In the Danger Zone: How Poor Zoning Laws Created the Untenable Housing Market at the Core of The Bay Area’s Homelessness Crisis

Ashwin Iyer, Jan 16, 2025
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In 2023, San Jose, Oakland, and San Francisco made the list of the top 10 cities in America with the largest homeless populations [1]. All other cities on the list encompass entire neighboring urban areas, like LA County or New York City, while the three main components of the Bay Area made the list individually. It’s no secret that the homelessness crisis is an incredibly pressing issue for Northern California’s main population center. In terms of total homeless population, it trails only the two aforementioned megacities, and shelters just 33 percent of its homeless population, the second lowest percentage in the country [2]. During election years, many Bay Area politicians campaigned on the promise of ending or curbing the homelessness crisis, yet any attempted change seems to be short-term at best and disastrous at worst [3]. To really understand why the Bay Area has such a unique relationship with its homeless population, we must look at the relevant history of its housing and how that has brought us to the current legal framework that undergirds the problem.

 

The Bay Area’s Affluence

 

The Bay Area contains a massive amount of wealth. It is home to 4 of the 11 richest counties in America and, with an average net worth of over $450,000 per resident, it is easily the wealthiest region of its size in California. For comparison, the average net worth in the San Joaquin Valley, California’s centrally located agricultural hub, is just $60,000 per resident, less than 14 percent of that of the Bay [4]. With Apple, Google, Nvidia, and Meta all headquartered in Silicon Valley as well, there’s no shortage of constant wealth generation either [5]. But at the same time, the Bay Area has arguably the most dire homelessness crisis in America, along with one of the worst sheltering rates in the country. How does a region with so much wealth struggle so heavily with homelessness? The influx of wealthy residents brought about by the tech boom has assuredly exacerbated the crisis, but the deeper roots of the issue transcend this epoch and can be attributed to a far more universal cause. While it is true that four of the top five reported causes of homelessness in the counties of Santa Clara, San Francisco, Sonoma, and Solano were related to losing a job, substance use, familial arguments, and divorce, this does not paint the full picture of how and why this crisis is happening [6]. It cannot link together the cases of all 27,244 homeless people in the Bay Area or suffice to explain the separate universal factor at play [7].

 

The Bay Area’s Housing Market

 

According to the Bay Area Council Economic Institute, only 28 percent of homeless people are chronically homeless, while the other 72 percent have had homes before and likely worked jobs, paid taxes, and partaken in other civic duties [8]. People who have participated in normal life don’t fall so easily into homelessness via some nebulous combination of the aforementioned causes. While these causes do play some part, the Bay Area’s homeless are homeless because they fundamentally cannot afford a home in the overpriced market they live in. The Bay Area has a notoriously inflated housing market, and statistics show that it is even worse than its reputation might indicate. 

 

A county’s income-to-home value is a great way to gauge its affordability. It works by comparing median incomes to median home values and outputting the ratio of the two, which creates an affordability statistic that factors in income, unlike many similar metrics. Of the 3,006 counties and county-equivalents in the US, 7 of the 9 Bay Area counties rank in the top 35 in income-to-home value rankings [9]. Bearing in mind that this ratio includes the income of some of the highest earners in America, the income-to-home value ratio for average earners is even worse than reflected. This statistic puts the Bay Area’s ludicrous housing market into perspective: it is only accessible to the most wealthy inhabitants and allows people to easily become homeless in situations that would not cause them to do so in other places.

 

The Underlying Problem Creating the Current Market

 

To fix the Bay Area’s homelessness problem, we must make housing more affordable for low-income residents. The Bay Area’s inflated housing market is just one of many around the world, which means that there is published research on the topic from numerous scholars, policymakers, and developers worldwide. While the housing market is admittedly very complex, the California news outlet/issue guide CalMatters outlines a simple principle that has been historically proven to guide the market’s pricing: supply and demand [10]. With beautiful weather, unparalleled economic opportunity, and vibrant cultural diversity, the Bay Area is a high-demand region. But while demand is high, the supply of housing does not come close to matching it, especially for low-income residents. The Bay Area added 658,000 jobs from 2011 to 2017, but only 140,000 housing units, which amounts to 4.7 jobs per unit, not nearly enough to house all residents [11]. From 1999 to 2014, for those most at risk of losing housing, Bay Area counties only issued permits that satisfied roughly one-third of the need for “very low-income affordable” housing units [12]. When there’s such a steep increase in demand without a proportional increase in supply, housing prices inevitably go up. 

 

Solutions and their Barriers to Completion

 

To help curb and eventually bring down skyrocketing housing prices, more housing needs to be built. Affordable housing developments would be ideal: multi-family apartment complexes that provide low-income residents who are in danger of falling into homelessness with housing they can afford. With a wide enough implementation, these would swiftly bring down housing prices, as each one provides homes for 10s and potentially even 100s of people [13]. Unfortunately, affordable housing is hard to come by. There is minimal incentive for developers or the city itself to build such housing because they cannot charge much for the creation of the property and would have to provide water and utility services to residents who will not generate much tax revenue, respectively. Backed by affordable housing organizations and progressive city governments, such housing options have been provided and succeeded in certain places that have government incentives, such as low-income housing tax credits, which subsidize the creation of affordable housing through tax reductions [14]. But the lack of incentive for most parties involved means it is unlikely to be the end-all solution to homelessness in the Bay Area.

 

But supply is supply, so contrary to what one might think, building more mid-level and even luxury housing can have a positive impact on the housing market. This has been shown to be true across America. New York University Researcher Xiaodi Li conducted a thorough case study of housing prices in New York City and found that, on average, for every 10% increase in available housing supply, rent decreased by 1%, even if the increase in supply was not affordable housing [15]. While this statistic is promising, it is realistically not enough to solve the issue at hand. It is still far more efficient to build affordable housing, but in the real world its creation contains far more obstacles on top of city or developer hesitancy.

 

Further Barriers to Progress

 

There is a third party who is not being considered in this equation — existing residents. While talk about affordable apartment housing from progressive governments sounds good, it legally cannot be built in much of the Bay Area, ultimately due to the Not In My Backyard (NIMBY) movement. NIMBYism is fundamentally against the creation of affordable housing, transportation projects, or other developments that would take place in the involved residents’ neighborhood, or “backyard.” It developed around the 70s in response to the potential creation of affordable housing, which would allow the movement of low-income residents of color into primarily wealthy and white neighborhoods [16]. These existing residents searched for a method to codify their opposition to affordable housing into law. They found that zoning laws that govern what types of buildings are allowed to be built on certain plots of land were the perfect way to prevent affordable housing in their neighborhoods. Over 100 years ago, Berkeley became the first city in the country to create single-family zoning laws for much of their land. The effects of this were not short-lived: 81% of Bay Area residential land is now zoned for single-family housing, with rates getting as high as 94% in San Jose [17]. On this residential land, building multi-family affordable housing is essentially impossible and illegal. Even on the 19% of land that isn’t zoned for single-family housing, much of it is proximal to residents who want to “preserve the character” of their community—meaning that they will fight to keep these developments and the people they bring out of their neighborhoods [18]. 

 

These residents use a myriad of methods to rationalize opposing these housing developments. In the wealthy Bay Area suburb of Woodside, residents overwhelmingly rejected a proposition to build duplexes and fourplexes on the grounds that the city was a “mountain lion habitat” and that building these complexes would hurt that habitat [19]. This reason was not cited in any of the city’s single-family home construction projects and there is research showing that mountain lions are unlikely to visit any sort of developed areas, regardless of the type of development [20]. Other Bay Area communities like Palo Alto and Los Gatos have historically done much of the same. They’ve abused the state’s strict environmental laws as a smokescreen for NIMBYism, alluded to the changing “character” of the neighborhood, and cited the potential obstruction of existing views to shut down affordable housing projects [21]. Some of these reasons may appear justified, but they are all realistically just disguises to keep low-income residents out and property values artificially high.

 

It is clear that the housing crisis, while complex, has a clear line of reasoning for its existence, as well as its solution. Communities must overturn exclusionary zoning laws, vote for affordable housing propositions, and push for development projects that can increase the supply of housing in general. If homes can become truly affordable for everyone, the amount of unsheltered individuals will decrease, especially among the transient homeless population of ~19,600 people [22].

 

There are still a myriad of other issues surrounding the homelessness crisis, the most pressing of which are mental illness and substance addiction. Unlike the glaringly unique housing market, there is no evidence that California has notably higher rates of these other issues than most states in the country [23]. Still, while solutions like higher investment in public mental health professionals and rehab centers do truly help, they will only create a lasting impact when housing follows. Without solving the housing crisis first, many homeless people will end up where they started even if they have received care. 

 

It may seem like the causes of the housing crisis are inevitable and not on course for change, but change is happening—slowly but surely. Minneapolis has repealed the majority of its single-family zoning laws, Portland followed in 2022, and Berkeley, the pioneer of the policy, is set to do the same in the coming months [24]. It may be too early to tell, but the dominoes to alleviate homelessness are starting to fall in the places that have truly given it the attention it deserves. The housing crisis has defined San Francisco, Oakland, and the Bay Area for years, but with the right policies, propositions, and developments, change is possible.


Sources

[1] USAFacts. “Which US Cities Have the Largest Homeless Populations?” USAFacts, March 29th, 2024. https://usafacts.org/articles/which-cities-in-the-us-have-the-most-homelessness/.

[2] “Bay Area Homelessness.” Bay Area Homelessness | Bay Area Council Economic Institute, 2017. https://www.bayareaeconomy.org/report/bay-area-homelessness/.

[3] Person. “San Francisco Mayoral Race: Mark Farrell Details Vision for City, Tackling Homelessness, More.” ABC7 San Francisco, October 3rd, 2024. https://abc7news.com/post/sf-mayors-race-san-francisco-mayoral-candidate-mark-farrell-shares-vision-city-tackling-crime-homelessness/15385241/.

[4] California’s geography of wealth - Legislative Analyst’s office. Accessed November 11th, 2024. https://lao.ca.gov/reports/2019/4093/ca-geography-wealth-090519.pdf.

[5] Tarver, Evan. “The Biggest Companies in Silicon Valley.” Investopedia, October 8th, 2024. https://www.investopedia.com/articles/markets/103015/biggest-companies-silicon-valley.asp.

[6] How large are incomes in each US county compared to ..., January 25th, 2017. https://abag.ca.gov/sites/default/files/maps/motm_1_17_0.pdf.

[7] William N. Evans & David C. Phillips & Krista Ruffini. “Policies to Reduce and Prevent Homelessness: What We Know and the Gaps in the Research.” Journal of Policy Analysis and Management, January 1st, 1970. https://ideas.repec.org/a/wly/jpamgt/v40y2021i3p914-963.html.

[8] Bay Area Economic Council. “Bay Area Homelessness.”

[9] Association of Bay Area Governments, “How Large are Incomes in Each US County Compared to the Values of the Homes.”

[10] Christopher, Ben and Tobias, Manuela. “Californians: Here’s Why Your Housing Costs Are so High in 2024.” CalMatters, October 15th, 2024. https://calmatters.org/explainers/california-housing-costs-explainer/.

[11] What it will really take to create an affordable Bay Area, April 2021. https://www.spur.org/sites/default/files/2021-05/SPUR_What_It_Will_Really_Take_To_Create_An_Affordable_Bay_Area_Report.pdf.

[12] Bay Area Economic Council. “Bay Area Homelessness.”

[13] Pendered, David. “The Multifamily Housing Conundrum.” Federal Reserve Bank of Atlanta, October 24th, 2024. https://www.atlantafed.org/economy-matters/economic-research/2024/10/24/the-multifamily-housing-conundrum?.

[14] Keightley, Mark P. An Introduction to the Low-income Housing Tax Credit, April 26th, 2023. https://sgp.fas.org/crs/misc/RS22389.pdf.

[15] Do New Housing Units in Your Backyard Raise Your Rents?, October 26th, 2019. https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf1434814a6f8f.pdf.

[16] Kinder, Peter. “NIMBY.” Encyclopædia Britannica, October 25th, 2024. https://www.britannica.com/topic/NIMBY.

[17] FiftyandFifty. “The History and Future of Single Family Zoning.” United Way Bay Area, September 26th, 2023. https://uwba.org/blog/the-history-and-future-of-single-family-zoning/.

[18] Hubbard, P. “Not in My Back Yard Response.” Not in My Back Yard Response - an overview | ScienceDirect Topics. Accessed November 11th, 2024. https://www.sciencedirect.com/topics/earth-and-planetary-sciences/not-in-my-back-yard-response.

[19] Singh, Maanvi. “Wealthy California Town Cites Mountain Lion Habitat to Deny Affordable Housing.” The Guardian, February 5th, 2022. https://www.theguardian.com/us-news/2022/feb/05/california-woodside-mountain-lions-development.

[20] Bloom, Tracy. How often do L.A.’s Mountain Lions go into residential areas? very rarely, new study says | KTLA, January 27th, 2022. https://ktla.com/news/local-news/how-often-do-l-a-s-mountain-lions-go-into-residential-areas-very-rarely-new-study-says/.

[21] Hubbard, P. “Not in My Back Yard Response.”

[22] Bay Area Economic Council. “Bay Area Homelessness.”

[23] Christopher, Ben and Tobias, Manuela. “Californians: Here’s Why Your Housing Costs Are so High in 2024.”

[24] Holtzmann, David. “First US City to Adopt Single-Family Zoning Set to Overturn It.” CoStar, August 22nd, 2024. https://www.costar.com/article/317176662/first-us-city-to-adopt-single-family-zoning-set-to-overturn-it.