How did our regional housing supply get so out of balance and how does that impact our cities?
Biotech (high-tech, and AI) are quickly replacing more traditional industries which have historically supported lower-income jobs in the region’s cities.
Many of the new biotech, high-tech and AI employees earn higher incomes. This puts upward pressure on home prices and rents by increasing the supply vs. demand imbalance. This enables regional housing developers and owners to increase the prices they charge to either buy or rent housing because housing demand exceeds housing supply. It also increases competitive bidding for housing which allows higher-income families to outbid lower-income families.
This creates a mismatch with jobs/housing fit (where the majority of employees have high enough income to afford the housing available in their community). This leads to an exodus of lower-income residents because they are either losing their jobs in traditional industry or can’t afford higher rents.
But (here’s the quandary) many of those higher-paying jobs are supported by lower-income workers such as teachers, health care workers, janitors, bus drivers, restaurant workers, gardeners, etc. who should be able to live in the community they serve. Yet they are being pushed out of their communities and forced to commute in from more distant, more affordable areas.
In fact it may be even more critical for lower-income workers to live in the community where they work because they must show up for work every day while higher-income employees may be able to work from home two or three days a week. This is especially important for emergency response workers such as firefighters, police and utility workers such as city public works and PG&E crews.
Also, many of these new high-tech employees (both lower and higher income) are not looking for homes within the city where they work because the local supply is not adequate to meet their need. Instead, they are commuting in from outside adding to traffic woes and increasing air pollution.
This puts pressure on surrounding cities to meet the housing demands of their neighbors without getting the tax benefits from the companies producing the housing demand in the first place. In short, they are outsourcing their regional housing responsibility onto other cities.
Approving more high-tech, biotech, AI industries in a city may increase revenue to the city from commercial property taxes and businesses taxes, but it drives up housing cost and worsens a city’s ability to provide a balance of housing choices for both higher-income and lower-income local employees.
The most effective way to regain a regional jobs/housing balance is for all the region’s cities to limit the number of new commercial projects they are approving (which bring in new jobs) while simultaneously providing incentives for, and reducing city impediments to the development of new housing to meet the shelter needs of those new employees.
The state has passed many recent laws that are intended to encourage the approval of new housing statewide to offset what is now calculated to be close to a need for up to 3 million new housing units statewide in the next 10 years just to catch up with the ever expanding addition of new jobs in the state.
One of the most effective ways to accomplish this is to have the state revise the tax code to eliminate the tax incentives for commercial over housing development in our cities, but Sacramento seems unable to act on this issue, and as long as the tax incentives are there, the cities will continue to approve new commercial development over housing and only grudgingly approve new housing when forced to by the state. It’s a shame our cities seem to have lost the understanding that a sustainable community can only exist if there is a viable jobs/housing fit (where the majority of employees have high enough income to afford the housing available in their city).
The closer the region can come to a true jobs/housing fit, the huge income disparity that currently exists in the Bay Area will become less of an issue as all income levels will be able to access a choice of places to live which will then allow them to work, shop and contribute to the social fabric of the community where they live.