Mary Huss: We are facing in the Bay Area an acute shortage of housing at all levels, a crisis of affordability. And we’re going to really focus on the middle and what is the middle. It’s an economic imperative to solve this housing affordability crisis for the bay. Give us one or two really top initiatives or priorities that you’re at work on. 

Carol Galante: There is not just one solution. I would say for me, my top priority in the coming year or so is that we have to keep working on the homelessness issue. It’s so critical to the economy, to the people, to the quality of life in the Bay Area. But if we don’t prioritize equally this missing middle and how we finance that, we are not going to survive economically or otherwise. Part of it has to be a focus on very explicitly racial equity in homeownership. The wealth gap between Black, Hispanic and white in this country is simply unacceptable. It’s not going to get better unless we put real intentionality on it. 

Rick Holliday: The affordability problem has gotten way worse, which has been a passion of mine. We have to figure out how to house this middle. We have to have more equitable ownership opportunities. And so I have thrown myself the last 10 years into the cost issue. I embarked with my business partner, Larry Pace, on a mission about five years ago. There’s real hope on our end. We think that we’re on the precipice of being able to build housing more efficiently. Some of the folks in this room have visited us and some have engaged with us. For those people who have, I thank you for leaning in and helping and for those who haven’t and are curious, we’re ready to try to help. We’ve created a sort of overarching company at Factory OS, which is called Harbinger Development. We think it is the harbinger of the development to come, it’s going to involve much smarter entitlement work, much smarter general contracting, much smarter financing, much smarter building method. That is for middle income housing. 

Jennifer Hernandez: I didn’t expect to spend this part of my career effectively as a civil rights lawyer advocating for the right of people to have a place to live. And the people I’m talking about tend to be younger and browner than other people who already have a place to live. But to actually address that, we have to just reverse engineer the whole system and figure out what we can buy for four times median income. That’s the price point that we need to deliver housing at. And when you do that, a whole bunch of stuff has to adjust. One thing that has to adjust is the entitlement and CEQA process. We have CEQA at the climate plan level. We have it at the general plan level. We have it at the housing element level. We have it at specific plan and community plan levels. We can’t have it for every project. We cannot. It’s not about the environment at that point. It’s about greenmail. And I hope the veneer of nonsense that camouflages greenmail has now been pretty fully blown up. We can’t charge country club-level fees for people who just need a place to live. It’s more expensive to build a unit in Fremont than to buy into Donald Trump’s Mar a Lago country club. We can’t have fees like that when the state is awash in money. We got to stop the idea that new housing has to quote, pay for not just itself, but all other preexisting woes in the region. Our dogma about what housing must look like does not pencil, and we need to stop imposing that dogma statewide. 

Bill Witte: I started my career in the public sector. I was the first director of the Mayor’s Office of Housing in San Francisco in the 1980s. But as we talk about this issue of housing availability and cost, I always reflect on a quote from economist Ken Rosen and I. We were quoted in an article in the San Francisco Chronicle about the cost of housing and that families can’t afford to live here. That was in April of 1981. This isn’t new. It’s always been a huge issue in the Bay Area, at least as long as I’ve been around. We have one division that does 100 percent affordable housing all over the state, including throughout. We’re the state’s largest developer of mixed income. You know, I think we and many others have had increasing success in building more affordable housing for people who can’t afford it. Rental, not ownership. Yes, providing shelter is a critical component. But what about the non-shelter side of the equation? Are they getting better educated? Are they advancing? Are their lives changing somewhat? I think we need to do more on that front or else this income gap is just going to keep getting worse. 

Huss: How do we define the middle? 

Hernandez: It is those jobs or people who have jobs that mean that they don’t qualify for the low-income housing tax credit program. There aren’t traditional affordable housing subsidies for this income group. But they also can’t afford the very expensive housing that is being built. That’s one part of the missing middle. The other part is the duplexes, the four-plexes, the empty lots in areas that can be developed with what we call gentle density. And there’s been a lot of work at the state level with the recent passage of SB 9 and SB 10 to start to think about that prototype of missing middle. Is it going to be feasible for it to be built in a way that makes it broadly affordable to the people who are the missing middle? And that’s why I’m saying we just need to tear it down and start from what’s four times average median income. What is that housing product type? That’s what we need to buy, and it’s not going to be an infill property on a million-dollar lot in Berkeley, even if it’s divided in four. 

Witte: This is a big state and one size doesn’t fit all. So we have to be very clear about where we’re talking about. It has different meanings in different parts of the state. Having said that, you get into the inner Bay Area and the affordability gap is immense. So that’s what we’re talking about in coastal California, north and south and even extending out into Contra Costa County. Missing middle’s pretty, pretty broad. But I think when you look at solutions, you’ve got to be very clear about how and where you’re tailoring. 

Holliday: The whole business of what’s affordable has plagued me for 40 years. When Don Terner and I were pitching Bridge Housing in 1985 we went to George Keller, who was the head of Chevron. We went in and he said, “What’s your liberal idea?”And I said, “George, we need to house the workforce. Mr. Keller, it means people making between $15,000 or $30,000 dollars a year. Keller goes, “My secretary out there, she’s driving from Manteca.” Bingo. He put a quarter million dollars in Bridge. Add inflation for the last 40 years and, affordable is $60,000 to $120,000. That’s who we’re trying to hit. If the median is 100, we’ve got to find a way to get a unit that’s about 400 grand. To Bill’s point, we’ve got to find some money.

Galante: We can’t build the type of housing that’s affordable at the four times in the inner Bay Area without some type of subsidy. And so I would just argue that we should build it where we can do it without subsidy. But we shouldn’t shy away from the fact that we still do want four $400,000 homes in Berkeley and Oakland available for rent and for sale. Federal government subsidy could be in the form of first time homebuyer tax credit can be in the form of shared equity down payment assistance. We can’t keep putting all of our resources into extremely low-income homeless, supportive services. We’ve got to have that ladder of opportunity. And that means we need some innovative forms of missing middle housing as part of our solutions kit. There are people in San Francisco who have the attitude that if you’re not building a house for someone at $30,000 a year or $20,000 a year, that house should not be built. We’re going to have more and more people competing for fewer and fewer available homes. It just doesn’t work.

Holliday: Part of the mantra that we’ve been building in at our factory in Vallejo is we have to work off of a standardised set of floor plans. Often times, people think that, oh, you’re going to build a bunch of Motel 6s. The way we did build a middle class is with Eichlers. Homes were L-shaped that went one way or three plans that were U-shaped. And Levittown, if you go back, it was a very simple home that had dignity in it. To any architect who comes in and goes, well, my closet has to be 12-foot-4-inches, I’m done with you, OK? It needs to be the right dimension for it to work and to be replicated.

Huss: If we could boil it down to maybe two key ingredients, what would they be?

Witte: Three things the government can control. One, process. And Lord knows we need a lot of work there. That’s not going to create middle-income housing by itself. Second thing is land use and zoning, and we’ve made some progress there. The area we really haven’t made much progress in is the last thing, which is financing. Missing middle housing ain’t going to happen without significant financing help, at least in the high-cost areas. It’s been alluded to earlier that currently the welfare exemption in which property taxes can be waived is for 80% of area median income (AMI) and below with some nonprofit ownership. A few years ago, when he was still in the state assembly, David Chiu had a proposal to increase that to 120% of median, and it didn’t gain traction. It’s politically tough. You’re asking cities now to forgo needed tax for 80%-of median projects. I’m not saying that’s a bad thing. It’s not sufficient for these high-cost areas, for Silicon Valley, Oakland, San Francisco, etc. It’s not going to happen unless there is some intervention like that. 

Hernandez: I hear it all the time, we’re 10 million people over California’s holding capacity. Who voted to elect you environmental czar? Which 10 million people are you going to expel? We cannot keep pretending that this climate thing, as practised in California, is anything other than exclusionary red lining, just like CEQA. So enough’s enough, a little leadership would go a long way. And that’s a message to the governor and his agencies. 

Holliday: Twenty years ago, I had a fight with environmentalists over trying to build 1,500 apartments for middle-income people in West Oakland. The last property that’s part of that project is what we just got financed. We’ll have a full cost basis with $30,000 land, which isn’t free, but close to $410,000 a door. It will get the property 80% percent of median income, probably between 60 grand and 100 grand. It’s very tight. We had to get Citibank and Turner Impact Capital, which is an ESG equity investor, to put the money up. We’re building it in the factory today. It’s the first time we’ve built the project a second time, so we actually know what it costs. These projects are not easy and they’re very tight. But I can tell you if you can make one of these ones start to work, and then go to the policymakers, Bill and Carol are suggesting we can get the money to make them work on locations that are more expensive and we can do it at scale. 

Galante: It does likely require some financial commitment from government, and that’s how we built the post-World War II generation. The federal government paid for the roads to get to these sites. The federal government paid for the water and sewers. Before communities had block grants, the federal government financed it. Long term, every single person who owns a single family home has been subsidised by the federal government, and let’s talk about the mortgage interest deduction on top of that. Every single person who owns a home in this room, you live in government housing. And we need more of that kind of government support at the end of the day, whether it’s property taxes, whether it’s downpayment assistance. And we need the political will in California to recognize we need that full spectrum or we’re not going to make it economically. 

Huss: We can’t end this panel without talking about CEQA. Are we at a moment that we have a chance to radically overhaul this 50-year-old law? 

Witte: I’m trying to think what I can say that won’t get me in trouble, but I’m going to try. There have been periodic attempts, but only for politically supported sports arenas and things like that. CEQA itself is not the problem. It’s the delay factor, the infinite time. Jennifer knows this better than I that X percent of CEQA lawsuits legally have no chance of winning, but by delaying, they can force people to negotiate things that they don’t want to negotiate. Eighty percent of the plaintiffs are there just to hold you up. 

Hernandez: So one of the studies we did looked at all CEQA lawsuits in the Southern California region. Housing was a top target — 40,000 housing units were challenged, 98 percent were in infill neighbourhoods. Seventy-eight percent were in transit priority areas and 70 percent in the region’s whitest and wealthiest areas. So CEQA stops people who need housing. And that is a treasured power. Look to our neighbours to the north in Marin. A more exclusionary location in all of California does not exist. And they will hold on to CEQA till their dying day. I think we now have enough momentum to overcome the pointy headed enviro dogma. The wealthiest and whitest areas exclude housing. I have no tolerance for pretending that’s about the environment. It’s not. 

Galante: These reforms can’t just be for 100 percent affordable developments. They obviously need that ability, too. But it needs to be for the spectrum of housing in the places where we want people to live. 

Jim Gardner: I have the privilege of being joined by three people who are in the policy trenches, as it were, on housing affordability and housing policy on the middle. 

Matt Regan: I’m Matt Regan and I work for the Bay Area Council, a business sponsored public policy advocacy organisation. We work on major policy issues that are of concern to our member companies. Housing is No. 1 and it has been for a generation. The affordability of housing for our workforce for our member companies is just getting more and more extreme every year. We have become, for all intents and purposes, a big gated community where the price of entry is a million dollars. From an economic perspective, that’s not sustainable. You know, we have created a bell curve type of economy or an egg timer shape, where we’ve got people at the bottom who are struggling to hang on, people who work in hospitality, leisure, retail, and then you’ve got tech and biotech and associated services at the very top. The middle is gone, and a lot of that is driven by housing policy and the lack of available housing. 

Jesse Arreguin: I’m the mayor of the city of Berkeley, and I also serve as the president of the Association of Bay Area Governments, which is our regional council of governments. We just completed an extensive two-year process to develop our Regional Housing Needs Allocation for the San Francisco Bay Area. For those of you that don’t know, this is the state-mandated plan where we have to distribute the regional housing need to 101 cities and towns and nine Bay Area counties. The Bay Area saw double the number of housing units that they had to plan for this cycle. Some of the most exclusive, whitest, wealthiest communities in the Bay Area actively resisted having to plan for more housing, let alone more affordable housing. We have to recognize in the Bay Area, including in my city of Berkeley, which is one of the most liberal cities in the United States, that there are parts of our city that are literally fenced off to people. This issue is deeply personal to me as well. I’m a millennial. I will never be able to buy a home in my city, with the median price set at least $1.5 million. As a lifelong renter and somebody who’s faced displacement, I have lived the housing crisis firsthand, and I know there are many families throughout this region who are being pushed to either to the furthest portions of our region or out of our state entirely. That’s not right. That’s not who we are. As Californians, we must do better. That means removing the barriers and making it easier to build housing in our cities throughout the Bay Area. 

Todd David: I’m the executive director of the Housing Action Coalition. We are a member-supported nonprofit that is attempting to address the affordability and displacement crisis in the Bay Area. This was not an accident. These were policy choices that were made in the Bay Area to choose policies that would make housing for middle income people almost impossible to produce. We often refer to this as the Christmas-tree effect, when you tax housing and you try to solve every social problem on the back of housing. Then the only housing that you can produce is high-income housing. The subsidies that you’re putting on housing is saying, Hey, we are going to subsidise low-income housing and we should. But that means that there has to be additional cost on the market-rate housing. We are going to do green roofs. We are going to preserve every park and every school. And what I say is I don’t want to have to decide which fee we shouldn’t be doing. But the number of exactions that we do on market-rate housing means that we are choosing to produce housing for only the wealthy and we are going to subsidise the low income. So these are policies. I think that there’s a lot of different things that we can do. But just start by knowing that these were policy decisions that led to where we are today. 

Gardner: So Matt, as you said, you represent the Bay Area Council, which in turn represents several hundred of our largest employers here. What is the business imperative for addressing this missing middle? What makes this a business issue? 

Regan: We’re in the middle of or hopefully coming towards the end of a global pandemic where we’ve all had to radically alter how we live and work. And during that period of time, every large employer has undergone a strategic planning process. What’s our workforce going to look like in the future? How much office space are we going to need? Where are we going to locate when companies make those sorts of decisions? And particularly now we’ve discovered that remote work can work, people can be productive working from home. You see the stories about some of our most iconic companies who have left the Bay Area. It’s got to do with housing costs, it’s got to do with taxation and regulation as well. But the biggest driver is the inability to attract and retain talent because of high housing costs. We’re going to get knocked off our perch really quickly if we don’t do something to address this housing crisis. And to Jennifer’s earlier point about the pointy headed people in Sacramento and their environmental policies: Every one of us in this room generates nine tons of greenhouse gases per capita. That’s California’s per capita production. We’re very clean and green here in California. We lose 40,000 people. Census data shows 40,000 people a year, primarily low-income people leave California for one state, Texas, a coal-burning state where the per capita greenhouse gas production is 27 tons. So as soon as that family, that low-income, blue-collar family moves into their affordable three-bedroom, two-bathroom home in auto dependent suburban Houston, their greenhouse gas production triples. But it’s off our books. California sees that as a saving. That’s the sort of idiotic policies that we’ve created, constantly adding to the cost and completely oblivious or ignorant to the end results. 

Gardner: Jesse, you mentioned your role with ABAG and the RHNA numbers. I think our experience in the Bay Area has been that some cities, mainly the larger ones, make more or less a good faith effort to meet them. Some make a half-hearted effort, and some make no meaningful effort whatsoever. Why should we expect this time is going to be different? 

Arreguin: We’ve seen some absurd situations even here in the Bay Area. You know, Woodside declaring the whole city is a mountain lion preserve. A Southern California city rezoning cemeteries, claiming that those are housing sites. I mean, that’s why our attorney general created a housing strike force to hold cities accountable. The fact that there’s been too much discretion and too much opposition to housing is why the state has taken the step of having to come in and pass statewide policy to make sure that the bad actors are not standing in the way of building housing. There is definitely a shift in the state towards holding cities accountable. And so these laws are one step, but I think we need to go further. RHNA can’t be theonly tool. There needs to be one of many tools that both the state and local governments are putting in place and the money to help local governments build the affordable housing. 

Gardner: Todd, I know your organisation is working on a measure that actually takes on this missing middle issue very directly. Could you tell us a little bit more about what that measure is? 

David: We filed a charter amendment that would expedite the approval of 100 percent affordable housing, educator housing and mixed-income housing that does a higher level of onsite affordability than is mandated in San Francisco’s inclusionary zoning laws. This charter amendment has a history in San Francisco. This is not the first time we have tried this. Mayor Breed in 2019 and 2020 attempted to get it through the Board of Supervisors. The Board of Supervisors blocked it. We started to collect signatures for this in March of 2020. Supervisor Safai attempted to bring back a very similar version of the Charter Amendment to the Board of Supervisors. We weren’t surprised that the Board of Supervisors killed it. We were surprised how quickly they killed it. The San Francisco Board of Supervisors have clearly demonstrated they are incapable of dealing with San Francisco’s affordability and displacement crisis. They are a clown car. That is what they are when it comes to housing and it is now time for the voters of San Francisco to deal with this issue. Polling indicates the charter amendment is supported in the mid-60s, just to show you how out of touch the Board of Supervisors is. About 65% of San Francisco voters support expediting multifamily housing throughout San Francisco. I think that we, as advocates, have to do a little bit better job of meeting people where they are in this conversation and trying to bring them along. I have no patience for wealthy, white exclusive neighbourhoods saying no to housing. Zoning in the Sunset District was created at the end of World War II, explicitly to stop black GIs from moving to that neighbourhood. That is the zoning that’s on our maps today in San Francisco. 

Gardner: Middle-class housing is market-rate housing since the subsidies top out at 80 percent of AMI. Is there anything that can be fixed in housing the missing middle until we find some way to make subsidy of some form available? 

Regan: There’s no silver bullet. We always talk about what do we need to address the affordability displacement crisis? You need a handful of things at the same time. Is it shocking that land to build multifamily housing is super expensive when only one third of our land is zoned for that? Think about this: It’s only legal to build 100 percent affordable housing on one-third of the land in San Francisco because of zoning. So if you can’t do multifamily construction in two-thirds of the city, we need zoning reform. We need process approval streamlining so it can’t take four years, five years. We need subsidies, which is what you’re getting at. And then we need political will. If you look at the Bay Area from space, 80 percent of it is open space, protected land, the parks. Of what’s left, the vast majority is zoned for single-family homes. It’s a very small sliver that’s actually for multifamily. Correct me if I’m wrong, but a family making $120,000 a year qualifies for subsidised housing in San Francisco. That’s bonkers. You tell anybody in the rest of the country that $120,000 a year gets you subsidised housing in San Francisco, they will laugh. We’ve got to change the numbers. 

Gardner: What effect is SB 9, which ends single-family only zoning in much of the state, likely to have? 

Arreguin: Before we took the step last year to say that we’re going to end exclusionary zoning, it wasn’t clear what the path forward was. The Terner Center did a study around the potential that SB 9 could yield, and it’s significant in terms of the number of units that could be created through lot splits or through adding additional units on single-family lots. And we’re already seeing these SB 9 projects happen. But there are cities that are trying to evade the implementation of SB 9 or putting in place restrictive standards. You know, you have to have a certain amount of open space or your fence needs to be blue or all these really absurd policies. Unlocking housing in our single-family neighbourhoods is not just a moral issue, as we’ve talked about, but also an incredible opportunity for us to create homes, particularly homes for that missing middle. I agree with Todd that I’ve seen a complete culture shift in the Bay Area on housing. If you asked me five years ago, you know what people in Berkeley thought, I think people thought that, you know, we don’t want to see these tall buildings and these greedy developers. But now I think people are sick of seeing people live in tents. They’re sick of seeing their kids not being able to stay in the city that they grew up in. They’re concerned about the impacts of climate change, and it’s real. We see the orange skies. And so I think there is a culture shift that’s happening. 

Gardner: I want to end with a call to action, What is one thing they can get behind? What is one action our audience can take or support that’s going to meaningfully move the needle on this? 

Regan: If there’s a call to action, it’s show up. There’s nothing more powerful that you can do, even if it’s a project that’s not even in your community. Show up and say, I’m an employer in the Bay Area. My workforce needs housing. I support this project.All of these decisions are made locally, they’re made by politicians who look at voters. 

Arreguin: I think it’s not just show up, but pay attention. It’s really critical that people pay attention to the policies that local governments are putting forward and whether they are serious about building housing. And if not, there is an avenue. You can go to the attorney general, you can hold cities accountable. The people that you elect have a significant influence over what kind of a city you live in and who can live in your city. 

David: We’re not solving this problem tomorrow. We have to do the right thing for the next 20 years and then we will be able to start seeing some improvements. Show up, and let’s make it as easy as possible for people to show up. Vote pro-housing. Every time, up and down the ballot, I don’t care if it’s for board of education, I don’t care if it’s for dogcatcher. Find out what the person’s stance is on housing and make them speak to it. If they don’t have an opinion and they’re running for office in the Bay Area, they don’t deserve to be an elected official.