A Tale of Two Cities
In the forthcoming Responsible Investor Handbook, we have documented how Labor visionaries have, for over a century, organized strategic investments to build affordable and workforce housing and to help rebuild cities. In early 1900s, labor leaders were building social housing for their members and local residents in various cities in the US. In the 1960s, working with the Civil Rights movement, the AFL-CIO formed new housing investment institutions as a new thrust in the movement for social and economic justice. With the leadership of the construction trades pension funds, these new institutions created affordable and livable workforce housing in dozens of cities. The new book also recounts the more recent work of union and pension fund leaders in developing responsible new infrastructure investment strategies and vehicles, in collaboration with cities and businesses.
Our latest stories this week focus on the problems of a city undergoing a new economic boom and a city in the Rustbelt that has been crippled by a politically-imposed austerity program.
San Francisco: In San Francisco and Rooting for a Tech Comeuppance. The City of San Francisco has experienced skyrocketing housing prices and rental rates. These out of control costs have pushed teachers and other working residents out of the city. This recent article in the New York Times describes the conflicts and tensions that have exploded around this problem. While many cities are growing rapidly around the country, suffering similar problems, San Francisco has been rocked by the boom in the tech sector in nearby Silicon Valley, which has metamorphosed into the City by the Bay (and adjoining communities).
One of the reports referenced in this article warns of the consequences: “Teachers help form the foundation for strong, local communities, yet just 17 percent of homes for sale in California are affordable on a teacher’s salary. That percentage drops to zero in pricey San Francisco, where the average teacher can’t afford a single home.”1
Flint, Michigan: ULLICO, the Union Labor Life Insurance Company, and the American federation of Teachers are investing $25 million in union pension funds to provide low-interest loans to replace some of Flint's lead pipes. In terms of assistance from the AFT and ULLICO, Flint Mayor Karen Weaver says it means the city can move forward to remove more lead water lines, and she says she's very grateful to ULLICO and the AFT for the investment. Several unions have stepped up to help the people of Flint Michigan as they deal with lead water pipes.
You’ve probably heard about the Flint water disaster, especially given the attention paid to this topic leading up to the Tuesday Michigan political primary. After Michigan Governor Rick Snyder appointed a fiscal manager of the City of Flint during the City’s bankruptcy, the city disconnected its water supply from the City of Detroit’s system, which worked fine and provided clean Lake Huron water, and reconnected to the Flint River, sending it through the city’s antiquated and lead-contaminated water system. Outside investigators from Virginia Tech and the Northeast-Midwest Institute discovered that the water was poisoning the people of Flint. The Governor’s office and other public authorities covered up the scandal until it came to light. The Governor has now declared state of emergency and is switching the city back to Detroit.
While San Francisco has a unique problem due to the dominance of a single industry, other cities like New York, Boston, Chicago and elsewhere are facing similar affordability predicaments. And unfortunately, the water crisis in Flint, which has its roots in a political takeover, is not just happening in Flint. Towns in Ohio and elsewhere have been struggling with an infrastructure deficit for decades now, and economic recovery has bypassed many of these communities.
Responsible investors are working on a range of strategies to address the housing affordability crisis, and, as the article points out, the water crisis in Flint. We’ll be reporting on more of these innovative solutions in future posts. In the meantime, our hats off to champions like ULLICO and the Teachers!