The top-voted comment for the same piece in the Economist explores the rent-seeking behavior of SF landlords, the origins and the conditions that gave rise to Prop 13 in the first place and proposes a set of (albeit, I admit, a bit far-fetched) solutions:
I am one of these SF oligarchs, and I benefit from high rents of
both types. Nevertheless, I have long called for an end to the
rent-seeking. To me, the problem started when the boomers of
old voted themselves two enormous market distortions over 30 years ago.
Proposition 13 was sold as a means of keeping granny in her home,
but it does not particularly benefit the elderly, the sick, or the
needy. It benefits land owning incumbents (like me) at the expense
of everyone else. Kill it. Start with the grotesque subsidy for
commercial property, and then phase out the residential subsidy.
Not to be outdone, SF renters voted themselves a rent control
ordinance. This also does not particularly benefit the elderly, the
sick, or the needy. Like Prop 13, it benefits one thing only -
incumbency. I know fairly wealthy 50-somethings who have rented
apartments for decades, and now pay a third or a quarter of market
rates thanks to rent control. They keep these now as pied-a-terres,
while they own comfortable homes in Marin or the wine country. For
each one of these old renters, there are ten smart ambitious young
people desperate to contribute new creativity and energy into the
community if they could just find a room. Only the wealthiest of
these can compete for the few remaining market rate units, and they
must pay plenty of both kinds of rent, to people like me.
This may be seem like daydreaming, but I hope Governor Brown and SF
can someday create a grand bargain. Kill Prop 13 AND rent control
with the stroke of a pen.
As for overall supply and demand, I would support a state law that creates
1 - an estimate of statewide population growth
2 - a requirement that every municipality periodically rezone to
accommodate a portion of that growth proportional to its current
size; or
3 - pay another municipality to take its share
This would create something like a reverse cap and trade system to
manage the supposed externalities of growth. This way, NIMBY cities
would have to pay growth-friendly cities, and NIMBY voters would have to
pay for their selfish rent-seeking behavior. Who knows? There might even
be less of it. [1]
Something I'm coming to learn: for any bureaucratic system, those who are most capable of taking advantage of the system are the privileged. Every time we try to arrange a benefit for the poor, infirmed, disadvantaged, disabled, we create a tool for the more privileged to advance themselves. The poor hit a rough spot and they can't hold onto their homes – only the well off can hold their property for decades. Even rent control: who is most able to ward off an eviction? Who can access the legal system? Who can mount their own defense? Who can see the machinations of their own landlord and work in advance to counter? At every turn, when we make a rule, we give a tool to those who can work with rules; if those people were at one time not privileged, they are privileged now, and have been for some time.
I wonder how that cap-and-trade system would be gamed by different interests?
The city would have to zone for the growth, or trade for credits. But zoning isn't the same as construction. It's hard to imagine an alternative without putting the city in the construction business, but it opens up loopholes. The existing system of "housing elements" http://www.hcd.ca.gov/hpd/hrc/plan/he/ seems broadly similar, and leads to some strange planning decisions.
I remember my conservative/blue collar father breathed a huge sigh of relief when prop 13 was passed. Before prop 13 property taxes were kicking older/retired/sick/middle income people out of their homes--yearly.
If you are lucky and can buy a home in the Bay Area--believe me forced retirement comes pretty quick.(This goes 10 fold for non-union workers). Getting old sucks! Having to get rid of a house you maintained for years because you can't afford the property taxes is criminal.
I was a child, but state and local taxes were completely out
of control. Home owners listened to every angry word Howard Jarvis spewed out. Even as a child, I knew that angry man was right.
(To be completely honest; I still think property taxes are too high. All those bonds and temporary scare tactics add up. It's almost like people don't realize just because
some politician's pet project looks good in the ballot box doesn't mean you don't need to pay for it? )
I know rents suck. I don't have any respect for people who make their living off renter either--yes, I think it a horrid
way to make money! If I pissed off a Landlord, all that comes to mind is a image of Eddie Murphy behind bars on SNL--repeating, "I hate my landlord!"
That said, I don't think rents would go down if they got rid of prop 13. Why--because people are greedy bastards! Rah-rah Capitalism!
The problem is when you cap gains at 1-2%, any time inflation is higher, that person is now getting a subsidy.
This is why CA has enormous debt and swaths of areas that have gone bankrupt. It's not sustainable.
Get rid of Prop 13 (or raise the limit) and rent control. I'd say cap it at 5% because if inflation is higher than that, well that's on the Federal Government more than local.
SF isn't making more land and they're also making it impossible to build up. Hell, my buddy looked into adding a deck onto his house. After doing research he figured it wasn't worth it (some people face years of delays getting neighbors to sign off on a deck on their own f'ing property).
>> "Maybe we simply come up with better ways to build and design cities..."
Reading that, I can't help but think that the canonically best methods for how to "build and design cities" have been pretty well understood for decades [0], if not much longer [1]. We in America have just been doing it wrong on purpose for quite a while (perhaps in order to goose suburban construction and automobile sales?) So the problem isn't lack of knowledge-how, but rather one of political organization to wrest control of the built environment from the groups and organizations that presently control it.
Much of SF's urban planning and restrictionist attitude toward change is Jane Jacobs' work taken to its illogical extreme. (That's the book you just cited in [0]).
Jacobs led a reaction toward Modernist top-down planning practices and urban renewal, which eradicated vibrant and lively communities in places like her home neighborhood of West Village. She celebrated the chaos and the street ballet cultivated by a mix of building, business and resident types that organically layers in a complex ecosystem of behaviors over many, many decades. But today, many of the neighborhood she would have been proud to call home are exorbitantly expensive. What is West Village today, if not, another insanely expensive neighborhood gentrified many, many times over? What middle or lower-income family could call it home?
Likewise, the progressive left thought leadership here has taken Jacobs' ideas to such a protectionist extreme that it has exacerbated a pre-existing housing shortage over the past 40 years. Not more than a decade after her book was published, there were the Freeway and urban renewal resistance movements of the mid-1960s. They later evolved into a Skyscraper revolt of the 1970s and 1980s. In the late 1970s, the entire city passed strict rezoning laws to preserve existing residential densities and architectural styles.
I have always thought that the West Village is so gentrified today because it's essentially one-of-a-kind. I.e. Jane Jacobs' ideas were (almost) not implemented completely in any other neighborhood in America, so everyone in the country who wants to live like that is forced to compete on price for the half mile square around Christopher street or what have you. But I wouldn't say the vibrance and liveliness has been "eradicated;" it's still pretty peppy all day and most of the night.
And I'm not sure it's fair to characterize SF's current malaise as the endpoint of Jacobs' ideas. IIRC nowhere her oeuvre is there an opposition to new construction---in fact, just the opposite. For instance, near the bottom of page 216 of the 1961 edition [0], she is pretty unequivocal that she is in favor of new construction, just not all at one time and place.
We're talking about a city that just built a brand new, terabuck priced stadium (which will be around for 20-30 years) 43 miles out of the city in a car-centric suburb.
I couldn't believe that the new 49ers stadium (in Santa Clara) cost a trillion dollars, so I looked it up. It cost $1.2 billion [1] - a "gigabuck" rather than a "terabuck." To put that in perspective, a single office building in nearby Palo Alto just sold for $300 million. [2]
Judging from the people driving up and down 101 with flags flying, the people wearing 49ers jerseys year-round in San Jose, the big BBQs hanging off the big trucks in the parking lot of games, and the truck commercials that litter televised football, the new car-centric location suits the football team nicely.
I'd be much more upset if the SF Giants decided to move out of the city!
Don't worry, the site has poor access by car as well as by transit! (It's not particularly close to 101; it's closish to 237, but 237 is terrible, etc)
Could be worse, the SJ Earthquake's stadium is adjacent to caltrain, but you have to take a crazy bus route to get there. You can see it, but you can't walk to it.
Something that is (typically) left out in these articles about how expensive rent in SF is, is that even for tech folks with rather high income the city becomes too expensive as soon as you have family. It might be ok to pay 2.5k per bedroom when you're single, but when you pay an additional 1.5k per child in daycare perspective changes.
In my opinion, if the trans-bay (e.g. Oakland to San Mateo) and around-the-bay (Berkeley - SJ) public transport would be reasonable in terms of time, things could normalize easier. It could take some pressure of the rent market as more opportunities could be found in other places.
Childcare expenses and lack of affordable housing options for a family of four are two of the primary reasons my wife and I moved away.
I really didn't feel like being on the hook for a $6,000/mo mortgage for the next 30 years. It'd still be a mediocre home at best and I'd never see my kids because I'd be out hustling trying to pay for it.
By San Francisco, I suspect they mean the San Francisco Bay area. While building in SF proper would decrease rents there, we can't have everyone who wants to move to the Bay Area live in San Francisco proper.
Keeping this in mind, SF proper has a natural and inherent economic rent. So there is only so much pressure more building could relieve in SF proper. That said, I don't think many people would have much issue with being able to afford a place in San Mateo, Mountain View or San Jose, even Fremont. The problem is the whole bay area is averse to build up. So the only current option for those not able to afford the housing, is to commute two hours each way --South from Gilroy, East from Livermore/Tracy, northeast Coco county, etc. or doubling, tripling up and sharing rent. But that's not an option for many families.
It'd be physically difficult to have more than 6 million people living in San Francisco, no matter what density we built. So there would be some limit, just not the current approximate 800 odd thousand. The solution is to have an integrated Bay Area plan to accommodate as many people as the area can support. We must also keep in mind the ecological impact of sustaining more people in a semi arid region so perhaps desalination plants to offset water demand. Most of all, a regional government capable of making hard decisions rather than one which gives in to boisterous interest groups (rent control, height & shade restrictions, prop 13, and the adversity to pubic transit.
The problem is the whole bay area is averse to build up.
Mostly true. However, that somewhat diminishes the degree by which SF especially is averse to construction, and more worryingly is averse to outsiders of all kinds - not just culturally misplaced Midwestern-ers - which is quite telling. Its a special brand of NIMBYism not found elsewhere.
The following comment is also from the Economist piece and sheds light on the kind of jaundiced eyes - I don't know what else one would call it - that long time SF residents view outsiders with. This sentiment is something I highly identify with and is rarely talked about, when the issue of SF housing is hotly debated.
The author is a Kansas City native who has moved to SF to wait tables :
2) San Francisco can be elitist and exclusionary towards outsiders. Some
San Francisco residents look any non-Brooklyn part of the country with dismissal
and/or disdain, creating a distinct form of self-defeating snobbery.
I also felt this elitism when I would look at all the row houses in the Richmond
and Sunset and how few where being torn down to build more efficient apartment
buildings. The message was, and is,- we have ours and we don't care about your
struggles.
I also felt this excluding elitism when I would learn about legacy apartment
dwellers who live in great locations and pay a fraction of the market price
because of government controls. The government kept rental prices artificially
low for established renters and rental prices artificially high for outsiders
looking to move in and rent.
The casual snobbery, the lack of new construction, and a preference for
established renters made the city feel unwelcoming to outsiders. Which is ironic,
because most people I met in San Francisco were born and raised elsewhere.
[1] The rest of his comment is eminently readable too; I've truncated it
because I felt I've hijacked this thread enough.
I don't know why, but there are a great many SFers who like to think of themselves as progressives (in the modern liberal sense) and have this weird affectation where they like to let you know what nth generation SFer they are. Like it makes a difference or as if I cared.
What i can't parse is that these are the same people who say they are for more immigrant rights --whatever one thinks of immigrant rights, I can't square their desire to tell you how genuine a San Franciscan they are and the proof is in their being nth generation. So a 6th gen SFer has more status than a 5th gen SFer and so on.
SF is the only place I've seen where people feel compelled to tell you their gen as if it were status in and of itself somehow.
I spent a year there during the dot com boom, and was frankly pretty happy to move to Italy.
I'm somewhat liberal politically, but San Fran always felt like a different kind of 'progressive' than back home in relatively egalitarian, fairly moderate and generally well-run Oregon.
When I got to Padova, it felt like coming back to the real world. I'd go downtown and see young and old, wealthy and the not-so-well off. These days, thanks to immigration, it's also acquired some ethnic diversity: my daughter goes to a public school with children whose parents are quite varied.
The economy isn't great here though, and it really makes you wonder... Most of the planet would absolutely love to have the bay area's problems, as you can see by how many places try and ape it with their Silicon Alley, Prairie, Forest, Meadows, Fjord, Barren Wasteland, Cwm, Bog and so on.
> When I got to Padova, it felt like coming back to the real world. I'd go downtown and see young and old, wealthy and the not-so-well off. These days, thanks to immigration, it's also acquired some ethnic diversity: my daughter goes to a public school with children whose parents are quite varied.
I'm confused; are you saying this is in contrast with SF? The Bay Area generally is one of the most diverse places I've ever been; Oakland is often cited as the most diverse city in America.
The area of Manhattan is 90km^2. The population is 1.62 million, double that of SF. The area of SF is 600km^2. So yes, while there is some theoretical limit to the population that could be fit into SF, we are not even remotely close to it.
We could triple the population of SF if we simply increased the density to that of Pune, a city with a small town feel that fits 2.5M people into 700km^2. (I.e., it's not remotely like Manhattan.) Pune has also experienced a tech boom and huge population growth, yet has not suffered from real estate issues the way SF does.
Unfortunately, your area for San Francisco is 80% water. The more relevant data of land area is more like 60 km^2 for Manhattan and 120 km^2 for San Francisco.
Edit: as a result, your comparison to Pune is significantly inaccurate. Indeed, Pune is only some 25% more dense than San Francisco, not three times as you suggest. This is easiest to check by looking at the "population density" figure on Wikipedia, but it's consistent with doing the relevant calculations yourself. (I checked.)
You seem to be correct - the area number you get by googling does include water. My mistake. I guess the ultimate limit of SF might indeed be only 2x or 3x Manhattan (Manhattan could be considerably more dense than it is).
Nevertheless, I do stand by the claim that Pune has handled population and economic growth well by building more housing, and is likely to continue doing so.
How is transportation and other city services there?
I have been listening to Econtalk episodes on urban growth[1][2] and apparently cities in the developing world experiencing quick expansion get completely clogged with traffic. The transaction costs are too high for developments to come to some agreement on providing city-wide transport. Some places don't have a proper sewage system, or rely on diesel power because they could not build an efficient power plant.
Pune has more traffic than it used to, but getting around is pretty easy. It's highly walkable, auto rickshaws are easy to find in most areas, and there is plenty of public transit (govt buses, privately owned 6 seaters). Many jobs also offer transport, jobs with western hours (read: call centers) in particular. Roads and flyovers are being built at a good clip - unlike the US, construction is pretty cheap and isn't paralyzed by red tape.
You don't actually need to provide city-wide transport. All you really need is demand for it - entrepreneurial types are pretty good at figuring out where it's needed. You do, however, need to avoid passing (or at least enforcing) laws against it.
I've heard New York is the only city in the US with excellent public transport. But yes, a proper underground metro requires a fair bit of planning and coordination, and if SF can't manage that then it will eventually end up like LA.
NYC's is on the order of Paris of London by way of comparison.
Washington D.C. (within the city) is a bit like a second tier European city, still quite good within the city, but D.C. has a huge metro area and it's spotty in the outer bits. There's lots of different jurisdictions that don't always integrate their bus systems well and building out the metro system has been slow going.
Portland has an excellent integrated system.
Chicago, Seattle, Boston, have decent, but limited systems.
However, even in places with almost no effective rail system, like Orlando, there's usually a comprehensive public bus system. They just run slowly, but they're relatively cheap, transfers are usually free and will get you close to where you want to go. Most public transport in L.A., for example, consists of the bus system.
I don't necessarily mean public transportation. Any transportation. Employer-provided buses, cabs, rickshaws, or even just roads where you can drive your own vehicle. Whatever is appropriate.
But the only thing that really works is underground carriage transport, because:
-It being underground means it's not in the way of everything and, more importantly, vice versa - it can go as fast as you want.
-It being carriage based means there's no coordination with other drivers. No queue dynamics, crossings or whatever. Transport happens in constant time, independent of the amount of passengers (within reasonable bounds).
I think rush hour travel on NYC's subway might put your "transport happens in constant time for grade separated trains" notion to the test. New York City's subway system is quite impressive, given that it's pushing 100 years old in many places and runs (nearly) 24/7/365, but the more crowded the subway gets -> the longer the doors take to close -> train headways become unevenly spaced -> queueing dynamics come into play. The latest "subway etiquette" ad campaigns from the operators specifically instruct riders to stand aside before boarding the train. [1] NYC rush hour is probably right on the edge of the "reasonable bounds" you are describing.
Most of the underground systems I have been on go pretty slow, and stop frequently. Pedal bike is the fastest way for me as long as you don't are willing to bend the rules (which in my opinion often make cycling more dangerous).
It's worth pointing out that the on-paper density of Manhattan is highly misleading. The daytime population of Manhattan on a weekday, including commuters and tourists, is 3.5-4 million people (versus about 1 million for San Francisco). The city is built to handle that amount of population, not the smaller resident-only population.
I was in Manhattan right after Sandy, when the trains were still not running, and it looked like a ghost town with just the 1.6 million residents there.
Comparison with Manhattan is unhelpful. I think better comparisons are Singapore and Tokyo. Bay area residents bristle st the idea of tall towers --specially given the geological faults running beneath. Given that, Tokyo's approach of midrises interspersed with highrises would probably be the best hope. We could at least double or triple the population in SF proper. It would help tremendously if surrounding cities also went on a construction binge to relieve pent up demand.
It helps Manhattan a lot that it has one of the world's best-engineered public transportation systems to connect it to the other boroughs and to Jersey.
The problem with construction booms in East and South Bay is that the transportation infrastructure in SFBA is barely keeping up with the population as-is, and however asymptotically it approaches "adequate" today, it is also one of the country's most poorly managed systems: it's underinvested, hemmed in by a dysfunctional political system, freighted with union, tenure, and retirement problems, and poorly maintained.
You really don't sound much different than those who seek to prevent people from moving in, let alone building to accommodate them. Meaning, come up with a neutral sounding reason to block undesirables from coming into the neighborhood.
Density would be too high, we must preserve cultural heritage, green space laws, restrictions on building heights, builds designated as heritage sites, and on and on and on.
If you build up or down you can accommodate a larger number of people. The key word here is "build". This activity is prevented by an amazing number of rules, regulations, and laws, all of which have nice sounding names but the end result is the same.
Zoning boards and those involved in creating political districts all need to be managed by as neutral groups as possible. All work needs to be as public as possible as well. Preventing someone from building more housing is not really different than the government condemning the land and taking it.
I would disagree with that. I'm for building and renewal. Too many SFers want to keep SF preserved as if it was the turn of the past century. They want a small town bucolic feel. But reality is that the sleepy town is in the midst of a metropolis but many residents resist the notion, even those affected by the policies restricting growth.
Renters and owners alike bristle at the possibility of their neighborhood changing its look and feel. They use words like gentrification, manhattanizatioon,; they also support restrictions on building as ridiculous as the ones which state that the shadow from new buildings shall not block the sun on a public park between specific hours. So its couched as nature friendly, in the meantime it is strictly anti building. People want to eat their cakes and have them too.
> While building in SF proper would decrease rents there
I'm not sure that's a given. Building lots of luxury housing in SF might actually decrease rent in Oakland and other parts of the Bay Area but not have an appreciable effect on rent in SF proper, at least in the short term. In fact, you could even argue that because of network effects and gentrification, building more luxury housing in SF would actually increase rents locally, even as it decreased rents regionally.
And that actually could explain why it's rational for some low-income residents of SF to oppose (or impose conditions on) new construction in SF itself. Increasing the geographic segregation between rich and poor can impact tax revenue, crime, education, transit, and regional politics in ways that particularly hurt the poor.
The point they make in the article is that the rich are going to move to SF anyway, but without available luxury housing they will have to buy up cheaper housing and have it remodeled. So you still get gentrification and network effects, but even higher prices for non-luxury housing than if you'd have just built more luxury housing in the first place.
> The point they make in the article is that the rich are going to move to SF anyway
That's what I'm actually unsure about. The article states it as a given without data or addressing regional effects. There are at least some well-to-do individuals who would purchase non-luxury housing in the North Bay, Berkeley, and the Peninsula rather than SF proper. You can obviously point to activity in places like the Mission and Bernal Heights, but at least some of the demand for unbuilt SF waterfront condos is going to go to the Oakland waterfront rather than something more inland. You can re-model your home, but you can't re-model your neighborhood.
Even if gentrification is a given though, the timing isn't. SF interest groups are pretty good at slowing things down (whether that's new development or a purchase and re-model). Presumably there's some difference in utility to the rich of buying luxury housing and buying non-luxury housing and remodeling it (otherwise there wouldn't be much demand for luxury housing). That's leverage the poor have in extracting some kind of negotiated benefit, like better public transit, education rights, re-distributive taxes, and so forth.
> That's leverage the poor have in extracting some kind of negotiated benefit, like better public transit, education rights, re-distributive taxes, and so forth.
Blocking luxury housing from being built is bad for poor and rich alike. So I suppose the poor could use it as leverage, in the same way a bank robber could use a suicide vest as leverage, but is this really a good idea? :)
The usual life cycle of high-rise luxury housing is that buildings move somewhat downmarket as they age. The bulk of your housing stock downtown is going to be 30-40 year old buildings that can't carry the premium rents of new luxury buildings. But you won't get to that point if you don't start building now.
This is a good point and one worth making. Unfortunately neither politicians nor renting residents look that far afield to the detriment of the area and future residents.
That's a concern but peripheral. Yes foreign RE investment could dampen the effect somewhat, but so long as there is a place for the wealthy to buy, they will ease up pressure I. The east bay, south bay and peninsula. The issue right now is that while SF is quite unaffordable bur for the lucky ir wealthy, the south bay east ba hug and peninsula aren't much better.
If we had good transit and we had a regional govt capable of planning and building to accommodate a growing population, that the affordable housing would be in the east bay south bag or peninsula does not matter much to families. Only very few people care to have the 'cachet' of saying "oooooh, no, I live in SF, not dreadful san jose". Most people in the bay area just want an affordable place to live with good transit. Typically only rich folk care about the SF cachet --also nth generation natives, but I dont care much for them.
So the problem is that yes SF is stubborn about housing buy other cities in the bay area are no try far behind in this attitude and they all contribute to this issue.
> you could even argue that [...] building more luxury housing in SF would actually increase rents locally
You can argue a lot of things.
But the relationship between supply, demand and prices is very thoroughly studied. Facts are known!
I have never heard of such an effect happening in the real world, but then again I'm no expert. If anyone can provide a reference to an example, I am willing to be enlightened.
Increasing supply lowers the mean price for the market as a whole. The laws of supply and demand do not rule out local changes that run contrary to the overall market depending on the nature of the new supply.
To pick one particular example, Facebook's construction of 394 apartments next to its campus is actually driving up home prices in that part of Menlo Park because the apartments are nowhere near sufficient to meet the demands of Facebook employees but are accompanied by new commercial developments that make the surrounding property more attractive to other Facebook employees.
But I think the data can be interpreted in several ways.
If home prices are rising while apartments are being constructed, that doesn't have mean the price increase is caused by the construction.
For one thing, these units won't exist until 2016¹, so supply hasn't actually increased. It could also be that the area needs 1000 units to offset the increased demand. Or, as you imply, that the higher level of services make the area more attractive, rather than the added units themselves.
I would like to see actual studies by real economists to change my thoughts on this.
There are numerous known exceptions to simplistic supply/demand arguments, including Giffen goods, Veblen status, lack of insight on either side, information arbitrage, and so on.
It's not impossible some of them apply to city housing markets.
What annoys me about arguments about housing is that housing is clearly a systems problem, not a one-or-two-variable optimisation problem.
Availability and rental prices depend on a complex network of interacting drivers, not all of which are purely economic, and some of which aren't even local.
Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.
> It's not impossible some of them apply to city housing markets.
Yeah, that's why I asked for real world examples.
But I still haven't seen any. If this actually happens, there should be real world examples that people would bring up in these arguments, right?
> Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.
I don't want to be rude, but isn't this just this standard anti science handwaving? "The world is far more complex than western civilization can grasp, therefore my gut feel must be the real truth!"
I mean, it's fine to say a model isn't perfect, but unless you have a better one to replace it with, or at least a clear example of something wrong, you're not really helping.
To me the SF housing market conforms perfectly with the supply and demand model: With a huge rise in demand, and supply being kept almost constant, it predicts the kind of strong price rises we've seen last few years.
> There are numerous known exceptions to simplistic supply/demand arguments, including Giffen goods, Veblen status, lack of insight on either side, information arbitrage, and so on.
> It's not impossible some of them apply to city housing
markets.
If you think there is such effects you should make the case, rather than hint that they might exist.
> Supply and demand storytelling doesn't even begin to come close to providing a useful model of that network.
I think 95% of economists would take issue with that statement
Why doesn't someone raise a VC fund to build another Silicon Valley somewhere else? I personally don't think it involves that much magic. Just build a brand new giant university in a relatively cheap place where you've bought up a ridiculous amount of land. Hire a bunch of Ivy League professors to teach there and establish departments. Market heavily. Around the university, build tons of housing for students. Further out, mixed office parks and all the goodies that people like about SF... lots of selection of food, drink, culture, etc. and pay up front so that a reasonable percentage of this is there before anybody shows up. Throw in some partnerships with big name companies and some VC firms to locate some startups there.
Expensive, yes. Profitable, I would think so. Sign me up to live there when it's built. I'd love to work for a similar salary and save a good 30% of it per year (while still leaving healthy profit margins for the investors).
Note to downvoters: You do realize that the US government essentially provided this sort of start to Silicon Valley right, and that after that there were a couple now-billionaire real estate investors who provided a lot of the office space?
Many people would probably agree with you but my personal unsubstantiated opinion is that both can be bought. Want good schools? Hire good teachers (and bring in a class of workers who care about their kids' educations and help their children succeed). Want culture? Hire musicians, artists, etc. Other natural culture will come by building the right kind of environment (see The Timeless Way of Building) and bringing in a bunch of talented people with cash to spend to generate the kind of environment they want by paying for bands to play, artists to make art, baristas, bartenders, etc.
Re: Olin College, I don't often hear it as often as Stanford probably because of the relative size of the marketing budget, but the software engineers who come out of Olin College are probably not paid so significantly less that a 30-40% reduction in rent wouldn't compensate.
Re: $Billions... Or a couple thousand software engineers organized to invest together.
Re: "You simply cannot build some of those things." Challenge accepted! Er, well, but I'm short about a billion dollars in order to attempt it. Know anybody who can help with that?
People can and do try to build good schools with cold hard cash. However... when was the last time you heard Olin College mentioned in the same breath as Stanford?
It's much, much easier said than done. It's still the work of decades and absurd amounts of money. Every freaking city of notable size in America has tried to dump money into getting their own local startup ecosystem going, and most of them have gone a lot of nowhere.
It can't buy everything, but if you're rich you get most of the remainder for free. I mean, you can't buy everlasting youth or other medical/physical current impossibilities, but I don't think that was what you were thinking.
Fantastic. Thanks for linking. That seems like something similar, although more university centric than business-and-residences centric. But it seems like a good example of a planned development done right.
I heard about this before, but I am not familiar with exactly what went wrong. I'd imagine a bunch of things could be learned from this so it wouldn't happen again.
A lot of focus on zoning and new construction limits when the housing crises comes up -- but what about foreign investment? I'd be curious to hear an argument over residency requirements. It's very appealing for a foreign investor to park their cash in real estate. The more that gets bought up and remains unoccupied, the tighter the market, and the more that prices continue to rise...
In DTLA alone, we have foreign investment (mostly Chinese and Taiwanese) to thank for the construction of nearly 2,000 new apartment units over the past 3 years (including units still under construction), with an additional 2,000 apartments and 1,000 condos planned over the next 5 years.
DTLA has a less than 3% vacancy rate for apartments, and for 11 months out of last year there were fewer than 5 condos for sale downtown, so occupancy is not a problem.
My point was that foreign investment can help solve the problem, which supplements the post that I was replying to.
Also, I'm not sure what the point of your link was. London's housing market has little in common with SF's; housing-wise London's market is most like Manhattan. Wealthy foreigners frequently acquire London flats without the intention to live in them beyond a few weeks or days each year and primarily use the real estate as a way to store their wealth. London allows, and even encourages, uber-expensive housing developments that displace impoverished communities precisely to attract this type of foreign wealth. In DTLA, foreign investment under the EB-5 Visa program has been used to increase the supply of housing and non-industrial commercial usage in a space that historically had limited amounts of both.
SF has felt unbearably constrained before. Then 2001 happened and there were tumbleweeds on 101. The people that were left had dozens of friends that left. Tech is fundamentally stronger this time around, but not by that much. Everyone is talking about the supply and demand of housing, but we also need to consider the supply and demand of six figure jobs.
Presumably part of the reason for the ghost town effect wasn't just the demand shifted but because the landlords (or banks) wouldn't blink. There presumably always a price which would have mitigated the churn, but the market failed to find it fast enough to avoid the undershoot.
During the 2001-2003 bust, rents fell quite a bit along 101 and the south bay. For an average apartment, from ~4,000 to ~2,500. High end apartments fell from ~8,000 to ~3,500
This is one of the most interesting parts of the article to me, but it's not mentioned until the very end.
On the other hand, if San Francisco zoning mostly deflects away non-techies who add to San Francisco congestion without adding much to its tech-centre synergies, then San Francisco's regulations may be reinforcing its status as technological leader.
That leaves technology as the saving grace. Maybe we invent really good holodecks, which make it much less critical to actually be in San Francisco. Maybe we invent teleportation, laws of physics be damned. Maybe we simply come up with better ways to build and design cities, which minimise the real or perceived downsides to residents of new building.
If they'd get rid of the ridiculous rent control, that would help a lot on both sides.
When I moved out there I considered buying a 3 story home out by Ocean Beach. Then to afford it renting out 2 of the 3 floors. After doing some risk analysis (researching the legal aspects) there was no way I could do that and expect to not get burned in a multitude of ways.
So it creates this really shady market for illegal rentals (you have to drive around to find them) and an adversarial way of living in this supposed liberal utopia.
Not my cup of tea, but I have many friends that love living in the city.
Land-value taxes would be a good part of the solution. Part of the unaffordability of the area is because the network effect of having lots of tech people in one area is extracted twice: once by income taxes on the extra productivity, and again by landlords on the money spent chasing the right to live in a high-productivity area.
To me the huge problem in the Bay Area was (is?) public transportation more than housing prices. This may have changed as I have not lived there in a while, but I just remember the Caltraink, BART, Muny, etc. being horribly disconnected - to live in the city and work in the Valley or vice versa was impossible if you had to rely on public transport, unless you just happened to live or work near the Caltrain on the southeast side of the city.
The East Bay, etc. of course was worse to impossible.
I could never understand this, given the otherwise progressive nature of the whole area.
"You see this in London, for instance, where /literally/ [my emphasis] every house in the city is now being rehabilitated, including those that were rehabilitated last year."
Really well written. How do you tell the NIMBY's that they're the problem? How do we get more construction and improve the lot of everyone, not just the monopolist incumbents?
That chart from Thomas Piketty's "Capital" has an odd scale at the bottom. The breaks are 40-40-30-30-10-10-20-20-20-20 years, with no adjustment in the scaling.
> "If local regulations did not do much to discourage creation of new housing supply [...] Costs would rise [...] And the value to the marginal resident would fall for two reasons. First, the marginal resident will definitionally be someone who is relatively indifferent between living in San Francisco and living somewhere else. Everyone more eager to live there would already have moved in."
That seems wrong. How much someone is willing to pay to live in San Fransisco isn't a measure of their "eagerness", but also a function of wealth. Marginal people in San Fransisco are also poor people who love the city, and are barely able to live there because they spend such a high proportion of their income on costs of living. Relative to their household income, they spend _more_ than someone not marginal to live in the city, but that wouldn't be reflected by their migration patterns. They're not less eager, just less rich.
In this particular case, the word play (intentional or not) might actually be useful in explaining the problem. The idea is that, yes, for people who make the same amount of money, a completely free market distributes housing according to their desire to live in San Francisco versus some other place. But for people who don't make the same money, desire might not even factor in the equation. For a lot of people, being displaced from their homes because they can't afford it doesn't look like a cost-benefit analysis, it looks like well... being displaced. More crudely: as being thrown into the street and told to emigrate from a place where they have lived their entire life. While some software developer who could, theoretically, work from anywhere in the world, moves to the same apartment after deciding that "well, it's pricey, but nothing I can't afford, and the weather is nice". Economically, it might be efficient, in terms of say philosophical utilitarianism, it is inefficient (more overall misery than happiness is created, the developer didn't care about living in S.F. quite as much as the previous tenant cared about not being kicked out).
Not saying current rent control policies and development policies in S.F. are optimal (in the colloquial sense, economic sense or utilitarian sense), or that more housing in general should not be encouraged somehow. But the option of having zero rent control and letting the invisible hand of the market shove tens of thousands of people into the streets seems like a pretty bad solution, in addition to being a particularly callous one.
In this case, those on the verge of poverty would also be marginal in the technical sense because a given price rise would cause them to choose to leave whereas those with more money might choose to stay because it's an easier choice.
The GP make simple and correct point - those with more money can wind-up choosing to buy something they "don't want that much" while those with less money overall money forgone things they very much want since they also need to eat.
I understand your point. I think in this case, the author is talking about a scenario where the price of rent in San Francisco drops dramatically to where it is no more expensive than anywhere else relative to the opportunities.
At which point, even people who would find themselves priced out of SF in today's market would already have moved to the city if they wanted to.
