#5: Busting the myths and spin about displacement

Displacement shibboleths dismantled

October 23, 2019

Let's start with the basics: It is unacceptable that we cannot free our housing markets to let low income people obtain and keep decent housing. In a properly functioning free market, nobody who is working would struggle to keep the lights on and stay ahead of the rent. Eviction, and the life that comes with it, is a cause of poverty, not an effect.  

Free marketeers believe that the  cause of our housing crisis is generations of misguided, anti-market zoning as well as overzealous land-use regulations.They believe that first step in solving the crisis is not to double down on more regulatory burdens, but rather to roll back the policies that caused the crisis in the first place.  

The recent forum at City Hall highlighted how the displacement debate is rife with myths and inaccurate perceptions. These misguided concepts hamper a clear-eyed discussion about the problem. Here are six concepts to help guide a thoughtful debate.

#1: Gentrification, displacement, and eviction are not the same thing. Gentrification refers to higher-income people moving into historically lower-income areas, and in doing so potentially raising the cost of some of the neighborhood’s property. This phenomenon also has the potential to bring improvements to the neighborhood (see this previous Opportunity Now article). Displacement refers to an increase in rental costs that are above the affordability threshold of current renters, prompting them to seek new housing. That new housing could be in the same building, down the street, or in a totally different city.  Eviction is when a landlord forcibly ejects a tenant for non-payment of rent. 

#2: Not all low-income people are at risk of displacement spurred by new development. Given the snail's pace at which new development occurs in Silicon Valley, the vast majority of low income residents will be unaffected by near-term changes. While they may be "at risk" in a formal sense, the risk is slight. A handful of pricey high rises in downtown San Jose will have negligible impact on the overall market. Additionally, lower-cost new development can create a more benign type of displacement, by creating newer, better, and more dense low-cost housing in the same neighborhoods residents currently live.  This holds true to displacement in transit corridors as well, as new development in those corridors could well be an improvement--costwise and qualitywise--to current housing.

#3: Building a wall around San Jose is an unfair strategy. Opposing new development and protecting the existing flawed housing marketplace hurts people who want to come to San Jose by keeping supply limited and overpriced.  This is an example of "Drawbridge Economics," in which newcomers (often immigrants) are penalized and existing residents get sweetheart deals.  The proposed commercial linkage fees are a classic example of this mistake, as new businesses are penalized for a problem they are not responsible for, i.e. the housing shortage.

#4: Rent control is a bust, and everybody knows it. Read this previous article for information on how there is a broad consensus among economists and city planners that rent control simply makes the housing crisis worse by increasing real prices and disincenting new development. 

#5: Median incomes in San Jose are rising faster than other parts of the Bay Area, broadly keeping pace with rent increases. Data from the San Jose Mercury News on 5.19.2019 says: "In the San Jose area, from 2008-2017, which includes Palo Alto and Milpitas...the poorest 25% had on average 12% higher incomes and 13% higher housing costs." This parity is not true for the San Francisco metro area, which saw the poorest 25% experience only 8% income rise, and 24% housing rise.

#6. The problem is radically limited growth; the solution is radically more growth.  As Kim Walesh, director of the Office of Economic Development puts it: “San Jose has always been changing and it will continue to change. Growth that is more inclusive is more sustainable over time.” As a result, anything that gets in the way of creating more housing is off-strategy and an added contributor to the problem.  

--by Christopher Escher, co-founder of Opportunity Now

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