
Crazy things happening in SF because of its out-of-control housing prices - kafkaesque
http://www.businessinsider.com/why-people-are-leaving-san-francisco-2018-3
======
Kronopath
It bothers me that so few people mention the role of Proposition 13 and low
property taxes for housing in all this. Proposition 13 makes it so that
property taxes are fixed when you buy the house and only ever increase with
inflation, whereas most other places make property tax rates proportional to
the current market value of the home based on things like recent sale prices
of other nearby homes. For example, in Toronto property taxes are set based on
the assessed value of the property relative to the city average, and rates are
set based on the municipal government’s budget and expenses.[1]

As a result, it’s costly for local municipal and county governments to zone
for residential areas, because of the need for schools, parks, libraries, and
other public services needed. If property taxes don’t balance out those needs,
then zoning for commercial buildings instead ends up being far more attractive
to local governments. The results: more office buildings, more jobs, but
insufficient housing to support them.

Increasing property taxes is tricky because of the risk of further displacing
long-term residents, or older residents, who have owned their homes for a long
time. But in my view the impacts of property taxes on cost of living and the
housing crisis are undeniable, and it’s unusual to me that so few people ever
even _mention_ it in these discussions.

[1]: [https://torontoist.com/2014/01/everything-you-ever-wanted-
to...](https://torontoist.com/2014/01/everything-you-ever-wanted-to-know-
about-property-taxes/)

~~~
bsder
The problem with Proposition 13 is that it also applies to _commercial_ real
estate.

A personal residence can only be about 30 years out of date in terms of
assessment. And, when the owner dies, that assessment corrects.

Commercial real estate will get buried behind layers and layers of sublease
agreements in order to avoid triggering a reassessment. At one place I worked,
we had to find the actual original building owner because someone drove a car
through a support beam and the rework was going to cause everything to come up
to code. We _moved out_ because nobody could actually get through all the
layers of subleases (11 layers when I last checked) and guarantee a completion
date.

The solution is to remove the Proposition 13 protections from commercial real
estate. Good luck. Every company with real estate on the books in California
is going to fight you tooth and nail.

~~~
DrScump
But companies don't vote.

If the people wanting that very change simply organized the requisite petition
drive, I'm guessing it would pass easily. That's how Prop 13 was installed in
the first place -- the Jarvis-Gann initiative amendment. Same with the
California Lottery and legalized marijuana (I think the latter was just
statute law, which has a lower number of required signatures.)

~~~
gnarcoregrizz
It requires a 2/3 majority to change it. Good luck.

~~~
DrScump
No. An Initiative Constitutional Amendment requires only a simple majority of
50%+1 of votes for passage.

For example, Prop 13 itself passed with "only" 62.6%.

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xivzgrev
Ugh I'm tired of these articles that declare SF / SV are over. This is my last
rant...hopefully!

They take a small group of people that actually are moving and blow it up into
a trend. It's been going on for years.

Yes home prices are insane. No salary doesn't make up for it. Yes your house
will be smooshed in between others unless you got a lot of money. Yes you
could get 2x the house for 1/2 the price anywhere else.

But it ignores two huge factors keeping people here. One the network density
for tech. There are more jobs and support here than other places. More
investment dollars create more startups which hopefully have more exits which
attracts more investment dollars. It's a virtuous cycle.

Two is the lifestyle. Yes there's a liberal bent but it's traditionally been
one of the most open minded places in the country. There are few other places
you can experience so much of life's variety within a 3 hr drive.

And the whole remote working thing sounds logical but I see few companies
actually widely adopting it. A lot of people prefer to connect in person, even
though there is no rational reason why anymore.

~~~
volgo
> been one of the most open minded places in the country

Not at all. I've lived in several states and I think you're conflating the
"liberalness" with open mindedness. If anything, the Bay Area is one of the
most closed-minded places in the country. There's absolutely no room for
conservative ideas

~~~
nostrademons
I'd question that, with a caveat: if you want to _live your life_ by
conservative principles, nobody's going to care in the Bay Area. If you want
_other people to live their lives_ by your conservative principles, that's
when people start to get pissed at you.

I know plenty of Christians in the Bay Area - my wife grew up in a
conservative, evangelical household (and her parents are still very devout),
so basically everyone she hung out with up through college runs in those
circles. We don't personally drink or smoke out, though we have no problem
with people who do. I have friends that go shooting regularly. I've been to a
gun range with them, and enjoyed myself. My politics run mostly moderate
libertarian - I'm for lower taxes and smaller government, but also believe
that government has a role in righting externalities and ensuring a level
playing field for everyone.

I've never met anyone in the Bay who has a problem with how I live my life -
but then, I don't believe that other people need to live their lives the way I
live mine.

~~~
hackerman12345
Peter Thiel or the Oculus guy might disagree, but you might not hear them over
the thousands of people demanding they be fired/divested from/run out of town.

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solidsnack9000
The regulations that prevent new building are the work of incumbent residents
-- people who have been here for many decades, support the arts and fly under
the radar when it comes to assigning responsibility for this situation.

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dizzystar
I don't live in SF. I visited a few times and it's not my cup of tea. I prefer
LA and plan to stay here forever.

LA is expensive as well, but there are places that you can rent on the cheap,
or at least a reasonable amount of money, and be safe. If this wasn't the
case, LA as a city would break down. We need music, artists, actors, people
pouring coffee, and serving tables to keep this city alive. We need a poor
person living in the same building as an executive. On top of that, we need
places where poor people can afford to eat, so there is a McDonalds anywhere
you go.

I bring up McD's because I was "over-fooded" in SF and went on a desperate
search for something trashy to eat, almost to no avail.

I'm just wondering how SF is able to sustain itself and how it plans to
sustain itself in the future if they push all the poor people to such a
distance that they can't even take the BART or bus to work anymore.

The other difference is that LA is very much a gig economy. There are a LOT of
people out here that either don't have a job and live just fine, or they have
a day job and do random gigs during their off-hours. As someone once told me,
you don't sleep in LA, you just rest. Others have pointed out that this is a
work area, and so on. But even so, there are so many different industries down
here that you can, with time, talent, and luck, have sustainable life and your
own place, well outside tech, movies, music, art, and so on.

My impression is that the bay area is an area with a few viable ways to make a
living. Is it just that the lower class has to live in the dangerous areas of
Oakland (and elsewhere) to just have a roof over their head?

~~~
twblalock
> My impression is that the bay area is an area with a few viable ways to make
> a living, and is it just that the lower class has to live in the dangerous
> areas of Oakland (and elsewhere) to just have a roof over their head?

There is no shortage of fast food workers, waiters, retail workers, coffee
shop workers, handymen, etc. It's expensive to live in the Bay Area, but
clearly those people are able to make a living or they wouldn't be around
anymore.

And they don't all commute from far away. I know plenty of people working
those jobs who live in the Bay Area near their places of work.

~~~
closeparen
There's a lot of inertia to people and their geography. The absolute loss of
non-tech activity may be small for now, but ask anyone who hires people
outside our industry where the think their organization will be in 10 years.

A colleague once remarked, "It's the second derivative of the thing that'll
get you."

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wpietri
There are a lot of causes for this. But one of the easiest to fix: VCs don't
like getting on planes.

I've lived here since Bubble 1.0, but I still keep in touch with people in the
midwest. There are plenty of startup-oriented people there, but in their view
to get real investment, they have to move to SF.

It'd be great to see more companies starting and growing in places where
housing and office spaced is reasonably priced. The Internet has made location
much less important for so many things; we should make that true for startups
as well.

~~~
nopinsight
To be fair to them, flying does cause a lot of time waste and hassles.

The curious thing is that expansion to places within reasonable driving
distance like East Bay has been slow as well. Is the cost saving from East Bay
locations not large enough or is it some other factors?

~~~
closeparen
The BART-connected East Bay is only a little cheaper, and many SF and SV
employees already live there. (On my last team, _everyone_ commuted at least
an hour on BART).

Sacramento is almost a normal American city in terms of real estate prices. It
would be pretty reasonable to live and work there, and take the train to SF
for investor meetings.

~~~
nopinsight
In that case, moving the office to East Bay would save everyone about 2 hours
each work day? Seems like an amazing benefit for everyone involved—-less
commuting time & stress, better productivity, greater employee satisfaction.
Why haven’t more companies move there? Really curious.

~~~
closeparen
When you’re in SF, people can also commute from the Peninsula. Also there is
probably more office space in walking distance of a single Market St. BART
stop than the entire East Bay network put together.

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lph
"WeWork, a startup that rents out shared workspaces, branched into co-living
in 2016. Their "dorms for grown-ups" are intended for people moving to a city
and looking for fast friends.The company, which has a $20 billion valuation,
has two locations: one in New York and one in Crystal City, Virginia, outside
DC. The average apartment is just 450 square feet."

How does a company running glorified dormitories have a $20 billion valuation
with only two locations?

~~~
ageitgey
You misread it. WeWork is a huge, international network of co-working office
spaces that also happens to be experimenting with two co-living locations.

See [https://www.wework.com/locations](https://www.wework.com/locations)

~~~
cylinder
Still incredibly overvalued -- they're just sublessors. They don't own their
real estate.

~~~
vlovich123
Could be but they're middlemen providing a valuable service. It's a one-stop
shop for a work environment. The landlord benefits because they have a regular
income stream & don't need to worry about tenants coming & going. Customers
get to adjust their needs on a month-to-month basis for a smaller up-front
cost than they could get leasing themselves & can dynamically adjust if they
grow. Similarly, they don't need to worry about setting up internet service &
any of the other things WeWork offers. Additionally you can cheaply
temporarily rent space if you have travel needs. That's the value-add. Now how
successful they will be I don't know but I fail to see why real estate
ownership matters here.

~~~
dasil003
Personally I think WeWork is pretty exposed to any kind of economic downturn
as most of their customers are burning cheap VC money. If half those companies
were serious about getting profitable they'd go somewhere else with half the
amenities at a quarter of the price.

~~~
beagle3
There aren’t places like this with short term leases. You either get expensive
month-to-month (or slightly cheaper year to year) or you get a cheap 5-10 year
lease.

If you are not established enough to take a 5 year lease, then wework (and
their competitors, of which there are many) make a lot of financial sense,
especially for the flexibility — e.g. if you downsize, rent goes down
accordingly in 1 month. No “cheap” lease has this feature.

Also, WeWork is cheap compared to prices Regus used to charge 5 years ago; I
would assume Regus did respond to the price pressure, but I haven’t checked.

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dmix
"-because of it's out of control housing regulation" _

~~~
Aloha
Arguably SF doesnt have stricter regulation than any other big city (save for
seismic) - but the demand far exceeds the units the type of regulation the
city has, will allow to be built.

~~~
zapita
The zoning definitely is more restrictive than other major cities.

And it's even worse in the Silicon Valley towns - Palo Alto, Mountain View,
etc. The zoning restrictions there are absolutely bananas.

~~~
DrScump
How, specifically, is zoning different in Mountain View from elsewhere in the
Bay Area?

~~~
rockinghigh
It’s not but it’s true that there are some restrictions in many cities on
building higher than 1-story or 2-story houses.

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ggm
Laws of use and laws of possession always seem to come down to enabling
benefit for current holders over future holders.

Thing is, changing this is like changing the gravitational constant. It's
baked into the DNA of property rights, leases and taxes.

sanFran is maybe on an extreme here for the USA but it's not necessarily worse
than say Tokyo, or the eggegious failure of leasehold in London, or a number
of worldwide housing issues

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farnsworthy
What is the average 1BR apartment going for now in SF? (I'm not sure that
Craiglist or quoted outliers are entirely representative, and am interested in
the experiences of people more familiar with the market.)

> This is how people outside the area imagine living in San Francisco.

She doesn't seem to think much of her readers.

> San Francisco's chief housing inspector deemed living in boxes illegal.

~~~
rockinghigh
Around $3000/month for a 1-bedroom.

~~~
cocochanel
So someone making 100k spends half their disposable income for a 1-bedroom?

~~~
jldugger
Pretty sure we started the intern we hired at 120k base salary plus like 20k
in stock a year. So you know, don't accept an offer that only pays $100k.

But more seriously, my $3k apt is fairly high end. I toured a number of
apartments in the $2k range, which is still kind of absurd, but then again
McDonalds is offering like $17/hr an hour as a starting wage and still
struggles to hire. At 2000 hours a year, that's a $34k annual wage, and you'd
still probably need a 2nd job to make ends meet. Or get paid under the table
and save yourself a good 5 thousand bucks on income / payroll taxes.

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rdtsc
> The median-priced home in San Francisco sells for $1.5 million, according to
> Paragon. It's not uncommon for buyers to bid hundreds of thousands above
> asking and pay in all cash.

Who are these people? There are a lot of homes there, so there must be a whole
lot of buyers with $1M in cash. There are enough of them that they even try to
outbid each other by slapping an extra $100k no top of asking price.

~~~
nostrademons
There actually aren't a whole lot of homes _on the market_ (much of the city's
housing stock is either rental properties or is owned by longtime residents
who ain't moving anytime soon), but to answer your question: anyone who's been
at Google, Apple, or Facebook since 2009, got stock options, and held them.
Google stock has appreciated 7x since then, Apple 10x, FB a whopping 35x.
$100K in stock options is actually a pretty small options package over 4
years, but if you got that much in FB stock when the whole company was worth
$15B, that's now worth $3.5M.

~~~
rdtsc
Thanks, I think that explains it. I guess with enough tech companies and
enough exits happening they'd be good amount of these people to skew the
market.

~~~
crzwdjk
And the market in SF and other Bay Area cities is _really small_. I recently
read that Cupertino has only a dozen houses on the market total, and SF may
have as many as hundreds or even a couple thousand (in a city with a
population over 800,000). Actually, I just looked at Zillow and there are 17
properties on the market in Cupertino, which had about 20,000 households as of
2010.

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vadimberman
> San Francisco’s median two-bedroom rent of $3,040

Is it? It's hearsay, of course, but I was told it's closer to $4K.

~~~
owyn
Not sure where that stat comes from but I suspect that median value would
include rent controlled apartments. My 1908 era 6 unit apartment building on
the edge of the mission is about $3900 for a 2 bedroom place which is 3 empty
rooms, a bathroom and a kitchen. I do like the location but I can hear the
upstairs neighbors drop a fork and it wobbles whenever a bart train goes
underneath.

~~~
vadimberman
I see, that makes sense now - thank you.

It's mind-boggling for me that a hundred-plus year old house costs that much,
frankly.

~~~
owyn
It's also 1 block from one of the famous under-freeway homeless encampments.

One more anecdote, since part of this discussion is about rent control and how
it affects peoples choices living in the area. I currently pay ~ $2150 because
I've lived there for 8 years. That's why I'm also holding on to the place even
though I currently work in San Jose (a 1 hour drive each way). I'd pay even
more than I currently do for a place down there, but probably less than a new
tenant moving in here (SJ is merely the 3rd most expensive area in the US).
The commute sucks, but I prefer to hang out in SF on the weekends.

So yeah, maybe the landlord is missing on a bit of opportunity cost because I
live there, but as soon as I move out, it would go to market rate. They could
make an extra $20k/year if I moved out but I think generally having a stable
tenant in the long run is a benefit, and they've certainly profited far more
than that from owning the property. Tenant turnover is pretty high, from what
I've seen most people only live here for a year or two.

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shipintbrief
Is there any part of this site where some suggestions could be made to
moderators/admins? Like restriction of sharing links to sites which you can't
see if adblock is enabled?

~~~
mnw21cam
Seconded. I'm not even using adblock, and this broken site insists I switch it
off.

~~~
hackerman12345
I am using adblock (ublock origin), and the site works fine.

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katebrooks
Eventually only a specific people who can afford would stay and who can't
would move. Other cities would definitely get established which is a good
thing. Remote working is not my cup of tea. I live in New York city and I love
living and working here.

