The focus of this blog is residential real estate in Marin County, and the Bay Area. I propose that the purpose of the residential real estate market is not to provide humans with quality housing. Rather, I propose that the fundamental purpose is profit, and that this is a problem. Our housing crisis is the “natural” result of a system doing what it was designed to do: generate profit. If the profit is distributed throughout the system of people who actually live in the houses, great. If the profit is concentrated in fewer and fewer bank accounts, with more and more people renting versus owning, at higher and higher rates, and in an environment of stagnant wages and a shrinking middle class, the result is a “housing crisis.” If we want to change this reality, nothing less than a new purpose for residential real estate—a more human-friendly purpose—is required. This is no minor alteration, and entails great leaps of creativity and bravery on the part of a whole population of people: moving from a wild west market free for all, to “wild” in the sense of totally new, outside-the-box approaches.
Many great and small ideas of what you can do are included toward the end.
In this blog, “residential real estate” in Marin County is treated as a “system.” There are various ways of defining what precisely constitutes a system, but I’m afraid we will have to leave a careful analysis of those definitions for a later entry. The important point here is to look to Donella Meadows—one of the most frequently referenced systems thinkers—for insights into this challenged system: residential real estate is at the moment extremely challenged, particularly here in the San Francisco Bay Area.
The Purpose of a System
The tidbit of wisdom we’re drawing from Meadow’s work is from Thinking in Systems: A Primer. Here we are most interested in Meadow’s criteria for what constitutes the “purpose or function” of a system. I refer you to pages 12 – 17 of Thinking in Systems for a fuller explanation, but this brief excerpt detailing her definition of what the purpose of a system is will get us going:
A system’s function or purpose is not necessarily spoken, written, or expressed explicitly, except through the operation of the system. The best way to deduce the system’s purpose is to watch for a while to see how the system behaves. […] Purposes are deduced from behavior, not from rhetoric or stated goals. Pg 14
Marin County’s Housing in 1973
Taking this idea of watching the actual behavior of a system (as opposed to assuming the stated goals are real), a case-in-point is the 1973 Marin County General Plan, page 51:
Marin’s two basic goals for housing, adopted by unanimous vote of the Board of Supervisors in 1971, are:
- To encourage continuation of social and economic diversity in Marin County communities through a variety of housing types.
- To expand the supply of decent housing for low and moderate-income families.
As we know, these “two basic goals” have not been met; one could say our county has bolted in the precise opposite direction. This ongoing trend was lamented by the authors of this very same report:
In fact, the reverse is happening. Between 1960 and 1970 the proportion of the county’s housing in the low price category went down from 41.8 percent to 19.4 percent, while the proportion of high price units went up from 12.1 percent to 34.1 percent. This occurred despite a 46 percent increase in the overall supply of housing. Ref
As we’ll see later, “affordable housing” is now down to about 9% in Marin.
This gives us a really clear example of the stated intentions of a system–the two goals above–diverging radically from reality. Granted, the report used the word “goals” as opposed to “purpose,” but that is actually my point: the overall purpose of the system was not addressed, therefore, the goals were not remotely realistic. There was a clear trend already in place, and the depth of change necessary to retool the system was not adequately enacted (or delineated), so the trend—sadly and predictably—has continued in the same direction to this very day.
The Current “Housing Crisis”
In the Bay Area—and California more generally to some extent—we have what has come to be known as a “housing crisis.” We know it’s a crisis based on both anecdotal evidence and data.
Anecdotally, as residents of the Bay Area, we are all too familiar with the widespread and growing numbers of homeless individuals and encampments (the great majority of whom were long-time Bay Areas residents prior to having become homeless Ref), stories of employers unable to find and/or retain employees (and in some cases coming up with novel solutions), and any number of friends and family members struggling to pay rent or make their mortgage. These individuals are forced into homelessness if they can’t afford to leave the area.
In terms of data, on June 3, 2018, the Bay Area Council released the results of a poll of Bay Area voters, 46% of whom claimed, “I am likely to move out of the Bay Area in the next few years,” and cited housing, traffic, and homelessness—in that order—as the top reasons for wanting to leave. Ref
Studies such as the Five County Bay Area Profile: Inequity and Economic Loss (updated in 2017, from the San Francisco Foundation, PolicyLink, and PERE at the University of Southern California), graphically depict the gap between the number of low-wage jobs (paying $1,250 or less monthly), and affordable housing (costing $749 monthly or less, equal to 30% of the income of two low-wage workers).
Linking this image back up with the quote from the Marin County Countywide Plan above (though I don’t know precisely how they qualified “low price” housing in 1973), we can see that the diminishment of affordable housing has continued. The authors of this report are clearly concerned about the drop in available affordable housing in the county from 41.8 percent in 1960 to 19.4 percent in 1970. The bar graph above shows that available affordable housing is down further, to 9 percent!
The Most Vulnerable are the Most Impacted, but Not Only
Drill down in the data, and you’ll note that there are fewer and fewer mid-range, middle class jobs available (a very troubling national trend), that higher-end homes are far easier to find than affordable housing, and that the bulk of people suffering directly from the crisis are non-whites (see Urban Habitat), though low income whites suffer as well.
Things are not really going great for high-wage earners either. A 2016 article from Zillow Research claims, “In the San Jose area, for example – the epicenter of booming Silicon Valley – the current median income is $99,897 per year, almost double the U.S. average. But even with that healthy paycheck, San Jose renters can still expect to pay 41 percent of their monthly income on the area’s median rent, up from 26 percent historically.” Ref
The reality is, everyone suffers sooner or later, it’s only getting worse, and it’s only going to get worse if we don’t do something drastic.
In this tangled web of factors, a systems perspective offers insights that our default mechanistic worldview is missing.
The Purpose of Housing
When I first read the passage quoted above from Meadows about seeing into the “purpose” of a system, I began to speculate about housing. I asked myself:
- “What is the purpose of residential real estate?”
- “To provide…housing…?”
I realized quickly that the real purpose of residential real estate is not to provide quality housing for human beings. Rather, the purpose is to make money; to make some people money.
If we refer back to the traditional ideal of owning one’s own home as a pathway through which ordinary families build stability through financial equity, then residential real estate appears to support a human, and humane, enterprise. (Though, the efforts of federal, state, and local governments have historically favored whites, specifically excluding non-whites; see The Color of Law. Not to mention the somewhat troubling etymology of “mortgage”: “death pledge.”) But if we recognize that wealth is being increasingly concentrated in fewer and fewer hands (and that many people who live in Marin County probably would not be able to afford to purchase their home today if they had to, much less pay the property taxes), then something is desperately wrong with this picture; wrong to the degree that conceivably half of the people who live here want to leave.
Bucking the Trend
To clarify how “purpose” plays out in a system, let’s look at some examples of micro residential real estate systems that *do* put safe, reasonably priced homes for human beings as the foremost purpose of their operations.
San Geronimo Valley Affordable Housing Association
The San Geronimo Valley Affordable Housing Association mission is pretty clear: “The mission of the San Geronimo Valley Affordable Housing Association is to create, preserve and manage affordable housing in the San Geronimo Valley.” They state on their website, “The San Geronimo Valley Affordable Housing Association is a non-profit, 501(c)(3) organization that owns and operates three shared housing units rented to six low-income seniors on Sage Lane, and the Mobile Home Park with 19 owner occupied spaces on Sir Francis Drake Boulevard in Forest Knolls.” Ref
Community Land Trust Association of West Marin
The Community Land Trust Association of West Marin (CLAM) states, “Our mission is to provide stable and permanently affordable homes in an environmentally responsible way in the communities surrounding Tomales Bay.” They go on to say, “As a community land trust, CLAM holds land and housing in trust for the community in perpetuity while creating housing that working people can afford.” Ref The way this system has taken shape is complex, including in the form of shared equity, and tenants-in-common arrangements, and cohousing communities. Ref
The first organization provides rentals, while the second goes so far as to create a system in which the actual buying and selling of real estate can take place, but in a reasonable, middle-class, family-friendly financial context.
Total Affordable Homes in Marin
Looking at the County of Marin’s Affordable Rental Housing in Marin County list, I counted 2,815 affordable rental homes in Marin (including 60 HUD homes at The Redwoods, which I learned via phone), many of which are for seniors and the disabled, none of which are nursing care facility units. (Nearly 1/3 of these affordable rental homes are owned by the large nonprofit EAH, which was originally founded in Marin County in 1968, operating in both California and Hawaii.) Adding in CLAM’s 9 residences, and the County’s Below Market Rate program of 350 condos, that brings the total to 3,174 affordable homes in Marin County. This is about 3 percent of the total number of households in Marin (see Census data).
Given how small this segment is—and that virtually every single last waiting list is closed—it’s unlikely that it has any meaningful impact on the local market. Even if my attempt at being scientific is flawed—say, if I inadvertently missed one or two thousand homes—we’re still talking about less than 5 percent of the market.
This begs the question, “What percentage of homes within Marin County would need to be owned by nonprofits with reasonable affordable housing as the purpose in order to have a meaningful impact on overall market prices?” Ten percent? Twenty percent? Fifty percent…? What percentage must be rentals, versus below market rate home sales? Is there a better answer?
When the purpose is profit…
Something fundamental shifts when the purpose of owning a home moves from stabilizing the financial standing of a family to making money. I’m careful not to demonize “making money” here; I myself have benefited from the thoughtful approach of former landlords who intentionally kept prices low rather than squeezing every last dime out of us, and I can only assume they were able to make a reasonable profit at the same time. The real issue is when the exchange of money for housing is not about relationships, community, and sustainability, so much as about, well, squeezing every last dime out of the other party, blithely termed, “the market.”
If you’re a landlord or invested in real estate, ask yourself, “Am I in this to make money? Or am I in this to promote housing stability, social diversity and equity, and to come out somewhat ahead at the same time?”
…even rent control is dubious.
Rent control is the lowest hanging fruit in terms of offering current renters relief and stability (and was recommended on page 15 of the 1973 Countywide Plan). But if an individual landlord is set on making a profit, and has the resources to fight for that purpose, they find ways around rent control, which sometimes means greater financial burdens for future residents of the area, as has been shown. Note in the affordable housing units/low wage jobs graphic above, only San Francisco’s supply of low wage jobs and affordable housing are closely related, which is due to rent control. However, the relief to renters in their particular rent control system is limited; San Francisco is one of the least affordable places to live in the nation.
If a human being’s number one purpose is to make a profit, he or she can be counted on to work diligently to realize that goal. This relatively small group can be termed “antisocial” (see my dissertation, pages 355-369). The job of those of us who are not antisocial is to avoid falling into the profit-seeking motive; to not allow these extreme individuals to set our social norms. Instead, we have to work together to counterbalance their single focus, least they keep the norm skewed in the direction of profit-seeking, such that even people who are not really antisocial act in ways antithetical to collective well-being.
Citizens Between a Rock and a Hard Place
We’re going to have to step back and admit something: the potential for private individuals and businesses to profit on homes must be confined to parameters within which human well-being is served. In other words, profits must be limited. If you have an allegiance to the ideal of the “free market,” the mere suggestion of “limiting profits” will make you sputter-up your coffee. However, this wild west free-for-all approach to private profit on real estate is not sustainable.
On the one hand we have “the near stagnation of hourly wage growth for the vast majority of American workers over the past generation,” despite higher productivity (Ref). On the other, the extremes of private profit on housing is demonstrated by corporations buying up single family homes and driving up rental prices (Ref). (To be clear, the institutional investment is the extreme; only a slim slice of the overall market.) Between these two are legions of small and medium-sized investors who make profits from real estate. I’m going to hazard the guess that this number has increased in recent years, and that its driven in part—perhaps significantly—by the “near stagnation of hourly wage growth,” causing more and more people to turn to real estate as an income stream, in turn driving up the cost of housing, putting more pressure on the work force, and around it goes. (I’m suggesting what might be happening here is called in systems thinking a “reinforcing feedback loop.”)
It’s difficult to make a case for continuing to do essentially nothing about this situation, or rather, running around in circles, debating minor changes.
In the same way that some corporations actually make money the more people they hold in their prisons, failing to act widely and resolutely will force greater and greater numbers of Americans into the untenable position of what amounts to a trap. Just as whole generations are being lost to the prison industrial complex, so too are whole generations losing out on that conventional American practice of storing up family wealth in a home. As they say in the systems thinking model Theory U, “…we collectively create outcomes that nobody wants.” Ref, pg 3.
Change the Purpose, Change the World
According to their 2017 Annual Report, by the end of that year CLAM was providing fifty people with affordable housing. As the report states, “This stability relieves a huge amount of stress and worry that so many people experience in our community. And by not facing a long and tiring commute to work every day, residents are able to participate more fully in the life of the community.” Ref This is a systemic view, in contrast to a profit-making machine view. Systems thinking is about relationships; the statement above puts relationships first, because it puts community first.
The organizations cited above, SGV Affordable Housing Association, CLAM, and others, are working to demonstrate what is possible when human well-being is the purpose. However, even lumped in with all other nonprofit owned affordable housing outfits in Marin County, they represent a very slim slice of the local residential real estate market.
What would it take to sufficiently move our housing crisis from a “slow-motion crisis,” in the works since 1940, as James Perry of the Winston-Salem Urban League profiled it at the recent Fair Housing Advocates Conference, to radical recovery? The purpose of housing must be reexamined, out loud, and appropriate local, regional, state, and federal controls set in place to institutionalize that purpose.
Maybe there should be no such thing as “rentals” in the historical sense; maybe all people should have the opportunity to invest in homes for the long-term if they are paying x-amount per month anyway. Maybe conventional rentals should only be owned by nonprofits whose number one purpose is to provide reasonably priced, safe housing.
Most importantly, referring to Theory U again, “bend the beam of observation back onto one’s self.”
Are you a landlord? Step up and drop rents, especially if you don’t have the overhead of a mortgage, and/or are benefiting from Prop 13.
Are you in the business of residential real estate? Donate a building, or several, to nonprofits that steward those properties responsibly for the sole purpose of providing housing at a cost appropriate for low to middle income earners. Or, retool your business model; become a B Corp, or perhaps an L3C.
Are you part of local government? Think systemically. That means addressing the problem at its root, not just treating the symptoms with special charitable programs. Consider offering property tax or other benefits to landlords who offer rent rates that are significantly below market rate. Maybe there’s even a way to incentivize people selling homes at more affordable rates to individuals and families, versus accepting irresistible offers from people looking for investment opportunities. (By the way, most people in the Bay Area are looking to governments to solve this problem, according to the Bay Area Council voter survey referenced earlier.)
Legislation curtailing private profits on residential real estate—say, if the profiting entity is already x-size—should be examined. Even if such legislation impacted a small percentage of the overall number of owners, it would send a signal that local governments are serious about prioritizing human well-being over the profit imperative. Even the mere discussion of such measures would send a welcome cool breeze through this overheated market, and by contrast, make rent control look like a rather mild first step, as opposed to the radical monster some people imagine.
Also, see the Sustainable Development Goal #11 below.
If you’re selling a home or homes, I think it goes without saying by now: override the part of you that feels justified—for whatever reason—in taking the highest, most financially attractive offer. You can help realize United Nations Sustainable Development Goal #11, target #1: “By 2030, ensure access for all to adequate, safe and affordable housing and basic services…” Ref Sell to humans, not profit-making machines. Consider taking affirmative action in a white neighborhood: sell to nonwhites. And why should your price be set at the highest number you can squeeze out of the market? Many flowers and thanks to those sellers who have in fact sold their properties with humanity in mind.
If you’re one of those people who renovate and “flip” homes, look honestly at the shadow side of your operation, no matter how small you think it is. Why not make a mild profit rather than a staggering one? Absolve your gentrification karma by learning about, and fostering, healthy, diverse local community, rather than fracturing it and breaking up people’s lives. Are you being genuinely creative, or are you part of the diabolical norm? (By the way, here is a link to a podcast about the fate of people who are displaced by gentrification, “American Suburb.”)
This Means All of Us
What is your roll in this “crisis,” even if it’s less obvious? Is your money in a large, conventional bank that supports unsustainable housing investments, or a local-centric financial entity like a Community Development Fund Institution (CDFI)? Moving your money to a CDFI can have far-reaching, positive impacts on the lives of people you’ll never meet, and on down through the generations.
Are you paying high rent to a corporate entity, and if so, are there ways you can influence them, through organizing neighbors to insist on no pesticides sprayed in your building and on the grounds, or other community benefit initiatives?
Do you own a condo and have a condo association? Same idea as renters above, and by the way, check out the language your Homeowners Association uses in reference to homeless people or other “outsiders” in your documents and communications: is it humane language, or does it perpetuate a culture of disdain?
Are you an employer of any kind? Are you paying people below the local self-sufficiency wage? If so, even if you’re a nonprofit, you are significant part of the problem: poverty wages are a critical piece of this puzzle.
Consider making a tax-deductible donation to the current Village Oduduwa campaign to rehab their Marin City affordable housing residences: Village Oduduwa Housing Corp.
Current Residents of Marin County
Have you opposed housing density along the 101 corridor? Then you’re part of the problem. Are you not quite sure how you’d feel about living next door to Latino or African American people, perhaps coding your subtle racism in words like “preserving the character of our community”? There are many things you can do to grow past these hang ups. A great place to start is with an emotional and/or cultural intelligence training, or even just some educational books. But in the meantime, vote to support eco and health-friendly, multi-use, high-density housing along the Highway 101 transportation corridor, like developments that reflect this forward-thinking, multi-use mockup, as on page 34 of the 1973 plan:
To summarize, the current purpose of the residential real estate market is at odds with human well-being. This impacts poor and nonwhites dramatically, but whites and those who are more well-off are not immune, whether we’re talking about high rents and mortgages, traffic, lack of available workers, or losing friends and family to far-off places because they can’t afford to stay where they grew up.
If we don’t think well outside of the conventional box and get creative, we’re going to keep getting more stratified, and less sustainable, until the system collapses in on itself.
Thanks to the individuals in Marin County who contributed time, data, and their thoughts to this blog entry.
[…] case of homelessness, residential real estate has increasingly become a profit-making system (see this blog). Though I am not a housing policy analyst, it appears as though there has been a shift in the […]