Calvin Welch Challenges Housing Supply Remedies

Calvin Welch, a long-time housing activist, part-time instructor at SFSU and founder of Council of Community Housing Organizations (CCHO), recently released a video through Tim Redmond’s 48Hills blog expounding his theories on San Francisco’s housing affordability crisis. They’re definitely worth viewing! His short lectures are a useful window into the thinking of a portion of our population that does not believe supply and demand applies to San Francisco in relation to housing affordability. In simple terms, Mr.Welch argues that “classical” [sic] economic ideas of supply and demand do not explain our expensive housing and that increased supply makes things worse.

Last year, Welch wrote a paper using housing data from the Planning Department that “demonstrates” how increasing housing supply INCREASES the prices of housing. This video is an extension of this thinking. Welch and his allies would argue that building new market-rate housing itself induces the demand that raises its price. Leaving aside the question of whether his paper has confused cause and effect and the extensive work of urban economists who have written about San Francisco’s housing markets, it seems certain that he’s describing a condition that has never been observed in a market economy – that increasing supply of a scarce commodity increases its price. Our readers would argue that this also flies in the face of all real estate data describing San Francisco’s housing market over the last 4-5 years. His analysis also appears to ignore larger factors such as increased employment and population growth related to San Francisco’s red-hot innovation economy. Where is the demand side of the equation discussed?

He has argued extensively that one solution to improving affordability is to restrict production of market-rate housing and increase the fees and exactions on it so that it pays its “fair share”. While SFHAC would agree that the downtown mid to hi-rise residential projects being built by themselves are not the entire answer, the heavy subsidies they pay for affordability cannot be ignored, either. Instead, we would suggest that improved affordability requires a variety of solutions; there’s no silver bullet. In particular, it should include looking at ways to sharply increase production of lower-cost housing in outer neighborhoods, away from the expensive urban core. As we all know, there are political difficulties to confronting the issue of “density equity” that Welch never discusses.

Please share your thoughts on this video in the comments section below.