
Shaken by the latest digital gold rush, San Francisco struggles for its soul. - smharris65
http://www.modernluxury.com/san-francisco/story/how-much-tech-can-one-city-take
======
surrealize
Grrrr. Existing SF residents are facing an influx of newcomers, who are
pushing out (pricing out) some existing residents. And somehow, it never
occurs to them to just _make room_ for more people, so that existing residents
don't get pushed out.

SF has _plenty_ of opportunities to build _upward_ , but as long as SF insists
on being anti-development and anti-height, the housing supply problem is going
to continue.

~~~
charonn0
How are current residents being priced out? If they rent, then rent increases
are limited by law and no-fault evictions are nearly impossible to get
honestly. If they own, the no one can force them to move short of the city
invoking eminent domain.

~~~
ryguytilidie
"then rent increases are limited by law"

In certain cases, yes, but personally I lived in SOMA in an apartment for 2
years and my rent was going to go from 2k to 3k because Google had asked the
building if they could rent some of the units. So I mean, maybe it was illegal
and I don't know about it, but I can certainly say I don't live in San
Francisco anymore because I was priced out by new incoming tech employees.

~~~
redthrowaway
I'm assuming you made a thinko there; as written your comment says you were
forced to move because living got too inexpensive.

~~~
ryguytilidie
haha good call, thanks for noticing.

------
sakopov
I was recently contemplating moving to the bay area from Midwest. Then a few
months ago i shared a hostel room in Edinburgh with a guy from Portland. When
we got to talking he told me that he is originally from San Francisco but
decided to _ran away_ to Portland to escape nearly insane cost of living. I
don't know how much of this is true but he was telling me that some dingy
studio apartments have 10-15 people in line to sign contract. Landlords are
reluctant to negotiate mainly because the next person in line is a Googler who
will pay $1000/month above the asking price without thinking twice.

A couple of months later, an acquaintance of mine got a gig as a software
engineer at Apple. When i got in touch with him, he told me that he's dishing
out $5K/month to pay rent for the house his family lives in. My jaw dropped.

~~~
ryguytilidie
"Landlords are reluctant to negotiate mainly because the next person in line
is a Googler who will pay $1000/month above the asking price without thinking
twice."

I actually lived in 388 Beale, right by the Google towers. My rent went up
exactly $1,000/month when Google started renting units at insane prices for
their interns/traveling employees. So yeah, pretty familiar with this and this
is why I no longer live in SF. Also, it really feels like shit to get pushed
out of your apartment so some sales exec at Google can stay there once a week.
Yay efficiency?

------
jacques_chester
This just in: economics applies to San Francisco.

If demand rises faster than supply, prices go up.

Demand is rising fast. Supply is being held down. Prices go up.

I come from Darwin, a wonderful little city clinging to the northern edge of
the Australian continent. About 10 years ago a confluence of factors (expanded
Defence presence and the early stirrings of the resources boom) meant that
property prices took off.

At the same time, the hyper-local nature of politics in that part of the
country (each member of parliament in the state-level government represents
about 2500-3000 voters) means that infill doesn't happen because the margin of
victory is easily less than two or three streets getting angry at you for
authorising a new block of flats.

So: demand shot up, supply did not. Unsurprisingly, Darwin is now one of the
most expensive places in Australia to live. If you can find an unoccupied
flat, good luck renting a nice one for a price affordable on a normal middle-
class income. And good luck finding a house for a price affordable on a normal
middle-class income.

Supply and demand. It's the same everywhere for everyone. There are no
exceptions. If SF wants to keep its middle class, it needs to make more
housing available.

Especially high density housing _for the wealthy_ , not the poor. Opening
space at the high end of a market can have a disproportionate effect on a
total market by removing massive amounts of bidding power. Every rich person
who moves into a $2 million dollar apartment is a rich person who isn't
bidding the price of an older building up and driving out the middle class,
who in turn will drive out the poor.

Another dumb policy: giving money for deposits or loans. It just drives up
effective demand. Every seller _knows_ you can get the $X thousand dollars and
then, surprise, surprise! The price of every house just rose but ~$X thousand
dollars. Everything that gets given to the middle and poorer classes to
subsidise housing is in fact a wealth transfer to the landlords, via good old-
fashioned populist policy making.

~~~
_delirium
> Opening space at the high end of a market can have a disproportionate effect
> on a total market by removing massive amounts of bidding power.

Are there studies on this bit playing out in practice? My impression so far,
mostly looking at Manhattan redevelopment, is that building high-end condos
typically does not reduce prices for other buildings in the area, but rather
raises them: the presence of new high-end housing increases demand in the
immediate vicinity by more than the new building's own supply provides,
assuming the area (like Manhattan or SF) is rather desirable in general terms
to begin with. That may be good if you want to raise the housing values in an
area (each building provides a multiplier effect that raises the prices of
neighboring ones, making the whole area more desirable). But probably not good
if you want to lower the prices. Good statistics either way would be
interesting, though: are there cases where opening new high-end housing
actually lowered the other prices in an expensive urban area? E.g. when new
condo towers open in Manhattan, does it produce an observable downward move in
prices?

(The main point I'm getting at is that demand and supply aren't independent
variables: demand for living in an area depends quite strongly on the housing
stock in that area, so building more housing stock affects both supply _and_
demand, in possibly complex ways, which need empirical data to tease out.)

~~~
jacques_chester
> _But probably not good if you want to lower the prices._

The thing I'm thinking of is the city-wide market, rather than in a particular
locale. One way or the other, though, the wealthy will get to live where they
want. The best thing you can do is to try and save the furniture by putting
them into golden ghettos, rather than having them fan out and drive off people
in multiple districts.

> _Good statistics either way would be interesting, though: are there cases
> where opening new high-end housing actually lowered the other prices in an
> expensive urban area?_

Good on you for calling me out on numbers. I'd be interested to see that too.

NYC is a poor case study; you have the confounding factor of widespread rent
control. It both creates an artificial limit on housing supply and distorts
your official statistics because people have a strong incentive to behave
deceptively.

~~~
_delirium
I agree the wealthy will generally get to live where they want. I think there
can be some variation in where they want to live, though, depending on
policies. Some wealthy definitely want to live in urban areas, and others
definitely want to live in suburban areas, but for others it may depend: for
example, if you build shiny new condo towers with modern amenities, there are
people who currently wouldn't consider moving into a dilapidated Mission
complex who _would_ consider buying one of those new condos and moving up to
the city. So you might bring in some new rich people to SF depending on what
gets built. The worry some anti-gentrification people seem to have is that the
end result will be that the new demand gets soaked up by new rich people, and
the only place demand is lowered is not so much a city-wide basis as a
metropolitan-area-wide basis: prices go down in outlying suburbs, which is
where the poor people then have to move. That's what seems to be happening in
NYC: every time a new neighborhood is gentrified, poor people have to move
another 15 minutes further away from work, into yet another further-out area
with worse transit.

Some people hope to make the city stay unattractive to rich people, so they
prefer to live on the Peninsula or North Bay (or in NYC, maybe some nice condo
towers on Jersey's "gold coast"). So you still have the golden ghetto, so to
speak, but you try to put it elsewhere. Even leaving aside whether that's a
good goal, I think it's certainly a good question whether current policy will
actually do that; it's quite possible anti-growth policies won't have that
effect anyway (e.g. Paris's anti-growth policy has certainly not resulted in a
non-gentrified Paris). The interconnections are pretty interesting though, and
seem hard to model, especially with the existing data points (e.g. NYC)
having, as you point out, their own oddities.

------
zinssmeister
blaming the "rich" techies for the over priced rental market in SF and the
rest of the Bay Area is terrible. The real reason rent is sky high in my
opinion is because SF is acting like a small city when it's not. Real estate
development is pretty much kept flat. Yes they are adding units but if you
look at the expected growth, we will stay flat at best. This results in
bidding wars for rentals and real estate purchases, because frankly there
isn't enough for everyone. Builders would like to buy up more space and crank
out energy efficient/modern housing, but no sir, no permit for you.

~~~
ryguytilidie
I can tell you that my SOMA apartment's rent went up 1k because Google wanted
to rent some units in it. This pushed me out of San Francisco. I don't think
most of these Embarcadero/SOMA startups are interested in high rises in the
Sunset or in West Portal, they want high rises in SOMA, which is where they're
being built.

~~~
w1ntermute
How does this change the fact that if you allow more high rises in SoMa, you
can accommodate both the existing tenants and the new techies moving in, all
without raising rents?

~~~
ryguytilidie
Part of the stated problem was "and the city only allows high rises in SoMa" I
was under the impression SoMa was the only place where you could build high-
rises and didn't think the restrictions were very tight.

Also, I don't think if someone demolished a lower-class apartment in SoMa they
will do anything but build the highest cost apartments (If your options were
to build apartments that cost $1500/mo for locals or $3500/mo for new tech
employees, which would you build?) and push those lower income people out,
which is basically the problem we are discussing, so no, I don't agree with
the above assertion. Sounds good in theory, wouldn't work that way in
practice.

~~~
w1ntermute
Do you understand that demand is _finite_? You cannot go on building
apartments for new tech employees forever. If you allow widespread
construction of new housing, then at least some of that housing must target
lower income people.

Moreover, I don't agree with the restrictions on high rises to SoMa. Why not
allow them to be built elsewhere? And who says that you have a right to live
in SoMa anyway? If it were allowed, high rises would go up in other parts of
the city, and you could live there instead.

------
joeblau
A little over a year ago, I moved out to San Francisco from D.C. because I
knew this was the hotbed of innovation and start-ups. Before moving here, I
had no prior knowledge of any of the culture or neighborhoods (beyond a little
about the Mission) but after being a resident of this city for a little over a
year I love it. The people I've met since I've been here are some of the
smartest people I've associated with; the food is better than any city I've
lived in, the people are friendly, and I feel like I can have intellectual
discussions with like minded people that understand my passions.

One thing I do struggle with is making this a permanent home. I feel like
right now, people are coming here (as I did) because frankly, this is where
the money is. Even Y-Combinator advertises that if they invest in your
company; They want you to move here and encourage you to stay here.

> If we invest in you, your group is expected to move to the Bay Area for
> January through March 2013. (You can of course leave afterward if you want,
> but it's a good place for a startup to be.)

I'm curious to see what happens when/if the bubble pops. Will people stay or
will they go back home? For people that have been here 15+ years, could you
shed some insight into what happend in between 1999 and 2003 as the last
influx of innovation left the area? I feel like those were the years when
giants such as Apple, Yahoo, Google, Sales Force, and Mozilla were essentially
minted.

------
iamwil
I don't know. How does New York deal with people in finance and artists in the
same place? Do all the artists just live in Brooklyn now, instead of
Manhattan?

~~~
subsystem
Yes, more or less. But there has been a number of areas getting gentrified
before it. Meatpacking district, Lower East Side, Williamsburg. At least
that's what I've heard, someone from NY could probably tell you if this story
hadn't been flagged to death.

------
mahyarm
Does San Mateo county (home of daly city, san bruno, south SF, milbrae, colma,
etc) have such development restrictions too?

~~~
mc32
They have similar mechanisms in place, but this is more understandable because
SM is composed mostly of small cities (under 100k inh), so any new development
must take into account traffic impact and offer some way to mitigate that or
in some way address the foreseen impact. In addition, each municipality (town,
whatever) has relics of 1950s height restrictions reflective of their town
sizes.

It does not help that back in the planning phases of BaRT, San Mateo co. in
the late 1950s, opted out of the system. Now they are plagued by a mediocre
public transit system and they're in a catch-22. They don't have the density
to sustain a working public transit system, so one does not get built and they
don't allow higher densities due to the adverse effects on traffic. Eventually
BaRT will reach San Jose, via the East Bay.... the idiocy.

I think if SJ plays its cards right, it could take away the clout back from
SF. Back in the 80-90s (the hardware days) SJ (the 237 triangle) was more or
less the 'capital' of SV (as the peninsula was more amorphous and one could
not annoint P.A. or Sunnyvale the capital of SV, for example)

------
brendanib
By far the funniest part of this is the image points "non-tech workers"
straight towards SOMA:

[http://www.modernluxury.com/sites/default/files/imagecache/s...](http://www.modernluxury.com/sites/default/files/imagecache/story-
photo-with-inset-main/story/freeway2.png)

Geography fail.

~~~
joeblau
That is pretty funny and ironic!

------
wglb
_When I moved to this neighborhood in 1993_

But isn't this how it always is? You form one idea of how the locale is and if
it improves a bit but keeps going, you want to somehow freeze it at your
favorite time.

Travis McGee, in fact, many years ago, lamented something like this about San
Francisco " . . . she now sells what she used to give away . . .". Florida
too, if I am not mistaken. (Travis McGee is a fictional character, by the
way).

My Oregon friends say it is wonderful there, but we don't want any more folk
to move here.

------
owyn
Ugh. This city does have some bad housing shortages right now, but this kind
of whiny name-dropping i-was-here-first essay doesn't help. Neither does this
epic rant I am about to write, but I'm going to do it anyway...

My favorite quote so far:

"If San Francisco is swallowed whole by the digital elite, many city lovers
fear, the once-lush urban landscape will become as flat as a computer screen."

Lush urban landscape eh? Is that from all the feces on the sidewalks? Who are
these city lovers? Are they the same NIMBY types who are trying to prevent any
kind of night club or live music scene from being established in the city
(google the "War on Fun" for fun). Well, that nameless person made up by the
author is boring and terrible and they should probably move out to the suburbs
to make room for someone who actually enjoys what this city has to offer now
instead of what it was back when you couldn't take your kids to the park, a
story which you told us yourself!

"When I moved to this neighborhood in 1993, just before the first dot-com
boom, I avoided taking my two toddlers to the playground across the street
from the café, because local gangs sometimes stashed their guns in the sand."

Yeah... soo.... that's bad, right? I didn't live here back then but I visited
frequently and it was awful! Your fake nostalgia for the grittiness of urban
life can go burn in a fire made from hobo shit.

Another stupid quote:

"The unique urban features that have made San Francisco so appealing to a new
generation of digital workers—its artistic ferment, its social diversity, its
trailblazing progressive consciousness—are deteriorating, driven out of the
city by the tech boom itself, and the rising real estate prices that go with
it."

Wait, aren't techie types usually considered to be sort of trailblazing and
progressive and friendly to the arts? What the hell are you talking about
dude?

Okay, rents have gone up in my building by 50% in the last 2 years. It's bad.
The building, that is. It's basically been a slum apartment for a hundred
years and 3 families do live upstairs from me in one unit. I WISH they'd move
out, because I can hear everything that goes on up there. Ugh. We have new
employees who are trying to move to the city and there aren't any good
options, most of them have ended up in Emeryville or Oakland. I certainly
wouldn't recommend my own building. I only stay here because the rent is cheap
because I moved here before this current boom. So here I am taking advantage
of the very upside-down rental market that's contributing to the whole
problem! I don't know what the long term fix is besides building a LOT more
new buildings, which seems to be happening... But it's only happening because
rents are high enough to justify new construction, which is good for non-tech
jobs and city property tax revenue in the long term, right? Would you rather
have a bunch of fenced off city blocks with nothing but empty holes in the
ground on market street? There's a new Draft House Cinema moving into a
theater that's been empty for like 20 years two blocks away from McSweeny's.
You don't think that's awesome?

Eventually this mini-boom will end and that's going to suck WORSE than what's
going on now. Oh man, it's going to suck. Maybe rents will go down then, but
only if a lot of people lose jobs and move away. That's not good is it? In
fact, that's a worst case scenario for the city. The cafe you were sitting in
when you wrote that article will probably go out of business too. Is that what
you'd prefer? Maybe one of those techies who moves to SF this year will invent
an alternate fuel generator that runs off baby boomer hand wringing and then
we'll all be amazed when you single handedly save the city.

Still, until recently there were dozens of empty city blocks that had no
development at all on them. Many stalled projects are in progress now, and it
is all going to be high priced brand new luxury stuff. 3 new buildings have
been built within a block of my current location in the Mission just in the
last year. Sure, they're small and overpriced, and maybe only rich techie
types can afford them but I'm FINE with that. When the people who can afford
it move in to those places, they'll free up space in the dumps they moved out
of and things will probably equalize in a couple of years, and that's probably
the best case scenario.

~~~
FelixP
Thanks for this, I agree with everything here but you've illustrated things in
a much more detailed and articulate fashion than I could have.

My family owns rental property in the city, so perhaps I can add a little more
color here. The reasons that the housing market is so messed up in SF
basically boil down to the following:

* Rent control - provides a huge disincentive for landlords to upgrade, invest in, (or for the unscrupulous) maintain their properties. It also artificially limits housing supply and saps liquidity, since people who've been in their units for long periods of time have distorted prices and very limited incentive to move or upgrade.

* Onerous city bureaucracy and regulatory environment - the myriad, overlapping, and draconian sets of rules governing property development and ownership have made new development unnecessarily time- and capital-intensive. Oh, and there's always the tenant's union and the ridiculously pro-tenant judiciary, but that's a story for another day.

* Prop 13 - basically this drives a distortion of property tax rates, with a disproportionate share of the tax burden falling on residential households and newcomers to the city/state.

Note that as (relatively) long-term owners in SF, we've done very well thanks
to (2) and (3).

