What I’d fix about SB827, aka that white paper has sooooooo been written already

The “takes the cake” response to yesterday’s post is this one:

Twitter Notifications

This is “Shut up, bitch” politics 101. Lisa, you are speaking about the wrong things in the wrong way. Lemme splain how you best participate in policy, lil lady.

Holy crap, what’s it like to get up in the morning assuming you are entitled to tell a woman as accomplished and as intelligent as I am what I may say and how to say it?

Look, nobody is out to ruin SB827. I’m glad you think I’m that important, but um, no.

I had what I consider to be an important point to make about how difficult policy design is when it comes to really getting money and benefits to flow into the hands of impoverished renters. And how, if policymakers are not really, really careful, the policy process works to screw over poor people even that’s the last thing people crafting and advocating for a policy intend. These problems apply to SB827.

So let’s get this through some heads: I have more than earned the right to write about urban policy even if my every blog post isn’t a perfect roadmap that spoonfeeds people policy solutions. I’m not a free consultant.The material on this blog is offered without charge and without advertising; the public does not pay my salary even since I work at private university.

Here’s how you respond if you don’t agree with my point. “Hey, I don’t think you’re right on this one. I think Weiner & Co really has a handle on it.”

Ta-da! Disagreement that treats me like an equal instead of misguided girl speaking when she should be spoken to.

So I could write a white paper, but it would be a little redundant because Henry George already wrote the book in 1879: Progress and Poverty. You can read it all here.

If 18th century prose is not to your taste (understandably), some super-smart UCLA professors spelled it out in the LA Times Op-Ed page not that long ago (July 2017, actually). It was circulated widely and is generally approved of by all the very smart people who splain things to me. What to do is *right there* spelled out in 750 words.

We have been talking about value capture strategies around train stations in California since Christ was a carpenter. At least since I was in grad school, which was right after the Lincoln assassination.

You want loose supply? We can give you looser supply! It would just be nice if the regulatory change and transit investment combo weren’t just windfalls to landowners here, and we could split the nice land value bumps that SB827 will bring between developers and governments so that government could use its damn power to boost the purchasing power of poor people for housing instead of just lobbing softball economic gains to landowners who already have lots.

I have no heartburn when developers develop developments and make money. That’s their job!

But pointing out when public policy is doing dumb, unfair things is, in fact, my job.

Thus I do have heartburn when in Los Angeles alone we are spending billions and billions of dollars to make places extra-nice and extra-profitable to develop with public investments in transit (let alone HSR) with taxpayers recouping fractions of what we put in because of the way we deal with property taxation in this state.

Value capture as a strategy goes like this:

1. Governments build wonderful amenities like train stations that add value, often gobs, to land–value that landowners get even though they themselves have not done really anything to earn it, such as by actually improving the property themselves. We spent $900 mill on the Expo Line alone. It’s a lovely train! It has made land more valuable along Expo. Let’s get part of that $900 million back! When we upzone in high land value areas like Santa Monica, we can recoup some of our investment. Whee!

2. Value capture is just what it sounds like: governments capture either all or part of the value of the publicimprovement in the land value (but the not the property value) so that developers can still improve the property (and still gain on their investments), but the government recoups some revenue from the investment it has made that got capitalized in the value of the land.

When we do not do that, our public investments in things like transit—especially when combined with nice plans for allowing more intensive land development, like SB827, near transit—become nice, multi-billon dollar windfalls for landowners.

A great, big, fat hand-out of unearned land value windfall.

But, where, o where, could we ever find revenues to expand renter support programs, like vouchers, for California renters? There’s just no money anywhere!e

Yeah, there’s money there, it’s just going to private landowners. Again and again and again and again. We’ve done it with all our metro rail systems, and we will race to do another nice land value giveaway with high speed rail, too.

So the cycle goes something like this: California public policy makes owning land a cash machine for owners, and then we get mad at people for having entrenched interests in their property values, since our policies do not distinguish between land value and building value.

SOOOOOOoo is there any info on the value capture strategy of which you speak?

Yes! Yes there is! It has been bigily studied and described! It’s been implemented I places. It’s been evaluated.

There’s this big huge lineup of reports from researchers at the University of Minnesota.

There’s this discussion The Man Himself David Levinson writing for CityLab.

This friendly brief from APTA!

This friendly informer from the High Speed Rail Advocacy folks.

This nice summary paper from an open access journal.

This nifty book from the Transportation Research Board (a secret Illuminati organization if there ever was one)

This awesome report from Brookings.

This cool study on TOD Value Capture in Massachusetts.

This little blurb from Smart Growth California folks at SCAG who have a really helpful discussion of tools that may be used in California!

This fantastic report from the Lincoln Land Institute. That has a GREAT submission from Mr. Windfalls for Wipeouts Himself, Dean J. Misczynski, who fist published (brilliantly) about this particular topic in 1978.

From FHWA here.

We might, for example, just tweak this approach a bit.

Some private consultants have been working on this VERY IDEA in affordable housing!

OH BOY OH BOY IT’S GOT ITS OWN WIKIPEDIA PAGE!! (A little light; David L, go fix it. )

New York City is eyeballing it.

And of course, the very nice VTPI Report from Jeffery J. Smith and Thomas A. Gihring, which is a GIGANTICALLY LARGE annotated bibliography.

So may I skip the white paper, boss?

Here’s the specific fix, spelled out:

Since we are with BS827 setting up special districts around transit stations anyway, we should set up them up special assessment districts, use the transit-value and up-zone value in land appreciation to derive revenues to put into a fund for: a) rental vouchers; b) school districts with new student need from the new developments and c) transit operations and support. Stations are expensive. They should be far more self-financing than they are. This is one way to do it.

I assume that Senator Weiner has smart legislative staffers who know what value capture is. That it’s not in this legislation, explicitly right now instead of TBD, says something to me, and I don’t like what it says. It says to me our legislature is going to let the value capture ship sail away on us–again–and with it revenues the state or localities could have had to do nice things.

If you don’t like that I don’t like SB827 with these provisions, in the words of Steve Martin: Welll exchuuuuuuuuuuuse me.

Now THAT cat is out of the bag, let me repeat my point from yesterday, which is about the policy process, and NOT about Weiner, YIMBYs, or any specific policy, which I am going to repeat because if the value capture part of this wasn’t obvious to you before I spelled it out, then you are NOT enough of an expert on the policy process and injustice to tell me what I may and may not post in the name of appropriateness.

When you treat the concerns of impoverished people in the “TBD” category of legislation, like so:

Twitter Notifications

It is very likely that the sausage factory will leave their concerns on the curb, even if your nice, well-intended, progressive bill writer says that won’t happen. Individuals don’t control politics enough for their “I’ve got this” to be a bankable claim.

If you pass the supply components of this rule without value capture (to happen “later”) and without a commitment of those funds for specific people (not general funds), you lose leverage over development (that’s the point, fine, but don’t give away the store), and you set the stage for fighting over affordable units project by project (again, with less leverage, so it’s a both headache for citied and developers AND less effective), instead of a) capturing the value we are due and b) just letting market rates fall where they fall andthen c) using captured revenues to provide income support directly for renters who can’t pay market rates without subsidy. Yes, landlords are likely to capture that increment in rent, but the renter gets to be housed in the process, which I thought was the point here, so I’m in.

And you don’t have to futz with rent control.

And, btw, landowners near stations will have much less incentive to convert their properties if we don’t do value capture on land appreciation, so the policy also has a strong efficiency argument.

Nope, it’s not an easy fix. Landowners love the sugar they get. But they shouldn’t get as much as they do, and they shouldn’t get it at the expense of their neighbors who have contributed to the sale taxes and gas taxes that went into building the transit in the first place if those same neighbors are not making enough $$$$ to be able to stay near transit without income support.

And it would help if Americans didn’t purposefully suck at public housing.

That’s what I’d fix.

3 thoughts on “What I’d fix about SB827, aka that white paper has sooooooo been written already

  1. What about getting the new fintech companies like Lending Club or Prosper to spin-off a new platform to help communities through the redevelopment process. Their platform and a local govt admin can provide shares in a region to the current residents and developers need to buy back those shares to build or the current residents get a dividend from all the new residents who move into the newly constructed residential complexes. Those fintech companies have amazing platforms that can track hundreds of millions of really small transactions and maintain them for decades. If an area is zoned for redevelopment current residents are identified by drivers licence or utility bills and all receive the same number of shares in the area. Would have to be govt controlled and funded but the fintech platform allows people to manage an account, receive payments and sell their shares if they decide to. Current residents could benefit just as much as a CEO in a corner office does from these developments! Just a thought.

  2. Thank you! Great work, much appreciated that you took the time to write this

  3. I was unable to post a comment—perhaps your settings close posts to comment after a specified period. I saved this one to respond to when I had a bit of time.

    You’re doing the Lord’s work here, connecting value capture and equity. I’m extremely pleased to see what you’ve written. Several comments, beyond the applause:

    1. Value capture should also produce transit operations funding. It’s critically needed.

    2. It doesn’t just happen that the equity aspects get lost when bills are drafted. The system works to further entrench the wealthy. It’s not an oversight, it’s a policy decision on the sharing of the wealth (i.e., let’s not and say we did). [That was an homage to your gloriously personal writing style.]

    3. I’ve long thought about a variant of what you laid out: Instead of doing a financial value capture, tying the act of upzoning to a formal transfer of community benefits. I see permanently affordable units for existing residents of the neighborhood as one option. The other is permanently protected open space. Either way, something is locked in at the same time the public entity conveys expanded property rights. The net result of this is to prevent any increase in the value of land. Landowners would fight with everything they have to protect future speculative profits from public sector actions, but I see this as the just way to proceed.

    4. I’ve said to Bay Area housing groups that they will never protect enough housing unless they adopt a far more sweeping set of demands that would effectively defang the capitalist system. What you’ve written gets there. As such, this is a battle with the highest stakes.

    5. As a transit activist, I’ve noticed that station areas, and neighborhoods with high transit access are a very special resource that need to be protected from low-density development, like the Costco built next to the South San Francisco BART station. Minimum zoning standards are desperately needed. However SB 827’s meataxe approach seems too politically toxic to get past extraordinary local opposition. I think Weiner’s headed in absolutely the right direction, but that this particular approach is a failure.

    Your loyal reader,

Comments are closed.