A New Philanthropy: Fixing the Urban Housing Crisis
by P Segal
International media are focusing on what has happened to San Francisco, once a charming tourist backwater and now the most expensive city in America. Rents, in what used to be called the “cool gray city of love,” have tripled in a few decades, and because of that, the cost of everything else has too, so merchants can pay the commercial rents that do not have the benefit of rent control.
An influx of people earning six-figure salaries has driven out the working class, freelancers, and artists, who can’t compete for the currently limited housing in the 49 square miles of this bijou peninsula. People cling to their rent controlled apartments, until they get evicted—whether they like them or not—because the only option is leaving.
As a San Francisco native, I grew up in this city when it was still cheap and full of artists, the people who gave it bohemian charm. It was the charm of bohemia that brought people here and captured their hearts, not high finance or cutting edge technology. When I was born, there were still no skyscrapers, and then the city became the center of Pacific Rim finance. The Montgomery Block building, a live-work space for artists and writers, was torn down to build the Trans-America pyramid. The building for the community that included, over the years, Mark Twain, Ambrose Bierce, Robert Louis Stevenson, George Sterling, Jack London, Diego Rivera, Frida Kahlo, Maynard Dixon, Benny Bufano, Dorothea Lange, Ralph Stackpole, Dong Kingman and others disappeared, replaced by the Bank of America world headquarters. An iconic venue of San Francisco’s creative culture was torn down to build an iconic venue of rapacious corporate greed—the first sign of heartbreak to come.
The Montgomery Block building was gone, but artists and writers still proliferated in the city. It was easy enough to survive here, so creative people could work part-time and devote the better part of their attention to creative ventures. It was possible to get by just on payment from creative work alone, even if you were not yet well known. North Beach was full of poets, including those who had become globally famous, like Allen Ginsberg, Gregory Corso, Phillip Lamantia, and Bob Kaufman, even though poetry paid little, even at the top of the game. Broke musicians in the Haight Ashbury played in the park for free and formed bands like The Grateful Dead and The Jefferson Airplane. A decade later, disgruntled musicians anticipating the stranglehold of big business formed other kinds of bands, like the Dead Kennedys, and disrupted the Democratic National Convention. Things, places, and scenes come and go in this city, as in all others, but the one thing that has always been here is the lively, highly innovative, community of artists and writers—until now.
In the late ‘80s, pranksters, culture jammers, and other creative cabals, like the San Francisco Cacophony Society, explored the creative world of play. A bunch of under-employed artists, writers, and other arty types put together the last great creative movement to spring from the city’s inspiring soil: Burning Man. But just as Burning Man brought fresh attention to the city’s arts community, the highly paid and inevitably indispensable tech people started moving in, along with the trust fund babies whose successful boomer families could pay their exorbitant rents.
San Francisco landlords began to see a better choice for their futures: tenants who could pay a lot more for what they had to offer. People who inherited property from their families, which had been purchased for a few thousand dollars, started selling those properties for millions. In order to justify the price, the new owners had to charge higher rents for the same places. And so the cost of living, in a once cheap place, soared and made undesirable the very people who had made the city so fascinating: the artists, writers, musicians, and unemployed visionaries of the creative culture.
Most of my friends, with whom I did things like inventing the desert incarnation of Burning Man, no longer live here. I realized a few years back that, although I once knew thousands of creative people in the city, I now knew very few, and most of them have full-time jobs to survive. The city became cleaner, fancier, trendier, and infinitely more boring, as well as more alienated and psychologically unhealthy. Anger and resentment blossomed, and an us-against-them mentality rose up in a city that once welcomed the outsider. As the old song went: San Francisco, open your Golden Gate, don’t let a stranger wait outside your door…
I started thinking about what the creative class did for the psychological profile of a city, why bohemia mattered, why artists make good neighbors, and why a city was bereft without them. Then I started to think about how to bring the artists back to this place, once such a breeding ground for the creative movements that the whole world seems to love. Miraculously, an answer surfaced. But the application of that solution offers hope not only to the creative class, but also to the society at large.
A New Philanthropy
One of the wonderful things about the tremendous influx of money in the city is that we are awash in people who need tax write-offs. Unfortunately, one of the ways people get them is buying buildings and leaving them empty, so they can show a loss. No one knows exactly how many empty units there are in this city, but the lowest estimate is 10,000. The highest estimate I’ve heard is 30,000. Given the fact that people are crammed into apartments with roommates, if they don’t fall into the 100K a year category, 30,000 empty units could house as many as 120,000 people. In today’s rental market, dining rooms and living rooms are bedrooms for a lot of us.
It’s unproductive to complain about people getting tax benefits from losses. The ability to declare a loss on taxes enables people without deep pockets to start small businesses, and keep them open during the years before they start to make some money. For the well-to-do, they seem to the rest of us as just another advantage. But they are an advantage that can be put to a sterling, game-changing use.
I asked a friend who deals in real estate about this. I said, “If people can declare a loss by leaving a building empty, can they get the same loss by donating the use of the building to a nonprofit providing housing?” He thought about it for a second and said, “Yes.”
Indeed, it’s a better choice. The building owners who are buying up the city and hoarding all that empty space may get a tax write-off, but they also inspire disgust and antipathy. However, a landlord giving a nonprofit a 10-year lease for a dollar a year is a hero. It seemed like an easy enough sell.
This use of tax loss to create housing, rather than the opposite, is a tremendous boon to investors. Property owners still own the buildings, when they no longer serves as tax write-offs in 10 years; but at that point, the owner can sell a building and make more profit. Ideally, in 10 years, the nonprofit could buy the building from the accumulated rents and other income. Or perhaps the building would contractually be sold to another person seeking to show a loss, with the nonprofit retaining possession. The person (or group of people) who own the buildings have lots of benefits: the write-off, the profit from resale, the superb publicity that comes from doing it, the knowledge that they have helped to solve a serious social problem, and a solidly attractive legacy.
My first concern in this scheme to finance affordable rents in San Francisco is the sad drain of creative culture, so that’s where I began, conceiving the San Francisco Art House Project and starting the nonprofit, Bohemia Redux, to do it. The idea was this: benefactors would buy buildings zoned residential and commercial—different kinds of structures, in different neighborhoods. Buildings would house people in various kinds of artistic practice; musicians would have to be in buildings where they would not disturb neighbors. Large-scale sculptors would need warehouse space. Writers could live anywhere, but they belong in North Beach, where so many greats of twentieth century American literature and poetry launched their careers.
Each Art House building would have a café and a “museum store” selling the work of artists in all the buildings. A painter’s building would have a gallery, of course, and a theater building would have a performance space. Because the businesses are part of the nonprofit, they would not be paying exorbitant San Francisco rents, and tenant volunteers could provide some labor. With minimal rents and labor costs, businesses in these buildings could actually survive and thrive, unlike so many new businesses without deep pockets to finance the rent and hang on while they build a clientele.
Giving artists a venue to market and perform their work, as well as cheap rent, promotes careers for residents, circumventing the soul-numbing business of art. The businesses in each building also give public access to the artist’s milieu, and bring back, purposefully, pockets of bohemian charm.
The Art House Solution is For Everyone
It’s because I love the arts and the people who make them, however lost in their own worlds they may be, that this nonprofit agenda for housing was born. But the city needs more than artists. It also needs restaurant workers, emergency medical technicians, teachers, and many other kinds of residents that, woven together, make up the human tapestry of a functioning society—including people in professions that do not pay $100K a year, in spite of their absolute value to the lives of others.
It is the purpose of philanthropy to fix social problems at their root, and in this city, affordable housing is the greatest social problem we face. It is also a problem in other big, desirable urban environments, and the same solution is applicable everywhere where donations to nonprofits are a tax benefit. Our philanthropists solve problems around the world, and the Gates Foundation has focused its considerable problem-solving capital on Africa. In the meanwhile, in the Gates Foundation’s back yard, the City of Love isn’t what it used to be. Google buses, which traffic workers from their city dwellings to work and back, are stopped by angry mobs of protestors, terrifying the passengers who thought they had it made when they got the job. Flyers appear with non-loving messages like this one: “New to the city? Work in Tech? You’re a plague and LOCALS FUCKING HATE YOU. LEAVE. The Mission is for lovers, not the greedy.”
Of course, tech workers are godsends when our computers aren’t working. We need them, too, and there should be a place for them in the same way that there’s a place for emergency medical technicians. In fact, with the inconceivable fortunes made in tech, the need for those tax write-offs could make tech companies and highly paid employees the very people who could make philanthropic building ownership possible. So we shouldn’t be anxious to banish them from the city, taking their fortunes with them. They have the potential to make this city a lot more equitable place, without any harm to themselves, and no doubt they would prefer to be heroes rather than a plague. Ordering them to leave will not engender complicity in a mutually beneficial solution.
But here is a solution—a viable one—that could start tomorrow. All it takes is people who need write-offs teaming up with nonprofits, like mine, interested in housing. There could be 30,000 units liberated from their emptiness overnight, and the city liberated from its scarcity. All it takes is some visionary landlords and a local rethinking of the philanthropic process.