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What we mean when we talk about "affordable housing"

Artist rendering of proposed affordable housing complex by architect Mike Pyatok.


'When we say “affordable housing” we're actually using a precisely defined concept. "Affordable", in this context, means housing that costs no more than 30 percent of a household’s income.

Here in the Bay Area, almost half of us are living in housing we can’t, by this definition, "afford". It's become so common, it's easy to lose sight of the fact that the economy didn’t used to work this way.

The rising cost of housing in relation to wages, it turns out, is a symptom of the widening income gap. Take, for example, Mike Pyatok's description of growing up in Brooklyn in the 1950s. Pyatok is an architect based in Oakland who's been nationally recognized for the affordable housing he’s designed. He says it was different back then for families that didn’t have a whole lot of money.

Pyatok grew up in a single parent household, in a rent controlled apartment. His mother earned minimum wage, which, at the time was a dollar an hour. This meant she earned $40 per week, or $160 per month. Meanwhile, the rent was only $40 per month. Therefore, it was never more than 25% of their income.

"It was an incredible neighborhood," says Pyatok. "At the time no one there thought of ourselves as being poor."  

Fifty years ago, one person’s minimum wage was enough money to keep a family in stable housing.

What lower incomes pay can pay for today

Here's a corresponding present day scenario: Say you have a job in food prep that pays $10-11/hour, and you’re renting a one bedroom apartment in the East Bay for a little over $1,000/month (which would be a find in this housing market). In order to spend no more than 30% of your income on housing you would have to work a 92-hour week, rather than the standard 40.

So how do people manage? According to the former director of Oakland’s Housing Policy and Programs Department, we’ve got multiple families crowded into single units. People with full time jobs living paycheck to paycheck, living in debt. Firefighters, school teachers, the people that make up the heart of the middle class. And, ultimately we see a lot of displacement.

San Francisco has the biggest wealth gap in the country. That's why it also has the toughest housing market. When there’s such a big divergence in what wealthy people are making and what everyone else is making, the prices of housing get further out of reach. The market just won’t supply workforce housing when there’s so much demand for luxury, expensive housing. It won't, because it’s not as lucrative for developers.

That’s where the government steps in with subsidies. By subsidizing housing, developers will build and make their profits, but people who can’t afford that housing stock get helped out. Mike Pyatok says that helps keep expensive regions in balance.

He points out that when a household receives housing subsidies, they are able to support themselves on lower salaries.

"Businesses are happy because they don’t get forced to raise salaries to compete with the runaway housing prices," says Pyatok. "In a sense, housing subsidies are an indirect business subsidy."

When people are spending 70-80% of their income on housing, he adds, the rest of the economy is losing out on its ability to fuel it.

In order to maintain its middle class, the Bay Area is trying to do a better job of providing subsidies for people who make the median income and even a little more than the median. In San Francisco, that number is about $68,000/year for one person, and a little more for bigger households. The way subsidies work is households pay 30% of their income, whatever that may be, and someone else foots the rest of the bill.

Supply and demand

In most Bay Area cities the need for subsidies really dwarfs the supply. Subsidized units make up about 8-9% of the total housing stock. The waiting lists are thousands of people long, and getting longer.

The main reason why the affordability crisis is getting worse is because the population growth of the Bay Area is seriously outpacing the production of housing. The region is projected to grow from seven to nine million people over the next 20 years. We’re making a game of musical chairs out of the housing stock. And when there’s a shortage, low and middle income people will be out-competed every time.

For this reason, there is a lot of advocacy for ramping up housing construction. In response to this, some question whether more houses won't just mean more wealthy people. People are increasingly comparing San Francisco with Manhattan, a city that has way more housing, but is hardly affordable.

Advocates for new construction counter this by pointing out that new housing isn't what creates demand. Jobs are. Sarah Karlinsky, the Deputy Director of SPUR, an urban planning think tank, says the Bay Area added 400,000 jobs over the last four years, which is an extraordinary level of growth. The people that have those jobs, she says, are going to be able to out-compete everyone else.

"It’s not like if you fail to build the units somehow you’re going to stop wealthy people from coming," she says. "Because they’re going to come anyway."

For this reason, cities all over the Bay Area are coming around to the idea that we have to build at rates the region’s never seen before. It's unclear how much of that new construction will be subsidized, affordable housing.

The state of California and lot of Bay Area cities have more tax revenue dollars to put toward affordable housing funds than they have in the past. But they’ve also got a new strategy: instead of just using taxes to subsidize housing, they’re taking the subsidy out of the developers' pockets. They’re saying, 'if you want to build 100 units here, you have to make 30 of them affordable, or below market rate.'

But that 30/70 ration is not an across-the-board requirement. There’s a political balancing act playing out right now – cities want developers to provide as much as they can, but they realize they can’t just take all of developers’ profits away. If they did, nothing would get built, including new affordable housing.


Liza got her start in radio with KALW's Audio Academy. Now, she is KALW's econmy reporter and a mentor for in the KALW Audio Academy.