Poverty amid plenty

Why are there so many poor people in such a rich city? Start with the cost of housing.
By Rachel Brahinsky and Tim Redmond


In 1973, at 18, she fled a conservative Michigan town and settled in the Haight-Asbury, finding almost immediately a community of open-minded, caring people. "If I hadn't been able to come to this city, I don't think I would have survived," she told us. She had an anchor tattooed on her leg, "to make sure I'd never leave."

Over the next decade, she became an integral part of the neighborhood, helping run the Haight Ashbury Switchboard, a community information and referral service. Always, she tried to give something back to her city: by the early 1980s, her flat on Fell Street, where she lived with her young son, had been a temporary shelter for literally thousands of people who were new to town, down on their luck, or just in need of a place to stay. Her friends started to call it the "Fell Inn."

Jasin (who doesn't use a last name) has always had physical-disability and mental-health issues and has never been able to hold a full-time job. But she's smart and competent, and with the help of supplemental security income (SSI) and welfare benefits, she lived a decent, if fairly modest life. "I went to the movies, bought toys for my kid, gave him an allowance," she said. "I never ate a free meal.

"If you told me back then that I would wind up at 48 with no place to live, I'd have laughed until I wet my pants."

But Jasin has spent much of the last five years living on the streets, and today she's scrambling to make the monthly rent at a vermin-infested hotel on 16th Street. Her story demonstrates how wrong Sup. Gavin Newsom and other homeless-bashers are when they demonize all people on the streets as substance abusers and welfare cheats needing "care, not cash." In fact, she's an example of another, perhaps more common phenomenon: she's a longtime San Franciscan who is a victim of city policies that promote economic inequality.

Put simply, Jasin has been homeless because she can't afford the rent. She's done nothing wrong. She's not a criminal, a drug addict, or a drunk. What's happened to her – and many, many people like her – is that the cost of housing in San Francisco has grown so much faster than the minimum wage and government welfare programs that she's been priced out of a home in a city she loves and refuses to leave.

In 1983, Jasin was collecting $550 a month in SSI and Aid to Families with Dependent Children (AFDC) and another $100 in food stamps. Her share of the rent – for her room and her son's room in the flat at Fell and Baker Streets – was $200 a month.

She was married for a few years, then divorced. Her next relationship collapsed, she says, after an incident of domestic violence that drove her to seek refuge in a battered-women's shelter. In 1996 she found herself on her own again – and facing a stark and brutal reality: the $560 a month she was then receiving in SSI wouldn't come close to covering the rent anywhere in the city. She started living in Golden Gate Park, then in a homeless encampment in South of Market, and after that was raided and broken up by the cops, she slept wherever she could find a place on the sidewalk.

For a short time, she and a man she met in the park (and later married), shared a $700-a-month house in Berkeley with some friends, but the church that owned the house (and kept the rent low) sold it to a private landlord, who jacked up the rent to $2,450 a month, forcing her back into homelessness.

She could never tolerate the city's shelters: "They segregate men and women," she explained. "My husband and I didn't want to split up."

Now, between her SSI and her husband's General Assistance (G.A.) grant, they can barely cover the $720-a-month rent on their sleazy hotel room. "It's overrun with mice," she said over a bottle of Pepsi in a café near 16th and Mission Streets. "It's awful, but we can't possibly move.

"We're just not making it. I love San Francisco, but it's just become so inhospitable."

Housing pathology

Jasin's not alone. If you want to understand why there are so many homeless people in San Francisco, and so many working people in poverty, you need to look at a key statistic that rarely gets discussed in policy debates. It's what longtime housing activist Calvin Welch calls a "sociopathological imbalance": the gap between the income people get from minimum-wage jobs and government programs and the cost of housing in this city.

Before the first wave of gentrification began in the 1970s, housing in San Francisco was among the cheapest in the region. As Brad Paul, former deputy mayor for housing, recalls, "25 years ago you could get a residential hotel room for $100 a month. People on G.A. or minimum-wage jobs could afford to have a place to live."

Back in 1973 an average two-bedroom apartment in the Haight-Ashbury cost around $153 a month, according to a review of listings in the San Francisco Chronicle. That year the California minimum wage was $1.65 an hour, or $285 a month for full-time workers. So it was possible, with a little conscious budgeting, and possibly some assistance through the food stamp program, for a low-wage worker (and certainly a family with two working people) to afford market-rate rents.

People living on welfare or disability payments, like Jasin, could also get by. The maximum welfare payment through AFDC at the time was $243 a month. SSI and disability payments averaged $161 and $193, respectively. Mix any one of those payments with food stamps and it was quite possible to survive, housed, in the city.

Even for the city's most down-and-out, living on G.A. payments, it was possible to pay rent. Back then G.A. paid out about $84, while SRO rooms went for around $80. By doubling up in a room, and using food stamps, they could stay off the streets.

Over the years, thanks to gentrification, federal cutbacks for affordable housing, and the failure of the city to control rents, housing costs went up – but welfare payments and the minimum wage, particularly since the 1980s, didn't even come close to keeping pace.

In 2003 dollars, that $243 welfare payment from 1973 would be worth $1,013 today, and the minimum wage would be worth around $7 an hour (or $1,120 a month). Instead, the maximum payment through CalWORKs, the successor to AFDC (which targets mothers with children), these days is $679. SSI typically pays $552; disability payments average $849. A full-time minimum-wage worker can pull in only $1,169 each month – before taxes.

It wouldn't be enough even if those payments had kept pace with inflation – because housing costs in San Francisco rose far faster than the overall cost of living. But with public assistance and the minimum wage lagging behind even national inflation, it's been a disaster.

There's no way a minimum-wage worker can afford that same Haight-Ashbury apartment, which now goes for about $1,800 a month, according to Metro Rent. Minimum wage barely covers rent in some of the city's cheapest domiciles – few studio apartments go for less than $600 to $700 a month in 2003, and even those are very rare.

Welfare clients on G.A. or one of the other city programs get between $332 and $410 a month. That's hardly enough to rent an SRO room, which costs $500 to $700 a month.

Further exacerbating the problem is the cost of health care. Until the early 1980s, indigent adults in California were covered by Medi-Cal, the state health care program for the poor. In 1987 the state transferred responsibility for indigent health care to counties – and never gave them the money to pay for it.

That means low-income people who have health problems either have to spend vast amounts of time waiting for treatment at a badly overburdened public hospital, like San Francisco General, or crowded community-based clinics, pay out of their pockets (diminishing even more their available cash for housing and food), or get no health care at all. Jasin and her husband, for example, are trying to pay $5 or $10 a month (which they can't afford) to settle an old hospital bill. "We'll be paying it the rest of our lives," she said. "But he insists on paying his bills."

Lots of billionaires

The persistence of poverty in San Francisco is particularly frustrating: this is, after all, a rich city – and the rich keep getting richer.

That, of course, is happening all over the country. "Over the last 25 to 30 years, upper incomes have grown, and the bottom 25 percent has gone down," San Francisco State University economics professor Michael Potepan told us.

But in this city, the level of inequality (the gap between the rich and the poor) is particularly bad. In fact, the U.S. Census Bureau ranks San Francisco as the county with the second-highest level of inequality – measured by the gap between the highest- and lowest-income people – in California, behind only rural Modoc County. While the city is home to 15 of the world's 400 richest people, including 11 billionaires, according to Forbes.com, the 2000 census showed that 14.2 percent of S.F. residents were living in poverty. And that's according to federal guidelines, which by any standard are grossly inadequate for this city. (The feds say a family of four is only considered impoverished with an income of $18,400 or less. The California Budget Project estimates that the actual poverty level in San Francisco is $26,122 a year for a family of three.)

Over the past 20 years, while homelessness and poverty have become more and more of a problem, the number of very wealthy people in San Francisco has risen dramatically. In 1980 just 5.8 percent of the city's households had incomes in the top census bracket (which back then was more than $50,000 a year). By 1990, the number reporting more than $100,000 a year was 7.4 percent. In 2000, 11.4 percent of households reported earnings of more than $100,000 – and almost half of those earned more than $150,000.

Meanwhile, the number of people at the bottom of the income scale – earning less than $15,000 (in 2003 dollars) – has stayed almost the same since 1990, at about 14 percent. But since the cost of housing has risen so profoundly since then – typical rents have more than doubled – the lower end of the spectrum has lost much of its buying power in the San Francisco market and has essentially been getting much, much poorer.

To make the situation even worse, income inequality has a direct effect on the rising cost of housing, according to "Homelessness in California," a study done for the Public Policy Institute of California in 2001. "Increasing inequality in the distribution of income affects the level of homelessness by raising the price of extremely low-quality housing," the report said. Essentially, the report argues, as inequality grows, previously middle- or low-income people begin hunting down lower-grade housing. The increased competition leads to higher prices for that housing, which leaves people in the lowest income bracket on the streets.

The wrecking ball

It wasn't the invisible hand of Adam Smith that wiped out affordable housing in San Francisco. Several generations of city officials either have actively pursued policies that made it impossible for poor people to live in this city or have stood by and allowed it to happen.

The first and most direct assault came in the 1950s and 1960s, when Redevelopment Agency bulldozers tore down thousands of units of low-cost housing, particularly residential hotels, in the name of "blight removal" and "progress." The giant Moscone Center convention complex and much of the adjacent Yerba Buena Center is built on the graves of cheap residential hotels where at one point as many as 10,000 people – retired people, low-wage workers, single immigrants, and yes, a few alcoholics – lived in tolerable, if hardly elegant, conditions. According to Chester Hartman's landmark 2002 book, City for Sale: The Transformation of San Francisco, the Yerba Buena redevelopment project alone destroyed some 4,000 low-cost housing units. (After a long period of litigation, the Redevelopment Agency agreed to replace fewer than half of those units.)

Over the next three decades, the conversion of single-room-occupancy hotel rooms to tourist hotels rooms lead to more evictions and more loss of affordable housing. While the city once had more than 32,000 SRO rooms, today there are only 19,645.

Almost 80 percent of the people who lost their homes to make way for South of Market redevelopment were paying less than $40 a month rent – which is the equivalent of $242 a month in today's dollars. Those were, in other words, housing units that people living on small pensions, Social Security, SSI, or even G.A. could afford. Without that truly low-cost housing, people in those situations today are, more than likely, homeless.

Over in the Western Addition, the redevelopment project along Fillmore Street (where a Safeway and the ugly, under-occupied Fillmore Center apartment towers are now situated) displaced 13,500 people, most African American. Only a fraction of that housing was ever replaced.

More high-rises, more homeless

In the 1970s and 1980s, the city went on a high-rise office construction binge, with developers from all over the world tearing down small, older buildings and throwing up huge steel-and-glass towers. The immediate impact: tens of thousands of new office workers, many of them earning relatively high wages, were attracted to town – and they began to displace lower-income residents. The gentrification put a phenomenal upward pressure on rents.

In 1978, tenant activists placed a measure on the ballot that would have tightly controlled rent hikes. Proposition R, as it was called, would have barred landlords from raising rents more than a set percentage each year, and it would have applied to all units, occupied or vacant. The San Francisco Board of Supervisors, under pressure from heavy landlord lobbying and in what was a clear attempt to undermine the measure, passed a far more mild version of rent control: it protected tenants as long as they stayed in the same apartment but allowed landlords to raise rents without any limitations at all as soon as a unit became vacant. Prop. R lost at the polls.

The so-called city vacancy decontrol law slowed down the gentrification a bit – but gave landlords a new incentive to evict long-term tenants. And since most apartments turn over every few years, it did little to stop rents from increasing.

"If we had passed Prop. R," Hartman, who now runs the Poverty and Race Research Action Council in Washington, D.C., explained in a phone interview, "then San Francisco would be a very different city today."

Several attempts were made to tighten the law, but all failed. In 1995 the state legislature passed a law banning cities from controlling rents on vacant apartments. Willie Brown, then speaker of the assembly (and a politician of massive power who could kill bills at will), did nothing to stop the legislation.

When the dot-com boom hit San Francisco in the mid 1990s, billions of dollars of venture capital poured into the city – along with thousands of new arrivals who had high-paying jobs and often extensive stock options and were willing to pay almost anything for housing. Rents in many neighborhoods more than doubled in just three or four years. Evictions soared: in 1992, San Francisco Rent Board figures show, 974 eviction petitions were filed by landlords. In 1998 that number reached 2,836. Fully half of those evictions involved owner move-ins – in many cases, wealthier people buying houses that had tenants living in them, and then tossing the tenants out.

Activists tried repeatedly to get the city to crack down on so-called OMI evictions (at the very least, to make the well-off homebuyers pay substantial relocation fees), but the administration of by-then-mayor Brown did nothing.

In the meantime, of course, the federal government had effectively halted spending on affordable housing in cities. In 1979, before Ronald Reagan became president, the federal government spent $8 billion on urban housing programs (that's the equivalent of $20 billion today) and subsidized 200,000 housing units a year (see "The Secret of the Permanent Poor," page 32). By 1983 virtually all that money was gone. And since most federal subsidies only ensured that units would be affordable for 20 years, the existing low-cost housing has been inexorably returning to market rate.

"The feds walked away from affordable housing," former deputy mayor Paul said. "The state does a little, but it's all in the form of housing bonds, and when the bond money is gone, there's nothing else."

San Francisco has done more than most cities to subsidize and build affordable housing – but it hasn't been anywhere near enough to keep up with the need. One obvious reason: building low-cost housing is expensive, and since the private sector generally won't do it, large amounts public money are required.

But what the city hasn't done effectively, on a widespread basis, is prevent the loss of existing affordable housing – by preventing demolitions and conversions, limiting evictions, and controlling rents.

And as housing prices have skyrocketed, the city has done almost nothing to ensure that people on public assistance – or working minimum-wage jobs – get enough extra money to meet the cost of living here. In fact, public policy is heading in exactly the opposite direction: led by Newsom, the city is moving to reduce its main welfare grant, G.A., for homeless individuals. And many of Newsom's allies, particularly the Golden Gate Restaurant Association, are opposing Proposition L, the November ballot initiative that would raise the minimum wage.

While all of this was happening, the San Francisco job market dramatically changed. S.F. State economics professor Potepan points to the "transformation from manufacturing to more services, which removes jobs for people with high school or less education."

State law required counties until 1991 to give G.A. recipients automatic cost-of-living increases every year. But after a public-interest lawsuit in Alameda County pushed the issue, the legislature repealed that provision.

Housing activist Welch points to another fact, one that had a profound impact on local politics. In 1968 the International Longshore and Warehouse Union agreed to accept a shift to container freight as the main element of commercial shipping. That agreement sent the shipping industry across the bay to Oakland, and with it went the militant power of the ILWU, which typically fought for living-wage jobs for all workers. The most powerful force for labor in the city for many years thereafter became the building trades unions, whose goals were typically more narrow: they aggressively supported the building boom, even if it forced low-income workers out of their homes.

Can we fix it?

Although the New York Times once famously editorialized that "money is not the entire solution to poverty," the simplest reason that there are so many homeless people and so many people forced by housing costs into poverty is that wages and public assistance are far too low. Raising the minimum wage, as Prop. L on the ballot this fall would do, is a step forward.

Raising – significantly – the G.A. grant would also make a major dent in the problem. If people who are now homeless had, say, $1,000 a month in cash, instead of the $332 to $410 they currently get, it might make it possible for a lot of them to move off the streets.

In fact, Hartman suggested G.A. should be automatically adjusted for inflation – particularly for the rise in the cost of housing. "Social Security and other middle-class entitlements are all indexed," he said.

Newsom loves to argue that increasing the cash grant would make this city a magnet for homeless people all over the country. But experts in the housing field say that's nonsense.

"I don't think there's any evidence that more homeless people would come to a specific city for cash," Hartman told us. "That implies a level of information, a fluidity, and an ability to travel that I don't think is there. Most people, including homeless people, have ties to their community."

Hartman also suggested San Francisco should study the full cost of homelessness – including burdens on the public health system, the police, the jails, social services, etc. – and compare that to the cost of preventing it. More than likely, the city wastes more money allowing the current situation to continue than it would take to build the necessary affordable housing and increase welfare payments to the level at which thousands fewer people would have to live on the streets.

And, he notes, the least expensive and most effective way of preventing homelessness is slowing down evictions. "If people don't lose their homes, they don't wind up on the streets," he said.

Welch cites a 1999 city report that states that with $133 million a year over seven years, the city could build enough permanently affordable housing for the entire existing homeless population.

Jasin puts it pretty simply: "We just need a little more help paying for housing," she said. "If the city doesn't want homeless people on the streets, that's what they have to do."

Research assistance by Anthony Ha, Tara Thirtyacre, and Nikki Woodard. E-mail Rachel Brahinsky at rachel@sfbg.com and Tim Redmond at tredmond@sfbg.com.

October 22, 2003