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The Cost of a Hot Economy in California: A Severe Housing Crisis (nytimes.com)
32 points by erickhill 150 days ago | hide | past | web | favorite | 60 comments



I always see news articles about companies building campuses and headquarters out there. Can anyone tell me why Google/Facebook/apple can't just build a residential tower for 10,000 people next to their building? It seems they get approval for everything else they build out there.

The only time I went out there it was very suburban, with plenty of room for more buildings. Seems odd that the businesses with all the money paying all the taxes can't get a city council to approve giant apartment complexes right next to their headquarters.

Anyone have the answer? Must be the only place in America where corporations don't get their way, unless they don't actually want housing for their workers.


The super short version is that for existing homeowners a big corporate campus benefits them, while housing doesn't.

If Google builds a huge office park next door, their housing value shoots through the roof. Every residential unit that gets built means more supply, which reduces their value.

People are also fiercely defensive of the "character" of their residential neighborhood. They do not care nearly as much what happens to office towers.

For a lot of people in the peninsula, nearly all their net worth is in their suburban house - it's not something they could never hope to afford in today's market. It's terrifying to imagine anything happen to it.

FWIW, Google doesn't push for this sort of thing very hard. Corporate housing generally brings the specter of "Company Towns" and all that came with it, which makes it a tough sell all around.


I actually don't believe that high rises diminish the value of SFH, in fact the opposite. As they become more rare relative to other options, their value as a status symbol increases. I believe that younger lower paid people will live in higher density and there will be more higher paid management to oversee them, who will bid on low density places.


They want to, the city and NIMBY don't allow them to.

See e.g. http://www.mercurynews.com/2017/06/23/mountain-view-slashes-...


The problem with that land is that it is trapped between 101 and the Bay with only 3 already-crowded ways in and out.


They try - in fact they just got their proposal slashed from on the order order of 10,000 units to around 1,000 for their new campus in San Jose.

Answer: NIMBYs who don't want new neighbors

In Mountain View they tried to build housing at the campus but were denied - among the stated reasons being that Google wanted to build 5000 units which is apparently close to the turnout in the entire city election. The city made the argument that Google could tell its employees how to vote


There have been some efforts: https://www.theguardian.com/technology/2017/jul/09/facebook-... However, building a few thousand apartments is hardly going to make a dent on the larger housing market. The area needs construction on a scale that large tech companies have no incentive to provide or expertise to do so.

Furthermore, attempts to get regulations changed are very hard. The people who are comfortable with the status quo are long-term residents in power, and generally don't want to bring down the value of the homes they own/ spoil the 'charm' of their neighborhoods.


Prop 13 is a major component. Property tax grows at below inflation, whereas commercial tax grows at the pace of the local economy.

So, if you zone housing, eventually the cost of servicing that housing exceeds the tax revenues from it, and there is little you can do to avoid that process. If you zone businesses, you get sales tax and similar revenue from the workers. Financially, it's best to let your neighboring municipalities build homes for your workers.

There is also a backlash from locals who see higher density housing as the core cause attributed to most local issues: traffic, crime, overtaxed city services, etc. This is mostly an incorrect perception, but it's a persistent one.

These combine to prevent zoning for housing.


The property tax seems like a likelier answer. NIMBY-ism always strikes me as a weak answer. At least in the midwest, if one city won't build it the city next door will. Seems odd (and in my view, unlikely) that every single city bands together and can resits the market forces of the most powerful companies on the face of the planet.

I'd have thought a municipality would have cracked by now and let everyone build huge residential buildings and used that population growth to fund everything else. Seems every weird no municipality isn't building houses like crazy.


  Property tax grows at below inflation
Property tax can go up 2% per year. Inflation has been below that for many years.


On the peninsula, property taxes for housing do not offset the school and other costs for the residents that live there. Therefore, no town wants more housing. We have to allow some projects because the state has mandated it (local authority comes from the state, so our hands are somewhat tied.)

Until with fix prop 13, residential development economically hurts peninsula city budgets. The taxes towns are able to levy against new construction don't make up for it.


1. Zoning

2. Corporate housing that you need to move out of as soon as you leave your job sounds pretty dystopian.


The zoning is what I'm wondering about. In most of the rest of the country large corporations make the rules. It seems the taxpayers in Silicon valley are the tech companies, and they want housing. So who is voting against changing the zoning? It seemed like miles and miles of corporate offices out there when I visited. Just build a giant apartment complex on top.

And I wasn't actually talking about corporate housing, just giant residential buildings. But even then, company towns still exist, why haven't Google and Apple built them?


>large corporations make the rules

I think you've been reading too much political chatter. It's not that straightforward.

>So who is voting against changing the zoning?

The actual voters.

>company towns still exist

Well, they mostly exist in the sense that some modest-sized cities/towns mostly have a single employer for a fairly large radius. That isn't true in any meaningful way in Silicon Valley.


In everywhere I've lived, the pressure to build has usually won out because the neighboring municipality will let someone build if the first one doesn't. So urbanism slowly creeps in. seems weird that it never has in 20 years out there.


I suspect a lot has to do with what draws many people to California in the first place. (In addition to jobs, which are more recent in many cases.) Those reasons didn't include remolding the Bay Area in the image on New York City and New Jersey.


"It seems the taxpayers in Silicon valley are the tech companies" - Most of the taxpayers are also homeowners who don't want to see their property values fall due to an influx of new affordable housing.


Unless you're building SRO housing, it would be very hard to fit 10,000 people in a single "tower".

Le Lignon near Geneva, Switzerland, is one of the largest apartment complexes in the world by square footage, and it only houses ~6,500 people with ~900k sq. m of floor space across 28 hectares of land.

So you'd need something on the scale of Stuyvesant Town-Peter Cooper Village in Manhattan, which houses 25,000 people on 32 hectares. Maybe Google could build a Stuytown or two of their own at Moffett Field (400 hectares).


Stuy town is actually what I was thinking of. Or at least mixed use, with office/commercial on the bottom and a residential tower on top. Everyone else seems to do it, it's weird to see purely office buildings still being built without residential up top.


1. Commute

2. Cost of living

3. Income potential

Pick two. Like everyone else, everyone wants everything. There's no place on Earth that has a short commute, low cost of living and amazing income potential. Compromise is the name of the game. Public transportation can help, but even still you'll have a commute. The only solace there is that you can do other things while you commute.

It'll be very interesting if commutes become on average 1.5+ hours each way and employers count time spent working while commuting.


I think remote work will become much more prevalent especially as our economy continues to move away from making physical things. i dont see employers counting time on a crowded train or bus full of distractions amytime soon. People who live outside the big city are much more likely to have a place in their home that can serve as a distraction free office.

There are so many benefits to remote work for humanity I don't know why it isn't the norm already. No commuting means less CO2 emissions, saner people, more flexibility, arguably more productivity, and the opportunity for the company to hure from a much larger and diverse talent pool.

Rmote work will soon be a competitive advantage.


I don't see any theoretical reason to only choose two, and reject it. We can choose three. Building more housing to lower the cost of living probably has very little to do with the bay area's tech income potential.


New York, the only example I can think of, has plentiful housing and it's still more expensive (yes, all boroughs) than most of the country. Will more housing help? Sure. The question really is whether or not increasing housing supply will or will not increase demand more than the newly available supply.

Why not just move to another area? If there's something uniquely good about the Bay Area perhaps it's that same thing that makes the incumbents not want to let more people in. It's kind of a geopolitical problem.


I do not think NYC is a great example as it is also supply constrained due to zoning. NYC is rezoning to allow more supply, unlike SF, due to its density friendly culture.

As a bay area resident I look around and I see incredibly low density in SF, and most other bay area municipalities are extended suburbs. We do not have to build NYC density to meet supply as building Paris-style 5-6 story buildings on a subset of the properties would largely meet the demand.


Look at Seattle, it has built a lot more than SF in response to the demand and as a result, the price of housing has not gone up nearly as much.

So yes, increasing supply does lower price.


Huh? Seattle's median home price has doubled from five years ago. [1]

[1] http://www.seattletimes.com/business/real-estate/seattle-hom...


Haven't prices in Seattle been going up at a faster rate then SF during the past 5 years?



People will crowd into an area until the misery and housing price equalize out the earning potential. Only way around it is to limit migration or to have a hard cap on rent (which of course causes its own chaos).


This is a very Malthusian attitude that hasn't really been borne out by the data. Many metro areas with similar earnings potential to SF do not experience nearly the level of crowding and rent gouging that we have here.


Which ones?

- Boston? Super expensive.

- LA? Super expensive.

- Seattle? Super expensive.

- New York? Super expensive.

Etc. You can just settle for a long commute to mitigate the problem, but then it comes back to pick 2.


All of those places are certainly expensive, but for instance in Seattle, 1BRs rent for a bit over half what they rent in SF. There's a ton of wiggle room in "expensive".


Seattle developer pay tops out at maybe 60-70% of bay area salary.


Instead join an up and coming city and have rent (and cost of living) be the least of your worries. I pay 1$ per square foot and have a 15 minute commute. How much would you need to earn to have that same commute (subtracting housing costs) in SF?


Here is Robert Shiller on these issues:

https://www.project-syndicate.org/commentary/real-estate-pri...

and the demographia survey he refers to:

http://www.demographia.com/dhi.pdf

You can get all three of these things. Become a lawyer or doctor and move to Cleveland, buy a house near your work and you have it. Or Washington DC or Berlin or Canberra.

Restrictions on supply in some places as in the Bay Area is what is stopping all three being chosen.

If more apartments were allowed then affordability would rise.


This isn't a three-way tradeoff, though. Cost of living and income directly interact; where one is high, so is the other. Commute is independent of both in a strict sense, or in a better sense it's just one component of "cost of living".


What's the alternative to San Diego or San Francisco if you are in Pharma? Boston? You really need to live in a hub city, nowadays everyone changes employers every two years.

Wouldn't it be nice of we could go back to the old times, and there was a choice between Philly, the New Jersey pharma cluster, Kodak in Rochester, Solvay in Syracuse, Dow in Midland, MI, Upjohn in Kalamazoo and many more?


>nowadays everyone changes employers every two years

They don't but, yes, there's a lot of clustering for various industries and industry sub-segments. I expect Kendall Square in Cambridge is bigger than most other pharma centers these days though.


I am amazed at the scale of the RV housing in industrial areas of Oakland. I walked several miles yesterday in southeast Oakland and saw up to five RVs on a block, obviously housing. As the article says, this is not a question of a few very poor people having trouble finding housing in few very expensive coastal areas. The Bay Area town I live in has a median household income of $100K. The payment on a 3-bedroom condo or 2-bedroom home is now just about $100K as well. And my area is a solid 1.5 hours from San Francisco.


This is one of those things the municipalities need to stop doing, promptly. If this becomes an established part of the housing market, it will acquire a constituency and it will be much harder to stop later. Just look at what a political mess decades of winking at illegal immigration from Mexico caused.


This is going to be a massive thread I predict. There's a big world out there. If you can't afford California, or you don't want a 2 hour commute with a $180,000 salary, then DO NOT LIVE THERE. It's that simple. Are you skilled, and you can't afford or don't want to afford to live in California? Give up the damn weather and move somewhere else. I don't even care if it's because the laws cause unaffordable housing, just don't live there. Besides, if you drop the housing prices so much that anybody can afford to live in California, how great do you think it's going to be there? The issue with a place like California is that there are almost always going to be more people that want to live there, than there is space. If you build more/better/affordable housing, more people will move there, then what?


> If you can't afford California, or you don't want a 2 hour commute with a $180,000 salary, then DO NOT LIVE THERE. It's that simple.

This is great advice, it really is that simple. You have very little voice in California but you have plenty of exit.

> The issue with a place like California is that there are almost always going to be more people that want to live there, than there is space.

This doesn't seem quite as obviously true to me. While there's lots of people who want to live in California, along with all it's other bountiful resources California has a lot of space. We could, in theory, house many more millions of people before we really started hitting true space limits. It's not infinite of course, but the resources are very underutilized right now. Or at least they appear to be to my eyes.


I mean, if developers plan right, you could add people in a more efficient manner, but good luck bulldozing the suburbs and getting rid of cars. Those are the main issues. It's not so much that I don't believe it is possible, I don't think there is the will for the people of California to give up their cars, and their suburbs for Tokyo-style living.

I strongly believe that California needs far fewer people, and more efficient/better housing. I don't think more people + more housing is a sustainable solution.

Of course this isn't the popular narrative, but I think it's true.


California has been popular for various reasons for a long time. But it's really since the recovery from dot-bomb that things have gotten out of control.

Zoning etc. is part of the issue. But by all accounts, the (not so great) public transit--especially in SF itself--is pretty near capacity as, obviously are the highways. Can this capacity be increased over the timeframe of a couple decades? Probably. But there's nothing in the 5-10 year horizon that's going to make a [EDIT: not so big] difference other than a combination of people choosing to not live there, incremental housing construction, incremental public transit improvements, and incremental increases in congestion.


I'm hopeful that autonomous buses make this extra capacity possible. The main problems are unpredictable/long waits and overcrowding; the proposals I've seen involve smaller (<20 passenger) buses that run much more frequently and can fit more people into standing-room space because automated drivers have better planned acceleration and longer braking. It's so much cheaper and easier to add hundreds of small buses to the peninsula's streets than to build rail or subways.

Another crazy low-footprint idea: connecting our city of hills with an aerial gondola network. https://www.fastcodesign.com/1671214/a-mass-transit-proposal...


Honestly? Sounds like magical thinking about how self-driving will make things possible that aren't with a relatively low-paid human driver today. And probably wouldn't be available for a few decades anyway. Small buses are available in a lot of countries today.


Unionized MUNI drivers make three times the SF minimum wage [0] before overtime so they're not "low-paid" by any means, but yes if money were unlimited we could achieve a smaller-but-more-numerous bus strategy... the ride will just be really jerky and require more seats at lower capacity, in addition to costing a prohibitive amount of money.

And "a few decades" seems extremely conservative when we're already testing driverless buses in San Francisco today [1]

[0] https://missionlocal.org/2014/06/is-32-an-hour-too-much-for-...

[1] http://www.reuters.com/article/us-california-autonomous-bus-...


Well maybe Baby boomers cashing out.. maybe.


This is a common sentiment. How far does this concept go though? If a neighborhood gets too expensive, you can move without much trouble. The whole city and commuting area gets too expensive? Move again, but now find new company/personal relationships. What about all cities for <industry> get too expensive. Change careers maybe?

At the very least the supply of housing should expand until it's proportionate to the amount of office space (jobs) in the area (although apparently office space is more lucrative for municipalities than housing, so we get more of it).

It isn't unique to California either, most cities in the US with good job markets (NYC, Boston, Washington DC, LA, etc) have seen housing prices shoot up.

I'm not sure it's true that building more housing has no effect on prices, Seattle has had a lot more housing built and apparently they haven't had quite as extreme price increases, although they also have a thriving tech industry. Raleigh/Durham has been growing incredibly fast but adding a lot of supply too. And more people moving in surely must lower the price at least where they are moving from, so if several places build prices can't go up everywhere.

It might be late / politically difficult to address the issue in California, but the escalation of housing costs is such a common problem that the solution can't always be "move away from <job center>".

Of course how to manage growth without excessively burdening existing residents or communities is another matter, but hopefully not impossible? Development doesn't have to go everywhere, but surely it should go somewhere? At least around transit hubs would make sense.


I think this is an incredibly fatalistic attitude. California is also great for many reasons beyond "great weather". Lots of people want to live here for family, emotional, or safety reasons. I've met so many gay and transgender people (tech workers and otherwise) who have told me they just don't feel safe where they're from.


Excluding some areas/situations, I'd just say grow thicker skin. There isn't anything particularly special about California with respect to LGBTQ and it certainly isn't a good justification for living there. You can be gay in Pittsburgh or Chicago or D.C. just as well as you can in Portland or L.A.. There are definitely family and emotional considerations and that's fair, obviously there are reasons other than the weather to live in California - that wasn't my point, rather, my point was that a lot of people want to live there and you can't expect to just get this somehow incredibly affordable cost of living you'd get in Kansas or something in California. If you could, we would ALL be living there.

People need to realize that location and where you live can be a luxury, and you have to pay proportionally for that luxury. I can't go move to Boulder or something on a $30,000/year salary and expect to ski year round then complain that I can't afford housing. The world simply does not, and should not work that way.


While I generally support the legislation discussed in this article, I wish the YIMBY people would stop talking about this in such simplistic terms. In some parts of California (e.g. San Francisco's eastern, urbanized third), no amount of building will ever satisfy the need, because all you can build on expensive land is "luxury" housing, and when those units don't sell/rent, developers will just stop building, because the unit economics don't work out.

Some places definitely need to build more housing -- see, for example, the western 2/3rds of San Francisco, or the cutesy little suburban enclaves of Silicon Valley -- but this won't help until transit allows people to commute from those neighborhoods to their jobs. So we should also be saying "YIMBY" to transit infrastructure and reducing/eliminating the broken tax incentives that are helping to create the problem in the first place (like the ill-conceived Mid-Market tax incentives, which have replaced SROs with tech offices, thus making the homelessness problem worse.)


I am a YIMBY and we consistently say all those things. I also reject the notion that the eastern district is "built out" or that developers will stop when things don't "pencil out".

What pencils or doesn't is a direct consequence of the regulation and tax burden we place on construction, and there's probably an order of magnitude of levers we've yet to pull.


I also reject the notion that the eastern district is "built out" or that developers will stop when things don't "pencil out".

Reject what you like, but you're wrong. Investors don't finance real-estate projects where the per-square-foot returns don't justify the expense.

The expense, in the case of eastern SF, is >80% land and materials. It's been documented, extensively, by groups like SPUR. Taxes and regulation are less than 20% of the cost of construction in San Francisco. It's simply not the limiting factor [1]

[1] http://www.spur.org/publications/urbanist-article/2014-02-11...

(You'll note that this link shows $48,000 of a $469,000 unit -- or about 10% of the cost -- is attributable to permits and regulatory fees. The cost of land and labor and materials amounts for >75% of the cost.

When you read people complaining about "regulatory" costs in SF, it's really a political dog-whistle to the BMR housing subsidy, which developers hate. Most self-professed "YIMBYs" I talk to do not know this.)


Sure, that's fine. The current level of what investors have demonstrated they're willing to build is by far below the norm for even SOMA. There is still a very significant amount of surface parking or 1-3 story developments in SOMA that could potentially become a very large amount of housing.


"The current level of what investors have demonstrated they're willing to build is by far below the norm for even SOMA. There is still a very significant amount of surface parking or 1-3 story developments in SOMA that could potentially become a very large amount of housing."

That's like saying "there's a very significant amount of land in America that could become a very large amount of housing.".

Sure it could. Except, someone owns the land and wants you to pay for it (trouble, that), or it's being used for something else that has a higher value, or it just isn't practical to build there for whatever reason. Or maybe the owner doesn't want to rebuild. In any case, be more specific: I live in SOMA, and I don't know of many vacant lots around here that aren't already slated for development. These sorts of stories are usually apocryphal.

This is another part of the "YIMBY" narrative that I dislike. You don't get to point at every building you think could be taller and say "I think that building could be taller, therefore, SF isn't building enough." That's not how it works.


You could build in the Bay area for 20 years and not lose money.


The bay area is a lot bigger than SF. As I said in my original post, I think a lot of bay area communities need to get with the program.


Here's a question: why don't more companies locate in the East Bay? There's a bigtime 'follow the herd' mentality when it comes to where VCs are allowing companies to make their headquarters. You don't need to have an office in Mountain View or Palo Alto. Many of your employees will live in places like Fremont, Pleasanton and Walnut Creek. Why not start a company there instead?


I would love to see a state pass an amendment removing all density restrictions on residential zoning and making all commercial zoning mixed use.




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