“Tiny homes,” residential structures that typically measure between 100 and 400 square feet, have been touted by some as an elegant solution to de-cluttering one’s life and embracing a minimalist lifestyle. Examples have graced the pages of every prominent home and garden magazine, and HGTV has three (yes, three!) shows dedicated to tiny homes. In San Francisco, housing activists and city planners are now looking to the tiny home movement as a potential tonic to the city’s worsening housing shortage.
With a vacancy rate at 0.3% and a population influx to the Bay Area to the tune of approximately 90,000 people per year, San Francisco, known for its stunning Victorian homes and hilly streets, is running out of housing. Chelsea Rustrum, a consultant on the sharing economy, believes that tiny home villages have the potential to increase housing inventory at a greatly reduced cost. Compared with the $1000-per-square-foot cost for traditional construction, the per-foot cost of constructing tiny houses falls between $200 and $400. Eager to develop the first tiny home village in the San Francisco Bay Area, Rustrum has assembled a team of 10 people and is scouting for a plot of land. However, she has run into a problem that plagues most new housing initiatives – zoning.
The tiny homes that Rustrum and her colleagues seek to build violate a number of common zoning rules as set by the International Code Council, a domestic trade group. Most notably, they are below the minimum square footage necessary to be classified by as a residence. Rustrum hopes to overcome such zoning obstacles through negotiations with city governments, but changes to zoning laws have become a flashpoint in the debate over the housing shortage and development in the Bay Area. Homeowners consistently try to stymie new construction because they assume that an increase in population density would decrease their own property values. (In actuality, the opposite effect has been shown to occur: increased population leads to increased land values.)
Even if zoning obstacles were overcome, could the construction of tiny home villages truly reign in the careening San Francisco rental market? Eric Fischer, a San Francisco resident, recently analyzed 30 years of rental prices (the median rent for a 1-bedroom apartment having reached an astonishing $3,500) and created a model that explains housing costs in the city. According to Fischer, it would take a 53% increase in the housing supply (200,000 new units) to reduce costs by two thirds. Given that the entire land area of the city is 7 x 7 miles, most of which is developed, tiny home villages do not pose a realistic solution in San Francisco County, because there just isn’t enough unused land to construct them on.
The Bay Area, by comparison, is comprised of multiple cities, some of which have far more available land than San Francisco. However, there is concern over the effect tiny home villages would have in these areas A criticism of proposed tiny homes developments is that, though less environmentally damaging than traditional tract home developments, they still represent a form of urban sprawl. And more sprawl is not something that the Bay Area can handle right now. The area’s burgeoning population is already crushing public infrastructure. Bay Area Rapid Transit (BART), a major transportation system, has $5 billion in unmet capital needs over the next 10 years, and interstate highway commute times are at all-time highs. Any housing solutions that place people further outside of urban centers could add pressure to already strained transportation infrastructure.
With this in mind, it would seem that any new housing construction should occur where economic activity is most concentrated: downtown San Francisco. Problematically, downtown areas tend to have the greatest land values, and traditional strategies for construction in the city center tend to be very expensive (using subsidies and eminent domain), politically treacherous (due to entrenched residential and commercial landlord interests), and ultimately ineffective. While tiny home developments might make the area more affordable for a handful of individuals and families, to effectively turn the tide of this crisis and resolve the housing shortage, government officials must take steps to build up housing inventory in urban centers, particularly in downtown areas near the business district. To this end, the city and state must consider a land value tax (LVT).
American political economist Henry George hypothesized that both property taxes and taxes on the value of improvements (structures) discourage new construction, as any residential or commercial development will result in higher overall property taxes. To expedite construction, Henry George recommended eliminating taxes on improvements and shifting the revenue burden towards higher land value taxation (LVT), which would encourage landowners and developers to increase residential and commercial space in order to pay the land value tax while providing them a respectable return as they provide value to others. LVT naturally becomes even more effective wherever land values are higher, such the urban core of cities. Implemented in cities, LVT leads to a substantial increase in both living and working space.
California faces a unique challenge due to the limits imposed by Proposition 13. Overcoming those challenges in the long term would require a difficult–but not impossible–voter-approved constitutional amendment to completely overhaul the property tax system. State legislators as well as regional and city planners would be remiss not to consider the solution of the LVT, which has had demonstrated success in increasing residential space the United States as well as abroad. For the moment, housing advocates have their eyes on Rustrum and her tiny home villages, a pop culture trend that could provide a short-term solution to a steadily worsening housing crisis.
Cover Image: Boneyard Studios. Licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.