the price of Priuses. And however you try to frame it, upzoning is a wealth transfer from the public to the private sector. Mind you, on principle I oppose preemptive statutory upzoning that comes from either Sacramento or Washington. I believe that each community has its own unique DNA and, especially in major metropolitan areas, it is important for us to be able to make lifestyle choices which give us the ability create a sense of place, a sense of home and a sense of belonging, all of which are best created within individual communities.  In an increasingly cold, impersonal and faceless world, Community is more important than ever.

Statutory upzoning as proposed by Sacramento politicians, taking a number of chapters from the Trump Administration’s playbook, is the urban planning version of turning copper into platinum. Plain and simple, it’s a wealth transfer from the public to the private sector; in most cases that’s probably exactly the point. Strengthening communities made up of real, live people is not the ultimate goal of these policies, but rather the creation of corporate wealth on the backs of the larger community. Real estate interests and developers donate a lot of money to the political campaigns of Sacramento politicians and in our plutocracy, profits often outweigh people.

Nonetheless, politicians are crafty, and, at least in California, they understand that instituting policies which amount to corporate welfare don’t play well among the public.  So they need to use that most effective of political tools: spin. The “public” goal of these developer giveaways is, at least ostensibly, to create affordable housing and thereby ultimately to serve the public good.  But for all those California politicians who don’t want to wear their plutocratic tendencies on their sleeves and who want to envelope themselves in the mantle of progressivism, the true-believers in blanket upzoning should clearly support ways to limit the wealth transfer and to capture the value that their proposed upzoning creates.

One solution would be to introduce a progressive upzoning tax. Such a tax would work in a similar fashion to the way a progressive income tax is structured: the more expensive a luxury condo or apartment created through statutory upzoing is, the higher the tax rate would be.

Public services and infrastructure need to be funded (not to mention public employee pensions – but that’s another story); creating more development and adding more people to the mix clearly leads to increased needs. In fact, numerous nexus studies have shown that increases in market rate and luxury housing actually exacerbate the need for more affordable housing — a simply logical conclusion, confirmed by data.

Progressive upzoning taxes would not only help to capture the value created by Sacramento policies but would also provide local communities the resources to address the inevitable impacts.  With more people comes a need for more housing, transportation, infrastructure, schools, childcare, green space, etc.

A progressive upzoning tax could be implemented in a number of ways. It could be levied on the developer directly, but since Sacramento and the Trump Administration seem more concerned with developer profits than affordable housing (including self-styled progressives like Senator Nancy Skinner, who authored SB330 at the behest of developers), it would be more likely that such a charge should be levied on the well-heeled buyers or end-users.

The reasoning is also fairly simple: someone who can afford a $25 million luxury condominium or $50,000 in monthly rent for a luxury apartment can also afford to pay an additional 40% in upzoning taxes.  This is simply another tool to address growing income inequality, which is one of the root causes of our state’s housing affordability challenges.

The sliding scale of an upzoning tax would clearly and obviously not apply to affordable housing.

Studies and surveys repeatedly and continually show that the level of trust of citizens for their local communities and locally elected officials is much greater than their trust for Sacramento or Washington politicians. It isn’t even close.  And it’s understandable. Local communities are where we live and we can participate in our communities in a way that Sacramento and Washington don’t allow. When done right, local government is inherently more transparent and democratic than state or federal government, which is yet another argument for why subsidiarity should be a guiding principle within our democracy.

Progressive upzoning taxes would make the best out of a bad, preemptive situation in which Sacramento politicians show their disdain for local communities across the state. They would at least allow communities to capture some of the value created by Sacramento’s peremptory wealth transfer and put those funds to better use within our diverse and unique communities, to serve the residents and to alleviate the impacts of bad policies from Sacramento and Washington.

And what of the self-styled liberals who would oppose such a truly progressive way of mitigating this unprecedented wealth transfer and of capturing value for the public? They simply out themselves as what they really are: Trumpian corporate shills who are more concerned with Wall Street profits than anything else.

This piece first appeared on Fox and Hounds Daily.

John Mirisch has served on the Beverly Hills City Council since 2009. He is currently serving his third term as the city’s mayor.

https://opportunityurbanism.org/2019/11/forced-upzoning-is-bad-policy-but-heres-how-we-can-mitigate-its-impacts/

Ending the War on Communities: 14 Suggestions

Ending the War on Communities: 14 Suggestions to Protect Neighborhoods While Providing Meaningful Housing Solutions

in Housing, Suburbs, Urban Issues /by John Mirisch

The debate on solving California’s housing affordability crisis has reached a fever pitch, and the level of noise is drowning out solutions. We are facing a push to indiscriminately force density on neighborhoods and a war on single-family housing, which some in Sacramento paint as inherently “racist” and “immoral.”

As Sacramento politicians spin their wheels on the highway to nowhere, we have an opportunity to find sensible, community-friendly measures to meet the housing affordability challenges here in California and across America.

The fundamental question: do we want to create affordable housing or do we want to promote housing as an investment vehicle? Wall Street, corporate developers and their Sacramento politician friends espouse “trickle down” housing theories which in reality promote luxury development which we have in abundance. The goal of non-profit affordable housing developers is: housing itself.

Huge difference.

With this in mind, sensible housing policies should look to promote affordable housing solutions with non-profit organizations, most of whom are in it for the long-run and want to be integrated within the communities they serve.

Sadly, the discussion of California’s housing challenges in traditional (and some non-traditional) media outlets is so one-sided that people have a right to be skeptical about the agendas being pushed in them.

Publications from the Washington Post to the New York Times devote a serious amount of column inches to housing in California, and almost everything they write places the blame for the housing affordability crisis exclusively on “Nimby” cities. The preferred “solution” is to override local zoning in favor of Sacramento-mandated levels of forced density. Self-proclaimed “housing advocates,” including San Francisco state senator Scott Wiener are freely allowed to state their Reaganomic trickle-down, “the unfettered market will solve it all” perspectives without any counterposing views.

When the communitarian views of those representing the very cities being scapegoated are denied the ability to respond and/or present alternative perspectives, you know something very strange is going on.

And when those who are being faulted are not “just saying ‘no’ to everything,” but have real, concrete solutions to propose, refusing to allow those voices to be heard represents something more than a mere sin of omission.

It’s not for want of trying.

Beverly Hills has been perhaps the poster child of Yimby efforts to make cities “the bad guys.” Sadly, most of the attacks are based on misinformation and, worse, bigoted stereotypes. Even people who should know better seem to be watching too many reruns of “The Beverly Hillbillies.”

One would think that a chance to rebut the skewed and false narratives with ideas which have been vetted with affordable housing advocates would at least be worth sharing, if for nothing else than for the sake of fairness and objectivity. And, of course, we have submitted these ideas to all the usual suspects.

But the Washington Post, New York Times, Wall Street Journal, Bloomberg, and closer to home, the Sacramento Bee, San Francisco Chronicle and LA Times all seem to prefer stereotypes to substance, fiction to fairness and diatribe to dialogue.

The LA Times, owned by a billionaire oligarch has a housing writer, Liam Dillon, who bids fair to become the biggest unofficial CBIA (California Building Industry Association) and Yimby spokesperson in the state, in addition to having a storied history of stereotyping and boosterism.

Publications like the Wall Street Journal, Bloomberg, the New York Times, the San Francisco Chronicle and the Sacramento Bee have a history of putting the interests of big business, corporations, and Wall Street above that of individual communities and the people who live in them. Perhaps it shouldn’t be surprising that the Wall Street Journal and Co. are organs of Wall Street talking points — wonder how many would like to see densification of their communities in Westchester and Marin, but never mind….

What’s perhaps even more disappointing is that CalMatters, which purports to be a marketplace of various Californian ideas, was unwilling to share the proposed solutions coming from a city that has regularly been targeted by the same Sacramento politicians whose feathers CalMatters evidently doesn’t want to ruffle by allowing our voice to be heard.

One would think that any or all of these outlets might at least have had the fairness to now present our solutions to the state’s housing challenges. One would think they might at least have tried to pay lip service to objectivity, even if it’s just window dressing to create a pretense of journalistic balance.

Fortunately, there are still websites, which are unafraid to feature a diversity of opposing viewpoints. And in this case, it’s not even a question of opposing viewpoints: it’s a question of proactive solutions to the state’s housing affordability crisis (which is what we are really dealing with; it’s not like we have a luxury housing crisis). True, these are solutions that the Yimbys and their Wall Street and tech oligarch benefactors might not prefer, but they i preserve local flavor and preserve community diversity in a way that the standard, virtually identical high-density buildings clearly do not.

What we need are community-based solutions that embrace urban humanism. These include the following measures:

1. A massive statewide bond, dedicated to building truly affordable housing, specifically directed towards non-profit affordable housing developers. Much of the state’s surplus could also be used to build affordable housing. Locally generated revenue, including linkage fees and local bonds could support local projects.
2. Land banking: using some of the state’s surplus funds to prospectively purchase properties throughout the state which would be used for purely affordable housing, in addition to registering all current public lands which could be suitable for affordable housing with the input of local agencies.
3. Reintroduction of redevelopment (or some form of tax increment financing) with a focus on affordable housing (at least 75% of funds would go to affordable housing built by non-profit affordable housing developers). Eminent domain of residential property or any property for non-residential uses could be precluded, so some of the abuses of past redevelopment agencies would be avoided.
4. Supporting economic development in underserved areas, reversing the trend of population clustering created by job concentration. Increased investment in public higher learning institutions in these areas, such as the Central Valley, etc. Carrot/stick approach to corporations to encourage job creation in these areas, while avoiding the pitfalls of overheated job concentration in already dense areas, thereby also furthering the goals of geographic equity.
5. Repeal of Costa/Hawkins and the Ellis Acts (which restrict cities’ abilities to implement rent stabilization ordinances and renter protections), along with assisting cities in creation and maintenance of rental registries. Good data can help with the creation of good policy, and particularly accurate information on vacancy rates are crucial.
6. Vacancy, foreign owner and “speculation” taxes. Vacancy taxes, like in Canada, would progressively be charged to absentee landlords. Additional taxes would be levied towards speculators who don’t actually occupy their properties but purchase them as investment vehicles. Some naysayers to this approach have complained that it would have the effect of reducing property prices – something which would actually be a boon to non-profit affordable housing organizations.
7. Strengthen state anti-trust rules for speculative ownership of housing and real estate; the securitization and commoditization of housing often stands in direct conflict with the goal of affordable housing and additional anti-trust regulations would aim to curb Wall Street’s influence.
8. Strengthen CEQA (the California Environmental Quality Act). Commercial projects which create a need for additional housing would need to mitigate the impacts they are creating, namely, by requiring the requisite amount of housing (including affordable housing) be built as a condition of project approval. No “kicking the can” to other communities or to the future; no “statements of overriding considerations.”
9. Institute a “Clean Up Your Own Mess First” principle, including linkage fees. Negative impacts of projects must be mitigated by project owners. If a project creates a need for more housing or infrastructure, the project owner must “clean up her own mess first” rather than place the burden on the public.
10. Density bonuses only for non-profit affordable housing developers, working in conjunction with individual communities, with continued community involvement/partnership with these non-profits.
11. Address the root cause of the housing affordability crisis: income inequality. Consider instituting corporate wealth taxes.
12. Allow regional cooperation/solutions to affordable housing (currently not allowed in California). Cities could through bi- or multi-lateral discussions/negotiations with other jurisdictions share RHNA (Regional Housing Needs Assessment) obligations across jurisdictional boundaries (and could share in revenue generated by projects, if the projects are the cause of increased housing needs which the jurisdictions would be meeting together).
13. Waive all fees for non-profit affordable housing, with the fees to be reimbursed to cities by Sacramento.

Let these ideas bring debate and discussion which ultimately lead to housing solutions and dynamic, livable and sustainable communities that celebrate urban humanism, our ability to make choices for ourselves and our belief that ‘one-size-fits-all’ doesn’t work well in America. Is there a better time than now?

Housing Can’t Be Both Affordable and a Good Investment

The two pillars of American housing policy are fundamentally at odds.

NOV 19, 2018

DANIEL HERTZ

Senior fellow at City Observatory.

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Promoting homeownership as an investment strategy is a risky proposition. No financial advisor would recommend going into debt in order to put such a massive part of your savings in any other single financial instrument—and one that, as we learned just a few years ago, carries a great deal of risk.

Even worse, that risk isn’t random: It falls most heavily on low-income, black, and Hispanic buyers, who are given worse mortgage terms, and whose neighborhoods are systematically more likely to see low or even falling home values, with devastating effects on the racial wealth gap.

But let’s put all that aside for a moment. What if housing were a low-risk, can’t-miss bet for growing your personal wealth? What would that world look like?

Well, in order for your home to offer you a real profit, its price would need to increase faster than the rate of inflation. Let’s pick something decent, but not too extreme—say, annual increases of 2.5 percent, taking inflation into account. So if you bought a home for $200,000 and sold it ten years later, you’d be looking at a healthy profit of just over $56,000.

Sound good? Well, what if I told you that such a city existed? What if I told you it was in a beautiful natural setting, with hills and views of the ocean? And a booming economy? And lots of organic produce?

(Stephen Lam/Reuters)

Maybe you’ve guessed by now: The wonderland of ever-increasing housing prices is San Francisco. When researcher Eric Fischer went back to construct a database of rental prices there, he found that rents had been growing by about 2.5 percent, net of inflation, for about 60 years. And this Zillow data suggests that San Francisco owner-occupied home prices have been growing by just over 2.5 percent since 1980 as well.

Like I said, over ten years, that gives you a profit of just over 25 percent. But compound interest is an amazing thing, and the longer this consistent wealth-building goes on, the more out of hand housing prices get. In 1980, Zillow’s home price index for San Francisco home prices was about $310,000 (in 2015 dollars). By 2015, after 35 years of averaging 2.5 percent growth, home prices were over $750,000.

Now, if all you cared about were wealth building, this would be fantastic news. The system works! (Although actually even this rosy scenario is missing some wrinkles: San Francisco real estate prices did suffer enormously, if briefly, during the late-2000s crash, and if you bought in the mid-2000s and had to sell in, say, 2010, you would have taken a massive loss.)

But this sort of wealth building is predicated on a never-ending stream of new people who are willing and able to pay current home owners increasingly absurd amounts of money for their homes. It is, in other words, a massive up-front transfer of wealth from younger people to older people, on the implicit promise that when those young people become old, there will be new young people willing to give them even more money. And of course, as prices rise, the only young people able to buy into this Ponzi scheme are quite well-to-do themselves. And because we’re not talking about stocks, but homes, “buying into this Ponzi scheme” means “able to live in San Francisco.”

In other words, possibly the only thing worse than a world in which homeownership doesn’t work as a wealth-building tool is a world in which it does work as a wealth-building tool.

This also means that the two stated pillars of American housing policy—homeownership as wealth-building and housing affordability—are fundamentally at odds. Mostly, American housing policy resolves this contradiction by quietly deciding that it really doesn’t care that much about affordability after all. While funds for low-income subsidized housing languish, much larger pots of money are set aside for promoting homeownership through subsidies like the mortgage interest deduction and capital gains exemption, most of which goes to upper-middle- or upper-class households.

But even markets with large amounts of affordable housing demonstrate the contradiction. Since at least the second half of the 20th century, the vast majority of actually affordable housing has been created via “filtering”: that is, the falling relative prices of market-rate housing as it ages, or its neighborhood loses social status, often as a result of racial changes. Low-income affordability, where it does exist, is predicated on large portions of the housing market acting as terrible investments.

And to the extent that low-income people do find a subsidized, price-fixed housing unit to live in, that means that they won’t be building any wealth, even as their richer, market-housing-dwelling neighbors do, increasing wealth inequality.

Even the community land trust, which seems to be a way of squaring the wealth-building/affordability circle, ultimately fails. Community land trusts typically provide subsidized or reduced price ownership opportunities to initial buyers, and assure longer term affordability by limiting the resale price of the home. In other words, CLT-financed homes remain affordable only because they restrict how much wealth building the initial owners are allowed to capture. The result is that CLT-financed homes only attract those who couldn’t otherwise purchase a home—which means that the lower-income people in CLTs will be building wealth more slowly than higher-income people in market-rate housing, a fundamentally inequality-increasing situation.

We say we want housing to be cheap and we want home ownership to be a great financial investment. Until we realize that these two objectives are mutually exclusive, we’ll continue to be frustrated by failed and oftentimes counterproductive housing policies.

This article originally appeared on CityObservatory.

Marin Voice: Legislature should recognize that housing is a right, not a Wall Street commodity

Marin Voice: Legislature should recognize that housing is a right, not a Wall Street commodity

Artist rendering of the Victory Village housing project in Fairfax. (Courtesy of RCD)

By SUSAN KIRSCH |
August 14, 2019 at 10:19 am


We remember the pain and dislocation brought about by the housing melt-down of 2008, when foreclosures spiked by more than 81% and more than 3 million people lost their homes. It was precipitated by deceitful, predatory loans, subprime mortgages, and fanciful financial tools like derivatives.

Many individuals never recovered, but banks, developers, and real estate investors scored big. While property values have largely recovered, an ominous trend has occurred: a shift from individual home ownership to corporatized housing.

The language has shifted, too, from “home” as a safe abode where a middle-class family could acquire a significant asset to “housing unit” where investors could acquire a commodity to produce return on investment.

“We’re in a whole new world of organized, global financial investment into the housing market,” Michael Storper, a professor at UCLA and London School of Economics, explained when asked what changed between 2008 and 2019.

He called it the financialization of housing.

Components of the financialization of housing include giant construction companies such as Florida-based Lennar which is behind the controversial San Francisco Bayview-Hunters Point housing project, and national and global private equity investment firms such as The Blackstone Group, with California offices in San Francisco and Los Angeles.

Why does the financialization of housing matter? It is fueled by corporate greed, not civic values or care about community. Mortgage or rent payments flow out of the community, stewardship diminishes, and global wealth goes into unknown, gold-lined pockets.

In 2017, the United Nations Human Rights Council warned that the financialization of housing “undermines democratic governance, exacerbates inequality, dehumanizes housing, and causes displacement and homelessness.”

The UN report cautioned “unprecedented amounts of global capital are being invested in housing as security for financial instruments and traded on global markets, which is having devastating consequences.”

Against this corporate backdrop groups such as Bay Area Council and the Silicon Valley Leadership Team have curried favor with California legislators. They’ve created a simplistic narrative: We have a housing crisis. Cities are to blame. The state must assert itself with top-down, one-size-fits-all bills that undermine local control.

What they don’t say is that by reducing local control, global investment firms and national builders will gain easier access to community wealth, including individual homes, land, and public places.

Certain bills introduced by Sens. Scott Wiener of San Francisco, Nancy Skinner of Berkeley, and Assemblyman David Chiu of San Francisco would weaken elected city councils’ planning authority and financial stewardship, and ultimately deepen the affordability crisis.

For example, a stripped-down version of Chiu’s Assembly Bill 1487 seeks to gain approval for a 2020 ballot measure known as the “San Francisco Bay Area Regional Housing Finance Act.”

It would provide a regional financing mechanism for affordable housing and would apply to all cities, including charter cities.

This new entity estimates an annual budget of $2.5 billion. It would be governed by the Metropolitan Transportation Authority board, but identified as a separate legal entity.

Critics, myself included, are alarmed because a regional authority to raise, administer, and allocate funds is likely to reduce their capacity to raise local tax revenue for local projects. Small cities worry that big cities will rake off the majority of the funds, and they’ll be taxed for big city successes.

Supporters of putting the regional tax on the ballot try to quell opponents’ fears saying they merely want to give citizens the right to decide. However, imagine the unequal playing field.

The national/global corporations that stand to gain from the financialization of housing will invest millions in messaging, push polls, ads, and social media.

We have a housing problem, but the crisis is the loss of democracy brought about by the financialization of housing. When legislators become champions of the simplistic explanation that cities are to blame, they abandon critical thinking, their constituents, and their oaths of office.

Legislation that diminishes local control by expanding developers’ rights, investors’ profits, and regionalism will worsen the affordability crisis. Take a breather. Adopt a collaborative approach. Review housing policy and projects at the local level that are proving successful.

Susan Kirsch, of Mill Valley, is founder and former president of Livable California, susankirsch@hotmail.com. She wrote this commentary for CalMatters.

Developer funded ‘Sue the suburbs’ group will be coming to Marin

‘Sue the suburbs’: 

Bay Area housing advocacy keeps up attack Advocacy group attempts to force cities to approve projects

Sonja Trauss is founder of the San Francisco-based California Renters Legal Advocacy and Education Fund. (Jane Tyska/Bay Area News Group)

By MARISA KENDALL |
PUBLISHED: August 4, 2019 at 7:16 pm | UPDATED: August 4, 2019 at 9:56 pm


In a low-key San Francisco office decorated with “legalize housing” T-shirts and a fluffy, avocado-shaped throw pillow, a tiny group of advocates is trying to sue their way out of the Bay Area housing crisis.

The four-person California Renters Legal Advocacy and Education Fund, or CaRLA, has one reason for being — to sue cities that reject housing projects without a valid reason. The litigious nonprofit with YIMBY roots struck again last month, suing Los Altos after the city rejected a developer’s bid to streamline a project of 15 apartments plus ground-floor office space.

It’s a bold strategy and one advocates say fills the enforcement hole in California housing policy. But it’s also helping push housing decisions out of city council chambers and into the courtroom — removing those key issues from local control and further stoking the flames of bitter contention that often surround Bay Area housing debates.

As the Bay Area struggles with a housing shortage that’s driving up home prices and rents, and some building proposals that could alleviate the crunch get bogged down or denied amid pushback from neighbors, CaRLA’s founder, Sonja Trauss, sees her mission as simple:

She’s here to enforce the law.

“Something, by hook or by crook, has to make these cities actually build housing,” said Trauss, a 37-year-old law school dropout turned housing advocate, who has a lawyer on staff and also works with an outside law firm to file her cases. Her group’s unofficial motto is “sue the suburbs.”

But critics argue suing the suburbs is not the best way out of the housing crisis. Development decisions should be made locally and with community input, not in courtrooms under pressure from outside groups such as CaRLA, said Mill Valley resident Susan Kirsch, founder of slow-growth group Livable California.
“These people (city councils) are so dedicated and are working so hard to find the solutions, to get the right affordable housing mix and the right jobs-housing balance,” she said. “And then to have the threat of a lawsuit, it’s just unfortunate, I think.”

In late July, Trauss’ group sued Los Altos over the city’s ruling that a residential and office project proposed on North Main Street did not qualify for streamlined approval under the state’s new SB 35 law. That law requires cities to expedite approval of certain residential and mixed-use projects. The city said the project didn’t have enough residential space to qualify under the law, among other issues, but the lawsuit takes issue with how that calculation was reached.

Los Altos Mayor Lynette Lee Eng said the city remains confident in its decision to reject the application.

“This project would result in a five-story building surrounded by two-story buildings, which goes against our General Plan and is completely out of character with our downtown aesthetic,” Lee Eng wrote in an emailed statement.

Trauss’ cases are based on the argument that rejecting zoning-compliant projects not only exacerbates the housing crisis — it’s illegal. Her weapon of choice is the state’s Housing Accountability Act, which says officials cannot deny or reduce the density of a housing project that complies with the city’s general plan and zoning rules, unless the project poses specific public health and safety concerns. Since 2016, CaRLA has sued nine cities over allegedly improper project denials or illegal housing ordinances, including San Mateo, Berkeley, Lafayette and San Francisco. Of those, four have resulted in settlements that forced officials to approve the housing.

Dublin, for example, was forced to approve a 220-unit apartment building next to the Dublin/Pleasanton BART station last year as part of a settlement with CaRLA. Four other cases are ongoing, and one case settled without the project getting approved. CaRLA also has sent dozens of letters to cities — including Cupertino over the contentious Vallco Mall site — warning officials against taking action that would violate state law.

“I think the bigger impact they’re having is that cities are now on notice that they can’t be scofflaw cities and not face any consequences,” said Matt Regan, senior vice president of public policy for the Bay Area Council.

Trauss says she learned her techniques from the other side. She watched residents opposed to new housing derail projects with lawsuits filed under the California Environmental Quality Act, or CEQA. The Housing Accountability Act is her way of fighting back, Trauss said

To wage that fight, CaRLA raised almost $400,000 last year from donors and grants, Trauss said. She shares an office with the more well-known housing advocacy group YIMBY Action, an organization she helped found and still works closely with.

The state already has methods in place to make sure cities build enough housing, but advocates have long complained they lack teeth. To begin with, every city has a certain amount of state-mandated housing it’s required to plan for — known as its Regional Housing Need Allocation, or “RHNA” number. Cities must create general plans and zoning rules that allow for that amount of housing to be built, but until recently, there was little punishment if jurisdictions fell out of compliance. Gov. Gavin Newsom has started to change that, suing the city of Huntington Beach for failing to set aside enough land for housing. In June, he laid out a plan to fine other noncompliant cities up to $600,000 a month.

But none of those measures force cities to approve individual housing developments. That’s where the Housing Accountability Act comes in. Enacted in 1982 and strengthened since, it requires cities to abide by their own general plans and zoning rules. Until CaRLA came along, it was rarely used.

Now more rejected projects are ending up in court. Dublin Mayor David Haubert, whose city was sued by CaRLA last year, doesn’t think that’s good. Litigation is costly and risky and it makes the city look bad, he said.


“While I respect their right to sue cities,” Haubert said, “as mayor, I would prefer that they would sit down with me and talk in person. I’m not sure why they didn’t seek to do that.”

Affordable Housing developer advocates for Massive Regional Housing Tax

FABLE: THE WOLF AND THE HOUSE DOG

There is nothing so precious as Liberty

There was once a Wolf who got very little to eat because the Dogs of the village were so wide awake and watchful. He was really nothing but skin and bones, and it made him very downhearted to think of it.

One night this Wolf happened to fall in with a fine fat House Dog who had wandered a little too far from home. The Wolf would gladly have eaten him then and there, but the House Dog looked strong enough to leave his marks should he try it. So the Wolf spoke very humbly to the Dog, complimenting him on his fine appearance.

"You can be as well-fed as I am if you want to," replied the Dog. "Leave the woods; there you live miserably. Why, you have to fight hard for every bite you get. Follow my example and you will get along beautifully."

"What must I do?" asked the Wolf.

"Hardly anything," answered the House Dog. "Chase people who carry canes, bark at beggars, and fawn on the people of the house. In return you will get tidbits of every kind, chicken bones, choice bits of meat, sugar, cake, and much more beside, not to speak of kind words and caresses."

The Wolf had such a beautiful vision of his coming happiness that he almost wept. But just then he noticed that the hair on the Dog's neck was worn and the skin was chafed.

"What is that on your neck?"

"Nothing at all," replied the Dog.

"What! nothing!"

"Oh, just a trifle!"

"But please tell me."

"Perhaps you see the mark of the collar to which my chain is fastened."

"What! A chain!" cried the Wolf. "Don't you go wherever you please?"

"Not always! But what's the difference?" replied the Dog.

"All the difference in the world! I don't care a rap for your feasts and I wouldn't take all the tender young lambs in the world at that price." And away ran the Wolf to the woods.

There is nothing worth so much as liberty.

When Wall Street Is Your Landlord

When Wall Street Is Your Landlord

With help from the federal government, institutional investors became major players in the rental market. They promised to return profits to their investors and convenience to their tenants. Investors are happy. Tenants are not.
rSnapshotPhotos / andrea crisante / kai celvin / Shutterstock / The Atlantic


ALANA SEMUELS
FEB 13, 2019
TECHNOLOGY

In 2010, at the height of the foreclosure crisis, the federal government watched nervously as hundreds of thousands of families lost their homes. Empty houses blighted neighborhoods, their shades drawn, their yards overgrown. Without some kind of intervention, federal officials worried, the housing market would continue in its free fall, prices would keep dropping for existing homeowners, and the economic recovery, already tenuous, would be imperiled.

But who would fill these empty homes? Few Americans were in a buying mood, and for those who were, mortgages were harder to come by than they had been before the crash. So the government incentivized Wall Street to step in. In early 2012, it launched a pilot program that allowed private investors to easily purchase foreclosed homes by the hundreds from the government agency Fannie Mae. These new owners would then rent out the homes, creating more housing in areas heavily hit by foreclosures.


“There was this glut of foreclosed properties in parts of the country, and inadequate demand from the traditional home-buying population and even traditional investors,” Meg Burns, who was at the time the senior associate director of the Office of Housing and Regulatory Policy, told me. “We were trying to influence demand.”

It worked. Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country. In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012; today, institutional investors own at least one in five single-family rentals in some parts of the metro area, according to Dan Immergluck, a professor at the Urban Studies Institute at Georgia State University. Some of the nation’s hardest-hit housing markets were finally stabilized.

The investors argued that they could be good landlords—better, in fact, than cash-strapped small-timers. According to Diane Tomb, the executive director of the National Rental Home Council, a trade group established in 2014, single-family rental companies “professionalized” a sector traditionally run by mom-and-pop landlords, bringing with them 24/7 responses to maintenance requests and a deep pool of capital they can spend on homes.

They also projected they could make money, which no one had done on a large scale in the home-rental business. “We wanted to rescue these neighborhoods and create a long-term, permanent income stream for our shareholders,” says Frederick Tuomi, who was until recently the president of Invitation Homes, which is now the largest single-family rental company in the nation. (Tuomi is currently on a temporary leave of absence to care for a family member.)


Wall Street analysts and potential shareholders, however, were skeptical. Maintaining thousands of homes of different sizes, ages, and conditions across an entire metro area seemed like a logistical nightmare. “How can you operate and create scale in that situation?” Sam Zell, the billionaire real-estate investor, told CNBC in 2013. “I don’t know how anybody can monitor thousands of houses.” When the new rental companies started offering shares to investors on the public market in late 2012, the response was tepid.

But housing trends were on the side of the investors: America was becoming a renter nation. According to census data, between 2007 and 2017, the United States added less than 1 million households in owner-occupied homes, but 6.5 million in renter-occupied homes. Many families wanted to live in a spacious house in a good school district, but could no longer afford to do so as owners. The homeownership rate bottomed out at 62.9 percent in 2016, down from a high of 69 percent in 2005.

Read: The never-ending foreclosure

Of course, the trends that favored these new landlords were largely produced by a financial crisis that Wall Street had itself abetted. That some of the same investment firms that had played a part in the housing crisis were now poised to profit from it made for a dismal irony. But if the new companies could deliver on their promises of making home rentals easy, affordable, and worry-free, perhaps everyone could win: The companies could return a profit, the housing market could be shored up, and houses that had lain fallow after the crash could once again be happy homes.


That’s not what happened. I talked with tenants from 24 households who lived or still live in homes owned by single-family rental companies. I also reviewed 21 lawsuits against three such companies in Gwinnett County, a suburb of Atlanta devastated by the housing crash. The tenants claim that, far from bringing efficiency and ease to the rental market, their corporate landlords are focusing on short-term profits in order to please shareholders, at the expense of tenant happiness and even safety. Many of the families I spoke with feel stuck in homes they don’t own, while pleading with faraway companies to complete much-needed repairs—and wondering how they once again ended up on the losing end of a Wall Street real estate gamble.

In 2011, rene and Erica Valentin were living with their two young children in a small two-bedroom apartment in suburban New Jersey. They had been saving for years to buy a house. But then Rene, now 42, was laid off as a district manager at Best Buy, and the couple decided that the only way they would ever be able to afford to buy was in a cheaper market.

Erica, now 34, applied to be an engineer at AT&T in an Atlanta suburb. When she got the job, the family picked up and drove south, moving into a two-bedroom apartment near the city center. They pinched pennies as Rene’s job search stretched into its second year. By the time he finally found a position in 2014—again at Best Buy—the family still couldn’t afford to buy. But their daughter, Sophia, was about to enter first grade, and the Valentins wanted her in a good school district and not to have to share a room with her brother. So they decided to rent.

A real-estate agent showed them around Lawrenceville, a sprawling suburb 30 miles northeast of downtown Atlanta, where the homes are large and the schools are good. Every house they saw was owned by the same company, Waypoint Homes, which they told me the agent explained was a professional rental company, with 24/7 maintenance, quarterly check-ins, and deep pockets to spend on repairs.

They settled on a 2200-square-foot house on a quiet street. From the outside, it didn’t look like much—vinyl siding, black shutters, brick detailing. But it had three bedrooms, two bathrooms, walk-in closets, and a large, fenced-in backyard, all for just $1,373 a month. Soon enough, they were installing a tire swing in the backyard, hanging art on the walls, and putting up curtains in the kids’ bedrooms—dark blue for Antonio, light blue for Sophia. They paid their rent using Waypoint’s online platform, impressed by how far technology had progressed from the days of dropping a check in the mail. The property wasn’t theirs, exactly, but they finally felt like they could settle down.

As the valentins were nesting, America’s new corporate landlords were looking for efficiencies. The companies set about standardizing flooring and appliances, which would, in theory, lower costs and make life easier on maintenance workers. They established centralized call centers to handle tenant communication, and installed smart locks so that potential renters and maintenance staff could let themselves in to look around or do repairs.

At the same time, the industry was consolidating. Investment groups created companies to manage the homes: Blackstone established Invitation Homes; Cerberus created FirstKey Homes; Colony Capital created Colony American Homes. And then those companies started merging.

In 2015 alone, Colony American Homes merged with Starwood Waypoint Residential Trust, Cerberus Capital Management acquired more than 4,000 homes from BLT Homes, and American Homes 4 Rent said it was acquiring American Residential Properties in a $1.5 billion deal. By 2017, two major players, Invitation Homes and American Homes 4 Rent, controlled nearly 60 percent of the market.

On calls with investors, those two companies touted their cost-cutting measures, which often involved pushing responsibilities onto tenants. In 2016, Jack Corrigan, the chief operating officer of American Homes 4 Rent, told investors that the company hoped to reduce spending on repairs, maintenance, and “turn costs”—preparing a home for a new tenant—from $2,500 per home to $1,600. That same year, Colony Starwood cut property-management costs 25 percent from the previous year; one of its money-saving innovations was to use videos and chat software to show tenants how to fix minor problems, so they wouldn’t have to request repair staff for a clogged garbage disposal or a leaking toilet.

The obligation to repair their own rental wasn’t the only responsibility passed on to tenants. I reviewed one Colony Starwood lease from 2016; it was 34 pages long and specified that tenants were responsible for landscaping, “routine insect control,” replacing air filters in their central air systems once a month, repairing broken glass (regardless of how it was broken), and repairing and maintaining sewer and sink backups. American Homes 4 Rent started levying “trip charges” if maintenance staff were sent out to homes to assist with repairs that the tenants should have performed themselves, David Singelyn, the company CEO, explained at a 2015 investor forum. Some companies began requiring that tenants buy renter’s insurance to cover the property itself, rather than just their belongings, a clause lawyers in some states say is unenforceable.

As the industry started to grow, the major players all described their desire to standardize and improve the business of being a landlord. But even to the companies’ employees, the effort to become more efficient started to look more like craven attempts to squeeze tenants. “It shouldn’t be just about making money, but that’s what it turned into,” Shanell Hanson, who was a property administrator for Colony American Homes in an Atlanta suburb from 2014 to 2016, told me. Hanson said the company had six maintenance workers for 2,100 homes in the area she managed. Residents would frequently call with substantial problems: Sewage was overflowing, or the house was full of mold. But with such a small staff, Hanson could rarely deal with the problems quickly. And the law was on the corporations’ side: If tenants want to seek financial remedy for a landlord not keeping the property in adequate condition, under Georgia law, they have to take the landlord to court, a costly and lengthy process. “It’s almost impossible to do without an attorney,” Lindsey Siegel, an attorney at Atlanta Legal Aid who works on housing issues, told me.

Hanson said she was instructed by a supervisor not to answer the phone when certain tenants called. “Her response would be, ‘We’re not fixing that, just don’t call the tenant back,’” Hanson said of the supervisor. Hanson said she was fired when she reported the company to OSHA because she worried that the homes were in such poor shape that the conditions for the maintenance staff she supervised were dangerous.An Invitation Homes rental sign in a suburban Georgia neighborhood (Alana Semuels / The Atlantic)

In 2017, Invitation merged with Starwood Waypoint, the company that itself had merged with Colony American in 2015. Invitation said it could not comment on individual employees (or the alleged OSHA complaint), but that company policy protects whistle-blowers from retaliation, and that the company does not tolerate unsafe working conditions for maintenance workers. A spokeswoman added that the events Hanson alleges occurred when the company was under different ownership. (Fred Tuomi, the longtime Invitation CEO, was a senior executive at Colony American beginning in 2013, and headed the company as it merged with both Starwood Waypoint and Invitation.) Invitation also said that any employee not returning tenants' calls was not following its company policy.

Many other single-family landlord companies were cutting corners on maintenance and repairs. “As the corporation got bigger, it just got worse, in terms of what we had to work with and how we had to deal with problems,” a former Los Angeles leasing agent who worked for Waypoint between 2015 and 2017 told me. (She spoke on the condition of anonymity because she still works in real estate.) Regional teams received bonuses for keeping costs low, she said, which incentivized them to skimp on spending. Instead of responding to tenants personally, supervisors would send calls for maintenance to out-of-town call centers—which would in turn assign maintenance workers dozens of repairs in a day, not realizing that Los Angeles traffic could mean that relatively short distances could take hours to traverse.

Another former Waypoint leasing agent, in Florida, who also spoke on the condition of anonymity because she is still in the real-estate field, told me that the company stopped replacing shower-curtain rods and changing locks when tenants moved out. When Waypoint learned that it was spending $5 million annually on paint, local managers were told to just touch up the walls rather than repaint them, giving the interiors a splotchy, unfinished appearance, she said. At one point, a mandate came down from a field manager that the company was going to do everything it could to not to return security deposits to tenants. “It wasn’t a company policy, and you will never find it in writing, but it was a verbal thing passed down to field project managers,” she said.


Charles Young, who was named the chief operating officer of Starwood Waypoint in 2015 and now serves in that position for Invitation Homes, told me that the company never told staff to avoid returning security deposits. Tuomi, of Invitation, said that while the companies may have been “horribly inefficient” at first, they’ve gotten better at responding to problems as they’ve gotten bigger, with the help of technology and more experience. Invitation launched an advance-scheduling and route-optimization program last year to improve the efficiency of its maintenance staff, according to Kristi DesJarlais, an Invitation Homes spokesperson. The company told me repeatedly that complaints about the early days of the single-family rental industry are no longer valid.

Rene and erica valentin’s problems with their rental home began almost immediately. Their pipes would periodically break, sending a stream of water onto their living-room carpet. Sometimes the water would be boiling hot—their kids once stepped in it and burned their feet, they told me. Getting someone to come fix the pipes was always a production. Erica said she would call, or file a complaint online, and it would take days, sometimes weeks, before she received a response. Repair workers would come and replace small sections of broken pipe, but Waypoint never investigated why the problem persisted. They didn’t replace the soggy carpet, either; a faint mildew smell started to permeate the house. The contractors Waypoint sent seemed, to the Valentins, unqualified—one didn’t have a car and had to call his mother to drive him to Home Depot to pick up a part. “You would expect this type of behavior from a one-person landlord who’s a jerk, but a big multimillion-dollar company—how do you treat your tenants like that?” Erica said. “They have the money to fix things.”


The Valentins thought about leaving, but moving is expensive, and they were still saving up to buy a house. They also worried that breaking a lease would ruin their credit. So they stayed, and the problems mounted. Their air-conditioning stopped working; the family waited eight sweltering Georgia summer days for a repairman, who told them that the