I caught an interesting side discussion over the weekend between two of our commenters. One of them commented that while San Francisco, for example, has generated a tremendous amount of wealth, one reason that it has helped the wealthy rather than the average person is the lack of housing – especially affordable housing.
In fact, some of the data put out by Greater Sacramento bears this out. The cost of living index measures relative price levels for consumer goods and services. They set the national average at 100.
Sacramento rates a 127.5, slightly above the national average. San Francisco on the other hand, rates at 304.7 – three times the national average.
The wealth is there for San Francisco – $104,880 in terms of median income, but the cost of housing prices even people making nearly twice that out of the market. The median home price in San Francisco is a whopping $1.6 million, topping San Jose’s $1.275 million and Los Angeles’ relatively pedestrian $650,000.
According to a Vox article, “the median down payment needed was around $250,000 last year.” On the other hand, in a report by the California Association of Realtors, they found a prospective buyer would need an income of nearly $350,000 to buy in San Francisco or San Mateo counties.
One of the commenters argued that this is a housing supply problem. It is primarily a jobs-to-housing imbalance. Thirty-five to 1 is the ratio of new jobs to housing units in the Bay Area, according to a MTC report in September.
CBS in San Francisco writes, “Much of the housing crunch has been blamed on housing construction not keeping up with job creation.”
They note: “On the Peninsula, the housing / jobs imbalance is even worse. A report by the San Mateo Housing Leadership Council found San Mateo County added 72,000 jobs in the first half of the decade, but permitted the construction of less than 4,000 housing units, a ratio of 19 jobs for one new home.”
In 2018, things actually got worse with construction on new homes in San Francisco dropping 41 percent.
The bottom line here is San Francisco has plenty of wealth with a very high median income – in some surveys it is the wealthiest city in the nation, but without the housing-jobs balance, it harms the quality of life for people attempting to live there. With enough housing, San Francisco would be a booming community. Instead, it is a community where, increasingly, no one but the very rich can live.
This is a lesson for Davis as well. Davis is a community that has a lot of jobs, especially through UC Davis. But, increasingly, people who work in Davis have to commute from elsewhere to get to work. That’s one reason why University Research Park’s first project after Fulcrum purchased the research park was to propose workforce housing. It is a key reason why expansion of the downtown contains a mixed-use proposal and the primary reason why ARC (Aggie Research Campus) also has a housing component.
Creating jobs without the housing in the Silicon Valley and elsewhere is leading to a huge imbalance in the jobs-housing balance, which is fueling the housing crisis.
There is another imbalance that has been raised that is also important. In San Francisco, they have added jobs, they have thriving economic development, and yet they have a deficit.
In Davis, we have proposed as one plank of the fiscal solution to generate more revenue from economic development and various taxes.
In the last few years the city has added revenue from the cannabis industry – one hotel is about to open while another has just broken ground, and the city is also looking at economic development.
Meanwhile, the city is looking to renew its sales tax measure permanently because of budget shortfalls and, even with that tax measure, the city is still about $8 to $10 million short on the revenue needed to maintain parks, greenbelts, city buildings, bike paths, sides walks and road pavement.
But, as many communities that generate far more per capita in terms of retail sales and taxes will attest, it is not sufficient to merely generate more income. What we need at the same time is cost containment.
From 2004 to 2008, the city of Davis experienced double-digit percentage increases in property taxes. And yet, the fiscal situation worsened because the city turned around and gave city employees huge total compensation increases. The result was that when the real estate market collapsed, the city was in fiscal difficulty – a situation that it has never emerged from over the following decade.
The city has had to cut its workforce by 25 percent permanently, it needed a sales tax increase, and it has maintained a backlog of infrastructure needs that it simply has not been able to fund.
As Robb Davis put it in 2017: “Our inability, given current revenue, to pay for the maintenance and replacement of critical city infrastructure is a weakness. Over the past 15 years, total general fund revenue has grown by 95 percent while general fund expenditures have grown by 92 percent. Revenue appears to have kept pace with expenditures. However, when we dig into the expenditures — or rather what is not in the expenditures — we see that the picture is not positive.”
The reality is that we need to grow revenue through taxes and economic development, but that is not enough. Without balance, we end up falling further behind – our revenue grows, but our costs increase even more.
In order to see the benefits of economic development, then, we need to do two things to keep the balance. First, we need to maintain the housing-jobs balance so that we do not end up like the Silicon Valley, generating huge amounts of jobs with no place for people to live (or no place they can afford to live).
Second, in order for the fiscal condition to improve, the city must not only generate revenue, but contain costs.
—David M. Greenwald reporting