This past weekend, a friend mentioned that if San Francisco had the population density of Manhattan, it would have a population of 3.3 million, far more than its actual population of 825,000. And I calculated that if San Francisco had the population density of the five boroughs of New York city, including relatively low-density outer boroughs like Staten Island and Queens, it would have a population of 1.2 million. Despite San Francisco’s reputation as a hotbed of progressivism, the city is in many respects very “conservative,” which is to say resistant to change. Many San Franciscans are adamant that the look of the city remains frozen in its midcentury state. There is a good amount of new development in neighborhoods like South of Market, where the technology industry has clustered and where many young knowledge workers are choosing to live. Yet demand for housing far outstrips supply, due to a combination of restrictions on development, motivated in large part by aesthetic and cultural considerations, and rent regulation. The upshot of these sharp constraints on housing supply has been that a number of neighborhoods are experiencing gentrification-as-displacement. That is, as affluent people bid up market-rate rents in neighborhoods like the Mission, less-affluent incumbents who are also paying market-rate rents find it more difficult to remain in the neighborhood. Less-affluent incumbents paying below-market rents also face difficulties, as property owners might be less inclined to maintain regulated properties and they might find that the mix of retail options is changing in ways that make the neighborhood less affordable and less welcoming. One important complication is that there is a natural churn in neighborhoods, i.e., when the quality of life in a neighborhood does not improve, incumbents will tend to move out. But when quality of life improves , incumbents are more likely to want to remain in place, so the feeling of displacement in part reflects the fact that gentrification tends to associated with other improvements, e.g., improved public safety. Late last year, Stephen Smith contrasted gentrification with filtering:
If downtown Brooklyn does not make room for more newcomers, it will simply price working-class residents out of less trendy, historically black neighborhoods like these. When a housing market is functioning properly, new luxury construction can not only prevent this type of gentrification but also reverse it entirely, creating new affordable housing units.
Housing economists call it “filtering.” Housing filtering is the gradual decline of home values as structures age — and with home values, prices and rents — and the new opportunities for low-cost housing that this affords. In other words, with time, all housing eventually becomes affordable. Designs go out of style, appliances age and new technologies such as central air conditioning are not installed. Middle-class, single-family homes on the Lower East Side were carved up into tenement apartments during the late 1800s, and grand apartments across the city were divided into more reasonable one- and two- bedroom units during the Great Depression.
This concept might seem totally alien to New Yorkers today, though, who are accustomed to multimillion-dollar renovated brownstones and elite prewar co-ops. Because New York has allowed so little new construction after the passage of its anti-urban 1961 zoning code, most of its housing stock is very old, and so the opposite of filtering is occurring: gentrification. Rather than poor people moving into rich people’s old houses and apartments, as had been the pattern for most of civilized history, gentrification is when the wealthy take the homes of the poor.
And as Ryan Avent argues in The Gated City, facilitating development in high-productivty regions like the Bay Area will have broader economic and social benefits:
When Americans ration access to economically dynamic places with high housing costs, it isn’t the rich that suffer most. It’s the middle- and low- income households who must accept long, costly commutes or move elsewhere. Dynamic cities should be engines of economic mobility. Historically they have been. But one can’t take advantage of the economic vibrancy of a city if one can’t afford to live there. When we filter rich and poor into productive and unproductive cities, we limit opportunity and advance the calcification of the income distribution.