
The San Francisco Rent Explosion Part III - nikunjk
http://priceonomics.com/the-san-francisco-rent-explosion-part-iii/
======
tibbon
While not to the exact same scale, rents in NYC and Boston have been doing
similar. In Somerville, apartments are roughly double what they were 10 years
ago by my estimates. Salaries for the average person haven't kept up. My
partner and I clear 160k/year, and affording a 2-3BR apartment is still not
easy given student loans, saving for a 20% home down payment, etc. We are
currently in a 1BR to make that happen, but the lack of space is killing us.
The only way I can see ever owning property is if my options at some company
end up being worth something.

My question is not if things are going up (they are), but what can we do about
them. We are going to destroy our neighborhoods, culture and opportunities
(yes, even for us software developers) if these things keep going up like
this. Unless none of us ever want to have more than a 150 sq/ft bedroom that
we rent (no kids, room for hobbies, etc), we need to find a solution.

I'm really sad for my friends who aren't developers, because its impossible to
keep up. I don't want everyone to be a developer. I don't think that is
culturally good, or a solution. I want artists, academics, electricians,
caregivers, medical professionals, and people of all walks of life in my city.

Look, we've got some incredibly bright minds on here. What is a realistic,
forward looking and innovative way we can work on this? We're aiming for the
moon, hyperloops and self driving cars... but maybe a few people can try to
figure out how to make it so that cities aren't absolutely terrible cost-wise
to live in?

NEW THOUGHT: Yes, it is supply and demand. I wonder if someone can start a
company whose mission is to quickly create scalable affordable housing in
major cities? Something involving tricks for greater density, new building
techniques, focus on efficiency but also quality of life... and doing it fast.
We need this in 2 years, not 20. How can we build 20,000 units of housing
within reach of someone in their 20's in the middle of the income range in
each Boston, NYC and SF?

~~~
nilkn
Cities are expensive for a relatively simple reason: the number of people who
want to live there exceeds the number of open spots.

Two immediate solutions:

(1) Create compelling reasons for someone to not want to live in this one
particular city. For instance, allow one to work remotely. There are hundreds
if not thousands of amazing cities to be enjoyed, not to mention the vast
stretches of rural land for those who don't want to live in a city at all.

(2) Build more housing units in the city. Eliminate zoning restrictions. Stop
worrying about protecting the existing homeowners and pay more attention to
everyone else.

Note that both of these are mostly matters of just convincing people to jump
on board the plan. People in general are resistant to remote work (
_especially_ outside the software world, but even inside it), and some cities
like San Francisco are extremely hostile towards a vast number of proposals to
just build more housing.

When you combine the desire to compress an entire industry into one city with
a refusal to build more housing units, what result could you possibly expect?

~~~
seizethecheese
> (1) Create compelling reasons for someone to not want to live in a city. For
> instance, allow one to work remotely.

A lot of folks who work remotely prefer the city since it gives them all the
amenities that an office usually would like food (restaurants), gyms, cafes
and an environment with a lot of people.

~~~
nilkn
And there are thousands of cities in the world in which they can enjoy all
those amenities.

(I edited the above quote now to reflect this.)

~~~
seiji
NYC is the only city in the world with a 24 hour subway system every day. Many
people enjoy not having a car: especially the very poor (can't afford car
anywhere), so NYC is full of very poor; and they very middle (can't afford car
in NYC), so NYC is full of very middle and everybody fights for the same
resources.

~~~
ido
It might not have 24/7 subway (i think it's 24h on the weekend and 20h during
the week), but I've been living in Berlin for 2 years and have yet to chance
upon the situation where I didn't have transit available to get back home
(neither me not my wife have a driver's license).

Having good transit is really _really_ important. But it doesn't have to be
24/7 for the vast majority of people. In the _maybe_ once per year that I need
to go somewhere in 3am on a weekday I can take the night bus or even a taxi.

~~~
seiji
Yeah, those are good times. SF sucks transit-wise because Caltrain (SF to
South Bay) stops at _midnight_. BART stops around the same time too. Heck, in
NYC many events don't even start until 10 pm.

Every evening transit trip to SF (if you live in the south bay) results in
end-of-day stress of trying to make the last train home if you don't have
overnight accommodations. Not to mention the full South Bay route takes 90
minutes (to go 40 miles!), so you leave at midnight SF and arrive at 1:30 am
San Jose.

~~~
ido
Yeah everything stopping at midnight even on the weekends would suck. I guess
because of the way you wrote it I thought the literal 24h even on weekdays was
your point which seemed pretty odd.

I've lived n Vienna and Berlin and in both the subways go till around 1am on
weekdays and 24h on weekends, iirc it's about that way in Prague too. I
thought this was the type of situation you were comparing it to.

Before they started running the subways all night on weekends in Vienna (which
I think only started maybe 5 years ago) I would often have to take the night
busses on weekend evenings, which would suck cause they only went every half
an hour.

------
Xcelerate
I've always wanted to live in San Francisco for at least a few years, but this
data (combined with the fact that my girlfriend steadfastly refuses to move
outside of the south) is slowly turning my interest towards places like
Chattanooga. Is San Francisco _really_ the only serious place for startups, or
are there other options that I might be happy with ("settle for")?

~~~
adventured
No, SF isn't the only serious place for start-ups.

NY, Seattle, Boston, Northern Virginia / DC, Los Angeles - are all excellent
start-up destinations depending on your needs.

There are second tier start-up locations as well that can be quite nice, such
as the research triangle in North Carolina or Dallas - Fort Worth. If you're
in energy, perhaps Houston (it continues to boom); if you're in biotech /
pharma, perhaps San Diego. Denver and Portland can be nice for lifestyle
purposes. And so on.

~~~
killerdhmo
Austin is probably the only place that's considered "the south" to the
previous commenter's point.

~~~
rfrank
Chatanooga has that sweet gigabit fiber though.

~~~
thechao
So does Austin. Not _my_ particular bit of Austin, but most of it.

------
7Figures2Commas
Investors who are pouring money into Bay Area startups might as well be
investing in Bay Area real estate, because real estate is ultimately where a
lot of their money is going.

As San Francisco startups like this one[1], which has an all-in cost of
$146,000/year per employee and an insane rent to revenue ratio of 15%,
demonstrate, investors are largely footing the bill for the explosion in
residential and commercial real estate costs that the boom they're funding has
helped create.

[1]
[https://news.ycombinator.com/item?id=10049808](https://news.ycombinator.com/item?id=10049808)

~~~
Balgair
Bingo! This is the real reason rents are bananas. The question is: when will
investors stop this?

Anyone with some brains can figure out Oakland, or heck, American Canyon is
just as good a place to start-up. At these rents, even Portland is looking
good. The 'community' of other entrepreneurs that SF expounds as the reason to
start-up there has it's price and its possible all the smart money is leaving
it behind. Let the other investors pay the landlords while you sell the next
big widget.

~~~
rco8786
> when will investors stop this?

when they stop making $$ from it.

~~~
7Figures2Commas
VCs are playing with OPM, so as long as they can continue to raise new funds,
they _always_ make money.

But one shouldn't assume that the angels that have flooded the market are all
making real money. Even many of the minority who have seemingly enviable
portfolios are primarily sitting on unrealized gains, and many of those have a
very sizable portion of those unrealized gains concentrated in a very small
portion of their portfolios.

Additionally, there are a lot of barriers to success as an angel even if you
are good at picking winners. From position sizes (small) to pro rata rights
(ignored or too expensive to exercise), a lot of things can conspire against
optimal returns even when you invest in good companies.

My sense is that a good deal of angel capital in the Bay Area, particularly
that which is frequently invested in party rounds for the most attractive
early-stage startups, is recycled from folks who have done well at a previous
company (or two or three) and are having fun with their monopoly money.

~~~
Balgair
This is a great comment, thank you. I would have naively just thought of IPO
and other stock mechanics as the 'big idea' many investors are running
towards. That there is a churn of the money was unknown to me. However, these
rents are siphoning off that churn at a much higher than normal rate.
Additionally, it is changing the culture of the Bay, making future start-ups
less attractive there.

------
myth_buster
Wow, this got dropped from front page pretty fast. I thought the discussion
was engaging.

Previous discussion:
[https://news.ycombinator.com/item?id=8174583](https://news.ycombinator.com/item?id=8174583)

~~~
seiji
Sometimes HN seems to have an anti-interseting-topic filter doesn't it?

~~~
myth_buster
Especially controversial topics... I think there may be a factor based on
points to comments ratio...

------
venomsnake
I don't understand. Why are there so many light colored areas in the city
where rent is half/third of Mission.

Non SF person here. Can anyone explain? With exploding demand it should have
trickled there by now ( Bayview, Excelsior)

~~~
SandersAK
SF and the bay area in general have done an astonishingly bad job of updating
mass transit to handle growth. I used to live in NY and thought the MTA was
stupid and short sighted, but since moving here, they come off as geniuses
compared to BART etc.

~~~
resu_nimda
What large cities have mass transit that is not astonishingly bad, stupid,
and/or short sighted, in your opinion? Maybe it's actually just a really hard
problem?

~~~
shard
Seoul has a pretty fantastic public transit system. Busses and subways come
every 5 to 15 minutes, are clean and fast (you better hold on tight!), and are
still expanding year after year to the few underserved areas in Seoul and to
the cities surrounded Seoul. There are digital signs giving you the time and
location of the coming vehicle, and TVs showing news and entertainment
segments. Strong cellular service so you're never without a connection. The
busses and subways do stop running around midnight to 1AM, but there is always
the choice of taking a taxi, which are also plentiful, fast, and cheap (a ride
from the south part of Seoul to the north part is only about $10).

------
paulpauper
That's why it's smart that millennials are living with their parents longer,
using the saved $ to eventually buy a home instead of making the landlord
rich. It's not immaturity - it's adaptation.

------
Animats
Firefox/Mozilla now has a new location on the Embarcadero facing the Bay
Bridge. They must be really profitable.[1] (Go to the Google Maps link below,
and take a look around.) Those deals with Hello and Pocket must be paying off
big-time!

[1]
[https://www.google.com/maps/@37.7895641,-122.3885496,3a,19y,...](https://www.google.com/maps/@37.7895641,-122.3885496,3a,19y,267.19h,93.54t/data=!3m6!1e1!3m4!1sigSMX7SmQMKmDrBG8efoYw!2e0!7i13312!8i6656)

