ABAG and BMR Housing 1

Every move California ABAG and related unelected and not-responsible Committees have made seems to be based on making it easy for developers to increase their profit. They claim it is based on planning, but it is not. As is borne out by the results.
Unfortunately, implied or expressed, the Palo Alto City Council is helpful. Using the wonders of Google I was looking at the 50 pages of 2555 Park Boulevard Project in the City Council minutes: there is was, stated by the PA Planning Department: enabling maximum profits for the developers is the highest aim of the planners.
This will only change if Palo Alto fires its City Attorney, gets an attorney who knows how to fight for the City, joins up with other Communities, and sues. ABAG demands are unconstitutional and against common law. Since New England times, before 1776, the police power of communities wrt to building is nearly unrestricted, as certified by the Supreme Court.
Example: We all know that property may not be taken for public use without payment of just compensation to its owner (Cal. Const., art. I, § 19; U.S. Const., 5th Amend). But in the case of zoning changes in practice the courts have for 200 years deferred to the police power of Cities and Counties. Particularly difficult to overcome is the threshold that a “mere diminution” in property value due to a zoning action is not compensable. (Agins v. City of Tiburon (1979) 24 Cal.3d 266, 273-274 [157 Cal.Rptr. 372, 598 P.2d 25], affd. (1980) 447 U.S. 255 [65 L.Ed.2d 106, 100 S.Ct. 2138].) The “mere” for the Supreme Court cases has meant diminution up to of 80%. Under these circumstances it is hard to understand why 2555 Park zoning was not changed to PTOD, the zoning with the greatest benefit to Palo Alto, but not the developer.
The following text, opposing SB50 and pseudo SB50s, I sent on July 4, 2019, to the California Senate (via Palo Altan for Sensible Zoning PASZ). I have got an unusual number of letters from Palo Altan, with the exhortation to impress the thoughts on the City Council.
There are actually good reasons to oppose taking local control away from residents and local authorities and giving it to for-profit developers. Because, worldwide experience has shown, that local control is best for the local population, see more details below.
I have lived in Palo Alto since 1978. I noticed starting maybe in 1995 that developers have basically bribed City Council members to approve unlimited construction of commercial office space, by donating tens of thousands of $ for election campaigns. Those City Councilors were not embarrassed to call buildings in prime locations with 20,000 sqft of office space, and only two luxury condominiums, “mixed use”.
Unfortunately, for the elections in 2014 residentialists were too timid to answer the accusation that they wanted to stop office construction in Palo Alto with: you bet, we are! Because there is no advantage for Palo Alto’s coffers, and its citizens, in more office square footage.
It has taken 50 years to create this problem, it will take another 50 to remedy it. The fight against too many jobs in Palo Alto, and not enough housing, has only begun with elections about 5 years ago, and is now well under way, I hope, with commercial building caps finally introduced. But watch the money flow to candidates for City Council. And insist on adequate fines for violations of rules, like a fine 5 times the money illegally raised, and not $2000, on a $10,000 gain.
Friends in San Francisco (Faculty members at UCSF) showed me likewise (follow the money they said) that building interests have been buying off Assembly members like Scott Wiener, who seem to be mostly interested in personal power.
I do not want for-profit developers to be empowered by any law or edict, to reshape our town, to negate the process Palo Alto has made for a better building process.
Lack of affordable housing has become an international problem. Some of it in the US comes from increased demand in space: the average house size in 1945 in the US was 1000 sqft; now it is 2,700 sqft. The average household size went down from 3.6 to 2.5 people.
The worldwide experience is that efforts to force affordable housing construction (BMR = Below Market Rate) centrally from above, without the cooperation and the knowledge of local experts, including the leadership of non-profit mutual building associations, leads to the abominable results we see in the US Projects, British Community Estates, French HLM, etc. That does not even mention the catastrophe of Soviet style central decisions in housing, which even in countries with traditional high standards (East Germany), did lead to dismal results.
And then there is Japan to consider: intensification of housing (higher density) follows rules which are negotiated often block-wise by neighbors). This decentralized concept would not have been alien to New England settlers long ago, as I noticed on famous Washington Street in Bath, Maine.
In Europe, building mass housing around Rail Road Stations (and other traffic hubs) is seen as a one-way ticket to insanity, because (a) it crams construction onto the most expensive real estate in town (Wide sidewalks? Forget it!), and (b) where is the commuter going to go after arriving at another train station with BMR housing: another apartment? It will lead neither to Jane Jacobs’ beautiful cities, nor to Le Corbusier’s walkable cities of New Urbanism. However, it will lead to maximizing profits, and so the building industry is all for it.
The most successful BMR efforts in OECD countries seem to be the German, Dutch, and Scandinavian (the Nordic Block) approach; where within the framework of their social market economy (conservatives take note: it is based on Friedrich Hayek’s Ordo Liberalism) Mutual Non-profit Building Associations are the developers. It cuts out the for-profit developers, who naturally cannot compete on price; their profit prevents it. Non-profit here just means that the 30% profit, which flows into the pockets of private developers, is used as starting capital to build more BMR housing, and not take it out circulation for private enrichment.
In the next step of progress local utilities and building associations join forces. In Germany (which I know best) a well-known example is the Hessian City of Darmstadt, the town of the Architect Peter Behrens (the teacher of Le Corbusier, Mies van der Rohe, and Walter Gropius). Here the former Arbeiter Bauverein 1864 (Workers Building Association of 1864, now Bauverein AG) and the local Hessian Electricity AG (HEAG) have joined to create the starting capital.
The CEO of the combined enterprise is a “Dr. Ing.”, who as a Diplom Wirtschafts Engineer (literally a graduate industrial engineer) has a hybrid degree of an Economist and an Engineer.
Since Darmstadt has built up its BMR apartment stock since 1864, they now own 16,000 Apartments in a city of 150,000 people. And this despite Darmstadt being destroyed by Anglo-American Terror bombing to 80% in WW2. But Darmstadt, governed by Social Democrats being not in the pocket of local builders, has never allowed the run-away office construction by for-profit companies we see in California.
As always in BMR projects rehabilitation and preservation of existing affordable housing is a continuous hand-to-hand combat, as is the adjusting of rent depending on changing income of renters, creating and maintaining vibrant mixed income neighborhoods. This only can be done locally.
We all know the terrible consequences the Thatcherism inspired ‘right to buy’ ideology had in Britain. By nationally forbidding that the profit made, from the sale of the estate housing in the 1980’s, could be used to build more houses, and by even confiscating the profits by the treasury, BMR housing stock all but disappeared and new stock was not created. The profits from the “right-to-buy” sales were used by Thatcher for trickle down tax cuts. Sounds familiar? It did not work in Great-Britain either!
A final remark: the “Nordic” system for below market rate housing is a take-off of the Nordic Block’s health insurance system. The “insurance entities” were originally thousands of local (now often regional, but never national) non-profit 1700’s guild based mutual sickness funds, which like any mutual association are run by the members, thus off-the-bat lowering the cost by the 30% of profits which US Health Insurances take out. And operating for the interests of the members and not the profit of the companies keeps premiums low.
Regarding the economic Cooperation between Building Associations and Utilities, Palo Alto with a local Housing Authority and a local Community Utility Company (which produces a return-on-investment – Dividends) could easily do that. As an example, Palo Alto in 1987 already introduced a Utility Users Tax to support in a clever maneuver the Palo Alto School District.

Rainer Pitthan, Rainer.Pitthan@GMail.com 8/19/2019

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