Friday 7th of August 2020 12:21:08 AM GMT

SB 50 Wiener Will Only Cause More Gentrification, Here’s Why

(Last Updated On: February 28, 2019)

California State Senator Scott Wiener (SD 11 – ) has pushed legislation known as “SB 50” for some time now, claiming that it will add more affordable housing to the California’s urban areas.

State Senator Wiener seems to think that just increasing housing density will lower the cost of housing, and expresses that tired and wrong-headed ideology in this dog of a bill he insists on advancing. Here’s why he’s totally wrong, and why everyone, including the Bay Area Rapid Transit (BART) Board, should run, and not walk, away from this travesty of thought.

SB 50 Doesn’t Provide True Affordable Housing-Focused Development Incentives

Scott Wiener SF

Scott Wiener SF

First, let’s take a look at what SB 50 is: the bill reads that a developer has to express a desire to want to build high-density housing around a BART Station. Once that’s desire is procedurally expressed via the application and approval process, the municipality would waive the standard zoning laws that would prohibit that developer’s project – and streamline the approval process. That’s SB 50 in a nut-shell.

Here are the problems:

First, complications aside, the developer has to want to build in that zone around the BART Station. There’s no guarantee the developer will want to do that absent a clear cut financial reason to do so. SB 50 mentions housing incentives, but presents them as options in a passive aggressive way – no targeting or housing subsidy objectives are stated.

(And in recognition of a recent comment by Ari Isaac that “SB 50 does not at all explain what those incentives are,” I double down and say that it does not. An incentive is a reason to do something; Ari Isaac presents reasons not to do something, or to do something a certain way: those are regulations. So, Ari Isaac confuses regulations with incentives.)

Second, SB 50 does not at all explain what those incentives are and how they would cause more affordable housing to be built. The proponents of SB 50 have to create the fantasyland story for themselves.

Third, SB 50 ignores the modern dynamic that comes with building high-density housing, bet it around BART Stations and other transit hubs, or in downtowns in America: new dwellings are promoted to an international audience of investors, not so much a set of local residents seeking new places to live they can make the payments for.

181 Fremont San Francisco

181 Fremont

There are many examples of that process happening in the Bay Area, most notably around Salesforce Transit Center in . Take 181 Fremont, which is marketed as “new, luxury condominiums for sale are located in the cultural heart of the SOMA.” 181 Fremont’s most expensive residence is its penthouse, which was on the market for $42 million. A low-price unit goes for $3.2 million.

Yeah, that’s certainly affordable housing in a 55-story tower. In fact, the Wiener version of SB 50, with its call for “jobs focused or housing focused” development would effectively allow more buildings like 181 Fremont to be built in – certainly not affordable housing, by any stretch. Housing costs will only rise, as has been the trend due to a dynamic that started 19 years ago.

What has been called “the decoupling of housing from local labor market participation” has gone on since just after the year 2000, and roughly matches the growth of digital media and Voiceover IP. In other words, the growth in the use of the Internet has helped cause a rising of rents in urban areas without an equivalent rise in incomes.

SB 50 is not designed to fight that market dynamic; here’s a fix that will.

Transit Redevelopment Zones For SB 50 And BART Stations

The early days of BART came with calls for redevelopment areas around BART Stations. The idea was simple: BART itself would have zones around designated stations where tax increment finacing would be used to capture property tax revenue from the project area, and use that toward a bond issue that would provide subsidies for high density affordable housing.

At the time, California Redevelopment Law called for 20 percent of redevelopment revenue to be set aside for affordable housing set. In the BART context, all of that money could be ear-marked only for affordable housing projects in the transit housing redevelopment project area.

In the past, when California Redevelopment Law was active and before Governor Jerry Brown worked to terminate it in 2011, development around BART Stations focused less on affordable housing and more on retail development. The Fruitvale BART Station is one example of that history.

Today, what’s needed is a transit development law that focuses squarely on building affordable housing and specifically uses redevelopment law and tax increment financing. This is how SB 50 should be re-written.

SB 50 should allow BART to set up transit redevelopment zones (TRZ) around stations and do so in conjunction with the municipality where the station or stations are located. The way it would work, BART and the municipality would draw transit redevelopment zones that captured not less than $150 million in total area assessed value.

The reason is, a 40-year bond issue would yield base tax increment financing revenue of $30.6 million, assuming the Prop 13-allowed two percent rate of growth, and the base one percent tax rate. Of that $30.6 million in TIF revenue that could be applied to a 40-year bond issue, roughly 50 percent could be used for an affordable housing subsidy program for any project for that transit redevelopment zone.

(For those who need a refresher in tax increment financing revenue as practiced in California, the formula is the current year assessed value minus the first year – called the “base year assessed value” – annually. The total of that yearly revenue collection estimate is applied to a municipal bond sized to the revenue stream. The proceeds from the bond are used for the housing subsidy program, while the TIF revenue pays off the bond issue over the 40-year timeframe.)

If $150 million in total area assessed value reads like a lot, consider that in 2018, alone, the largest construction projects in totaled over $2.3 billion. Most of those were housing projects. So, the $150 million in total area assessed value is only 6.5 percent of that total. There’s room for growth.

The new SB 50 law envisioned here would allow the drawing up of transit redevelopment zones using TIF and only for affordable housing. The smartly drawn TRZ would include private developments of such high value they would wind up financing the construction of new, nearby affordable housing.

If you think about it, this “SB 50” is a clearer, better defined, and better financed way to achieve the construction of affordable housing next to transit centers like BART Stations, than what Mr. Wiener proposed.

State Senator Wiener’s SB 50 will not get the affordable housing job done; this SB 50 will.


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