A common refrain at housing forums in San Francisco is the perennial question of why tenant advocates are sometimes hostile to new housing construction in their neighborhoods, with counter argument being that supply and demand will drive down rents and home prices if new housing is built.
In a June report detailing the effects of housing supply on eviction, UC Berkeley graduate student Kate Pennington explains a contrary hypothesis informing the opposition: The fear that new construction will drive up home values and incentivize chronic eviction.
“Many advocates and incumbent residents worry that new market rate development will cause displacement and gentriﬁcation to begin in neighborhoods that have not yet been aﬀected, and to accelerate in neighborhoods already experiencing demographic change,” Pennington writes in “The Impact of Housing Production on Legal Eviction in San Francisco.”
(Mission Local has reproduced a full copy of the 23-page report here.)
To help settle this question, Pennington compared rates of formal eviction notices in SF neighborhoods before and after new construction since 2003. She found no particular evidence that eviction attempts spiked in response to nearby changes.
However, Pennington also cautions that further study of other variables is necessary before reaching a decisive conclusion. She goes on to note that fears of gentrification from rising home values based on new development are not groundless.
A few of Pennington’s findings:
- The historic character and makeup of many neighborhoods is rapidly changing, and possibly slipping away entirely: “A 2015 study by the Board of Supervisors budget and legislative analyst found that the Mission’s Latino population fell from 60 percent in 2000 to 48 percent in 2015, and predicts that, without action, it will hit 31 percent in 2025.”
- Market rate housing can indeed lead to gentrification and displacement, but the devil is in the details: “In theory, new market rate construction could either accelerate or decelerate gentriﬁcation and displacement. Through a supply eﬀect, new construction can bring down prices and slow displacement. [...However] new housing might also have spillover eﬀects on nearby housing prices and upgrade decisions that could accelerate the gentriﬁcation of nearby buildings. It is also possible that both eﬀects occur at once.”
- Logically, nearby new construction does give landlords a hard push to evict existing tenants: “If building new market rate housing increases property values nearby, then neighboring landlords have an incentive to raise the rents. Landlords of units that are not rent controlled can either simply set a new monthly rent, or evict existing tenants and set a higher rent in the next lease. [...] Landlords of both rent controlled and uncontrolled units become more likely to evict tenants when their property values rise.”
- However, Pennington found no specific evidence that this is happening in the Mission: “The coeﬃcients on months far before the new project are small and indistinguishable from zero. This means that there is no impact of a project being under construction. Next, notice that the coeﬃcients do not change signiﬁcantly after time zero. Each of these point estimates is a precisely estimated zero, no larger than 0.05 percentage points and always statistically indistinguishable from zero. This means that the monthly probability of an eviction notice being issued does not change due to the completion of new housing nearby.”
- And she reiterates this several times, across the entire spectrum of housing types: “For all three construction types, I ﬁnd a precisely estimated zero.”
- However, further study is needed, as other indicators may yet reveal more to the story: “To fully evaluate the impact of new construction on displacement and gentriﬁcation, future re-search should examine a fuller set of measures. As discussed earlier, eviction notices are not a perfectmeasure of evictions. Illegal eviction through harassment or intimidation may be more responsiveto nearby new construction. Furthermore, evictions are not a complete measure of displacement or gentriﬁcation.”
You can read the full report, including its methodology, here.