SAN FRANCISCO – Housing moratorium activists, and indeed some city officials, routinely argue in Planning Commission and Board of Supervisors meetings that market rate housing can never help us fight the housing crisis, often quoting “the city’s own study” that purportedly shows building market rate units increases demand for below market rate units.

The study is called The Residential Nexus Analysis, and you can read it here.

On page 4, under “Context and Purpose” the consultants write, “the City has contracted with Keyser Marston Associates to prepare a nexus analysis in support of the Inclusionary Housing Program,” (emphasis mine). The purpose of the nexus study was not to discover a phenomenon in the world, the purpose was to provide “supporting documentation” for impact fees.

Perhaps you remember in school getting an assignment like, “Argue that HP Lovecraft’s The Shadow Out of Time is a parable of overbuilding.” Whether you agreed with that thesis or not, you understood the assignment was to marshal whatever scraps of fact you could, and string them together, however tenuously, into an argument that supported the thesis.

The contract the city made with Keyser Marston specified that the document must “support” the Inclusionary Housing Program. In other words, the outcome was determined in advance. 

Let’s look at the reasoning of the report itself.

The methodology or analysis procedure for this nexus analysis starts with the sales price (or rental rate) of a market rate residential unit, and moves through a series of linkages to the income of the household that purchased or rented the unit, the disposable income of the household, the annual expenditures on goods and services, the jobs associated with the purchases and delivery of services, the income of the workers doing those jobs, the household income and, ultimately, the affordability level of the housing needed by the worker households. (pg 5) …  

An underlying assumption of the analysis is that households that rent or purchase new units represent net new households in the City of San Francisco. (pg 6)

The argument is that a new, expensive (some would say “luxury”) home will be inhabited by a rich person who is new to the area and would not have moved to the area without the new unit being built. The rich person hires a cleaning lady, and buys expensive coffees, and goes to the drycleaner. All of these workers are low income workers, and the low income workers need low cost housing. Therefore, expensive housing units create a need for cheaper housing units.

That would be considered an irresponsibly naive assumption in an actual academic work.

In fact, 84% of households that rent or purchase new units already lived in SF. It is not reasonable to assume that households in new units are new to the area. This is a severe blow to the results of the nexus study. If a high income person in a new unit already lived in SF, then the new unit didn’t cause any new jobs to be created.

Conversely, it is demonstrably false that high income people move here only if a new unit is built for them. In fact, 97% of high income people move into existing housing in SF. The implication of the nexus study is that new units create a new need for low income housing, a need that would not exist if the new units weren’t built. If 97% of high income people are moving into existing housing, the need for low rent housing is independent of the creation of new, expensive housing. High income people are moving here, new housing or not.

The consultant’s assignment was to argue that there is a nexus between new building and the need for subsidized housing. A document proving that linkage is required by state law to justify any fee on new housing. The decision to try and impose a fee was already made as part of the political process, so the report’s conclusion was foregone. 

Regardless of how we feel about whether it is helpful for new housing construction to be taxed to subsidize affordable housing, we must concede that a report that failed to show building new housing produces a need for subsidized housing would have been rejected by the City of SF. It would not have filled the terms of the contract between SF and the consultant. 

So when you hear it brought forward as a justification for moratoriums, blockages, and protests, remember that the nexus study was never a scientific document that neutrally investigated the world, and reported the facts. It was always a political document and should be treated as such.