☆ Why SJ's anti-displacement rules = Modern Redlining
Image by Associated Press
Not so fast. Last week, SJ's City Council unanimously passed a so-called "Tenant Preference" policy that privileges a subset of local residents in what the city deems "High Displacement" areas with special access to subsidized, city-funded affordable housing. Scott Beyer of the Market Urbanism Report looks deeper and finds that the good intentions may be misguided, and that rules like these for affordable housing actually perpetuate ghettoization. An Opp Now Exclusive.
There’s a mindset, common in liberal cities like San Jose, that improving and building housing in low-income neighborhoods harms current residents. Because it makes the neighborhood more desirable, the logic goes, home prices rise to the point residents are displaced for higher-income ones. This “gentrification” is real in high-cost cities, and avoiding it motivated Mayor Mahan’s call -- recently approved unanimously by council -- for a new “tenant preference” regulation for city-subsidized projects. But such laws could perpetuate another dynamic that harms the poor: isolating them into low-quality neighborhoods without offering chances to get out.
The Mercury-News writes that under the law, which was passed March 26, “20% of affordable apartments in new city-funded properties will be reserved for lower-income applicants living in ‘high-displacement’ areas. Additionally, 15% of affordable apartments will be set aside for lower-income applicants living within the same City Council district as the available affordable housing units.” The regulation is supported by local activists and SB 649, which was authored by San Jose’s state Senator Dave Cortese and passed in 2022. SB 649 is a self-styled anti-displacement bill that blames new real estate development for gentrification, and bakes in tenant protections to combat that. The city’s 2020 anti-displacement strategy also included support for tenant preference rules, showing the political momentum that led to this recent law.
Other California municipalities, including San Francisco, Berkeley, and National City (a San Diego suburb), have implemented tenant preference programs for public or subsidized home construction. Austin also has such rules, including within a community land trust for affordable housing; applicants who had been displaced or who had displaced relatives are given preferential placement. New York City has had tenant preference regulations in place since the 1980s, according to Shelterforce.
San Jose housing authorities find neighborhoods at high risk of displacement using a UC-Berkeley model that tracks areas with low median incomes. In San Jose, this will include wide swaths of the north and east side. Perhaps the policy would be more effective if it targeted more specific sub-locales, but even that would be questionable, since the whole idea of tying affordable housing to an anti-displacement agenda is flawed.
To be sure, forced relocation is disruptive for low-income residents. But as with any attempt by governments to reverse-engineer past policies, this one could have unintended consequences.
Let’s start with how these areas became “low-income” to begin with. Like many U.S. cities during the early- to mid-20th century, San Jose was divided up by municipal authorities and financial institutions into categories based ostensibly on their lending risk level. In practice, the categories were informed by racial bigotry, and led to minority neighborhoods receiving less investment. This practice, called “redlining,” caused the areas to deteriorate over the decades. Restrictive zoning also reinforced racial and class segregation by discouraging those within the redlined areas from being able to move to different ones.
Old redlining maps in San Jose, compiled by blogger Josh Begley, show that many of the ones derogatively rated “Third Grade” and “Fourth Grade” in the 1930s are the same ones considered “high risk” by this new anti-displacement law.
Legal mandates aimed at keeping existing residents in these neighborhoods and keeping new entrants out (for fear of gentrification) continues such segregation. Studies find that this sort of concentrated poverty “[magnifies] other challenges, such as crime, the movement of middle-class residents to better neighborhoods, and a perpetual shortage of finance capital, stores, employment opportunities, and institutional resources,” notes the Department of Housing and Urban Development. The intent of tenant preference is different from redlining, but the impact is the same. It’s like a 20th-century style of exclusion made acceptable for modern times because it’s couched in today’s social justice rhetoric. Aspiring new entrants into a neighborhood are kept from affordable housing on the basis that they’re new; while longtime residents who may wish to leave a subpar neighborhood are discouraged from doing so.
For this reason, some tenant preference rules have run afoul of the Fair Housing Act, a federal law which seeks to prohibit housing discrimination. The law's “disparate impact” clause means that even policies that demonstrably don't have a discriminatory intent nonetheless must be reversed if they lead to discriminatory outcomes. New York City altered its policy after a lawsuit charged that it unfairly biased unit allocation against new entrants. San Jose’s website on tenant preference says that its policies would aim to be compliant with the law, but time will tell.
The tenant preference law is yet another case where the technocratic left brings its micro-managerial mindset to public policy. The criteria must fit specific percentages - in this case, 15% and 20% - and revolve around navel-gazing about income, location, etc. Every action and counter-action seems to bring the risk of a lawsuit.
Meantime, it turns out life and human preference are more complex, and that’s where market mechanisms would better fit. The best way for San Jose to curb displacement is by loosening zoning and other regulations to allow more housing citywide - something we’ve advocated for at length at ONSV. But even affordable housing policy, specifically, can have a more market focus. For example, San Clara County could, in lieu of subsidizing expensive affordable units, expand its existing voucher program. San Jose could do something similar, issuing subsidies that are tied in no way to location. That would let people shop the rental market for the units that best fit them, in neighborhoods they prefer. They might not pick the same accommodations at the exact percentages that local politicians prefer, but that is okay.
This article featured additional reporting from Market Urbanist content staffer Ethan Finlan.
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