San Francisco is about to vote on Proposition C, a measure that would increase the affordable-housing requirement for "new developments from 12 percent to 25 percent." This sounds like a good thing, but as City Lab reports, there are a number of groups and politicians who are worried that the sharp increase might bring development in the housing market to a standstill. Why? City Lab:
...developers could find that—given the costs of land and construction in San Francisco and the requirements to preserve 25 percent for below-market uses—investors will simply refuse to fund residential projects going forwardIt seems, they are only happy when nearly 90 percent of what they build is sold at the market rate of one of the most expensive cities in the world. 75 percent will not cut it. They may instead focus on developing commercial buildings and hotels.
Two things. One: This possibility (that developers may freeze if they have to build too many affordable houses) can not be predicated by the standard economic model that most urbanists unknowingly use—unknowingly because that model is based on a form of economics that, through its dominate position in the press and universities, made everyone believe that it, and it alone, is economics, viz. the neoclassical model. The thinking of the influential urbanist economist Edward Glaeser is neoclassical from top to bottom (he received his education from the University of Chicago and actually believes that human capital plays a central role in American inequality). It is for this reason economics is not mentioned at all in his book Triumph of the City. Neoclassical theory sees itself as a glass on economic reality. But a heterdox view of economics would see that our entire society has been financialized, and this condition is by no means neutral. It has real and frequently negative effects and determines what is and what is not made, bought or sold. It places pressure on developers, who for the most part must borrow to build.
A heterdox economic view would better see that Proposition C has the real chance of imploding because housing, under the current condition, is not strictly about supply and demand but about leverage, interest rates, spreads, stock indices, and yield-hungry surplus capital. All of these financial features exert a big force on the present at the cost of what can only reward investments on affordable housing, the future.
On a more philosophical tip, yet very much not in the clouds but on the streets of a city, two: Affordable housing so far has only meant housing for those who are in the middle class. It has not been about those who may or may not work. We are not building houses for people who work only occasionally or not at all. We live in a society that is taught to believe that everyone can find work. This belief does not correspond with reality. Millions in our cities will never work regularly (and this is not including those who are locked up or are mentally ill). The number of men and women in this tough but standard situation can be expected to increase in the near future. (Read my posts on self-checkout machines.)
Let me take you back to 1956. That year, which was wonderful for middle-class white Americans, Günther Anders and bad for the finance class, a leading social and technology critic of his times, publishes The Obsolescence of Man, Volume I:. That book contains this very interesting passage, which looks forward to what has become our present situation:
And even now I can see our great-grandchildren: shepherds of automation and unemployed, who will look back on the good old days of assembly line work, despite the fact that the latter consists exclusively of dehumanizing and Chaplinesque gestures, because it still contained a minimum of doing something...We now live in a society were many are condemned to doing nothing. Redundancy is no longer exceptional. Yet, we have no housing plans whatsoever for this growing class of people. When we talk about affordable housing, we are only talking about a form of housing that's affordable to those who have regular work that pays reasonably well. This group is above the bottom 50 percent of our society.
To get a sense of how bad the situation is, think of this: Housing activists in San Francisco worked really hard to get developers to include just over 10 percent of that kind of housing, affordable, into their projects. This achievement was considered a great success. Now many fear that 25 percent will push developers over the edge. The financial world is not the real world.