How Mark Zuckerberg Might Attack The Affordable Housing Crisis

Last year, when Mark Zuckerberg launched the Chan Zuckerberg Initiative, a limited liability company that he and his wife, Pricilla Chan, founded, they announced that their goal was to solve social issues with a startup-like mentality. The company, which will be funded by the bulk of Zuckerberg’s own Facebook shares, an estimated $45 billion, said it would focus on long-term bets to reshape the world. Their motto is “Advancing Human Potential and Promoting Equality.” They kicked off by leading a $24 million funding round for Andela, a group that trains elite software developers in Africa to match with top companies around the world.

That’s why it came as some surprise when The Information reported that Zuckerberg had met with several housing experts to learn more about the country’s affordable housing crisis. It does make some sense as it’s an issue that—in the Bay Area at least—Silicon Valley tech companies have helped create, so much so that Facebook recently set aside a section of their latest corporate housing development in Menlo Park to absorb residents being displaced by tech workers with hearty salaries.

But it’s also far broader. Most Americans are worried about being able to pay for decent housing, according to a recent MacArthur Foundation report. While the exact point at which shelter cost becomes a life burden has been debated—it’s generally accepted that if you’re shelling out more than 30% of your income on rent or mortgage you’re going to have trouble affording things like food, clothes, and medicine. But an estimated 12 million Americans now spend at least half of what they make on that.

Zuckerberg and Chan haven’t announced a plan to solve this. So we spoke to several housing experts to see what a tech-savvy billionaire might consider to attack the housing problem.

KNOW YOUR AUDIENCE

According to Miriam Axel-Lute, the associate director of the National Housing Institute and editor of Shelterforce, the group’s community development trade publication, those facing housing issues fall into two camps: low-income workers priced out of safe, sanitary spaces, and those with higher wages, who can still get hammered by price surges in hot markets like San Francisco. They may not end up out on the street, but probably still feel insecure and face soul-sucking commutes. If you’re low income and live in one of those places, you’re in double trouble.

In order to create healthier cities, the foundation should address the neediest first. These people generally do the jobs that are required to make metros work. Addressing their needs could snap a cycle of generational poverty. Initial findings from dozens of MacArthur Foundation studies show that improved housing correlates with families experiencing less sickness and stress, and their kids doing better in school. Students who move out of extreme poverty zones when young earn 31% more in later life, a Harvard study shows.

The problem is supply and demand. If there aren’t enough good units available, those that do pop up will be expensive. The government tries to subsidize against this, but only a quarter of the 19 million households eligible for federal housing assistance receive it. Those left out end up being price gouged, forced to live in squalor, or both.

Figuring out how those folks can gain access to good homes in ways that allow them maintain their jobs and build strong communities should be his top priority.

BUILD SMART, BUY SMARTER

Just building more units in high-demand zones isn’t the answer. First, it’s expensive. Zuckerberg could spend his entire fortune and still not have made enough units for everyone who needs them in California alone, estimates Aimee Inglis, the director at Tenants Trust, a housing rights group. Short term, new units going in can cause a bubble; they may be overvalued as wealthy buyers flock.

If he wants to play developer, Zuckerberg would be better off backing mixed-income developments with deed restrictions, says Axel-Lute. These don’t need to be in the middle of cities; it might be cheaper to locate them near transportation hubs like BART has advocated for its commuter trains system.

For the price of a few billion, CZI could provide cheaper living space in the hardest hit areas by buying buildings that they just manage as mixed- or low-income oases themselves. The goal wouldn’t be to turn a profit, but to break even and maybe receive tax breaks. After housing failures similar to what’s happened in the U.S., the French are reportedly using a similar model effectively.

Rather than spend all his own money on problems, Zuckerberg could use Facebook itself to campaign for mortgage interest deduction (MID) reform. The MID is a federal tax break that allows homeowners to deduct home loan interest from their taxable income. (Vacation homes are fair game, too.) Not surprisingly, most MIDs tend to be used by the six-figure set. This year alone, the U.S. Treasury will forgo a projected $62.4 billion, according to the Office of Management and Budget.

The National Low Income Housing Coalition wants to cut the deduction limit of $1 million overall in half, and convert the bonus into a partial tax credit to put against whatever the homeowner might owe Uncle Sam. Most middle- and low-income homeowners would get a break. Part of the revenue that the rich can’t write off—an estimated couple billon over the next decade—could be used to fill the coffers of the newly formed National Housing Trust Fund for building and rehabbing more affordable places for those in need.

BUT WAIT, THIS IS MARK ZUCKERBERG

As Vox has pointed out, there’s a brute force fix for this: Tokyo, which has experienced substantial growth over the last two decades, has only seen a modest increase in home prices because NIMBY neighbors can’t micromanage their neighborhoods—zoning decisions for who can build what and where are made nationally. Tokyo may have one-third the population of the entire state of California, but they’ve issued nearly twice the housing permits.

The result has been impressive skyscrapers. And smog. And congestion. “If a city has limits on density and you say, let’s get rid of limits on density, planners are going to roll their eyes at you because you can’t do that without overwhelming your local systems,” says Rolf Pendall, the director of the Metropolitan Housing and Communities Policy Center at the Urban Institute. To that end, Pendall hopes that Zuckerberg might just rethink the entire problem. “I think philanthropy in this space will probably have a bigger impact by investing in lateral areas, thinking one step ahead about spurring innovation,” Pendall says.

His theory is that if you address the underlying factors causing fear of urban density first—say, construction costs, eyesores, or congestion—then the public may embrace ambitious projects instead of oppose them. That’s the kind of pitch that Silicon Valley makes best: After all, joining a social network to overshare everything could have seemed weird. Instead, the clear pathways to find friends, block trolls, and maintain privacy made it approachable.

In this case, “more” and “affordable” doesn’t need to mean block housing. You could distribute a fair amount of people pretty evenly across a city if each single family homeowner was allowed to build a secondary rental unit or put a micro-home in their backyard, suggests Pendall. For homeowners, the revenue from those rentals could assuage their own financial insecurities. (Or at least provide some distance if your kid graduates and moves back in, joined by your aging mother-in-law.)

Extra occupancies could stress utilities, traffic flows, and parking. We have a lot of decent fixes for those things—congestion pricing, ride sharing—but Pendall thinks the more elegant solution could be a set of civic apps, and that CZI should organize and perhaps fund the competitions to make them. He won’t speculate on exact contest format, but the guy who instituted Hackathons at Facebook may already have some ideas.

What might come out of those tournaments? Bloomberg Philanthropies is trying to find out with its own city Innovation Team program, which offers up to $1 million annually for three years for cities to test pilot ideas for making places more livable and socially cohesive. In Boston, that’s included a “density bonus” program allowing developers to build taller if they include more guaranteed affordable units, an “urban housing unit” that could be placed or stacked almost anywhere, and to plan to modify some homes in a way that would create a second apartment inside them. The resulting rentals may be tracked with an app called Sumu, that matches renters to the right style surplus while making sure no landlord is charging hidden fees.

The Los Angeles Innovation Team has created a GIS-based mapping program that tracks various indicators of how neighborhoods are changing to predict displacement pressure, and hone things like small business support or renter-rights awareness to stop it. Zuckerberg is already the king of social data sifting. His competitions could be far less structured, pushing people instead of governments to think up solutions like the contest Rockefeller just backed.

Having other philanthropies venture into this space is good. It leaves CZI the chance to employ his other successful Facebook strategy. If someone makes the Instagram, WhatsApp, or Oculus Rift of housing aide, CZI could just buy it to release more widely.

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