Urban poverty is Not an Accident

CJ Trowbridge


USP 560 Urban Poverty

Term Paper

It’s no mistake that there has never been a capitalist city without poverty. In his essay, “The Urban Process Under Capitalism,” David Harvey explains that cities are a process, not a place. Cities under capitalism – by definition – serve to extract labor and resources from the masses and deliver those resources to the wealthy and powerful. Equality in capitalist cities is impossible by definition. Systems that facilitate the asymmetric flow of power and resources to privileged groups at the expense of everyone else are called systems of oppression. Seen through this lens, a city is an engine which produces poverty in order to create a small, wealthy ruling class. There is no ameliorating this fundamental purpose and function of cities under capitalism. Urban poverty is a feature, not a bug.

If inequality, poverty, and the structural denial of people’s basic needs are bad things, then look at the housing market in San Francisco and you will see perhaps the worst city in the world. According to original research I did in the GWAR class, you have to be in the 78th percentile for income to afford a median-rate apartment in San Francisco. This research took place before covid, and while we don’t know how bad it is now, it seems unlikely that covid made this better. That means four out of five working people are denied access to housing. This is simply untenable. This widespread denial of such a basic need for the vast majority of people is the result of many things, but in part it’s because of BANANAs (Build Absolutely Nothing Anywhere Near Anything) and NIMBYs (Not In My Back Yard).

One of the most widely accepted political projects of the residents of San Francisco for decades has been working to prevent any new housing from being built anywhere, with a few trivial exceptions. And that project has succeeded. Housing prices have been artificially inflated to astronomical levels seen nowhere else in the world. People are moving to Manhattan, “because it’s cheaper.” I was recently in Manhattan and talking about housing with people who flat out did not believe me about the median rates in San Francisco.

Are there feasible alternatives to the current model of housing development? One intrinsically related problem to solve is the model of housing ownership. San Francisco is a deeply ideological city. It is committed to implementing only neoliberal solutions to all problems. Neoliberalism and its approach to solving problems could be defined as, “more capitalism is actually somehow the solution to the problems caused by capitalism.” This is why these two issues are so closely related. Because high density urban housing projects in San Francisco today are exclusively private. There is no public housing anywhere in San Francisco. There are only for-profit and non-profit housing projects. These all exist under a legal framework which requires them to make decisions based on a fiduciary responsibility. Even a nonprofit has to make a profit, they just can’t take it home at the end of the day.

One example is Hope VI and its local version Hope SF. These programs are publicly funded but they are extremely limited. They also target minority neighborhoods for forced redevelopment. This does not mean increasing the density of housing in those neighborhoods. It just means replacing existing housing with new housing at about the same density or even less in some cases. This means demolishing minority neighborhoods and forcing those minority groups to leave the city while new housing is built. Theoretically there is outreach to get those same people to come back and live in the new units. But according to one developer I talked to who works on Hope SF projects, almost no one ever comes back. Therefore the real impact of these programs is simply to accelerate the erasure of ethnic minorities in the city without adding any new housing inventory.

Another issue is the public opposition to any new housing development. A lot of neoliberals respond to this by working hard on crafting the thousandth version of the perfect argument that will finally convince the NIMBYs and BANANAs to allow housing to be built in the city. Maybe that will work, but I see a better way.

The Tenderloin and Chinatown have seized control of their housing from the free market through the use of community development corporations. A community development corporation is a special type of nonprofit whose mission is to build affordable housing in a particular geographic area. They also have special powers such as first right of refusal for any residential real estate transactions. So if there was a community development corporation for the mission, and some private developer wanted to build a gentrification center, the Mission District Community Development Corporation would have the power to step in and take that land from the private developer to use for affordable housing instead.

One of the main barriers to the construction of affordable housing is the fact that the cost per unit to build affordable housing in San Francisco is higher than the ten-year return on investment. There is no incentive for a private developer to build new units because their investment horizon is legally limited to that ten-year period. If they can’t make a profit by then, then legally they can’t do the project. They have a fiduciary responsibility to maximize shareholder profit. Legally they can not do the right thing and build affordable housing, they can only build luxury condos for tech bros.

There are lots of special funding sources that community development corporations can use to build affordable housing including federal, state, and local grants and tax credits. Since it’s a nonprofit, people can also leave their real estate to the community development corporation in their will. I also think it would make sense for them to sell “housing credits” like we currently have carbon credits, creating a market where companies can choose to donate directly to offsetting the cost of housing construction in particular neighborhoods.

Many companies currently brag about being “carbon-neutral” or even “carbon-negative.” It’s easy to see a future where large corporations are forced to pay to offset their impacts on housing prices. This could also become an auxiliary function of Community Development Corporations; to sue for the funds to reconstitute stolen housing in their communities. It’s easy to see a campaign by the combined CDCs for the districts of San Francisco to sue the tech giants for the funds to build housing to replace all that the tech bros have taken.

Another exciting thing about Community Development Corporations is that they are allowed, and even mandated to discriminate. For example, some of the federal housing grants require income restrictions on who is allowed to live in the housing. This is a great way to make sure that those new housing projects don’t just go to the same tech bros, but rather go to the minority groups, artists and hourly workers in the city who actually need that housing.

Because Community Development Corporations are not working on a short horizon, they can build projects around a longer timescale. If your goal is to maximize affordable housing in a geographic area rather than to maximize shareholder profit, then you can legally do lots of things that those private developers can not. For example, charging significantly lower rents means it will take a lot longer to recoup an investment. And if you’re working on a short horizon, then that means your rent has to be high enough to cover your investment cost within that horizon. A Community Development Corporation works on a virtually infinite timescale, meaning it can access different funding instruments to work on that longer timescale and charge significantly lower rents.

There are some other proposed alternatives such as Land Trust. The problem with Land Trust is that it’s not an entity, it’s just an agreement about how the land will be used. A land trust can’t build a high rise or even hire an electrician. All of that still falls to whoever actually owns the land being used under trust. This is why I think the Community Development Corporation model is a better option.

It’s one thing to try to fix San Francisco, but that’s not why I came to the worst city in the world to study its problems. I came here to learn about this because a lot of things have been tried here, and since the problems here are worse than anywhere else, the solutions that work here will likely work even better everywhere else. To that end, I spent much of the year traveling to different experimental communities around the country and learning and studying and discussing infrastructure and ownership models. There are a lot of things being tried out there. This brings me to the last major problem with providing affordable housing, the border fiscalization effect.

Emeryville sits right next to Berkeley. They make most of their income by simply legalizing whatever things Berkeley bans, from box stores to gas stations. This has the net effect that every policy Berkeley sets is utterly meaningless and merely shifts those land uses a few feet to the south where Emeryville welcomes them with open arms. If you look at the Market-Octavia District and the absurd glass towers of luxury condos with their token alleyway poor doors for the non-rich, you can immediately see the problem with building affordable housing anywhere near there. It’s even more expensive because so much of the land has been excluded for luxury development.

That’s why I think this model would work even better in a small town, or a new town. Arcosanti is a good example of a community done right. They bought hundreds of acres abutting a national monument and built a very small, very high-density housing project with workshops for industry and commerce. Cars are banned, and no one can build anything within miles of the community because they own all that land. This is all owned by one nonprofit which decides how the land is used. It’s also incorporated as something like a town meaning outside politicians can’t impose codes and laws on them. Most people there live for free as part of their pay for whatever work they’re doing. This is the Community Development Corporation model taken to the best-case scenario, and it happened half a century ago.

I see a huge opportunity for cities like San Francisco to implement Community Development Corporations for all the districts. This would really improve things with regard to housing which is fundamental to urban poverty, but it also creates a natural union of the people to fight together for the political needs of the people rather than the corporations which currently run the city. Community Development Corporations are corporations in the classical sense, people coming together for a common purpose. They are fundamentally anti-capitalist because they seize assets and distribute them to those who need them rather than empowering the wealthy elite to accumulate those assets and deprive the people who actually need them.

I think the larger opportunity is to launch Community Development Corporations everywhere. I think of them as sort of the opposite of a Homeowners Association. The purpose of an HOA is to treat housing as an investment and to maximize the return on that investment. This is necessarily contractionary and anti-affordability; it deliberately reduces the supply in order to artificially inflate prices. The alternative Community Development Corporation model does just the opposite. It treats housing as a basic right, and it works to build as much as possible and provide to those who really need it. This would be a perfect way for small towns everywhere, or even new towns, to seize control from the capricious free market which only want to deny their needs in order to facilitate the higher prices and scarcity that are necessary for inflating the wealth of the ruling class.