
Silicon Valley homes now out of reach even for big spenders - prostoalex
http://www.mercurynews.com/2017/12/14/housing-crunch-hits-new-extreme-even-big-spenders-cant-find-homes/
======
kcorbitt
In a sane world, the Bay Area would have the highest new-construction numbers
of any metro area in the USA, and probably the developed world. Unfortunately,
the market is so distorted that I'm only aware of one potential large-scale
buildout in the area (the Brisbane Baylands development -- and even that has a
50/50 shot of being successfully blocked). Such pointlessly wasted potential.
:(

~~~
gehwartzen
Or some of the tech companies could be distributed over a larger number of
cities. It seems ironic to me that tech companies, of all industries, are
placing such a huge premium on physical proximity.

~~~
robbyking
I'm a longtime Bay Area software engineer, and the problem is it's scary to
move to a town that only has a couple tech companies. I'd love to live
someplace smaller, but if I find -- and lose -- a job in a small town, I'm out
of other options. Here I have recruiters knocking down my door.

~~~
PopsiclePete
Man, it's not like there's 1000 software companies in the Bay Area and 12 in
the rest of the country combined. I have a hard time believing you'd be out of
a job for _too_ long in Austin or Denver/Boulder or NYC or DC or Seattle?

~~~
ashwinaj
As someone who was present in the so called "Silicon hills" (Austin, TX) and
"Telecom corridor" (Dallas, TX) it was hard to find a tech job during the 2008
recession.

These places look great from the outside (cheap, plenty of space,
infrastructure etc.), but the job prospects during a downturn are radically
different as compared to the Bay Area (I'm only talking about 2008, not the
dotcom bubble).

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chiph
Back during the .com era, I got bored one day and looked up the cheapest house
for sale in Cupertino. $300k got you what would have been a crack house in the
RTP area - run down, no lot, chain-link fence to keep people out.

I just repeated this experiment - $500k for a 1-acre lot with a shack on it,
or $925k for a 2 bedroom condo. Those prices are insane. Yet every time I
think they're unsupportable - they go higher.

~~~
nojvek
Also don't discount the fact the USD went through some serious deflation. In
the name of jump starting the economy, our govt literally made money out of
thin air and made it rain.

~~~
the_gastropod
I'm going to assume you've read a bit about crypto currencies, and are now
confident in their superiority to fiat currencies. I recommend spending some
time learning about basic macroeconomics before drawing too many conclusions
about the government "literally making money out of thin air". You can get the
kindle version of Keynes' General Theory of Employment, Interest, and Money
for $1 [0] or pick it up from your local library for free!

[0] [https://www.amazon.com/General-Theory-Employment-Interest-
Il...](https://www.amazon.com/General-Theory-Employment-Interest-Illustrated-
ebook/dp/B018055I7Q/)

~~~
etr-strike
Inflation is responsible for the wage slavery we find ourselves in today.
Those peddling inflation and control of the money supply as a necessary
component of modern economics are peddling snake oil. Price discovery is hard
enough without an invisible handle manipulating the units you’re trying to
measure value in.

------
rat_1234
The share of the wealth creation in Silicon Valley that has been captured by
property owners is outrageous.

~~~
SapphireSun
From yesterday: [http://highline.huffingtonpost.com/articles/en/poor-
millenni...](http://highline.huffingtonpost.com/articles/en/poor-millennials/)

~~~
jimbokun
God, 21st century America is a Dickensian Hellscape.

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ilaksh
There should be another option besides McMansion, townhouse, condo or condo
hi-rise. That is small two-story homes. I say split the lots up into two or
three pieces.

~~~
harryh
In many cases this idea is illegal under local zoning laws which
is....unfortunate.

~~~
joering2
same goes with going underground. Nothing stops us from having -100 stores
underground in NYC or LA or SF. We know how to lay water pipes, AC, deliver
air, supplies, create emergency plans, etc... the only problem --- zoning laws
:(

edit: was referring to places where you cannot build up anymore, such as sky
scrapers in NYC

~~~
cgb223
Isn't there some kind of law against a living space without access to windows?

I'm all for the idea, but I don't get claustrophobic very easy

~~~
icebraining
Yes, in the NYC administrative code: _Lighting Requirements: All bedrooms must
have at least one window that opens to a street, yard, or court on the same
lot. The window may also open to a balcony that opens on a street, yard, or
court. The total area of the windows in the room must at least be one-tenth
the floor area of the room. All required windows must be at least twelve
square feet in area._

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cgb223
What are the factors preventing real estate developers from buying up land and
building larger complexes to meet the demand?

Seems like an opportunity to make a lot of money

~~~
azernik
Not sure how much of this primer on Bay Area politics you need, but here we
go:

Mostly local governmental opposition. Local towns want businesses (tax
revenue!) but not residential development (costly services!). Local homeowners
who vote for said town governments also have an interest in higher home
prices.

What makes this possible for them is the lengthy public hearing process
involved, allowing local activists to delay construction for years for BS
reasons; and the discretion given to elected officials not just to make
policy, but also to override it.

In recent years, Bay Area activists (under the slogan of YIMBY - "Yes In My
Backyard") have been successful in both pushing housing development through
direct local advocacy (especially effective in places with lots of voting
renters, like SF proper), and in getting the state to exert its power more
over local government. The background to _this_ being that the state has since
1982 had a law trying to combat this phenomenon - the Housing Accountability
Act. It requires cities to publish city development plans for public
inspection, requires those zoning policies to meet certain requirements in
terms of housing quantity, and then to actually make zoning decisions that
comply with those policies. However, private individuals or organizations need
to bring suits against cities to make it effective, because the US is crazy
and prefers lawsuits to actually hiring professional regulators. So activists
have funded lawsuits (see the more recent entries at
[https://en.wikipedia.org/wiki/California_Housing_Accountabil...](https://en.wikipedia.org/wiki/California_Housing_Accountability_Act#Litigation_involving_the_HAA))
against cities that have obstructed development. They also got the CA state
legislature to strengthen the HAA this year, putting more of the burden of
proof on the cities to show their justification for development denials,
making cities pay attorney's fees when they lose a case, and allowing judges
to fine cities for violations.

~~~
wahern
The fiasco that was the appointment of the acting director of the Consumer
Financial Protection Bureau (CFPB) and the absurd ping-pong policies of the
Federal Labor Bureau (FLB), FCC, and (presumably) the CFPB exemplify why in
the United States civil suits are the better enforcement mechanism, especially
in the modern era. They typically lead to more stable regulatory policies.

Heck, even the behavior of zoning boards exemplifies this. The civil actions
are being used by YIMBYs precisely because the regulators--the zoning board--
are neither obeying the spirit nor letter of the law, having become puppets of
the elected officials or worse--wagging the dog.

A system of centralized regulators only works when you have a strong and
independent technocratic bureaucracy. Because of the extreme divisiveness of
modern politics, especially at the federal level where regulatory agencies
have become turf for epic policy battles, that simply doesn't exist in the
U.S. Indeed, the use of civil actions for enforcement is often chosen
precisely to try to deflect criticism aimed at proponents of a regulatory
framework, and protect the framework from interference by opponents. This is
common at both the federal and state levels, and used by both parties.

Sure, civil actions are more costly. But much like democracy you pay a price
for a certain amount of stability. Because of the size, diversity, and
peculiar politics of the U.S., we often must resort to such approaches where,
e.g., Norway, Japan or the EU would not.

~~~
azernik
You create a centralized bureaucracy by hiring bureaucrats and giving them the
final say. The ping-pong policies of the FCC, FLB, and shortly the CFPB result
from legislatures insisting on a system where political appointees are the
ones who make the final vote on regulatory decisions. This results in a
situation like the current FCC, where votes are party-line and regulatory
action depends not on the written policies but on who won the most recent
election.

Similarly with zoning boards and the YIMBY suits - local zoning policies were
made by elected city councils, and the YIMBY suits and state legislation are
trying to force cities to pass legislation and then apply those rules without
political interference.

~~~
wahern

      > You create a centralized bureaucracy by hiring bureaucrats and giving them the final say. 
    

Americans don't like doing that, especially conservative Americans for whom
"centralized bureaucracy" is literally synonymous with Communism. In many
states even judges and sheriffs are elected. My point is, if you want to
shield the regulation from politics your best bet (although by no means
guaranteed) is a framework that creates a private right of action.

    
    
      > Similarly with zoning boards and the YIMBY suits
    

If zoning boards mechanically applied zoning ordinances like they're supposed
to, things wouldn't be nearly as problematic as they are now. Ask any
developer; they'd be thrilled if they only had to contend with the letter of
the zoning ordinances.

FWIW, in the business world private rights of action are usually preferred
over a centralized regulator, at least if they have to choose their poison.
Centralized regulators usually _prohibit_ certain business practices
prophylactically long before any substantial harm arises. Whereas with private
rights of action you get to do whatever you want, whenever you want, until you
_actually_ harm someone.

Historically this is one reason why some economists argue the United States
and other Common Law jurisdictions that relied on civil actions were more
innovative. Similarly, such jurisdictions were long considered more business
friendly as regulatory policies were more predictable. A central regulator can
decide to block your business on a whim, whereas with a civil action there has
to be _actual_ harm as well as refusal to settle damages outside of court.
Both can involve a lot of red tape and a long paper trail. The important
distinctions are 1) whether the government steps in before or after
substantial harm has occurred, and 2) how closely penalties reflect actual
harm.

Moreover, the basic issue is how reliably you can price risk into your
business plan. A business can reasonably plan expenses for civil suits. A
regulator can shut you down, and all the money in the world won't stop it.

But other Common Law jurisdictions have slowly shifted enforcement to
Continental-style centralized regulators. The U.S. has too, but it's been more
chaotic, inconsistent, and (predictably) much more corrupted by politics.
There are many reasons for this, but in any event there's no reason to think
that Americans can do centralized bureaucracy any better than we do now. It's
important to recognize and accept built-in political and societal constraints
when engineering regulatory frameworks if you want to maximum benefit and
minimize harm.

~~~
azernik
> The U.S. has too, but it's been more chaotic, inconsistent, and
> (predictably) much more corrupted by politics. There are many reasons for
> this, but in any event there's no reason to think that Americans can do
> centralized bureaucracy any better than we do now.

Agreed. Hence my original "because the US is crazy".

------
gnicholas
I wonder how the self-driving car trend will change things in the Bay Area.
Right now, there's a tradeoff between paying $2M+ for a house and having a 2
hr+ commute. When your car can drive you to work, the commute becomes much
less annoying. If people can save $1.3M on a house in exchange for a long, but
self-driven, commute, the allure of living right in SV will be significantly
lower.

~~~
goialoq
Really, you'd enjoy sitting in your car for 2+ hours every weekday? That's
incredibly unhealthy.

~~~
gnicholas
How is this any different from a 2 hr train commute, which many people endure?
Not saying it's great, but if it saves over $1M in purchase price (plus
another $10k/yr in property tax), I think some people would take the bargain.

------
legulere
“The biggest single factor that determines pricing or value of a home is
supply and demand,”

It's a bit different from the traditional supply and demand: There are two
kinds of demand: One is the demand for actually using housing, which is not
affected by supply and price. The other is the demand as a financial
instrument, which even increases with rising prices.

------
sputknick
I know there is a class of people in SV unaffected by this directly, but
eventually it MUST start to affect them in that they will be unable to get
employees to come to the area? I guess this is probably a self correcting
problem with more people/companies going to Seattle, RTP, Austin, Boston and
elsewhere.

~~~
sytelus
The best way to cut success probability of your startup in to half is by
basing it in SV. Startups don’t have truckload money to pay for COL in SV.
They can’t attract talent other than big shots who are already multi-
millionaires (and likely won’t code). People from other place would not move
to join them because base salary won’t even pay for their rent (and stock
options stays paper money for long time). It’s utterly foolish to base your
startup in SV. Come here for hiring but keep your base out of SV, probably in
Austin, Seattle, Florida or may be Southern CA.

------
sloxy
I find it beyond belief that local homeowners are being so short sighted. Do
they not worry what their children/grandchildren are going to do for
accommodation when they are property hunting? Or is their assumption that
screw them, that's their problem?

~~~
pwinnski
As with most issues, what does the future have to do with _today_?

Most people don't want to take the risk of a huge hit on their property value
_today_ in exchange for a chance at avoiding crisis some day in the future.
Ideally, some other chumps would take a huge hit on _their_ property values
for the future, and mine would remain high.

I don't actually live in SV, but that sort of thinking is everywhere.

------
PopsiclePete
Fuck the Bay Area. Just...fuck it. There _are_ other well-paying jobs in nice
parts of the country where you can still live like a human being and not spend
4/5 of your income on rent or 2 hours a day in traffic.

Just boycott the whole damn mess and let the _companies_ figure out that they
have to _stop_ hiring and expand to other parts in the country.

America _cannot_ do city planning to save its life. Hasn't been able to since
the 1920's. It's all single-story homes and strip malls and highways and that
shit doesn't scale past a point that most other industrialized societies laugh
at, but we just _suck_ at it here and quality of life goes to shit
immediately.

Just accept it, there's no easy solution, and move somewhere else. Even NYC is
better at this point. DC are has a shit-ton of jobs, so does Texas, so does
Washington, so does Colorado.

------
johan_larson
I'm a developer well away from Silicon Valley, so when I saw this story I
laughed. Then I remembered my most recent paycheck, and I cried.

------
junkscience2017
many homeowners are electing to retain ownership of their home but rent it
out. this has reduced the inventory available for purchase. many homes on my
street in Los Gatos have become rentals. when my new neighbors (renters) tell
me their monthly rent, my jaw drops.

~~~
fossuser
If you follow homes on Zillow you'll see small two bedroom houses get bought
for 1.2-1.5 million and then immediately show up as rentable for $5500/month.

If you actually live here and want to buy it's very difficult and extremely
risky. I don't mind living with roommates, but if you're someone who wants to
have a family it's probably not worth it.

I share a 3 bedroom with three other roommates (four total since there's one
couple) and the total rent is $6150 (which is a pretty good deal).

I wish there was some hefty tax on people buying houses just to rent them that
don't actually live here.

~~~
icebraining
_I wish there was some hefty tax on people buying houses just to rent them
that don 't actually live here._

So, you want to pay quite a bit more on your rent?

I don't get the aversion to rentals. Not everyone wants to purchase a house
everywhere they might live.

~~~
fossuser
Maybe some other way to not incentivize rich people from far away buying
houses to rent which drives the entire market (and rents) up?

It's not an aversion to rentals (I don't mind renting) - it's more an aversion
to burning large amounts of money on extremely high rents even when I plan to
stay somewhere for a long time.

------
bobosha
what is the situation in east bay Oakland or thereabouts? or perhaps Marin
county? are they just as insane?

~~~
stmfreak
Yes. But proportionately less as the commute worsens.

