Expert: SJ City Council/Housing Dept's misguided giveaway to local nonprofit based on bogus assumptions about "displacement"
Image by Wikimedia Commons
SJ's new Housing Director Eric Soliván and a unanimous (!) SJ City Council raised eyebrows recently when they gifted a local nonprofit known for assaulting employees of local business groups with a cool $5m to help buy properties in ESJ. Soliván/Council claimed that the scheme would block new development on the property and thus ease worries about neighborhood “displacement.” Only problem? The logic is all wrong, says SF housing expert Kate Pennington, who notes that data says new development actually helps alleviate overall displacement and rent hikes in affected neighborhoods.
San Francisco is gentrifying rapidly as an influx of high-income newcomers drives up housing prices and displaces lower-income longtime residents. In theory, increasing the supply of housing should mitigate increases in rents. However, new construction could also increase demand for nearby housing by improving neighborhood quality. The net impact on nearby rents depends on the relative sizes of these supply and demand effects.
This paper identifies the causal impact of new construction on nearby rents, displacement, and gentrification by exploiting random variation in the location of new construction induced by serious building fires. I combine parcel-level data on new construction with an original dataset of historic Craigslist rents and panel data on individual migration history to test the impact of proximity to new construction.
I find that rents fall by 2% for parcels within 100m of new construction. Renters' risk of being displaced to a lower-income neighborhood falls by 17%. Both effects decay linearly to zero within 1.5km. Next, I show evidence of a hyperlocal demand effect, with building renovations and business turnover spiking and then returning to zero after 100m. I find that gentrification follows the pattern of this demand effect: parcels within 100m of new construction are 2.5 percentage points (29.5%) more likely to experience a net increase in richer residents. Affordable housing and endogenous construction do not affect displacement or gentrification. These findings suggest that increasing the supply of market rate housing has beneficial spillover effects for incumbent residents, reducing rents and displacement pressures while improving neighborhood quality.
Read the whole thing here.
Follow Opportunity Now on Twitter @svopportunity
Opp Now enthusiastically welcomes smart, thoughtful, fair-minded, well-written comments from our readers. But be advised: we have zero interest in posting rants, ad hominems, poorly-argued screeds, transparently partisan yack, or the hateful name-calling often seen on other local websites. So if you've got a great idea that will add to the conversation, please send it in. If you're trolling or shilling for a candidate or initiative, forget it.