About This Episode
Jonathan Fearn is someone I’ve gotten to know slowly over the past five years the old fashioned way—by seeing him at housing events. Jonathan is a Senior Vice President of Real Estate Development at Oakland’s own Signature Development Group, where his day job is to build buildings, most of which are for people to live in. But for me, and I imagine many of you listening in, Jonathan is someone known for what he calls his “extracurriculars”—serving on public committees and non-profit boards across the Bay Area. He’s never the loudest person in the room, even when he’s on stage, but when you look at his list of accomplishments and the places where he shows up, you’ll realize how quietly important a person like Jonathan is to moving all of Bay Area housing forward. It’s an honor to have him on the show, and I hope you enjoy our wide-ranging conversation on everything from the interconnectedness of the housing economy to social housing.
This Episode’s Guest
Interview Transcript
Alex Schafran: Jonathan Fern, welcome to Housing After Dark. It's great to have you.
Jonathan Fearn: Alex, good to be here. Thanks for having me.
Alex Schafran: So as is customary on this show, we start by asking all the housers how they got into this business. So you've had a very varied and interesting career. How did you become a houser in the first place?
Jonathan Fearn: It's similar to why a lot of people get into this discussion, some of it's really personal. I had always really wanted to do whatever I could, whatever my part may be, to correct some of the historical harms that happened to Black communities, communities that I grew up in.
So I grew up in a community called the Central District in Seattle, Washington. It was actually the intersection of four different neighborhoods, but it was a predominantly Black neighborhood. It didn't take long for me to learn and see that I had some advantages and privileges that my friends didn't have and others didn't have in the community. I didn't come from a wealthy family. My dad was a public sector attorney, my mom was a public school teacher, but just the simple fact of having two parents at home, to parents that went to college, grandparents that went to college—these were things that set my trajectory in life in a way that was different than my friends and folks who I grew up around, and that really was impactful.
I didn't get those things out of merit, I didn't get those things through working hard, it was just the luck in life that I had, and there was little injustice around that I felt. And I wanted to do something with my life. I felt a desire and obligation to do something to try to change that for folks that came behind me. That established my North Star in life, and how I follow that North Star has changed, but certainly it's that real desire to give back, to make things right for folks that just hadn't had the things I did.
I went to college back in Connecticut in a school called Wesleyan University, and I'll never forget, I had a class my freshman year, a sociology class, and the professor asked a question around “Well, you know, Black folks have been in this country for 400 years, arguably longer than any other group in the United States, but they still occupy the lower rungs of the economic societal ladder. Why is that?”
I'd obviously had lived experience being a Black person. I knew about the Civil Rights movement, Martin Luther King, Malcolm X, slavery. But it wasn’t until you really start digging in, did you really start understanding the institutional, structural, formal, informal barriers and obstacles that have been put in place deliberately to prevent Black folks from achieving and getting ahead en masse in this country. And so that had even underscored even more my desire to really correct some of these historical harms and injustices.
I graduated and went to DC with the intent of becoming a civil rights attorney. Found out that there were only two civil rights law firms in DC at that time, neither of which wanted a green undergrad graduate to come on board. So I then moved on to working for a nonprofit that dealt with asset building in low income neighborhoods, primarily Black and Brown neighborhoods, because I actually felt coming out that the next step after the Civil Rights era was really this kind of economic empowerment of Black communities. That was the best way to move forward in this country. And so I was doing that.
I also was, and I'm going to date myself a little bit here, living in DC in the late 90s, and that's when, after three and a half/four decades of cities emptying out, people were trying to go back in. It's kind of the beginning of the urban renaissance here in the United States. So what I was seeing just on my walk to work and around DC was a lot of development happening, and it really interested me, because you could see development where it was occurring, but you could also see where it was going in terms of being focused around the DC metro stations. DC has a very comprehensive subway network, for those that may not be aware, and you could just see all this stuff happening. And that really excited me and it was the tangible nature of development that really got me. I liked the idea of using investment to go into these disinvested neighborhoods and actually putting real things in the ground. I came out here to the Bay Area to go to Cal. I went to Cal, got my masters in City and Regional Planning, but I was really focused on doing development work.
When I graduated from Cal, I right out the box, went and worked for an African American owned development firm. It was a very small firm, but what I liked about it was it was a for profit firm that was doing primarily affordable and economic development deals with redevelopment agencies at the time. I didn't want to be pigeon holed is the best way to put it. I didn't know if I wanted to do market rate development or affordable, this was doing a little bit of both. And so that's what I did. And it was great.
We were working in West Oakland, Bayview-Hunters Point, the Fillmore in San Francisco, and also places like Richmond. But in 2006 I made a decision to go to a more institutional scale developer, because I really wanted to see a larger spectrum of the development process. When you're working for a small firm, you really get a very in-depth knowledge of one or two projects, but because it takes so long, you don't really get to see the bigger perspective. And so at this larger firm, SummerHill Homes which is based out of Palo Alto, I was able to be a part of projects in different phases of the development process and destruction, from entitlements to sale lease up. And so that was very key and important to me, and that’s when I came front and center with this larger policy environment that we are in.
I remember when I got one of my early entitlements that I was a part of, I remember saying, “Man, it really shouldn't have been that hard. It really shouldn't have taken that long to do that few units. To get that units across the finish line. Something, something is really, really wrong here.” And in addition, I was going to a bunch of community meetings in different cities, and I was seeing how all these community meetings there were similar, there were similar kinds of ways to get to the answer, but the answer was always no, we don't want this housing. And so you saw how this housing crisis that we're in now was really taking place and being instituted from both the policy level and on the ground, because people in every city were basically saying “Well, we don't want it. We want it somewhere else.” And you could kind of tell, well, these people are saying the same thing you're saying.
What I was also seeing is, what we could build, what we could not build, where we could build, and importantly, where we could not build—that all had these downstream implications that I was seeing affecting communities that I came from, particularly around the topic of displacement. And so that has become really important to me, that has been my focus: how do we stop displacement either voluntary or involuntary.
But that is what drives me, it’s why I came out here. What I love about the Bay Area is its diversity. But the whole shame of it is that people are being expelled for reasons not of their own making, because of other things that are happening. A lot of it is the policies that we have in place that are causing folks to be displaced. That is an injustice and one that I feel completely obligated to address. And so that's really why I am here today. I've gotten involved in these things outside of my my job as a practitioner like the CASA Technical Committee, the All Home Regional Impact Council, time on the Planning Commission, all of these other things actually then help me in my job as a real estate practitioner as well, which my work informs as well.
Alex Schafran: Let's talk a little bit more about your extracurriculars. The way I got to know you—and the way I think a lot of people in the Bay Area and the fans that will tune into this show to listen to you got to know you—are folks who know you not necessarily through your day job of building buildings or maintaining buildings but because you've worked with the Metropolitan Transportation Commission, you're on the CASA Committee, you’ve been a huge part of Casita Coalition, All Home (an organization which we both love, and you're heavily involved in, that is a client of mine), the Housing Action Coalition that we're gonna talk about in a little bit. You've clearly been driven and see the importance of policy and the politics behind it. Give us a sense of some of the things that you've been involved in, and how you've worked to try to make an impact through these extracurriculars.
Jonathan Fearn: It’s a great question. Again, a lot of the stuff that I’ve done has stemmed out just of what I faced as someone who's been just trying to get housing built. One of the things I really got passionate about is, ironically, the stuff that I don't build. I typically, in my day job, build large scale, institutional scale projects, think of your mid-size high-rise apartment buildings, townhome communities, large scale town communities and things of that nature. One of the things that kind of turned a light bulb on in my head is kind of a random story, but I got a dog years ago, and I started walking around my neighborhood with the dog. I started seeing all these houses in my neighborhood in North Oakland and South Berkeley that had all of these electrical meters and gas meters that just looked like regular houses. And so being a developer, I could see, “Oh, these are multi-unit houses that have the same form as regular single family homes. They fit very nicely into these communities.”
I started looking around and wonder why can't we build these things? What I realized is a lot just got zoned out. Again, here's the policy thing. We used to build this stuff, but now with down zoning and parking requirements and all this other things that we've kind of layered on, that kind of level of development is gone now. That's what led me in to do stuff like the Casita Coalition, because there we have, what I like to call, a monoculture of housing development in the Bay Area. We build nothing but high density stuff, which is very expensive, or we're building single family homes on the periphery. The reason why I got involved in things like the CASA process with MTC was because I felt like I had an angle, and I had a perspective that was important to share. When you're looking at things like how to solve the housing crisis, coming up with these big solutions, our housing discourse is like, well if you're a proponent of ADUs, you see the headlines to say that ADUs alone won't solve the housing crisis. But we all know that. Nothing alone is going to solve the housing crisis, but if you don't have these things, you're not going to solve the housing crisis either.
I just see the whole housing ecosystem is connected, and having an involvement in various different touch points was just really, really important. The time on the Oakland Planning Commission that I recently rolled off was important because I felt that Oakland had done a lot of good work around rezoning, a lot of it in these very specific plans, and I wanted to be part of that implementation process. I sit on the board of Midpen Housing Corporations, a large nonprofit, because I think that's important. We need that angle to solve the problem. And then these larger organizations, like Housing Action Coalition, the Council of Infill Builders, those have a vision of housing abundance. And that really to me is it. Housing abundance and articulating what that actually means to folks is really an important piece, because that's how the displacement goes away. It’s to create situational housing.
We in California and certainly in the Bay Area, just can no longer envision, I don't think anymore, because of how wrapped around the axle we are in this housing crisis and this housing shortage that we have. But it's really a concert of all of these things that I see all of them have their various aspects and usefulness in trying to push forward this larger vision of housing abundance.
Alex Schafran: One of the reasons I think we get along is that you're (almost) even more of a both and person than I am. Which I try not to make possible, because I've always tried to be the most both and person in housing.
When it comes to extracurriculars one thing I've noticed is that you've worked at the local scale on the Oakland Planning Commission, you worked on the regional scale through MTC and through CASA. And if folks don't know CASA, it's the great under-known regional effort that I think some people thought was a failure, but I think is a massive success, because it helped launch many important things like BAHFA and All Home and various other things that were born out of a very unique thing. I think people have taken some of the wrong lessons from CASA. Can we run it back at the state level? Can we do things like that?
You work at Casita Coalition, HAC. Working at these different scales, was that intentional? Was there a kind of recognition, “Okay I gotta play the game at at all of these different levels in order to be able to make an impact?”
Jonathan Fearn: Um, you know, I actually never thought of it. I actually did do it in all these levels, but that was actually more happenstance. I got on the Oakland Planning Commission, actually first. It wasn’t just that I lived in Oakland, but a lot of the work that I was doing was in the peninsula in the South Bay, so I had this kind of regional perspective. That's what attracted me to CASA. We called ourselves a “self help body,” we weren't counting on the federal government at the time, we can talk about that later, but it definitely needs to be part of the process here.
Living in one area, working in another, understanding the interconnecting of the region, and the potential impact that something like CASA was going to have, I just felt was was just too important to pass up and too important not to be a part of. Now, with the state, I think the state really is the body that's going to push housing policy forward, as you've seen. We are forming a kind of regional identity. A lot of the legislation that's coming out of the state has been regionally focused, because it's very difficult to pass some of this housing legislation when you are including the southern part of the state, the Central Valley and things of that nature. But it really has just been “Where can I make an impact?” And the state really is the best conduit. But I think things like BAHFA have a great opportunity to focus us in the regional kind of context, which I really think is the best of the three.
Alex Schafran: People unfortunately get obsessed with the development, like what's the right type of housing to build, or what's the right level of government that needs to do X, Y and Z? And I think we clearly see, and we see this as an example in many other countries that do housing better, that there's just collaboration and cooperation amongst the different levels. And I think finding the right role of the federal government, which is to me, largely about finance, it's about money, whether it's direct support for people who need money to pay for housing or direct support for development, all the way down to a kind of a critical role, especially in the state as largest California, where you're going to need powerful regions. And it was good, we had Kate Hartley on the show last year, which is really wonderful. Don't forget, people, that BAHFA still exists. It has always existed. It did not go away. The bond went away, and it's coming back, but BAHFA is still there. Everybody give BAHFA some love.
I want to come back to something that you said earlier, which I thought was really important and profound, and something that I feel like I've been trying to say, but maybe not as effectively as I think you can say it is. You mentioned when you were walking around the neighborhood and seeing all of these buildings that could not be built now, right? I mean the phrase you learn is the concept of the pre existing, non conforming use.
It's as much of a tongue twister as it is a ridiculous concept, because it's basically this way of saying “Oh, yeah. These things used to be allowed, and now we don't allow them anymore.” And we're not talking about toxic waste dumps or something like that, we're talking about a duplex or a fourplex, or the apartment building right down the street, or the apartment building right behind my house, or all of these kinds of things.
And to the credit of a lot of folks in the pro housing movement, who pay a lot of attention on changing that. Re-legalizing all these kinds of things that should never have been made illegal in the first place. But one of the things you mentioned, I don't think enough people in the housing policy world, in particular understand, is that the development industry, they've been illegal for so long that the development industry has evolved with the policy.
And if we legalize them all tomorrow that doesn't mean that there are builders able to do it, and that doesn't mean that just because they're legal, that they now pencil because of the financing. Can you give people a little bit of a sense, with your day job hat on from in the building industry, what folks need to know and understand about the shape and size of the development industry? In order to do all these types of housing that we want, do we have the industry that we need to do it? What is it that has to change on the industry side to be able to meet the moment, especially now that increasingly, more and more of these things are now legal.
Jonathan Fearn: Let me just back up a little bit, because I think what people have to understand is that we talk a lot about cost to build and so one of the things I always state is that the high density product that we build, which is basically the predominant thing that we build, is just very expensive. It's got building codes that require it to be expensive. It's got a lot of concrete in it which requires it to be expensive. It's got elevators. All these kind of components in it make it very expensive inherently.
There's only so much you're going to be able to do to get that construction cost down. That is about $400,000 a unit for a mid-rise building. That's not even talking about union wages, that's just an open shop mid-rise building. And so my concern is that it, the analogy, I like to say is that it's like we're building nothing but Tesla Model S and that's the only thing we're offering.
Alex Schafran: Is that the fancy Tesla, or that's talking about the cheap Tesla.
Jonathan Fearn: I'm talking about the S, it's the fancy one. And what our policy response to that is is saying, “Okay, Tesla, you've got to either sell a portion of your fleet for less than what it costs to build it, or we're going to give people money to go buy your Tesla Model S.” And the issue is, we're not building the threes [the cheap Teslas] in a residential context. We're not building Toyotas. We're not building Hondas. We don't have that diversity of offering.
And that's the importance of doing something different. The other thing about it is that the smaller scale development doesn't have a lot of concrete. It doesn't have elevators. It doesn't have sophisticated building codes that require you know this to happen with you know your seismic with your seismic framing or around fire and things of that nature.
At some point in time, you know I respect the forays into modular. I respect the forays into off site construction and things of that nature, new technologies, 3D printing. But at some point in time, we have to look at doing another product altogether. And we're not doing that. That is what people need to really understand. We are not building, we have basically zoned out, as you're saying, the ability to do this smaller scale product.
And so what needs to happen is a very large scale rezoning. It's not enough to do it on a neighborhood by neighborhood basis. You got to rezone, in my opinion, the way that we're currently zoned. I think people who listen to this podcast have seen some of the maps about how much of our land area is zoned, nothing but single family homes. We have to do something equally as expansive, the kind of next level up, if you will. You're seeing that in other states in Oregon and Washington that are kind of doing this type of thing. And if you do that, I think that then gives birth to an ecosystem of developer, designer, contractor, that will come out of that. And we saw in ADUs, the Casita Coalition was very, very successful. There was a whole industry that had been created because the pool of work, because of the laws that got passed allowing folks to be able to repeat. The problem is, right now, if you're trying to do this kind of one off missing middle housing product types, the pool is not deep enough to really sustain a business at it. That’s the problem.
SB9 was a split law that was passed a few years ago that was the kind of the foot in the door the camel's nose under the tent, or whatever you want to call it. But what happened is they put, along with the financing, the thing that really upset people is the owner occupancy requirement. And that's something that people may not realize the ADU coalition fought hard to not have, because they felt like if that was the case it was just another barrier to prevent folks from actually doing these things and having these things be put in their backyards. But certainly, when you're talking about a 2, 3, 4 unit development, it's just not going to be done by a single family homeowner. I mean, that's the issue. It's just almost impossible. It's hard enough to do an ADU from just an individual standpoint, but you really need third party developers to come in and do this kind of next level up, and that's what we're hoping to push forward with some of the Casita Coalition’s doing, as well as the Council of Infill Builders with the smaller scale development and making it more accessible and more universal.
Alex Schafran: I want to elevate Casita Coalition's work, and shout out to Denise Pinkston, Noerena Limon who's now there, Jared Bessler and all the folks that have helped build this over the years. When I first found out about Casita, I was actually in a position where we were potentially going to make an investment in what Casita was doing. In the earliest days, it was about legalization. So many folks were focused on this policy kind of legalization.
But I think Casita made a really important pivot, not too long after being founded recognizing, like “Oh, we need to rebuild this industry if we're going to make this policy successful.” Because, there's nobody on the ground to implement it and to take advantage of it, and nobody's going to do it ethically. One of the key things, which I think we're going to keep talking about, especially as we move back into this question of displacement, is not only we have to help build the companies to build them. We've got to be able to be building them in ways that some of the folks that are doing the building and owning the companies come from those communities, look like the people that they're working with that people can trust. If all of a sudden people are selling shitty ADUs, trust will go out the window, and then we'll be back where we started. People will forget that.
Sure, some of these bad laws that we have were about NIMBYism and racism, but some of the bad laws were actually people feeling like they are just protecting themselves in what we're often working class communities from mistakes. The planning commissions that drive so many of us crazy, including the people who sit on them, people forget that they were created by the development industry in the first place because shysters were selling fake parcels of land that they didn't own.
We've had this problem with these bad actors in the space that really make it difficult. Real respect to Casita and I think as you see them grow as an organization, they're really focusing more and more about small business development, about financing, about this really holistic approach that recognizes that policy doesn't build housing, it's policy plus land plus labor plus capital. That's what builds housing and you need all of those pieces to work together.
Jonathan Fearn: Exactly, that's the thing, I strongly advocate for this missing middle housing, I strongly advocate for ADUs. In no way am I saying this is the end all be all. But I'm saying that if you don't have this, you're not going to solve the problem, because we can't address our whole housing shortage in high density buildings. The amount of households out there aren't sufficient, and not everyone wants to live in a high density development, as much pride I have in the stuff that I built, I know it’s necessarily for everybody. People want to live in different in different types of housing. And that's the issue, is that we have a very diverse population. Diverse households and we need a diverse housing stock to match that. To me, what's important about that level of development you kind of alluded to it, is that if we're only building this institutional stuff, if we're only building this stuff that costs, you know, $50, $100, $150+ million to build, what I know coming from where I am, I don't have contacts in the institutional area of finance. It prevents a lot of minority developers, or people who would strive to do development, who look like the communities that they're in, from doing it. We don't have the ability or the connections to operate in the institutional world. Theoretically, hopefully, two folks or one person who lives on a block who was just seeing the vacant lot at the end of their block for 15 years, can cobble together friends and family and do something at a much lower cost.
That's the interest, that's the ability to start wealth creation and building in some of these neighborhoods who have been starved of it. That is the other real benefit of that type of housing.
Alex Schafran: I've been fortunate enough to become a homeowner recently, which has put me in contact with a bunch of great general contractors. I'm thinking of Sam, who I'm working with, who was born in Guatemala; Lenin, who was born in Mexico, but grew up in East Oakland, true old school, A's fan in mourning like the rest of us (I should say that I'm a Giants fan, let's not pretend).
To go back to the auto example. If we have a housing system that is entirely based on a handful of large scale manufacturers, we're never going to get there. Whereas there are so many sort of small scale general contractors who maybe survived on home renovations, who have been renovating wealthy people's homes in the area, but who could move into ADUs, who could move into duplexes. I'm hoping that one of the two of them, or the two of them together, are eventually going to build another house in my backyard, because I have the space and I have the zoning. I don't have the financing, and I don't have the plans, and I don't have a business model yet, and I don't really know how I'm going to do going to do it, but I know that I want to do it. I know I'm going to do it and it's going to be a small set of shops. It's my architect friends who are going to help me, I think.
And that's the key. And not that anybody wants to read the Spatial Contract, which is my second book, the big philosophy book, but a lot of it is basically like, “Hey, we need to think about how transportation and housing are actually really different.” You can have a transportation system where a couple dozen very large corporations build the majority of the vehicles, whether it's the trains or the cars or whatever. As long as you have enough to have competition. It's great that we have a bunch of new electric car makers. It's better that we have ten instead of three.
Housing is the opposite way. There's always going to be thousands and thousands and thousands of different companies all operating in an ecosystem to be able to deliver because of how big housing is, how diverse it is. There's just no way, like you said, even if we can get more efficient, I think there are ways that we can make these larger machines more useful. I know people are excited that Costco is getting into housing. I don't know, maybe if that works we'll have Costco here on the show to talk about Costco and housing. These big corporations, I think, can make a difference, but it's no substitute for the small business, and especially if we're hoping that housing can produce economic development and opportunity. These are jobs that can't be offshored, that many people from immigrant communities, from lower income communities, can get the education and the training they need to become builders.
Jonathan Fearn: Exactly.
Alex Schafran: There's a real win-win here, if we pay attention to that economic side especially now that legalization has proceeded. There is now more space in the zoning code than we've ever had, but we don't necessarily have folks who are able to rush in and do it, and do it right, and do it ethically. Which is the part that I'd love to pivot to.
You’re part of two organizations, Council of Infill Builders and Housing Action Coalition (full disclosure HAC is a client, they're my friends, and I'm falling more and more in love with the work that we're trying to do there). And HAC is an organization that has been very active in policy and is becoming more of a statewide organization and is starting to think more about: “Okay, how do we support our members to do housing better. To do it right. Yes, policy matters, but there are other aspects of it.”
You are a builder who's part of the board of these organizations that are member organizations of developers and builders that want to do housing and want to do it right. What does that mean for you? How do you see the housing crisis, kind of more broadly? We've talked a little bit about misunderstandings both on the political side, but also in the development industry. What is your vision for what a better housing industry looks like that both delivers and without the displacement?
Jonathan Fearn: There are a couple of ways to answer that, some of what we just talked about. To me, having a diverse developer, contractor, designer ecosystem is going to address a lot of that. I mean that that's the thing. I think what happens is, you have only a few firms that are doing the vast majority of the work. Of course they're going to tailor things to work for them.
I think developers in large part (and again we're talking about real estate here, but there are exceptions to every rule) but they are investing in communities. The success of the community is key to their success, right? Because either they are going to be owning the property, or they want to be selling the property, and so they have a vested interest.
What I believe is that, the more folks that are able to enter into this community and reflect the community will ideally lead to better outcomes. When you start talking about housing abundance, the things that HAC reaches, and what the Council of Infill Builders is really trying to do, as well as the Casita Coalition, it's really this diversity of housing. We’ve basically said, “Hey, look. If you can't afford a 400 square foot unit, or whatever the minimum size is in whatever cities you're talking about, then you're going to be homeless.”
There are so many creative thinkers around this that just aren't able to, because of the rigidity of the laws that we have in place, solve this riddle. There's a lot of a value system in our code that I don't think people kind of quite realize.
When we really start talking big picture about the housing crisis, I think it's important to understand how interconnected it is and understand what is causing our housing prices to be as high as they are. And I don't want to demonize anything when I say this. When we talk about the Bay Area being ground zero for the homelessness crisis, for example, I like to take a step back and understand: Well, why? Why is that like? What is different about the Bay Area than other metros in the United States.
To me, the major thing that has happened in the Bay Area over the last two and a half decades has been this tech explosion. It’s happened in other cities and you're seeing similar things happen. But one of the things I find that's very interesting is if you take a look at the Loma Prieta earthquake, which happened 35 years ago last week.
I was looking at footage from that, and I know that there was a World Series game happening at that point in time that was both Bay Area teams and so people were watching that, or at the game, or whatever. But if you look at that footage, the freeways were almost empty and it was like five o'clock in the afternoon, and you would just not have that today.
And it shows how fundamentally, and over a relatively quick period of time, the Bay Area's economy has completely shifted. What has happened and what has come about has been a wealth creation machine like we've never seen before. And that wealth creation machine is what is drawing people here. And those people are going to come here regardless of how many housing units we have, how many square feet of office we have. It's somewhat of a modern day gold rush and that to me is what's putting the pressure. That is what we’re up against. Because that wealth creation is creating very, very high paying jobs and it’s resetting the standard of living for everybody. And everybody that's not in it is kind of feeling this pressure, and it’s this cascading effect that's coming down and driving up rents all over but particularly at the bottom end of the range. And what's happening is that you have this erosion of rents that are just going up and up and up, and as it goes up and up and up. An analogy, it’s like a ladder on fire from the bottom, and the rungs are just flaming away and as folks can’t hold on anymore, they fall into homelessness.
But you've got to deal with that. That's the issue because the irony is that the ills that the Bay Area is facing is not of urban decay, it's actually of a growth machine, and our inability to accommodate what that growth machine is. Now, whether or not you think it's good or bad, that's a different topic. We can discuss that all day long, that could be another podcast. But you’ve got to deal with that, because if you don't, you're going to continue to have the goal posts move. And that is really why the Bay Area, unlike other metros like Houston, have not been able to get a hold of the homelessness crisis as well, because we can't stop those rents from rising, because the ability for people to pay is just astronomical.
If our major industry was simply school teachers and college professors, you could never have a median home sales price of $2.3 million which is what it is in San Jose County, because people couldn't afford it. But they can afford it with this major industry that we have. And you see this all over with Seattle and Austin and other places, but it's the combination of this kind of unequal society that has occurred meeting a very rigid housing stock. You have high income earners competing for the same units and driving up costs.
And that’s my concern. High earners, somebody making $150,000 to $200,000 will always be able to get a house in the Bay Area. But that oftentimes comes at the cascading effect and displacement of somebody at the lower end of the scale. That’s why I am a “both and” to the degree that I am. I believe you have to deal with this growth engine that I don't think people want to go away (well, people may want it to go away). I just don't think it's politically possible to get it to go away, and I don't think it's possible to keep people from moving here to be a part of that. And so that's why we need other other cheaper forms of housing, and just simply, more of all of it.
Alex Schafran: I agree with so much of what you said. Big chunks of this story are also in the Road to Resegregation, my first book. One of the hardest things about this now is that even if the bloom is off the Silicon Valley rose or in the Bay Area and we're no longer the place where everybody has to move to, we're 50 years behind. And so it doesn't that doesn't matter. Aspects of the housing crisis have moved beyond just the pressure and are now global in nature. It used to be that we were kind of the outlier, and other places were affordable, but there's now no more affordability. Fresno is not affordable anymore, especially not the people who live in Fresno, right? There isn't anywhere to run anymore for affordability where the incomes in that area match the housing prices in that area.
With our remaining time, I want to talk a little bit more about changes in the development industry. But for people who listen, all my guests and I sit down beforehand, we have a little bit of conversation, we block out the plan for the podcast. And so some of my guests, we have five point bullets, and then we kind of try to follow this. But Jonathan made notes. I almost want to take your initial script, which we're not going to get to everything in here, and turn it into its own Substack, because it includes a lot of really awesome stuff around this vision for the future. So I'm out to pick and choose. Otherwise we're going to go longer.
So one is, you made a point about the interconnectedness of the housing industry. So what do you mean by that? How do folks need to think about the interconnectedness of the housing industry? What are you talking about specifically?
Jonathan Fearn: Well, it's kind of what I was talking about just now in my last answer. Folks on the market rate side, we have our challenges in building enough housing on the market rate side, for the market to do its thing. Because of that, the folks that are in the homeless services industry on the other side of the spectrum are going to be more challenged. Because the inability to provide enough housing units at the top end is causing this competition, which is driving rents up at the lower rate. I think people may not really realize how dependent, and I do want to take a step back here, 95% of what I understand about homelessness I learned from my partner, Stacey Murphy. I think 100% of what's right about homelessness, I learned from from her. She has spent 30 years dealing with homelessness in this industry.
What she's saying is that the homeless services are reliant on the private sector with things like section eight vouchers and landlords willingness to accept section eight vouchers. But if rents are running away, then they don't have to take them anymore, and they won't. And those are units that are no longer available for folks that are experiencing homelessness. That inability makes things a lot worse. The goal posts keep moving back. But what I'm also saying is that our inability to deal with the homelessness problem makes each project that the market rate developers do that much more fraught, that much more political.
People want more and more things out of it, like inclusionary zoning and things of that nature. They layer on these things to market rate development, to solve these societal ills that housing wasn't meant to do, and makes them less likely to pencil out and then less likely to happen. It's this vicious cycle where they both actually need to say, “We're in this together. And you know what I'm doing here, impacts each other.” And so that's what I mean by the interconnectedness of it. They are linked. And that's one of the things that in doing this work and all these extracurriculars, I've really come to realize.
Alex Schafran: I hope folks are listening—especially folks who are both my EBHO people, HAC people, all the folks on the for profit and the nonprofit side—to what Jonathan's saying, it’s super critical. You also got a note in our list about social housing. Now, Shanti Singh from Tenants Together, was just on the show. I think her episode will come out right before yours, where we talk about social housing. But everybody knows that Shanti Singh is going to talk about social housing, but you wrote it down.
Why do you think this idea of social housing, which has a lot of different definitions, but generally involves some greater public role in the development process in some way, often based on Singapore, Vienna. What is it about the idea of social housing that makes you, as a developer, interested?
Jonathan Fearn: Well, a couple things. Number one, I'm never going to be (and I think people somewhat appreciate this) a guy that believes that this is a supply side issue, that the market's going to deal with this issue. There is 100% market failure to deliver housing. Market rate developers are not going to be able to deliver housing for the entire spectrum. They never have, they never will. So there does need to be, I believe, a very strong government response to this. And we talked about this earlier, the federal government has basically pulled out of the business of providing housing since the 1980s, basically. I reject the belief that a government agency can't deliver housing, can't build housing, can't run housing.
Government can hire the expertise. We talked about transportation, things that make European cities. European countries and cities are different than the US. They have the state agency to do this stuff, but we've just basically outsourced all this stuff. We believe that the government isn't capable of doing it. I believe that's fundamentally wrong. I think that BAHFA could be something, in my vision, that could build housing, could own housing, just like my former employer, Gray Star, who's a private owner of housing. That is important from a displacement standpoint. I know people have their opinions about public housing. There have been many things that have gone wrong with public housing, but the biggest thing that has gone wrong, just as this hasn't been funded correctly and it hasn't been funded adequately, for a lot of reasons, racist reasons and things of that nature. But, if you are concerned about displacement, which is what I am, then the best place that land and units can be held is within the government.
Say what you want to say about public housing, but if you were to look at where Black folks are in the Bay Area, certainly places like San Francisco and in West Oakland, places where there's public housing. I wouldn't want to repeat the errors of public housing by segregating it to just very poor Black people. It was successful at its outset, when it actually covered a greater spectrum of end user, of the renting public.
To me, that's where social housing is. I see it as, I don't know why the city of Oakland or BAHFA, or whoever, doesn't just go buy a 15-plex in Palo Alto and own it outright. Then they can program how they want it. It could be a Google engineer, it could be a section eight tenant, it could be whatever. To me, it’s the public ownership of it all, and the non reliance on the private market that best certifies or guarantees that displacement will not happen. And I think you have to have government ownership of housing for that to occur.
Alex Schafran: Especially in Oakland, where people like to talk a lot of smack. But if you walk around my neighborhood, you'll find Oakland Housing Authority buildings that are in decent condition and that are keeping people in the neighborhood that would have been pushed out otherwise. You'll find Project Home Key sites, which is the closest thing that we've had to any kind of new social housing in California, which is often in this case, the one down the street is a public private partnership. There's a private for profit developer, there are nonprofit service providers, there's public money owning the building. A lot of these are PPP projects, and that's great, we have different models that we can evolve. The Viennese and the Singaporeans have evolved: public housing and home ownership are not opposites. They can go together. They do in all kinds of other places. I really appreciate you saying that and making that call.
You are one of the kindest and most thoughtful people that I have met in this business. Something that we talk about at HAC, is that one of the challenges that the development industry has, and one of the reasons why it's hard for us to build housing, is that society doesn't trust real estate developers. Real estate developers are, to many people, a four letter word. I hope that when people hear you, if they ever have a chance to meet you and others like you, they will start to see that not all real estate developers are this way, and it gives me hope, as somebody who's advocating for a whole lot more real estate development, that you and others that we are both allied with are going to help give a new face and a new name to not just who is a developer, but how they think.
And the fact that you're willing to talk about homelessness and affordable housing and social housing and all these things openly and publicly, and contribute so much of your time on the side to so many different things as we've determined at different scales, which is necessary locally, regionally, the state, and I haven't even asked you about the federal which we'll do at another time.
Jonathan Fern, thank you so much for being a guest. Thank you for all the work that you do. Shout out again to the great Stacey Murphy.
Jonathan Fearn: Absolutely.
Alex Schafran: Appreciate it and to everybody else listening. Thank you so much for being part of Housing After Dark.
Jonathan Fearn: Thanks, Alex.
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