Perspectives on Helping Low-Income Californians Afford Housing

Perspectives on Helping Low-Income Californians Afford Housing MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • FEBRUARY 9, 2016 Summary California has a serious housing shortage. California’s housing costs, consequently, have been rising rapidly for decades. These high housing costs make it difficult for many Californians to find housing that is affordable and that meets their needs, forcing them to make serious trade-offs in order to live in California. In our March 2015 report, California’s High Housing Costs: Causes and Consequences, we outlined the evidence for California’s housing shortage and discussed its major ramifications. We also suggested that the key remedy to California’s housing challenges is a substantial increase in private home building in the state’s coastal urban communities. An expansion of California’s housing supply would offer widespread benefits to Californians, as well as those who wish to live in California but cannot afford to do so. Some fear, however, that these benefits would not extend to low-income Californians. Because most new construction is targeted at higher-income households, it is often assumed that new construction does not increase the supply of lower-end housing. In addition, some worry that construction of market-rate housing in low-income neighborhoods leads to displacement of low-income households. In response, some have questioned whether efforts to increase private housing development are prudent. These observers suggest that policy makers instead focus on expanding government programs that aim to help low-income Californians afford housing. In this follow up to California’s High Housing Costs, we offer additional evidence that facilitating more private housing development in the state’s coastal urban communities would help make housing more affordable for low-income Californians. Existing affordable housing programs assist only a small proportion of low-income Californians. Most low-income Californians receive little or no assistance. Expanding affordable housing programs to help these households likely would be extremely challenging and prohibitively expensive. It may be best to focus these programs on Californians with more specialized housing needs—such as homeless individuals and families or persons with significant physical and mental health challenges. Encouraging additional private housing construction can help the many low-income Californians who do not receive assistance. Considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households and, consequently, helps to mitigate displacement in many cases. Bringing about more private home building, however, would be no easy task, requiring state and local policy makers to confront very challenging issues and taking many years to come to fruition. Despite these difficulties, these efforts could provide significant widespread benefits: lower housing costs for millions of Californians. AN LAO BRIEF 2 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF VARIOUS GOVERNMENT PROGRAMS HELP CALIFORNIANS AFFORD HOUSING Federal, state, and local governments Vouchers Help Households Afford Housing. implement a variety of programs aimed at helping The federal government also makes payments Californians, particularly low-income Californians, to landlords—known as housing vouchers—on afford housing. These programs generally work behalf of about 400,000 low-income households in one of three ways: (1) increasing the supply of in California. These payments generally cover the moderately priced housing, (2) paying a portion of portion of a rental unit’s monthly cost that exceeds households’ rent costs, or (3) limiting the prices and 30 percent of the household’s income. rents property owners may charge for housing. Some Local Governments Place Limits on Various Programs Build New Moderately Prices and Rents. Some local governments have Priced Housing. Federal, state, and local policies that require property owners charge governments provide direct financial assistance— below-market prices and rents. In some cases, typically tax credits, grants, or low-cost loans—to local governments limit how much landlords housing developers for the construction of rental can increase rents each year for existing tenants. housing. In exchange, developers reserve these About 15 California cities have these rent controls, units for lower-income households. (Until recently, including Los Angeles, San Francisco, San Jose, and local redevelopment agencies also provided this Oakland. In 1995, the state enacted Chapter 331 type of financial assistance.) By far the largest of of 1995 (AB 1164, Hawkins), which prevented rent these programs is the federal and state Low Income control for properties built after 1995 or properties Housing Tax Credit (LIHTC), which provides tax built prior to 1995 that had not previously been credits to affordable housing developers to cover subject to rent control. Assembly Bill 1164 also a portion of their building costs. The LIHTC allowed landlords to reset rents to market rates subsidizes the new construction of around 7,000 when properties transferred from one tenant to rental units annually in the state—typically less another. In other cases, local governments require than 10 percent of total public and private housing developers of market-rate housing to charge below- construction. This represents a significant majority market prices and rents for a portion of the units of the affordable housing units constructed in they build, a policy called “inclusionary housing.” California each year. NEED FOR HOUSING ASSISTANCE OUTSTRIPS RESOURCES Many Low-Income Households Receive 3.3 million low-income households (who earn No Assistance. The number of low-income 80 percent or less of the median income where Californians in need of assistance far exceeds they live) rent housing in California, including the resources of existing federal, state, and local 2.3 million very-low-income households (who earn affordable housing programs. Currently, about 50 percent or less of the median income where they www.lao.ca.gov Legislative Analyst’s Office 3 AN LAO BRIEF live). Around one-quarter (roughly 800,000) of Majority of Low-Income Households Spend low-income households live in subsidized affordable More Than Half of Their Income on Housing. housing or receive housing vouchers. Most Around 1.7 million low-income renter households households receive no help from these programs. in California report spending more than half of Those that do often find that it takes several years to their income on housing. This is about 14 percent get assistance. Roughly 700,000 households occupy of all California households, a considerably higher waiting lists for housing vouchers, almost twice the proportion than in the rest of the country (about number of vouchers available. 8 percent). CHALLENGES OF EXPANDING EXISTING PROGRAMS One possible response to these affordability Affordable Housing Construction Requires challenges could be to expand existing housing Large Public Subsidies. While it is difficult to programs. Given the number of households estimate precisely how many units of affordable struggling with high housing costs, however, this housing are needed, a reasonable starting point is approach would require a dramatic expansion the state’s current population of low-income renter of existing government programs, necessitating households that spend more than half of their funding increases orders of magnitude larger income on housing—about 1.7 million households. than existing program funding and far-reaching Based on data from the LIHTC, housing built for changes in existing regulations. Such a dramatic low-income households in California’s coastal change would face several challenges and urban areas requires a public subsidy of around probably would have unintended consequences. $165,000 per unit. At this cost, building affordable Ultimately, attempting to address the state’s housing for California’s 1.7 million rent burdened housing affordability challenges primarily through low-income households would cost in excess of expansion of government programs likely would be $250 billion. This cost could be spread out over impractical. This, however, does not preclude these several years (by issuing bonds or providing programs from playing a role in a broader strategy subsidies to builders in installments), requiring to improve California’s housing affordability. annual expenditures in the range of $15 billion Below, we discuss these issues in more detail. to $30 billion. There is a good chance the actual cost could be higher. Affordable housing projects Expanding Assistance Programs often receive subsidies from more than one source, Would Be Very Expensive meaning the public subsidy cost per unit likely is Extending housing assistance to low-income higher than $165,000. It is also possible the number Californians who currently do not receive it—either of units needed could be higher if efforts to make through subsidies for affordable units or housing California’s housing more affordable spurred more vouchers—would require an annual funding people to move to the state. Conversely, there is commitment in the low tens of billions of dollars. some chance the cost could be lower if building This is roughly the magnitude of the state’s largest some portion of the 1.7 million eased competition General Fund expenditure outside of education at the bottom end of the housing market and (Medi-Cal). allowed some low-income families to find 4 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF affordable market-rate housing. Nonetheless, under Housing Shortage Has Downsides Not any circumstances it is likely this approach would Addressed by Existing Housing Programs. High require ongoing annual funding at least in the low housing costs are not the only downside of the tens of billions of dollars. state’s housing shortage. As we discussed in detail Expanding Housing Vouchers Also Would in California’s High Housing Costs, California’s Be Expensive. Housing vouchers would be housing shortage denies many households the similarly expensive. According to American opportunity to live in the state and contribute Community Survey data, around 2.5 million to the state’s economy. This, in turn, reduces the low-income households in California spend state’s economic productivity. The state’s housing more than 30 percent of their income on rent. shortage also makes many Californians—not only These households’ rents exceed 30 percent of low-income residents—more likely to commute their incomes by $625 each month on average, longer distances, live in overcrowded housing, and meaning they would require an annual subsidy delay or forgo homeownership. Housing programs of around $7,500. This suggests that providing such as vouchers, rent control, and inclusionary housing vouchers to all of these households would housing that do not add to the state’s housing stock cost around $20 billion annually. By similar logic, do little to address these issues. a less generous program that covered rent costs Scarcity of Housing Undermines Housing exceeding 50 percent of household income would Vouchers. California’s tight housing markets pose cost around $10 billion annually. There is, however, several challenges for housing voucher programs good reason to believe the cost of expanding which can limit their effectiveness. In competitive voucher programs would be significantly higher housing markets, landlords often are reluctant than these simple estimates suggest. As we discuss to rent to housing voucher recipients. Landlords in the next section, a major increase in the number may not be interested in navigating program of voucher recipients likely would cause rents to requirements or may perceive voucher recipients rise. Higher rent costs, in turn, would increase the to be less reliable tenants. One nationwide study amount government would need to pay on behalf conducted in 2001 found that only two-thirds of of low-income renters. This effect is difficult to voucher recipients in competitive housing markets quantify but probably would add several billion were able to secure housing. This issue likely would to tens of billions of dollars to the annual cost of a be amplified if the number of voucher recipients major expansion of vouchers. competing for housing were increased significantly. In addition, some research suggests that expanding Existing Housing Shortage Poses housing vouchers in competitive housing markets Problems for Some Programs results in rent increases, which either offset benefits Many housing programs—vouchers, rent to voucher holders or increase government costs for control, and inclusionary housing—attempt to the program. One study looking at an unusually make housing more affordable without increasing large increase in the federal allotment of housing the overall supply of housing. This approach does vouchers in the early 2000s found that each very little to address the underlying cause of 10 percent increase in vouchers in tight housing California’s high housing costs: a housing shortage. markets increased monthly rents by an average of Any approach that does not address the state’s $18 (about 2 percent). This suggests that extending housing shortage faces the following problems. vouchers to all of California’s low-income www.lao.ca.gov Legislative Analyst’s Office 5 AN LAO BRIEF households (a several hundred percent increase in Barriers to Private Development Also the supply of vouchers) could lead to substantial Hinder Affordable Housing Programs rent inflation. If this were to occur, the estimates in Local Resistance and Environmental the prior section of the cost to expand vouchers to Protection Policies Constrain Housing all low-income households would be significantly Development. Local community resistance and higher. California Environmental Quality Act (CEQA) Housing Costs for Households Not Receiving challenges limit the amount of housing—both Assistance Could Rise. Expansion of voucher private and subsidized—built in California. programs also could aggravate housing challenges These factors present challenges for subsidized for those who do not receive assistance, particularly construction and inclusionary housing programs. if assistance is extended to some, but not all Subsidized housing construction faces the same, low-income households. As discussed above, in many cases more, community opposition as research suggests that housing vouchers result in market-rate housing because it often is perceived as rent inflation. This rent inflation not only effects bringing negative changes to a community’s quality voucher recipients but potentially increases rents or character. Furthermore, subsidized construction, paid by other low- and lower-middle income like other housing developments, often must households that do not receive assistance. undergo the state’s environmental review process Housing Shortage Also Creates Problems outlined in CEQA. This can add costs and delay for Rent Control Policies. The state’s shortage of to these projects. Inclusionary housing programs housing also presents challenges for expanding rent rely on private housing development to fund control policies. Proposals to expand rent control construction of affordable housing. Because often focus on two broad changes: (1) expanding of this, barriers that constrain private housing the number of housing units covered—by applying development also limit the amount of affordable controls to newer properties or enacting controls housing produced by inclusionary housing in locations that currently lack them—and programs. (2) prohibiting landlords from resetting rents to Home Builders Often Forced to Compete for market rates for new tenants. Neither of these Limited Development Opportunities. With state changes would increase the supply of housing and, and local policies limiting the number of housing in fact, likely would discourage new construction. projects that are permitted, home builders often Households looking to move to California or compete for limited opportunities. One result of within California would therefore continue to face this is that subsidized construction often substitutes stiff competition for limited housing, making it for—or “crowds out”—market-rate development. difficult for them to secure housing that they can Several studies have documented this crowd-out afford. Requiring landlords to charge new tenants effect, generally finding that the construction of below-market rents would not eliminate this one subsidized housing unit reduces market-rate competition. Households would have to compete construction by one-half to one housing unit. These based on factors other than how much they are crowd-out effects can diminish the extent to which willing to pay. Landlords might decide between subsidized housing construction increases the tenants based on their income, creditworthiness, or state’s overall supply of housing. socioeconomic status, likely to the benefit of more affluent renters. 6 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF Other Unintended Consequences This lock-in effect can cause households to stay longer in a particular location than is otherwise “Lock-In” Effect. Households residing optimal for them. in affordable housing (built via subsidized Declining Quality of Housing. By depressing construction or inclusionary housing) or rents, rent control policies reduce the income rent-controlled housing typically pay rents well received by owners of rental housing. In response, below market rates. Because of this, households property owners may attempt to cut back their may be discouraged from moving from their operating costs by forgoing maintenance and existing unit to market-rate housing even when it repairs. Over time, this can result in a decline in may otherwise benefit them—for example, if the the overall quality of a community’s housing stock. market-rate housing would be closer to a new job. MORE PRIVATE HOME BUILDING COULD HELP Most low-income Californians receive little higher-income households. This seems to suggest or no assistance from existing affordable housing that construction of new market-rate housing programs. Given the challenges of significantly does not add to the supply of lower-end housing. expanding affordable housing programs, this is Building new market-rate housing, however, likely to persist for the foreseeable future. Many indirectly increases the supply of housing available low-income households will continue to struggle to low-income households in multiple ways. to find housing that they can afford. Encouraging Housing Becomes Less Desirable as It Ages . . . more private housing development seems like a New housing generally becomes less desirable as it reasonable approach to help these households. But ages and, as a result, becomes less expensive over would it actually help? In this section, we present time. Market-rate housing constructed now will evidence that construction of new, market-rate therefore add to a community’s stock of lower-cost housing can lower housing costs for low-income housing in the future as these new homes age and households. become more affordable. Our analysis of American Housing Survey data finds evidence that housing Increased Supply, Lower Costs becomes less expensive as it ages. Figure 1 (see Lack of Supply Drives High Housing Costs. As next page) shows the average rent for housing we demonstrate in California’s High Housing Costs, built between 1980 and 1985 in Los Angeles and a shortage of housing results in high and rising San Francisco. These housing units were relatively housing costs. When the number of households expensive in 1985 (rents in the top fifth of all rental seeking housing exceeds the number of units units) but were considerably more affordable by available, households must try to outbid each other, 2011 (rents near the median of all rental units). driving up prices and rents. Increasing the supply Housing that likely was considered “luxury” when of housing can help alleviate this competition and, first built declined to the middle of the housing in turn, place downward pressure on housing costs. market within 25 years. Building New Housing Indirectly Adds to the Supply of Housing at the Lower End of the Market. New market-rate housing typically is targeted at www.lao.ca.gov Legislative Analyst’s Office 7 AN LAO BRIEF . . . But Lack of New Construction Can Slow New Housing Construction Eases Competition This Process. When new construction is abundant, Between Middle- and Low-Income Households. middle-income households looking to upgrade Another result of too little housing construction the quality of their housing often move from is that more affluent households, faced with older, more affordable housing to new housing. limited housing choices, may choose to live in As these middle-income households move out neighborhoods and housing units that historically of older housing it becomes available for lower- have been occupied by low-income households. income households. This is less likely to occur in This reduces the amount of housing available for communities where new housing construction is low-income households. Various economic studies limited. Faced with heightened competition for have documented this result. One analysis of scarce housing, middle-income households may American Housing Survey data by researchers at live longer in aging housing. Instead of upgrading the Federal Reserve Bank of New York found that by moving to a new home, owners of aging homes “the more constrained the supply response for new may choose to remodel their existing homes. residential units to demand shocks, the greater the Similarly, landlords of aging rental housing may probability that an affordable unit will filter up and Graphic Sign Off elect to update their properties so that they can out of the affordable stock.” Other researchers have continue to market them to middle-income found thatS loewc-rientcaormye neighborhoods are more households. As a result, less housing transitions to likely to exApneraielynscet an influx of higher-income the lower-end of the housing market over time. One households when they are in close proximity to MPA study of housing costs in the U.S. found that rental affluent neighborhoods with tight housing markets. Deputy housing generally depreciated by about 2.5 percent More Supply Places Downward Pressure on per year between 1985 and 2011, but that this rate Prices and Rents. When the number of housing ARTWORK #160020 was considerably lower (1.8 percent per year) in units available at the lower end of a community’s regions with relatively limited housing supply. housing market increases, growth in prices Template_LAOReport_sm.ait and rents slows. Evidence supporting this relationship Figure 1 Housing Becomes Less Expensive as It Ages can be found by comparing housing expenditures of Percentile Rank of the Rent for Housing Built Between 1980 and 1985 low-income households living 90% in California’s slow-growing 1985 80 coastal communities to 2011 70 those living in fast-growing communities elsewhere 60 in the country. Between 50 1980 and 2013, the housing 40 stock in California’s coastal 30 urban counties (counties 20 comprising metropolitan 10 areas with populations greater than 500,000) grew by only Los Angeles San Francisco 34 percent, compared to 8 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF 99 percent in the fastest growing urban counties (see next page) shows, displacement was more than throughout the country (top fifth of all urban twice as likely in low-income census tracts with counties). As figure 2 shows, over the same time little market-rate housing construction (bottom period rents paid by low-income households grew fifth of all tracts) than in low-income census tracts nearly three times faster in California’s coastal with high construction levels (top fifth of all tracts). urban counties than in the fastest growing urban Results Do Not Appear to Be Driven by counties (50 percent compared to 18 percent). Inclusionary Housing Policies. One possible As a result, the typical low-income household in explanation for this finding could be that many California’s costal urban counties now spends Bay Area communities have inclusionary housing around 54 percent of their income on housing, policies. In communities with inclusionary housing compared to only 43 percent in fast growing policies, most new market-rate construction is counties. This difference—11 percentage points—is paired with construction of new affordable housing. roughly equal to a typical low-income household’s It is possible that the new affordable housing total spending on transportation. units associated with increased market-rate Graphic Sign Off development—and not market-rate development Lower Costs Reduce Chances of Displacement Secretary itself—could be mitigating displacement. Our More Private Development Associated With analysis, however, finds that market-rate housing Analyst Less Displacement. As market-rate housing construction appears to be associated with MPA construction tends to slow the growth in prices less displacement regardless of a community’s Deputy and rents, it can make it easier for low-income inclusionary housing policies. As with other households to afford their existing homes. This Bay Area communities, in communities without can help to lessen the displacement of low-income inclusionary housing policies, displacement households. Our analysis of low-income neighborhoods Figure 2 in the Bay Area suggests Places With More Building Saw a link between increased Slower Growth in Rents for Poor Households construction of market-rate Rents Paid by Low-Income Households in Urban Counties (In 2013 Dollars) housing and reduced $1,400 displacement. (See the technical appendix for 1980 1,200 more information on how 2013 we defined displacement 1,000 for this analysis.) Between 800 2000 and 2013, low-income census tracts (tracts with an 600 above-average concentration 400 of low-income households) in the Bay Area that built the 200 most market-rate housing experienced considerably less California Coast U.S. Counties With Most Home Building displacement. As Figure 3 www.lao.ca.gov Legislative Analyst’s Office 9 ARTWORK #160020 Template_LAOReport_mid.ait AN LAO BRIEF was more than twice as likely in low-income experience displacement. A neighborhood’s census tracts with limited market-rate housing demographics and housing characteristics probably construction than in low-income census tracts with are important. Nonetheless, we continue to find high construction levels. that increased market-rate housing construction is Relationship Remains After Accounting for linked to reduced displacement after using common Economic and Demographic Factors. Other factors statistical techniques to account for these factors. play a role in determining which neighborhoods (See the technical appendix for more details.) CONCLUSION Addressing California’s housing crisis is The current response to the state’s housing one of the most difficult challenges facing the crisis often has centered on how to improve Graphic Sign Off state’s policy makers. The scope of the problem affordable housing programs. The enormity of is massive. Millions of Californians struggle to California’s housing challenges, however, suggests Secretary find housing that is both affordable and suits that policy makers look for solutions beyond these Analyst their needs. The crisis also is a long time in the programs. While affordable housing programs MPA making, the culmination of decades of shortfalls are vitally important to the households they Deputy in housing construction. And just as the crisis has assist, these programs help only a small fraction taken decades to develop, it will take many years of the Californians that are struggling to cope or decades to correct. There are no quick and easy with the state’s high housing costs. The majority fixes. of low-income households receive little or no assistance and spend more Figure 3 than half of their income on Building Market-Rate Housing housing. Practically speaking, Appears to Reduce Displacement expanding affordable Percent of Low-Income Bay Area Census Tracts That housing programs to serve Experienced Displacement Between 2000 and 2013 these households would be extremely challenging and 40% Amount of Market-Rate Housing Construction prohibitively expensive. Low In our view, encouraging High 30 more private housing development can provide 20 some relief to low-income households that are unable to secure assistance. While 10 the role of affordable housing programs in helping California’s most All Communities Communities Without Inclusionary Housing disadvantaged residents remains important, ARTWORK #160020 10 Legislative Analyst’s Office www.lao.ca.gov Template_LAOReport_mid.ait AN LAO BRIEF we suggest policy makers primarily focus on The changes needed to bring about significant expanding efforts to encourage private housing increases in housing construction undoubtedly will development. Doing so will require policy makers be difficult and will take many years to come to to revisit long-standing state policies on local fruition. Policy makers should nonetheless consider governance and environmental protection, as these efforts worthwhile. In time, such an approach well as local planning and land use regimes. offers the greatest potential benefits to the most Californians. www.lao.ca.gov Legislative Analyst’s Office 11 AN LAO BRIEF REFERENCES Early, D. W. (2000). Rent Control, Rental Malpezzi, S., & Vandell, K. (2002). Does Housing Supply, and the Distribution of Tenant the low-income housing tax credit increase Benefits. Journal of Urban Economics, 48(2), the supply of housing? Journal of Housing 185-204. Economics, 11(4), 360-380. Eriksen, M. D., & Rosenthal, S. S. (2010). Munch, J. R., & Svarer, M. (2002). Rent Crowd out effects of place-based subsidized control and tenancy duration. Journal of Urban rental housing: New evidence from the LIHTC Economics, 52(3), 542-560. program. Journal of Public Economics, 94(11), Rosenthal, S. S. (2014). Are Private Markets 953-966. and Filtering a Viable Source of Low-Income Eriksen, M. D., & Ross, A. (2014). Housing Housing? Estimates from a “Repeat Income” Vouchers and the Price of Rental Housing. Model. The American Economic Review, American Economic Journal: Economic Policy. 104(2), 687-706. Finkel, M., & Buron, L. (2001). Study Sims, D. P. (2007). Out of control: What on Section 8 Voucher Success Rates. can we learn from the end of Massachusetts Volume I. Quantitative Study of Success rent control? Journal of Urban Economics, Rates in Metropolitan Areas. Prepared by Abt 61(1), 129-151. Associates for the U.S. Department of Housing Sinai, T., & Waldfogel, J. (2005). Do and Urban Development, 2-3. low-income housing subsidies increase the Glaeser, E. L., & Luttmer, E. F. (2003). The occupied housing stock? Journal of Public Misallocation of Housing Under Rent Control. Economics, 89(11), 2137-2164. The American Economic Review, 93(4). Somerville, C. T., & Mayer, C. J. (2003). Guerrieri, V., Hartley, D., & Hurst, E. Government Regulation and Changes in the (2013). Endogenous Gentrification and Housing Affordable Housing Stock. Economic Policy Price Dynamics. Journal of Public Economics, Review, 9(2), 45-62. Volume 100 (C), 45-60. Susin, S. (2002). Rent vouchers and the Gyourko, J., & Linneman, P. (1990). Rent price of low-income housing. Journal of Public Controls and Rental Housing Quality: A Note Economics, 83(1), 109-152. on the Effects of New York City’s Old Controls. Journal of Urban Economics, 27(3), 398-409. 12 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF TECHNICAL APPENDIX To examine the relationship between displacement between 2000 and 2013. This type market-rate housing construction and displacement of model allows us to hold constant various of low-income households we developed a simple economic and demographic factors and isolate econometric model to estimate the probability of a the impact of increased market-rate construction low-income Bay Area neighborhood experiencing on the likelihood of displacement. The results displacement. of our regression are show in Figure A1. Data. We use data on Bay Area census tracts Coefficient estimates from probit regressions are (small subdivisions of a county typically containing not easily interpreted. While the fact that the around 4,000 people) maintained by researchers coefficient for market-rate housing construction with the University of California (UC) Berkeley is statistically significant and negative suggests Urban Displacement Project. This dataset included that more construction reduces the likelihood information on census tract demographics, housing of displacement, the magnitude of this effect characteristics, and housing construction levels. We is not immediately clear. To better understand focus on data for the period 2000 to 2013. these results, we used the model to compare the Defining Displacement. Researchers have probability that an average census tract would not developed a single definition of displacement. experience displacement when its market-rate Different studies use different measures. For our construction was low (0 units), average (136 units), analysis, we use a straightforward yet imperfect and high (243 units). As shown in Figure A2 (see definition of displacement which is similar to next page), with low construction levels, a census the definition used by UC Berkeley researchers. tract’s probability of experiencing displacement was Specifically, we define a census tract as having 47 percent, compared to 34 percent with average experienced displacement if (1) its overall construction levels, and 26 percent with high population increased and its population of construction levels. low-income households Figure A1 decreased or (2) its overall Regression Results population decreased and its low-income population Dependent Variable: Did Displacement Occur (Yes=1 and No=0)? declined faster than the Independent Variable Coefficient Standard Error overall population. Number of market-rate housing units built -0.00237 0.00043 Our Model. We Share of population that is low income 1.74075 0.54137 Share of population that is nonwhite -0.61213 0.29151 use probit regression Share of adults over 25 with a college 1.90054 0.38599 analysis to evaluate how degree Population density -0.00001 0.00000 various factors affected Share of housing built before 1950 1.16506 0.22569 the likelihood of a Constant -1.45886 0.33420 census tract experiencing www.lao.ca.gov Legislative Analyst’s Office 13 Graphic Sign Off Secretary Analyst MPA Deputy AN LAO BRIEF Figure A2 More Housing Construction Linked to Lower Chances of Displacement Likelihood of an Average Low-Income Bay Area Census Tract Experiencing Displacement, 2000 to 2013 50% Amount of Market-Rate Housing Construction Low 40 Average High 30 20 10 All Communities Communities Without Inclusionary Housing ARTWORK #160020 Template_LAOReport_mid.ait 14 Legislative Analyst’s Office www.lao.ca.gov AN LAO BRIEF www.lao.ca.gov Legislative Analyst’s Office 15 AN LAO B R I E F LAO Publications This brief was prepared by Brian Uhler, and reviewed by Jason Sisney. 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