Episode 12 – 3/1/2021
Closing Gates: Conor Dougherty on California’s Housing Crisis
New York Times reporter Conor Dougherty guests on Arch MI’s PolicyCast to discuss his new book on California’s dire shortage of affordable homes.
Kirk Willison: [00:00:06] When Connor Doherty returned to California from a decade of living in New York city, he quickly discovered that the state of the state’s housing was measurably worse than when he had left. A technology reporter hired by the New York Times to follow Google; his report editorial instincts were peaked. Connor began to track the people, policies and passions committed to expanding or preventing additional affordable housing in the San Francisco Bay area. The result of Doherty’s years of reporting is Golden Gates fighting for housing in America. Connor is first and foremost a storyteller, in Golden Gates he weaves together the lives of advocates eager to build more shelter and recounts failed efforts to manage growth in a state that is now three and a half million units behind what it needs to meet its housing demand. And while the story focuses on California, the affordable housing crunch is expanding across the country. As Doherty wrote recently in the New York times, as bad as California’s affordable housing problem is, it really isn’t a California problem. It’s a national one. He adds it the same set of housing issues that have befallen California has now bubbling up in Boise, Nashville, Denver, Austin, and many other high growth cities. And he predicts they’ll become even more widespread as remote workers move around. Connor joins Policy cast from his home in Oakland, California. Connor Doherty, thank you very much for joining me today on the Arch Mortgage Insurance PolicyCast. I got to tell you from the very start that I loved your book. I’ll give you an idea, I read your book with a highlighter in a hand, tagging all kinds of different spots around it. It’s not a wonky dissertation about affordable housing in California, instead, it’s great storytelling. It includes passion and ambition and little even chicanery about a common good that I think we’re all seeking to have and that’s affordable housing.
Conor Dougherty: [00:02:26] Thank you for all the kind words, I’d been covering housing for a long time. First at the Wall Street Journal and then of course at the New York Times, and I was very familiar with a lot of these, a lot of the things maybe we’ll talk about, but this sort of idea that we had a huge affordable housing problem in America, and that are in many places, California notably, our inability to build and really our restrictions on building were a big, really the primary reason behind that. And I thought that was interesting, but as I delved deeper into the story, I kind of got into the history and found that many academics and planners and other types of land use scholars and public officials have been very concerned about this problem, going back to the middle seventies and all their prescriptions from that time are pretty much identical to the prescriptions we have today. And so it struck me that the most important story I could tell, the best way to where I could make a contribution journalistically was to sort of ask the question, well, if everybody knows what to do, and if everybody knows this is a huge problem, why can’t we solve it? The sort of broader point here is that this is not a partisan issue, it’s not an issue that is new and it’s not an issue where we don’t know what to do. So seemingly all the stars are aligned for us to be able to solve this problem, at least superficially, but we can’t. And so the reason I took a more narrative tone in the story, the reason I decided to follow the stories of people trying to solve the problem in a multitude of ways, many of them vehemently disagree with each other, but I think they’re all going about it honestly from the, from their own perspective, is that it struck me that if you watch these people try to solve this problem through philanthropy, through activism, through there’s even a developer trying new construction methods, you will get a sense of, you’ll kind of watch these people smash their heads against the wall in real time and smash heads against each other, in many cases, you know, they’re on different sides of these issues. And I think that gives us a better sense of why it’s so hard to solve and I think that’s perhaps what we need to think about more rather than thinking about solutions, because we know what the solutions are.
Kirk Willison: [00:05:15] You point out in Golden Gates that California faces about a three and a half million home shortage, and that’s about half the national average. Now you’ve done a lot of economics reporting and I studied economics in college and you know, from a theoretical standpoint, an economist is going to tell you that demand is far outpacing supply. So the answer is build more homes, prices will come down, we’ll solve the problem. Why isn’t that working? What are the obstacles that you found in particular, in your reporting of Golden Gate?
Conor Dougherty: [00:05:42] I think one reason is that there are a lot of variables and people genuinely are concerned about you know, parking problems and trash problems and things like that. On top of that, there is, of course the people move to very wealthy neighborhoods or neighborhoods that are made up of people like them. The home prices generally reflect that and they are, and on top of that, they tend to have a uniformity to them, you know. And I think that people are sort of naturally kind of resistant to that change. I’ll give you a little example that I think is actually kind of indicative of, kind of the part of the book. One of the, the main characters of the book, if there is a main character, it’s this person, Sonya Trauss is this woman from Philadelphia and she’s kind of been a performance artist she’s, she went to, she has a master’s in economics, but she’s got a very performance-based background. She was in a parade troop and kind of in the underground art scene and stuff. And she of course goes, becomes this firebrand political activist, who goes to the San Francisco board of supervisors and tells people I’m from BARF, the Bay Area, Renters Federation, and ultimately ends up creating this whole thing called the YIMBY movement, the Yes In My Back Yard movement and eventually runs for office and, but she’s a very entertaining character. Sonya, I went to Sonya’s home in Philadelphia. This is like a three-story home in Philadelphia. Very large, very beautiful, suburban style home, I would say. I mean, it was a very big home, spacious home, single family home. And you open up the windows or open up the curtains and there’s a giant apartment building right through her childhood window and right catty-corner from that is, it’s about a four story, four or five story apartment building and catty-corner from that as of six or seven story, public housing project for senior housing and then as you walked down her block, there’s single family home and then there’s a school and then there’s kind of like a nursing facility and it’s, then there’s a very historic building that George Washington had lived in while he was president briefly during a yellow fever outbreak.
Kirk Willison: [00:08:010] That’s a mixed use community.
Conor Dougherty: [00:08:12] Well, so, but when she came to San Francisco work or when she goes to suburbs, as is illustrated in the book. People would say things to her like, well, what are you going to do? Build an apartment building next to a single family house. That would be so crazy. How would that look? And she would sort of say, yes! yes, you could do that. There’s no, there’s nothing that says you can’t do that. And what I thought was, so, what I thought it was so telling about those reactions is that she kind of only knew what she grew up with. And what she grew up with was that that works perfectly fine, right. But other people who grew up in a much more low-density neighborhood, it’s hard for them to imagine that something like that can work just because they’re used to seeing a kind of uniformity.
Kirk Willison: [00:09:00] Jonathan Reckford, the CEO of Habitat for Humanity International, he was our earlier Policy Cast guest. He says that one of the reasons that affordable housing gets short shrift is that all the influential people who have to make the decisions already have their own homes. You spoke a lot about the struggles that renters have trying to persuade policymakers in the community where they don’t live to create affordable housing for them and, and I wonder if you can elaborate a little bit on that.
Conor Dougherty: [00:09:33] The conflict that you sort of outlined that people who don’t live in a place are the victims of the place, not building people who don’t live in a place yet, or the victim in terms of the people who live there now kind of making difficult to grow and on top of that they’re not unable to vote there, so they have no influence over the process. If you go, if you really think about why that’s the case, it’s because our Metro areas, which really are our economic units, cities in their suburbs, are not, there is no San Francisco Bay area. There is San Francisco and Oakland and Berkeley and Cupertino and Palo Alto. There’s no Silicon Valley, there’s Santa Clara County, San Mateo County, Cupertino, Palo Alto, San Jose, Burlingame, right. And all of those places set a housing policy, but they’re not setting the housing policy for the region. And in fact, they’re actively undermining and they’re setting the housing policy for these cities of, in the case of San Francisco, a million people. But in many other cases, cities of 50, 75,000 people, right. And so we’re never thinking about this place as it actually operates, right. And I think that’s a problem. I think that’s a, a big reason why we’re not operating, that we’re not able to address these problems in a way that really reflects our true, how we actually work. I’ll give you an example. A lot of people have seen or Google imaged Apple’s new or relatively new now just a couple of years old, headquarters. And it’s a donut shaped, looks like a flying saucer kind of spaceship looking thing and I’ve been there, it’s an impressive building. That building is like the equivalent of a skyscraper. It’s not as tall as a skyscraper, it’s not that tall, it’s three or four stories tall, right. But if you look at the number of people who work in it, that is, if you were to stand it up, I mean, it, it is a, uh, it is, I don’t know exactly what it is, but it’s a million or millions square feet of office space, right. So it is, it is functionally a skyscraper. This is in a town of, I think, I don’t know what Cupertino is, let’s say it’s 70,000 people give or take. Maybe it’s 55,000. I don’t know. Should we Google this? Let’s do it. So this is in a town of 60,000 people, and this is this massive office building in a town of 60,000 people, right. And they’ve built no housing to address this massive creation of office space. Now the people in Cupertino, it’s fascinating, you can go look this up. There’s a YouTube video where Steve Jobs himself goes down and makes the final presentation. Obviously, at this point it’s been through various committees and whatnot, but to get final approval for this building and the city council, they asked him every right question. They go, well, what about traffic? What about affordable housing, they ask all these questions and then, you know, after basically paying lip service, these questions, they go and allow for the creation of this giant office building, right. So they have now created this massive demand for, you know, obviously Apple was already there, but you know, this increased demand for, you know, for roads and housing and you know, all these things, but they’re not addressing it and their basic attitude is, oh, well, you know, someone else will address it, Sunnyvale, address it, or somebody else will address it. And they are, they are not acting, they are acting like they are this town of 60,000 people. But of course, it’s preposterous that there a town of 60,000 people, they are a town of 60,000 people in the middle of this, you know, 10-million-person region that has an Apples, $2 trillion company, right. You know, $2 trillion companies do not end up in towns of 60,000 people, they end up in regions with millions of people, right. So if you just look at the way they made that decision and multiply it by all the little cities around the country, in all the big Metro areas around the country, you can sort of see how we’re not thinking about ourselves, we’re not thinking about our housing problem in the way we should be thinking about it. But I will tell you what has happened, in California, there is a very arcane, wonky process that basically, it’s called the Reasonable Regional Housing Needs Allocation, people call it RRHNA. But the basic gist is they tell cities here’s how much housing you should be building and, based on your growth and your jobs and all that sort of stuff. And up until recently, the way that process has work is cities have just gone and great and they ignored it, right. But there’ve been numerous efforts notably in the state legislature to sort of make that process have teeth and essentially take away power from city councils to make their own land use decisions if they do not meet these goals. And so that’s the just of it is, here’s the housing you need to build and plan for and permit and we give you local government, because we do think it’s appropriate that you make the, the decisions. You can plan for how you want to build, where you want to build, what corridors you want to build on. You can design some neighborhoods is intensive, others as less intensive. You know, there’s still a ton of flexibility for you to decide the fate of your city in whatever way you decide in whatever course you think is appropriate, but you have to plan for this housing somewhere. And if you fail to, we’re going to take that power away. So, I think something like that make some sense and I think if a mayor or someone is in a position where they sort of say, this is how much housing we have to build, this is, and so our plan, the plan that we’re going to have a civic debate over is where and how we build that. And people understand that those are the terms of the debate that just out saying no, let’s plan for no housing, is no longer part of the terms of the debate. I think over time that actually as that starts to sink in and people kind of get used to it, it’s actually might make the politics a little easier because you know, as time goes on when people kind of don’t know what they’ve lost.
Kirk Willison: [00:16:44] Let’s move on and chat a little bit about some of the other issues you talked about, social equity, social justice type of issues. There’s a word, that gets played an awful lot as we think about changing cities and, and that is gentrification. Now there’s a lot of cities, particularly in the, in the rust belt and, and areas in the, in the middle of the country that would love more gentrification, you know, it would bring a little more prosperity and it would bring new businesses and new culture. However, in the thriving environments, the thriving cities, the challenge and attention seems to be over gentrification versus displacement. And how is the Bay area trying to solve that issue?
Conor Dougherty: [00:17:33] So gentrification is a really complicated thing and I’ll tell you why, there’s two layers to it. One layer is the economic layer that you’re discussing. Can we have gentrification without displacement, and we’ll get to that in a second. The next layer is more about race and power and how it works in America. You know, there’s a guy in the book I profiled, Damian Goodman, who lives in a predominantly African-American neighborhood called Leimert park in Los Angeles. This neighborhood is very historically, first off, it’s just a wonderful neighborhood, it’s got these beautiful homes, these like nice retail strips. A lot of the things that you would consider desirable about a neighborhood, it has those things. But Leimert park, you know, African-Americans in LA were kind of pushed into Watts where the housing was much more crowded, less the California dream that many, everybody of all races moved out to California for at that time. And as kind of civil rights, you know, as kind of discrimination sort of eased a little, I don’t know what the right word is. Obviously we still have it today, but, you know, as, the city sort of, as African-Americans moved more around the city, Leimert park and West Adams and the neighborhoods around there became very significant neighborhoods from middle-class, middle-class and even like, kind of upper-middle-class people, professionals, African-American professionals, and it became a really nice neighborhood, a stable middle-class neighborhood and for the particular people who moved, originally moved there became a neighborhood that represented them finally getting a piece of the California dream that to that point had been denied. So this is obviously a particular history and Damien, you know, he has a lot of pride and a lot of interest in maintaining that history and maintaining it as a solidly, you know, a very, prosperous is the wrong word, but a very solidly middle-class neighborhood. And I mean, it’s kind of a weird neighborhood because if you look at the income for the neighborhood, it’s actually fairly low, but there’s a lot of very, very well-to-do people who live there, entertainers, whatever, so, it’s kind of this mix, but my point is, is that his conception of gentrification is very much tied around the identity of the neighborhood as a predominantly black and black owned neighborhood, a lot of black businesses, whatever. So his view of gentrification though, economics plays deeply into it. I don’t think he would be okay with it becoming a 10% black neighborhood and, but there’s no displacement, right? So, so that layer of it is there. In the mission in San Francisco, which is about a 50% Latino, it’s a Latino neighborhood, but it’s never been more than 50%, but, you know, the same issue comes up, you know, people, so I think there’s a kind of cultural security in certain neighborhoods. And so I think in that case, that layer will always be there in certain neighborhoods.
Kirk Willison: [00:21:05] You mentioned COVID and since the book has been written, there’s been a pandemic and we’ve seen some kind of odd things. We’ve seen a housing boom, prices are soaring and of course the people who are hurt the most in that case are the lower income people, people already, who are living in difficult neighborhoods and, you know, the quickest way to wealth in this country is actually through home ownership. So these people are falling further and further behind, but I’m wondering if now there’s a couple of things going on that might balance it. Companies are beginning to flee California and going to lower cost areas and their workers are going with them. And at the same time, because of the pandemic, there are people who are deciding to move out of their homes in the cities and moved to the suburbs and move to rural areas and work from home. And do you think the combination of the two will provide a bit more of a balance and maybe create housing where it hasn’t existed in a word?
Conor Dougherty: [00:22:05] In a word, no. First off companies have been moving jobs out of California for a long time, right. And the places that they have, and for the most part, these have been middle-class jobs, right. You know, like Yelp move its entire sales operation, so sales is not, you know, it’s not customer service, but it’s, you know, people who make somewhere between $55 and $85,000 a year to Phoenix or Scottsdale, but Phoenix area, and all sorts of companies have been doing that for a long time. Phoenix, Boise, to a lesser extent, Salt Lake City, since the seventies. Intel was moving jobs up to Portland and whatnot quite a long time ago. So this is, this is part of, you know, this is part of the natural cycle of how companies mature, you know, at the beginning of a life cycle of a company, they have everything near them because they’re kind of like trying to figure it out. And as a company becomes bigger and more segmented and more specialized, they get comfortable moving things to lower cost areas because they feel like they have enough control over the process that they can basically do it remotely or with like management on the ground, right, you know. But when you’re in a startup and you have a, you know, you want your sales staff right next to you, so you can go walk over to them. So that’s part of the natural cycle. Now there are other companies moving higher end jobs out of the state, right, but let’s just look at where they’re moving. Facebook’s biggest office out to the Bay area is Seattle, have you been to Seattle? It doesn’t look like they have housing figured out much better than California does. When I look at, and I’m writing a piece about this right now that will be out by the time this posts, that is sort of about like, just go look at the places where that are growing, that are the beneficiaries of these work from home trends, right. All of them had a pretty significant housing problem already and it’s only going to get worse if they don’t, if they don’t start addressing it now, the good news is around the country, cities are sort of rethinking single family zoning. I live in a neighborhood in Oakland called Rock Ridge. I’m actually kind of getting a little bit bullish on these accessory dwelling units, which are these like backyard cottage units, because there are three building built on my block right now. Nobody has peeped at all. If somebody was trying to build a triplex on my block, it would be bedlam. I mean, there would just be, you know, city council meetings and, you know, all sorts of stuff, right. And we just kind of are quietly, now not all of those units are going to be rented. We’ll see how it goes, but that housing stock is, is there now. And it will have, it is possible for it to have some kind of life like that. It’s possible the ownership it chopped up some day and one person I live in the back and, you know, there’s all sorts of different possibilities there and so I think we kind of need everything. And I think that’s hopefully what people are doing. Sacramento is on the cusp of making it possible to build four units on any lot in the city. And so I think, and I’m not saying zoning is everything, but I am saying that we do have a pretty significant housing shortage, I mean, you can go, I have spent a lot of time with lower income workers and they are doubled and tripled up. Even through the pandemic, even as rents have fallen or they can see rate in affordable housing class C buildings, which is like a kind of a lower end, is flat. So, you know, we have a huge problem, with the actual just number of units. And, you know, like I said, I mean, revisiting public housing and all these other things are also good ideas.
Kirk Willison: [00:26:07] Well, one of the interesting things you had in the, in the book though, was about some of the technology innovations that are going in the factory-built homes, the actually building in a factory and then transporting that on the sites and it seems like a terrific idea. I guess some of the obstacles are the factory has to be relatively close to where the home is going to be because the cost of transit would be pretty high for that. And as you point out, if there’s a recession and the factory isn’t being used, it fails. Is there some hope that 3D technologies, factory-built homes can begin to solve some of these issues?
Conor Dougherty: [00:26:47] Yes, I’m very, I don’t know if bullish is the right word, but I’m optimistic and really, I’m just happy that people are tinkering around with this problem. So much of our, I’m going to go on a minor soap box here, but so much of what we’ve done with technology over the past couple, two decades has really just revolved around selling ads on the internet. And, you know, obviously we have a lot more information at our fingertips and that’s been great and I guess it’s, we sell ads slightly more efficiently now, so that’s good for small businesses and other people, right. But it doesn’t feel, and the data bears this out, that we really made huge strides in productivity. Now this is kind of a wonky concept, but productivity is a measure of output per hours worked. Let’s just not get caught up in the economic definition of the, let’s just sort of say what we all know, which is that all of human progress, lifespan and other things, has been in some way tied to us figuring out how to get a machine or an animal in the case of the plow, you know, to do more work, to do work for us. And that gives us leisure time and it makes it possible for us to have our wages, you know, our wellbeing, our, what we can buy with our labor, right, go up faster than inflation. Okay, so, housing has absolutely horrible productivity. We are no better at building housing then we were say 50 years ago, right. And that’s just not true for anything else. You know, we, you know, for all the talk about how manufacturing has left the United States, we manufacture more stuff now than we ever have, we just have fewer workers doing it, right. So, there was a tremendous opportunity to make the actual building of housing much, much, much cheaper. And so whenever I see something that there’s been very little productivity in the industry, I think to myself, well that’s at least a good opportunity. I’m not saying, you know, I’m not some industrial whiz, it doesn’t mean it can be done, but it does mean it’s worth it, it’s good that people are trying, you know. So, I’m just really happy to see people pouring money into a problem that if they make any progress on it, it will just have like a tremendous benefit to us, which again, soap box, just feels more essential, more good for us than another social media app, there’s a whole chapter on this factory in the book. Many of the people who worked there were working at like, you know, restaurants before, you know, making say $15 an hour and now they can make close to 40, probably a bit more as they kind of work up at they’re union jobs, you know, I’m not, you know, it’s not like it’s, you know, Walmart or whatever, right. I mean, this is a union factory. So, I just think that this is a, an opportunity for something, I’m not here to sort of say, these people will save us because they won’t, you still have land costs and other things, these businesses may turn out to be, you know, more sizzle than steak and I’m not here to be an evangelist for it, like I said, but I am here to say I’m really happy that people are trying to solve this problem and that we have capital and investment going into this instead of other things.
Kirk Willison: [00:30:27] Last question you followed a couple of stories in the end of the book about Minneapolis, the neighbors for neighbors, more neighbors, and successfully changing the zoning structure there so that it would prevent single family only zoning, and then the state of Oregon followed the same way are these stories that you’re going to be following to see whether they’re successful or not. And do you think that they really have a chance to, uh, to be models for the rest of the country?
Conor Dougherty: [00:31:00] Yeah, I will keep following, you know, it’s funny, you should say that because I tried to start following the Minneapolis thing a little while ago and I just, I mean, obviously now we have George Floyd and all these other things on top of that, but it does take time, you know, I talked to developer who was trying to do the triplex thing and he, you know, was like, we’re just like not there yet, you know. So, yeah, I’ll be following that. I don’t, you know, I will always probably follow housing a little bit, but I don’t know that I want to like condemn myself to it for the rest of my life, you know, like I’ve written this book. I will always be interested in it. But I’m, I’m really just interested in housing as a lens into cities and how we operate. And one of the things I like about this subject is it’s so nonpartisan and what I mean by non-partisan is I don’t mean that in some, Oh, let’s find the middle, everyone’s so happy kind of way. I mean, it, that nobody knows what to make of it. It really forces people to ask very hard questions about how they’re going to develop and how they’re going to live and how they’re going to make their economy work. I mean, you go to these, again, go to a place like Boise, not a town that a lot of people think of, but it’s a great American city, very prosperous city. They’ve a number of corporations there. And they are a very conservative place and they’re having as hard of a time dealing with this as California is. Cause it’s just not, and one of the things I love about housing is you’ll hear people. I mean, people are hypocrites, right. Like, you’ll hear San Franciscans say, Oh, I want affordable housing, but don’t build near me. You will hear people in suburbs of Texas, say I’m all for property rights, but pass as many rules as possible to make sure that nobody can do anything with their property near me, you know, everyone is kind of schizophrenic. And I, and I don’t think it’s, I don’t think it’s actually hypocrisy. I think it’s that, this is just, there is no ideological lens through which you can kind of easily solve this problem. We have to figure out how to live next to each other. We have to figure out how to live, you know, in an economy that, that is prosperous for all. And even, and I don’t even mean that in a kind of ideal, in a vision statement way. I just mean like, Unless you’re going to like cook all your own meals and, you know, educate your kids and farm your own food, we’re going to have to have an economy where people are doing different kinds of labor, and they’re going to get paid different wages and figuring out how to get them all near each other so then we can operate as a nation that will move forward and become hopefully more prosperous. We’re going to have to figure that out. And it turns out that figuring that out is just as difficult in a red state, as a blue state.
Kirk Willison: [00:34:06] Connor, really thank you very much for the time.
Conor Dougherty: [00:34:08] Thank you so much.