BIL: Oakland 2016 Recession Generation was an Earthsharing.org event which took place on July 9th, 2016 in Oakland, California. Keynote speaker, Robin Hanson, shared a fascinating vision of the future in which cheap, replicable robots are able to do most human work, and the implications of such a possibility.
Hanson presents an idea divergent from what he says are the two most prevalent in the world of artificial intelligence, those being either slow, ongoing developments in AI research over the coming decades, or some “grand new theory” that hasn’t been discovered.
“The third scenario is where we port the software that’s already in the human brain,” Hanson says.
“If we have good enough models for how each of the cell types work, we have a good enough scan of a particular brain, we have enough cheap, fast computers, then we can make a model of that particular person’s brain on those computers; and if it’s cheap enough, you could run that simulation cheaper than you could rent the human, that changes everything.”
He thinks this means “humans retire” and become completely replaced in the labor market by these emulated brains. However, he says humans “start out owning everything” and “their investments double as fast as the economy, i.e. every month.” So he thinks this means that humans who have access to wealth, and he mentions real estate in particular, will profit tremendously. He implies that those who don’t have wealth will suffer.
This parallels a lot of the discussions we usually have at EarthSharing about the need to fairly share the fruits of nature, so that we can all benefit from technological progress. Even these far-future forecasts aren’t, ultimately, so different from ages past. In the Guilded Age, we had industrialists profiting enormously off resource wealth and land during a time of rapid technological growth.
What this discussion shows is that no amount of technology can be relied upon for solving the problems of political economy. Poverty, in particular, cannot be solved without economic justice.
Who owns outer space? Our most idealistic visions of the future require us to transcend our narrow personal or nationalistic interests, but increasingly, space seems likely to be divvied up among the powerful, as has so often happened with the Earth. Can space be managed to serve the common interest?
Managing a Commons
Space is generally thought of as a commons. A commons is a resource which is not under the exclusive control of anyone. This makes it an interesting and challenging economic coordination problem. The US Department of Defense classifies outer space as one of the “global commons” alongside the oceans, atmosphere, and cyberspace. Former Under Secretary of Defense for Policy, Michele Flournoy, and Shawn Brimley of the Center for a New American Security write:
“…as rising nations and non-state actors become more powerful, the United States will need to pay more attention to emerging risks associated with the global commons, those areas of the world beyond the control of any one state—sea, space, air, and cyberspace—that constitute the fabric or connective tissue of the international system.”
Even during the heated Space Race between the United States and the USSR, there were lofty ideals about how to treat the cosmos. The Outer Space Treaty, ratified by all major world powers at the time, limits the use of orbital pathways and celestial bodies to peaceful purposes. Weapons of mass destruction are specifically banned. More interestingly, it also prohibits any signatory nation from claiming ownership of celestial resources.
The resources of space were not to be seen as just a bunch of loot waiting to be plundered. According to the Treaty, managing outer space was viewed as an international responsibility of utmost importance, for the benefit of all.
New Space Race
But a new space race is on. This time, a private space race. Billionaires are funding serious commercial spaceflight companies such as SpaceX, Blue Origin, Planetary Resources, Virgin Galactic, Stratolaunch Systems, and Bigelow Aerospace, and other lesser-known private companies and defense contractors are also competing. Additionally, competitions like the Google Lunar X Prize are under way. All of these enterprises share the goal of making space more accessible.
Elon Musk once raised the possibility of launching as many as four thousand micro-satellites into low Earth orbit for the purpose of providing worldwide high-speed internet access. Mark Zuckerberg had planned a similar service via Internet.org. Both men have quietly put these plans on the back-burner; however, the inexorable trend of cheaper spaceflight is continuing to increase satellite congestion surrounding Earth.
The progress that SpaceX has made with reusable launch vehicles does help reduce the quantity of space junk per-launch, but it also makes spaceflight cheaper thus encouraging more congestion. Junk continues to accumulate much faster than it is burned up.
Space junk is any small debris left in orbit by spacecraft. The problem is that it can impact orbiting spacecraft at speeds up to twenty times faster than a bullet. Worse yet, in the event of a collision, more debris is created.
In the worst-case scenario, this process of collisions creating more debris starts a chain reaction called Kessler Syndrome. If there are enough orbiting satellites, this chain reaction can eventually consume all of them, and leave behind a speeding cloud of bullets encircling the Earth and keeping humanity grounded for a century or more.
To reduce this threat, a number of mechanisms have been proposed. Decommissioning large obsolete satellites can significantly reduce the likelihood. However, doing so is expensive and of little direct benefit to the individual spacefaring organization. Nonetheless, the European Space Agency has already planned missions as part of its Clean Space initiative.
Another theoretical mitigation technique includes the development of lasers to shoot down space junk, or to redirect it whenever it threatens important orbital spacecraft.
Financing cleanup efforts
Who ought to be paying for these cleanup efforts? If billionaires intend to start launching thousands of satellites, is it simply up to the public to clean up the mess?
The ‘polluter pays principle’ is standard in environmental law. In addition to aligning with our moral intuitions for responsibility, taxes on pollution have the benefit of discouraging the damaging activities that create pollution in the first place.
In keeping with this thought, it would be sensible to propose a Pigouvian tax on anyone who creates space junk, in proportion to the amount of junk that they create. Since this junk can be accurately detected, it would be straightforward to measure and determine the tax.
Amending the Outer Space Treaty and establishing a body to implement the polluter pays principle would be a common sense method by which we could work to eliminate the threat of space junk.
There’s another possible source of revenue if we consider that the orbital paths themselves are a finite resource. Satellite collisions have happened in the past and will continue going forward. Indeed, every satellite launched brings with it a small risk of collision. And the more satellites we have, the greater the likelihood of collision and, eventually, of triggering Kessler Syndrome.
Certain orbital pathways are more desirable than others. Geo-stationary orbits might be more desirable than low Earth orbit; a sun-synchronous orbit may be more desirable than an alternative orbit. If billionaires start launching thousands of satellites, it is entirely possible that we could eventually be forced to allocate these orbital paths by auction, in order to fund general collision insurance.
Such a model would certainly be more fair and predictable than our current process, which is for companies to patent orbital pathways, and sue anyone who infringes on it (regardless of collision risk). Granted, the FAA’s Office of Commercial Space Transportation also has a permitting process in the United States. But permitting practices vary by nation, and there’s little or no international coordination for revenue-sharing, insurance, or cleanup. Motherboard interviewed Andrew Rush, a patent attorney and entrepreneur with expertise in space law, who said “As more and more companies start commercial activities using satellites, and using new and innovative ways to do so, we should see an uptick in patent activity.”
“We may also see the attendant uptick in patent litigation around some of those activities,” he added. “I personally hope that’s not the direction that we go. I hope there’s a lot more licensing and a lot more cooperative ownership and stewardship of patents, rather than just suing each other. “
An exemplary model of proper resource management can be found in the Norwegian Oil Fund. Upon discovery of its oil reserves, Norway instituted the collection of economic rent based on the revenue generated from oil extraction, plus oil exploration licensing fees. The resulting revenue was then kept in a trust fund and used to invest both within Norway and internationally. As of June 2015, the fund has accrued $873 billion. Given its size and stake in companies worldwide, the fund has become an significant player in international affairs. As such, it pursues economic and social justice through its decisions concerning its holdings, divesting from companies that violate its ethical standards.
If our civilization is able to use market pricing to collect economic rent from the Earth’s geosynchronous orbits, we would enjoy similar success as Norway while preserving a critical resource. Such concepts are already proving successful here on Earth. London uses congestion pricing to reduce traffic in its city center, and uses that revenue to fund public transportation. Congestion in space is ultimately no different. Let’s preserve our common inheritance of space for future generations, not at the expense of our current generation, but by achieving justice. We all deserve to share the benefits and the value of outer space.
Finding a new apartment in a competitive housing market can be exhausting: constantly scouring classified ads, racing from one showing to another, hoping that your credit history and persona can charm potential landlords. But just when you thought finding an apartment couldn’t be more difficult, prospective tenants are finding themselves in rental bidding wars, as landlords exploit competitive real estate markets to maximize revenues.
It is not uncommon for prospective renters to conduct searches spanning months, which can cause substantial disruption in their lives. But some landlords are now taking steps that will exacerbate this problem – once you find an apartment in your price range, bidding wars between applicants will probably increase the list price.
As Devin Cox and his roommate hunted for an apartment in Vancouver, they noticed that approximately a quarter of all rental applications asked prospective renters to list the maximum amount above the asking price they would be willing to pay. According to Cox, multiple landlords notified them of higher offers and gave them the chance to increase their bid.
This practice is not illegal, and is even being highlighted in classified ads. A recent Craigslist posting for a studio apartment noted that monthly rent would be determined by an on-site auction. While this practice might be gaining steam in Vancouver for the first time, it has plagued US cities with limited housing stock for several years, particularly New York City and San Francisco.
Housing advocates cite bidding wars as a reason to implement stricter rental laws. At present, Vancouver officials are taking no action to curb this practice. Bidding wars have been blamed for worsening Vancouver’s housing crisis, although no studies have investigated the full extent of their effect.
Bidding wars are another way in which landlords are taking advantage of Vancouver’s economic success. Yet, they are just a symptom of deeper issues. The city’s infrastructure, people, and businesses are enticing large swathes of educated workers to relocate there, increasing the value of land in the metropolitan area. This increasing land value is a social product that should be reinvested in the community. Unfortunately, this value is being depleted through rising rents that are far outpacing wages.
If Vancouver will not take steps to eliminate bidding wars, it should at the very least take steps to increase residential space. Government officials should consider implementing a land value tax (LVT).
American political economist Henry George argued that taxing productive activity discourages production. Taxing buildings punishes those who build vertically, and results in a reduction in urban housing and worksites. To encourage more construction, he proposed abolishing the building taxes altogether, and shifting all taxes onto land. He argued that land is our common inheritance, and we can achieve justice by sharing the revenue from land.
There are many nuanced arguments in favor of this strategy. George argued that sufficiently-high land value taxation would actually encourage landowners to develop residential and commercial space, adding value for others, in order to pay the land value tax as well as provide themselves a respectable return. This additional housing inventory would ultimately reduce housing costs. But also the increase in construction and development would create a high demand for labor, thereby reducing unemployment and improving wages.
Given the extreme nature of Vancouver’s housing market, officials should move quickly to keep Vancouver a place where all people can afford to live and live well. The Vancouver mayor and council can be contacted online, over the phone, in person, or using a mobile app, details of which are listed at vancouver.ca. Read more on the problems of bidding wars and speculation.
Earthsharing.org organized BIL: Oakland 2016 Recession Generation on July 9th in Oakland, California. The Optimal Taxation Panel participants were Yoram Bauman, Joshua Vincent, Fred Foldvary, Robin Hanson, and Kris Nelson. The panel moderator was Edward Miller (bios below).
The discussion revolved around the essential role that natural phenomena play in all economic activity and how to fairly treat these resources vis a vis taxation. Resources like land, minerals, access rights, the electromagnetic spectrum, domain names, and atmospheric carbon were discussed.
Joshua Vincent: Executive Director at theCenter for the Study of Economics since 1997. Vincent has consulted for more than 75 municipalities, counties, NGOs and national governments. He works with tax departments and elected officials to restructure taxation to a land-based system, and has testified as an expert witness on the impact of land value taxation. Vincent is the editor and publisher of Incentive Taxation, a journal on land value taxation.
Fred Foldvary: Board member at Robert Schalkenbach Foundation (RSF), a non-profit organization established in 1925 to spread the ideas of the social and economic philosopher Henry George (1839-1897). Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at the Latvian University of Agriculture, Virginia Tech, John F. Kennedy University, California State University East Bay, the University of California at Berkeley Extension, Santa Clara University, and currently teaches at San Jose State University. Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research include public finance, governance, ethical philosophy, and land economics.
Kris Nelson: Principal at Phoenix Finance, which provides access to capital without collateral to small businesses and startups. Nelson also serves as Legislative Director of Common Ground OR-WA, a non-profit organization that promotes a more democratic treatment of land and natural resources. Previously, Nelson worked as a Principal at Genomics Consulting, where he helped launch a clean technology venture capital firm. He holds a Master’s degree in Business Administration from Willamette University and a Bachelor’s degree in Journalism from Evergreen State College.
Edward Miller: Co-organizer of the Recession Generation event. Miller is the Administrative Director of the Henry George School of Chicago, a non-profit educational organization which provides educational opportunities to the public on the topic of classical political economy. He serves as a board member for the Center for the Study of Economics. Previously, he has worked with the Institute for Ethics and Emerging Technologies.
The Grand Canyon is remarkable for its awe-inspiring scenery, precious geological value, and diverse flora and fauna. It is a natural wonder recognized by UNESCO, and also happens to be the site of significant underground uranium deposits.
These deposits have made it a prime target for energy companies seeking to privatize the public commons that the uranium represents. Unfortunately, natural resource extraction can have devastating consequences for public health and the natural environment. President Barack Obama is now considering designating the area a national monument, to add new protections to the lands and waters of the Grand Canyon, and prevent potential environmental disaster.
Arizona has a long history of traditional mining. In 2014, the state reported 303 active mining operations employing a total of 25,660 people. The entire industry generates a staggering $12 billion of the state’s GDP. Due to market fluctuations and government restrictions, there are no active uranium mining operations in the state at this time, but between 1918 and the early 21st century, traditional uranium mining in Arizona yielded tens of millions of pounds of uranium, valued at approximately $65 per pound.
While the mining industry benefits Arizona by contributing substantially to the state’s GDP, it is often accused of hoarding publicly-owned natural resources. Such speculative hoarding is common in unregulated or under-regulated industries. The vast majority of mining operations occur on public land, which accounts for 82% of Arizona’s total landmass. Federal law, through the General Mining Act of 1872, permits US citizens to stake a natural resource claim on public land and subsequently extract that resource. While mining operations are subject to state and federal taxes, they are not required to share revenue from their operations. Natural resources, as a public commons, comprise a large share of a nation’s wealth and, as such, ought to generate substantial economic rents. An excellent example of this in action comes from Norway and the management of its oil.
Uranium mining in Arizona has a history of disastrous environmental and public health consequences. Following World War II, the United States increased uranium production in order to produce more nuclear weapons, and mining companies hired large numbers of Navajo people to work the mines. Incidence of diseases caused by excessive radiation exposure increased sharply because companies failed to adequately protect those workers. Uranium mining has polluted 15 springs and five wells in the Grand Canyon watershed with toxic levels of uranium, requiring multi-million dollar government-funded cleanup measures.
It is clear from this history that uranium mining companies have proven themselves incapable, under current regulations, of operating without jeopardising people or damaging the critical lands and waters of the Grand Canyon watershed. Introducing royalties for uranium mining would fund implementation and enforcement of regulations that would lead to greener mining.
As uranium prices increased in the early 21st century, mining companies increasingly pursued access to the vast uranium deposits surrounding the Grand Canyon. In 2012, the federal government, recognizing the need to protect “natural, cultural and social resources in the Grand Canyon watershed,”issued a 20-year moratorium on new mining operations in lands surrounding the Grand Canyon. The order applies to all mining but is primarily aimed at uranium mining. The reaction from Arizona and the mining industry was swift, citing the order as an example of federal overreach and petitioning for it to be overturned. This case has now been challenged in federal court.
Many Arizona citizens have applauded the federal government, citing the enormous importance of the Grand Canyon for Arizona’s cultural heritage and economy. To many, permitting uranium mining on this stunning landscape would not only jeopardize the massive tourist activity driven by the Canyon, but would irreparably degrade a monument that is held close to the heart of Arizonans.
The federal government is now trying to make its moratorium permanent by declaring the lands surrounding the Grand Canyon as the Greater Grand Canyon Heritage National Monument. The monument was first proposed in 2015 and has support from 80% of Arizona voters, the Navajo Nation, and other key Native American tribes. The plan has stalled in Congress due to Republican opposition, but President Obama has the singular authority to bypass Congress and designate the area a monument by invoking the Antiquities Act.
An alternative approach would be to regulate the uranium mining more stringently, with the additional regulation and mining oversight financed by uranium royalties. While that may well require congressional approval, it would permit the mining to take place and that it be done under careful stewardship.
It is not yet clear which action President Obama will take, but support for the monument is a profound example of citizens recognizing the importance of their natural inheritance and taking steps to protect it. Concerned citizens can write to President Barack Obama at 1600 Pennsylvania Ave NW, Washington, DC 20500 or call the White House at (202) 456-1111.
Natural resources play a foundational role in a country’s economic development. As natural commons, they provide economic assets via space, raw materials, and energy that can be used to create other assets and opportunities in the form of industry and wealth. But because these commons are finite, their mismanagement often leads to a boom and bust pattern of economic development. Norway, however, has set a solid example for how to properly manage natural resources, including one of the most sought after – fossil fuels.
In the 1950’s, European countries began to speculate that vast oil and natural gas deposits lay under the North Sea. This theory was confirmed in 1959, when the largest natural gas field in Europe was discovered in the Netherlands. Excitement grew around potential future discoveries, particularly in the area of Norway’s continental shelf. Anticipating the discovery of reserves, the Norwegian government passed legislation in 1963 stating that the State owns all natural resources. The legislation also stated that the government is the only authority that can grant licenses for exploration and production. This legislation put Norway’s natural commons firmly into the hands of its citizens.
Initially, the Norwegian government gave private energy companies limited licenses to explore and tap Norway’s reserves. These companies can be credited with developing the country’s first oil and gas fields. However, in an effort to maximize national revenue, in 1972, the government moved quickly to create a government-owned petroleum company called Statoil. From that point forward, any foreign energy company granted a license was required to split 50% of the work with Statoil.
In the 1990’s, the government created the Government Pension Fund – Global (GPFG), informally known as the Norwegian Oil Fund, as a place to deposit all excess oil profits. The value of the fund stands at a staggering $850bn, and officials estimate that sum will surpass $1 trillion by the end of 2019.
So what has Norway been doing with all this money? Well, not much. And that is the point. The government capped annual withdrawals at 4% in order to prevent hyperinflation and to secure a surplus of money to survive in a looming post-fossil fuel world. This decision has proven wise recently as a drop in oil prices has moved Norway to declare its petroleum industry in crisis.
Norway’s natural commons management is a shining example of the prosperity that results when revenue from national resources is shared by all citizens. Norway has used this wealth to create social and economic programs that help each citizen. This wealth has also built a massive pension fund that can support the country during periods of economic hardship. It is a powerful equalizing tool not often seen in nations rich in oil and other natural resources.
Some economic scholars draw comparisons between Norway’s approach to natural commons (referred to as “petro populism”) and the theories of Henry George. Henry George, an American economist and political theorist from the 19th century, postulated that land is social commons, and that the profits drawn from land should be shared by all citizens via the use of land value taxation (LVT). In the case of Norway, they have taxed the revenue drawn from oil rich land at the very high rate of 78% and both redistributed and saved that revenue. In addition, they have carried over such sustainable thinking towards other natural resources, such as lumber and fisheries, and seen the same successes as with petroleum.
Resource-rich nations should take lessons from Norway on how to fully profit from and intelligently invest revenues from the utilization of our natural commons. The discovery of lucrative resources can inevitably lead to a boom and bust economy. Avoiding that requires managing those resources appropriately and wisely, as the Norwegians have, by using wealth derived from them to create an equitable and healthy society for all.
But all nations, whether “resource-rich” or not, have at least one socially-created resource of enormous value which can be tapped: the rental value of land.
Audio podcast on Norway and it’s oil management system. Courtesy of NPR online.
Chelsea Roff Discusses non-profits at BIL Oakland 2016: Recession Generation. Chelsea leads Eat Breathe Thrive, a Los Angeles based non-profit focused on treating and preventing eating disorders. Eat Breathe and Thrive began as a free program that Chelsea began at local clinics, as her personal passion, in her free time. After some timely and fortunate media exposure, the opportunity suddenly arose for her to convert this program into a meaningful career as part of a non-profit organization.
Chelsea was one of the featured speakers at BIL Oakland 2016: Recession Generation. The event served as a skill-sharing event for those interested in social, economic, environmental justice. In addition, a myriad of revolutionary ideas aimed at promoting greater social, economic and environmental justice like land value taxation were introduced and discussed at length.
In the talk, Chelsea introduces the similarities and differences between non-profit and for-profit businesses. During it, she explains how to effectively manage and fund raise for a non-profit. In particular, Chelsea carefully introduces the potential revenue streams available to non-profits and how the unique status afforded to nonprofits serve to better enable their sustainability, all while satisfying the extensive byzantine legal requirements that the IRS places upon all 501 (c) non-profits.
About Chelsea Roff (bio)
Chelsea Roff is the Founder and Director of Eat Breathe Thrive, a nonprofit organization that prevents and helps individuals overcome disordered eating and negative body image. An internationally recognized author, speaker, and yoga teacher, Chelsea has spent the past seven years pioneering integrative health programs for people with mental health challenges. Prior to her work in mental health advocacy, Chelsea worked as a researcher in a psychoneuroimmunology laboratory. Her research explored how stress affects mental, emotional, and social health, and how mind-body practices like yoga can improve the outcome of chronic immune diseases like HIV/AIDS and cancer.
WKZSU 90.1 FM Stanford University Radio Interviews EarthSharing.org
July 5th, 2016, Edward Miller and Jacob Shwartz-Lucas were invited onto Stanford University Radio to discuss an event they would organize in Oakland a few days later. The event was titled BIL Oakland 2016: The Recession Generation.
The discussion revolved around the event’s aim of helping young adults to navigate the challenges of living in our harsh economic climate and rapid technological disruption.
Jacob and Edward discussed their motivations for putting on the conference. This included explaining their backgrounds, and what changes they want to see in the world.
These items and a multitude of others require the second-most common element in the universe to function. Although it is generally abundant throughout the cosmos, helium is relatively hard to find on Earth, as its low mass allows it to easily escape the atmosphere.
Helium can be found in a few separate deposits under ground as well as in trace amounts in the atmosphere (5 parts per million) and in underground natural gas deposits (up to 7% of total NG volume). It is also a common byproduct of radioactive decay, as alpha particles.
Since the 1920s, the United States government has held a monopoly on helium production. Helium is crucial for national defense applications such as rocket engine testing and air-to-air missile guidance systems. Thus, the government, through the Bureau of Land Management, began to produce and store it in large quantities at the National Helium Reserve in Texas, at one point amassing over one billion cubic feet of helium.
In the 1990s, the National Helium Reserve fell into debt to the tune of $1.4 billion due to poor management and increasing costs of helium extraction. Concerned about bloated government, the 1996 Congress passed the Helium Privatization Act, which initiated the shutdown of the National Helium Reserve. The Reserve was required to sell its entire stockpile at below-market rates, finally shutting down operations entirely in 2015. The intention of the Act was to jumpstart the privatization of the helium industry, but things did not play out as hoped.
The National Helium Reserve flooded the market with helium, which drove worldwide helium prices to record lows. Low prices made helium recycling economically disadvantageous, which increased consumption. Most strikingly, private industry failed to step in because low prices made helium extraction and sales unprofitable.
As the National Helium Reserve continued to sell off its reserves and slouch toward its mandated end, an heir apparent in the private sector failed to appear, and scientists began to worry. A panel convened by the US National Resource Council, a branch of the US National Academy of Sciences, recommended that the US Government increase the cost of helium and slow the depletion of the National Helium Reserve. They warned that if the US failed to take action, the closing of the reserve in 2015 could trigger a global helium crisis, and that consequences of such would be dire due to the ubiquity of the need for helium in scientific and and technological research.
The US Government took action in 2013 by extending the lifespan of the National Helium Reserve and selling existing helium reserves at market prices. But with private industry failing to identify and extract new helium reserves, helium prices soared and US reserves continued to dwindle. Scientists worried that the United States’ poor management of a finite natural resource would devastate the helium market for years to come.
Luckily, due to a recent discovery, this does not seem to be the case. In June 2016, a team of researchers from Durham and Oxford Universities discovered a massive helium gas field in the Tanzanian East African Rift Valley. The field is estimated to contain 54 billion cubic feet of helium, enough to meet global demand for several years.
Although the discovery of this reserve has inspired hope that more like it exist in the world, that hope should not translate into careless use and management of existing helium reserves. Our current understanding tells us that helium is extremely rare on Earth, so we must consume and regulate helium reserves with that fact in mind, at least until the development of new technology to make alternative helium production economical. Scientists have recommended banning the use of helium in party balloons (yes, seriously) and implementing helium recycling technology to prevent the escape of helium from MRI machines and other such devices.
If Tanzania is able to collect economic rent from the exploration and extraction of its helium reserves, it could likely enjoy similar success as Norway while providing the world with a critical resource. Our history with helium is a lesson in the consequences when governments fail to properly manage a finite natural resource. As Tanzania begins to manage its vast reserves of helium, we can only hope that they will heed the lessons of successful natural resource management.
“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).
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.