Living in a Fool’s Paradise

http://www.boomcalifornia.com/2014/06/living-in-a-fools-paradise/

by Mz • 12 years ago

186 148 12 years ago

Mz• 12 years ago

Excerpt:

To fully understand what’s happening here, let’s zoom out and take in the wider picture. San Francisco is a relatively small part of a much larger nine-county metropolitan area of over seven million people. Within this area, governance is fragmented at the county and city levels and it is served by a slew of separate transportation agencies, including six separate but overlapping bus agencies and four regional rail or light rail agencies. There are three major airports, run by separate agencies, and while regional housing policy is supposed to mandate that all municipalities provide their respective shares of housing demand, based on employment patterns, this is often undermined at the local level. Public policy is often not coordinated in any meaningful way at the regional level.

greggman• 12 years ago

There are at least 10 separate train companies running 40+ lines in Tokyo and yet that seems to work for them. JR, Tokyu, Seibu, Eidan, Toei, Odakyu, Keio, Tobu, ... I'm too lazy to look them all up. There are probably as many bus companies as well.

On top of that in Tokyo there are 23 wards each with it's own laws, taxes, etc.

What's special about California? Why does it work in Tokyo with 25 million people (or maybe it doesn't?) and why doesn't it work in the bay area with only 9 million?

Plasmoid2• 12 years ago

I would argue California has a huge Somebody Else's Problem field.

Much of California public services are provided by local taxes. I'm not sure about Japan, but if it's anything like Canada then much of it provided at the state or federal level. Add in things like Prop 13, "Pay for government?! That's Somebody Else's Problem", and you end up with huge incentives to externalize your costs.

Schools are cheap if all your workers live somewhere else. Low-income assistance is easy if the cheapest place to live is $2000/month for a room-share. Most of the local legislators are home owners and decreasing costs by increasing supply will directly hurt them and their paper gains.

tsax• 12 years ago

You must be a neoliberal, Koch-funded corporate stooge, amirite? Everyone knows private companies can't run essential services.

WildUtah2• 12 years ago

The counties and wards of Tokyo don't have the power to impose discretionary zoning on landowners. In fact, they don't have the power to impose any of the kinds of abusive and harmful zoning and parking requirements that are universal in the Bay Area. [0]

Japanese zoning and urban development policy are set by the central national government. That policy is considered the gold standard for simplicity and promoting quality development by planners everywhere in the developed world.

If the quality and honesty of government urban planning that Japan has could be transplanted, life in the Bay Area would improve immensely. No amount of land scarcity or Google shuttles or rising demand or offshore Chinese corrupt officials parking money or anything else would be able to make things unaffordable if local governments were good, honest, and effective. But quality government is simply not possible with the current politics of California.

[0] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html

xorcist4• 12 years ago

Tokyo is not comparable to anything else, really. It works because everybody values that things work out for society. In that environment dissent such as NIMBY is indeed troublesome but never blocking.

If one local wards would take decisions to enrich itself to the cost of others the system would break down. It wouldn't last a day in California.

That said, there are some problems there too, such as the aforementioned quintillion public transport lines. (Source: a few friends who moved there)

sytelus4• 12 years ago

Who says it works for Tokyo? It's one of the most miserable cities in the world as far as housing is concerned. It's so bad there that they have to start opening new types of hotels for couples to have sex because most couples are forced to live in shared tiny apartments. They have even pushers to pack as many people in trains as possible.

eli_gottlieb• 12 years ago

Seven million people in a nine-county metropolitan area isn't very metropolitan at all. The Bay Area's fundamental problem is that it wants to combine the business growth and jobs of a major urban center with the countryside luxury of exurbia -- and you can't.

dennisgorelik• 12 years ago

Dallas/Fort Worth metro is doing exactly that: combining the business growth and jobs of a major urban center with the countryside luxury of exurbia.

mturmon2• 12 years ago

Boom is a small, high quality journal put out by UC Press. The whole issue of Boom this quarter is devoted to the San Francisco tech influx, and it is excellent (http://www.boomcalifornia.com/2014/06/summer-2014/)

They have articles from both pro-growth and anti-growth people, including Rebecca Solnit, whose piece on Google buses in the February LRB really touched a nerve.

mturmon2• 12 years ago

I submitted the Rebecca Solnit interview in the same issue a few days ago here:

https://news.ycombinator.com/item?id=7957573

Solnit is of course anti-development, whereas the editorial stance of the issue is generally pro-development.

michaelochurch5• 12 years ago

The "Manhattanization" argument always struck me as odd. How is a mess of ugly, uncomfortable five-story buildings (at ridiculous prices) superior to an 80-story tower of modern housing? Sure, the tower is more prominent, but it frees up space for parks and makes housing cheaper. These people should either have the courage to say, "We're trying to keep housing costs artificially high and rob people" or get out of the fucking discussion.

Manhattan is expensive, but relative to the local job market, it's cheap. It has its problems, but it's relatively smartly designed. San Francisco is expensive, relative to the job market. Even in California, it's almost impossible to crack $175,000 doing real work, and every corrupt official in Asia has bought housing in SF and the Valley, driving prices into the millions.

California seems to insist that it is building the future, and yet it lives so much in the past.

maxerickson3• 12 years ago

It would be interesting if you would post roughly how many corrupt officials you believe there are in Asia and approximately how many housing units they each purchase.

eru5• 12 years ago

Looks like a figure of speech to me.

dictum• 12 years ago

I believe he's referring to this: https://news.ycombinator.com/item?id=7963678

michaelochurch5• 12 years ago

It's well-known that Russian and Arab billionaires keep Manhattan real estate (usually bought through shadowy shell companies) so that, if their people ever revolt and bring them to justice, they have a place to hide. There's so much money laundering it's sickening: http://nymag.com/news/features/foreigners-hiding-money-new-y...

Generally, the corrupt scum of Europe and Africa and the Americas focus on New York while the corrupt scum of Asia (where half the world's people live) tend to use California. I'm not sure if that's because geographical proximity matters, or if it's something else.

In addition to the purchase of safety housing by corrupt foreign officials, much bigger is the secondary market in U.S. real estate that exists because of this purchase pattern. The fact that every overseas scumbag wants a U.S. house (preferably a high-value one, because if your assets are frozen and have to change your identity, you may have to borrow against the house for 3 years while your fixers buy you a resume and get you able to work legit) in case shit goes seriously wrong, U.S. real estate has become a store of value.

I don't know the numbers. I don't think anyone does, but as for how much housing is being bought by foreign scumbags (or to sell to them, but speculators betting on scumbaggery) it's probably on the order of 1-10% on the high end, and possibly much higher (10-50%) on the ultra-high ($5M+) end. That might not seem like a big deal, but there are two things to consider. First is the push-down effect. Billionaires buying penthouses push modest millionaires into 3BRs and upper-middle-class families into 1BRs and the middle- and working classes out. It propagates down the socioeconomic chain, making everyone pay higher prices.

The second issue is extreme price inelasticity. 1% supply destruction doesn't increase prices by 1%, as one might hope or expect. It can cause them to double.

seanmcdirmid3• 12 years ago

The Chinese real estate market in general is very depressing: high prices, lots of uncertainty, no good bargains without buko guangxi. The smart money in China looks to a more stable/growing market to invest in, and the USA is very accessible. Its not necessarily all gray money (or even black money) feeding the buying, but there is probably some of that.

eru5• 12 years ago

Another good comparison might be Singapore, where people live in residential high rise towers with plenty of space for greenery in between. (Hong Kong also has high rise residential, but not nearly as much greenery in the city centre.)

Scoundreller• 12 years ago

My favorite aspect about Singapore is that 85% of people live in "public housing", mostly under 99-year leases, which, per Wikipedia:

"is generally not considered as a sign of poverty or lower standards of living, as compared to public housing in other countries. Although they are cheaper than privately built homes in Singapore, they are also built in a variety of quality and finishes to cater to middle and upper middle income groups"

tritium• 12 years ago

...and the funny thing is that the majority of Manhattan's residential real estate is, in fact, a mess of ugly, uncomfortable five-story buildings (at ridiculous prices).

I'd estimate that less than 5% of Manhattan's residential space exists in buildings taller than 20 stories, and maybe 15% of said space exists in buildings taller than 5 stories.

michaelochurch5• 12 years ago

Right. Manhattan isn't even that "Manhattanized". Most of the high buildings are in the Financial District and Midtown, where few people want to live.

krschultz• 12 years ago

You are 100% correct, but interestingly more and more high rise stock is going residential. These are just a few examples, but check out 520 West 41st street (106 floors of residential) or 45 East 22nd Street (60 floors of residential). That's hundreds and hundreds of apartments going on tiny footprints. The one on 22nd street is replacing a 4 story nondescript building, in almost laughable fashion. The major buildings going up on Park Ave, in Long Island City, and all along the Brooklyn water front are all residential.

There seems to be a glut of office space, so for now this is where the market is going. Much of it is luxury unfortunately, but not all of it.

infinotize• 12 years ago

And all of the new construction tall buildings are luxury condos, which are barely "affordable" in Queens and start in the millions on Manhattan. I think something like 40% of them are actually even occupied year-round, instead they are used as investment/offshore holding/pied-a-terre for the absurdly wealthy.

_delirium• 12 years ago

Not liking "Manhattanization" is fairly common in continental Europe as well, but it mostly works out because we build lots of housing on transit lines, so you don't have to dump everything into huge condo towers right in the city center. As for why? Part of it is that it's not really Manhattan people are worried about turning into (at least that was built over many decades and has varied and interesting architecture), but Miami. Or the Spanish coast. Older buildings built during various eras, with varying architecture/history, and a "human scale" that doesn't block the light/sky, are more popular than tearing it all down and replacing everything with a rash of Miami-style high-rise condo towers. It probably doesn't help that there was a little openness to "modern high-rises" in the 1960s-70s, which led to some really terrible-looking monstrosities that have aged even less well than they first looked, now standing as monuments to "welp, let's never let the developers do that again".

However, you can still fit quite a lot of people into 5-story buildings if you build them densely over a region and connect them well with transit. I don't think the problem with the SF Bay Area is that it has 5-story buildings, but that for the most part it doesn't have 5-story buildings, rather 1-2 story houses with yards. The urbanized part of SF is tiny, effectively a small part of the eastern side of the city around downtown, SoMa, and the Mission. Not even the Sunset or Burlingame are built up with 5-story buildings. And Palo Alto, despite being both a university/research and business hub that has housing demand sufficient to support much denser housing, is instead occupied by things that look like countryside vacation homes, failing to even approach "medium-sized town" level of density, let alone some wild dream of getting near the density of 5-story apartment buildings.

nerfhammer2• 12 years ago

5 story buildings would be great - it would be closer to the density of Brooklyn.

Most buildings are uninsulated, two-story split-level.

gojomo• 12 years ago

Can we outsource our regional land-use governance to the Chinese Communist Party? We need much more housing and transit, fast, and they're the pros. Gains from trade!

seanmcdirmid3• 12 years ago

Ah, no. Unless you like shoddy toufu housing.

zghst• 12 years ago

Yeah no thanks. I wouldn't want them building over historical artifacts or putting up apartments that will fall apart in 10 years.

eru5• 12 years ago

You should outsource to the People's Action Party.

Uehreka• 12 years ago

Finally, finally, finally. An article on Hacker News about the whole San Francisco housing thing that doesn't assume that you're familiar with the issue and have picked a side. After all the rhetoric I've read about, say...

"the defeat of the proposition to prevent the blockage of construction on the waterfront proposed by the cool NIMBY elitist outcasts who are driving up housing prices to keep out the cool rich tech outsiders who are ruining this city"

...it's nice to have some history and context about what's actually going on. Thank you.

damncabbage• 12 years ago

This is also an excellent (and very long) piece that does the same: http://techcrunch.com/2014/04/14/sf-housing/

rtpg• 12 years ago

So Google can't build property in Mountain View, what about building another campus outside of the Bay Area? Maybe an hour south of Mountain View or something, where they could still recruit in the area.

I imagine Google's thought about this more than I have though.

that workers in the technology industry do not belong here and are not the type of people who are supposed to be in San Francisco. It is a strangely unprogressive attitude for this open-hearted city.

It's always ironic to see how people in 'rejected' subcultures tend to reject outsiders as well ( this happens way too much in tech as well).

Plasmoid2• 12 years ago

So Google can't build property in Mountain View, what about building another campus outside of the Bay Area? Maybe an hour south of Mountain View or something, where they could still recruit in the area.

Google is doing that to an extent. They have a lot of campuses world wide, mostly due to their acquisitions. It also decreases the amount of sway an individual municipality has over their growth and operation, which isn't a bad reaction given how much MV is mucking around with them.

hindsightbias• 12 years ago

Maybe after the first dot-com boom and all those evictions before the bust, their standards got a little lower.

digisign2• 12 years ago

Come to Los Angeles. It's not perfect, but the weather's better, economy broader, there's more space, its downtown is improving every year, and building up (in several places) is encouraged. Even the long neglected Metro is seeing investment.

lolwutf• 12 years ago

This. I'm fleeing SF this year for LA. The socioeconomic struggle has finally become, to me, unbearable + the rents too damn high.

eclipxe2• 12 years ago

I recently migrated from the Bay Area to SoCal (Orange County) - I'm seeing this sentiment more and more in my peer group.

(BTW - I'm hiring engineers down here in SoCal if anyone is interested in the migration - contact in profile)

rdtsc2• 12 years ago

For the longest time I didn't even know LA had a Metro.

I guess I just went there to visit friends/family and we ended so much time stuck in traffic it really got to me after a while. (Usually visit a week at a time). One day the friends had to work and suggested we take the Metro around town. Except that Metro didn't seem to go where we wanted to go. We opted for a bus. It worked out ... ok, the bus ended up stuck in traffic just as well as the other cars.

With that level of traffic, unless there is Metro and it is effective or some other public transportation system, I would go crazy. (Note: I haven't visited SF so not comparing it with, maybe it is just as bad there).

digisign2• 12 years ago

I don't do traffic either. Been lucky I guess, but I have two strategies that have worked out. One, live in walking distance to work. Two, work remotely from a walkable neighborhood.

overdrivetg• 12 years ago

I almost don't want to weigh in here since LA is kind of this hidden secret gem, but the answer is to just live on the Westside (Venice/Santa Monica).

You can almost never have to drive if you work it out this way - I bike to work along the beach every day and drive somewhere maybe once a week if that. It's amazing, and it's pretty much 70-80 degrees every day.

You could also live downtown (which has turned around in the last couple years and now is becoming very nice) - the Metro will connect there and Santa Monica in another year or two.

Sidebar: what I've also found here (I moved down from SF around 2002 & have lived all over the US) is that you really get back what you bring here. If you want to connect with smart, creative, great people, they're all over here. If you expect to meet a bunch of a-holes, well... They're here too, if that's the attitude you're bringing.

dirktheman• 12 years ago

From my experience, SF is much, much worse traffic wise. In LA the traffic moves. Slowly, but it's moving. SF is a total gridlock in rush hour. The only time you see a gridlock like that in LA is on the PCH on a holiday/weekend day. (Note to beachgoers: you know there ARE other beaches than Malibu, ok?)

megablast• 12 years ago

And you require a car to do anything. No thanks.

dima552• 12 years ago

This is a lifestyle choice that one absolutely does not have to make. I bike everywhere.

sliverstorm3• 12 years ago

So? Unless you are ethically opposed to anything with four wheels, it's a cost/benefit tradeoff. If a car is X hassle and Y money, but moving to LA saves you 2X hassle and 2Y money...

geebee3• 12 years ago

I enjoyed living in LA. I grew up in SF and came back because I have family here, but I find the irrational aversion to LA from SF extremely irritating.

LA does have somewhat dirty air, compared to SF, this is true. However, out by the coasts, it's not too bad, and the water quality at the beaches is actually very high (it has improved immensely over the years, but perception hasn't quite caught up). LA also has a lot of old neighborhoods with a really cool vibe. Hiking and more remote beaches aren't nearly as difficult to come by as people up here think, and the beach towns (Manhattan, Hermosa, and so forth) are pretty great. Also, people in LA don't start sentences with "as a fourth generation native LA resident" crap that is truly irritating in SF, and they don't seem to think that "right to move" is unidirectional (we can move out, but nobody's allowed to move in… I'm looking at you, Seattle). LA is also adding more and more density, getting more urban (as the bay area sprawls out due to severe building constraints).

Also, there's quite a bit of very interesting and creative work here. I worked for a film compositing software company, and it was kind of great.

With electric cars on the way? Eh, maybe some days LA will get its air quality under control. Then it really will be a huge, traffic clogged, overcrowded, clean, creative gem of a city… well, at least parts of it.

Ok, one thing - I've been hard on SF here, but that's because this is a particular issue where I think SF residents have it totally wrong. On the balance, I actually do think SF is a beautiful place - it's got problems, but the undeveloped coast, redwood forests, hills over the bay, and so forth are also spectacular, and some sections of the city are historic, dense, urban, and walkable in a way that you still don't really find almost anywhere else west of the Mississippi. There does seem to be a tendency toward hyperbole on the "sf suks" style post that would rival the knee jerk reaction to LA you sometimes see here as well.

skybrian2• 12 years ago

I was surprised that he said that the Marriott Hotel was ugly, as if this were a widely-held opinion. I haven't heard anyone else say that, and personally I rather like it.

ak217• 12 years ago

I agree, Marriott is one of the more beautiful high-rises in the city. Maybe he meant Marriott Union Square. Or Hyatt.

ryandrake2• 12 years ago

I want to know who's living in these places.

I work in a fairly senior role in a well known South Bay tech company (you've heard of it). I live in Livermore. (For those of you not familiar with the Bay Area, Livermore is so far away from everything, it might as well be Nevada.) Why do I live in Livermore? Because I can't afford anything within a 20 mile radius of Stanford. All over the Peninsula (and the areas in Santa Clara county you'd want to live) are dotted with $1.5M single family houses and $4,000/mo apartments. Summoning the voice of Jerry Seinfeld, "Who are these people? Really, who are they?" They can't all be stock option multi-millionaires can they? I'm doing pretty well for myself, but I can't afford to live anywhere in basically two counties. What do these people do who can afford to live down there?

The Bay Area is going to eat itself soon. There's just no way this housing situation is sustainable? What is the end game? Is this going to turn into Elysium? How will normal people survive here without affordable housing?

null_ptr• 12 years ago

Who are these people? Probably in their 20s, high paying job out of school, don't give a hoot about saving money and just live it up while the going's good. I can't imagine anyone else going for $4000/mo apartments.

Or, multiple people sharing a place.

d23• 12 years ago

I'm extremely confused as to how people aren't able to find anything for less than $4k/mo. It didn't seem all that unusual to find places for mid 1000s if you're sharing a place and not living downtown, and this is when I was looking less than a month ago. I ended up going with a 2.7k place downtown to myself, junior 1 bed.

It's more than I wanted to pay initially, but 4k minimum seems like a bald-faced lie.

kghose3• 12 years ago

So, a double income family, each person earning $250,000 with proceeds from a previous house sale for downpayment, can manage quite easily, no?

Pre tax income: 41666/month

20% Down = $300000 Borrow 1.2M @ 4.0% = $5728.98/mo

This looks quite doable.

Heck, with half that income, you could do it!

rdtsc2• 12 years ago

each person earning $250,000

Well back to the original question, who are these people earning $250k each? Is this common? Most people in the tech sector I know (ok not in SF) make about half that and I cant' say they are not productive or are stupid. Is that the valley of CEOs and upper management? Foreign investors buying up houses and not living in them just as a way to store their wealth...

ryandrake2• 12 years ago

Major outlier, no? That would be quite a wealthy family. You're basically talking two company CxOs living in the same house. I can see maybe a few households in that situation, but what of the rest of the hundreds of thousands of people who live up and down the Peninsula?

SheepSlapper• 12 years ago

Only in the Bay Area do people say "Well, if your household is making half a million a year it's affordable!" It reminds me of the Wall Street Journal disconnect last year [0] regarding taxes (those single mothers making $250k a year are really suffering). The Bay isn't the real world by a long shot.

I just moved away from the Bay Area for this exact reason. I went from making $120k a year to $85k a year, but in Washington I can get a decent family home for $150k. The Bay Area can't come remotely close to matching that kind of deal, even with the ludicrous salaries.

[0] http://i.imgur.com/bdgZa.jpg, http://online.wsj.com/news/articles/SB1000142412788732368960...

nilkn• 12 years ago

This is a joke, right? Reliably earning $250k is not easy even in the tech industry (bonuses and stock options are not even remotely reliable and hence should never be factored into the affordability of a mortgage payment). But on top of that, now you have to marry a spouse also making $250k. You're saying you have to borderline be a gold digger.

sytelus4• 12 years ago

Yes, you could do it but it's really a bad strategy. You are essentially betting all of your surplus income in to your house which is by any sane measure is already extremely overpriced. The worse thing is that the cause of this housing bubble is entirely artificial as per the article. It's not that there is no more land to build right around Google and Facebook campuses but that current residents are actively preventing new construction. This can't last longer. Eventually pressure would be too high for local authorities to change laws and with one stroke of pen bubble will burst. There too many other black swans such as earth quake or building new public transport or train system etc. I can only feel pity for those double income families who are working very hard and sacrificing seeing their kids etc just so they can throw their hard earned money in to this madness.

kghose3• 12 years ago

Ok, the replies to this make me wonder - I thought a two income family in SV was usually making in the range of $300k. Are the respondents below from SV?

declan10• 12 years ago

Well, I live within a five-mile radius of Stanford on the SF peninsula in a single-family home I bought a few years ago. I can tell you what I've seen in my own neighborhood.

These $1.5M single family homes (and those would be far lower than the median in many towns around here) tend to be owned by double-income professionals or long-standing owners paying pennies on the dollar in property taxes who have little incentive to sell. On the higher end, I've seen folks with significant liquidity events who no longer rely on income move to Palo Alto or Woodside, or perhaps Los Altos or Portola Valley, but then you're talking $5M+ and over 4,000 ft^2 and possibly a guest house or pool house too.

In my neighborhood there's a CEO at a funded sensor chip startup whose wife works at a large tech company, a physician married to another professional, an investment banker whose spouse doesn't work, some Stanford faculty married to other professionals, a partner at a major Silicon Valley law firm, and some retirees. The retirees are often paying around 1/20th what I do in property taxes -- less than what they'd pay if they were to move to Florida or Nevada, I imagine.

To try to answer your question more directly, if you're buying a $1.5M place and putting 20% down, Zillow says you can afford the resulting mortgage on a $265K/year salary: http://www.zillow.com/mortgage-calculator/house-affordabilit...

That seems like a stretch to me, but if it's accurate and banks believe it, you could get a mortgage on that $1.5M house if each person is making $140K a year or thereabouts. Hope it doesn't need repairs or remodeling!

sytelus4• 12 years ago

This is pretty enlightening. I've asked same question myself many time "who are this people?" because tech population is actually very small percentage. From your answer it appears that that people living in these 1.5M houses are not all tech works but rather new double income families and old pre-boom residents.

BTW, Zillow uses 36% debt ratio which is like the absolute max that you can possibly get mortgage (i.e. worse case scenario). That kind of debt ratio only makes sense for incomes > $250K. Once you can take out $10K as your monthly expenses, rest you can pour in to mortgage. With that calculation $260K income + $500K downpayment would allow you to live in 1.5M house without cutting too many corners. The downpayment can come in from previous house ownership gains or from equity stakes. This is probably not a good idea because you are in essence investing in already overpriced assets. There is no doubt that pressure is going to continue and bubble can only blow up so much.

waterlesscloud3• 12 years ago

I'm not a SV resident, but my visits to the area make me think Woodside is a whole other level of wealth. Like, estate level money. Is that right, or a mis-impression?

What's the hierarchy of the upper-upper end neighborhoods?

fernly2• 12 years ago

Howdy, neighbor! Or so I imagine, since you could be describing my neighborhood. Our 1,300sqft, 90yo cottage is, per Zillow, worth $1.3M. We bought in 1973, paid off the mortgage in the 90s, and yeah, our recent assessment notice had only a 5-digit number.

geebee3• 12 years ago

One thing to keep in mind is how high salaries are across the board in San Francisco. According to sfgate and us news best jobs, registered nurses earn an average of 122K a year in San Jose, and dental hygienists earn 106k in San Francisco (software developers fall between these two groups).

So this means a nurse and dental hygienist couple earns a family income of about 230K a year. They probably aren't buying in palo alto, but they aren't priced out of other nice suburbs. The sad thing is that most of the high salary is dumped into the housing market (and child care, which can be 25k per kid, which becomes a huge issue when you need two incomes). I guess it all depends on how much you love living here (if you have the right setup, it actually is pretty incredible, but you truly do pay).

It's not easy, but you don't have to scratch your head and wonder "who are these people". A two income middle class couple is in striking distance.

mcguire• 12 years ago

long-standing owners paying pennies on the dollar in property taxes

Proposition 13?

sliverstorm3• 12 years ago

Two common solutions:

- They bought their house fifty years ago when everything was peach orchards

- Split the apartment as many ways as mattresses will fit on the floor

WildUtah2• 12 years ago

dotted with $1.5M single family houses and $4,000/mo apartments

What about Hayward or East Palo Alto? Or Oakland? I thought there was still plenty of cheap land in the Bay Area, but people all want to live in the ritzy bits.

rhizome3• 12 years ago

Commuting anywhere from Hayward & the San L's is a parking lot in all directions. You can have a family home there, but the chance of a family life would be quite beset by traffic. You could BART to SF, but driving to the Peninsula and South Bay are gonna involve a bad time.

CalRobert3• 12 years ago

For the moment those places are fairly rough, so people with plenty of cash don't really want to live there. Also, there's a pretty enormous change in culture between SF and these cities. That being said, Oakland is being gentrified pretty quickly (along with the less-glamorous bits of south Berkeley).

declan10• 12 years ago

I thought there was still plenty of cheap land in the Bay Area, but people all want to live in the ritzy bits.

There's lots of vacant land on the SF peninsula, but no cheap land. There is cheaper land (not the same as cheap land), as you say, in the east bay, but the non-SF tech jobs tend to be on the peninsula or south bay.

BTW, this is the first time that I've heard Belmont or San Mateo or Redwood City being described as "ritzy." :)

xorcist4• 12 years ago

Interesting data point.

Around here (northern European capital), salaries are lower than the US counterparts. I would say a fairly qualified job in IT earns you around $100k (yearly, before all taxation). Houses cost around $1M outside town.

Even people with less qualified jobs buys at these prices. I would have expected $1.5M to be affordable with Silicon Valley salaries. I wonder if interest rates are that much higher in the US..?

chiph• 12 years ago

I used to work with a guy from Belgium that was building a house. He said it was affordable because it came with a 50 year mortgage. The common length in the US is 30 years.

zeroonetwothree• 12 years ago

A typical suggestion is that your monthly rent is 1/40 of your annual income. So if you earn $160k you can afford $4k rent. That's pretty realistic for a dual earner household. Even for one earner it's doable, though of course above average. But really many people are probably spending most of their money on housing and not saving anything.

roc• 12 years ago

"What is the end game?"

It appears to be: force the industry to move somewhere else.

Whether that's a good plan or not is moot. Decades of votes have underscored it repeatedly. That the situation is unsustainable seems to be the entire point.

I'm increasingly surprised people still insist on the region. I'd have thought more companies would have moved on by now.

gaius• 12 years ago

You know, there was a time when Silicon Valley made real, actual things - electronics, aircraft, etc. The engineers that worked there, were normal middle class folks making normal middle class salaries. It would be better all round, yes, if all the web companies making nothing for billions, were forced out.

at-fates-hands• 12 years ago

>>> The Bay Area is going to eat itself soon. There's just no way this housing situation is sustainable? What is the end game? Is this going to turn into Elysium? How will normal people survive here without affordable housing?

It seems to me this is a cyclical issue. I'm guessing something major has to happen like the market crashes again, or the tech bubble bursts. This would make a lot of these high rent places either have to lower their rent, or go out of business.

Once they lower their rent, I'm sure more middle income people will move back into the city. This of course does not solve the affordable housing issue. As is the case in most gentrification situations, it just pushes lower income people out into the outer burbs, and this is already happening. I don't see any solution for more affordable housing. It seems this war has already been lost.

declan10• 12 years ago

This BoomCalifornia.com article is well-written but misses a pretty big point: these are in large part choices that SF bay area governments have made to limit new development. The article does discuss SF, true, but SF has only perhaps 10% of the area's population, and a negligible part of the area.

Housing prices on the SF peninsula once were in line with the rest of the country. Then came anti-development fervor, pushed in large part by existing homeowners who benefited from a rise in demand coupled by fixed supply.

That's one reason why, even though I have enough land to build a small guest cottage that I could then rent out on the SF peninsula, my local government makes it cost-prohibitive or impossible to do (can't cut down trees, can't disturb natural habitat, can't build within 40' of a stream, etc.). That's also why Facebook's massive new campus logically should be surrounded by high-density housing instead of ranch homes on quarter-acre lots, and isn't, and why no housing can be built within walking distance of the Googleplex in MV.

Thomas Sowell, an economist at Stanford's Hoover Institution, wrote about this back in April:

http://www.dallasnews.com/opinion/latest-columns/20140423-op... "There are people who claim that astronomical housing prices in places like Palo Alto and San Francisco are due to a scarcity of land. But there is enough vacant land (open space) on the other side of the Interstate 280 freeway that goes past Palo Alto to build another Palo Alto or two — except for laws and policies that make it impossible. As in San Francisco and other parts of the country where housing prices skyrocketed after building homes was prohibited or severely restricted, this began in Palo Alto in the 1970s. Housing prices in Palo Alto nearly quadrupled during that decade. This was not from expensive houses being built, because not a single new house was built in Palo Alto in the 1970s. The same old houses simply shot up in price. That is part of the unacknowledged cost of open space and just part of the high cost of liberalism."

mtviewdave• 12 years ago

That is part of the unacknowledged cost of open space and just part of the high cost of liberalism.

The devotion to open-space around Stanford/Palo Alto actually comes out of the backlash to all the highway construction in the 50s and 60s. I find it odd to see opposition to big government programs described as "liberalism".

declan10• 12 years ago

The devotion to open-space around Stanford/Palo Alto actually comes out of the backlash to all the highway construction in the 50s and 60s.

And here I thought it was because Stanford owns over 8,000 acres and is exempt from paying state property taxes on it. :) Cite: http://www.nytimes.com/2011/08/15/business/california-scruti...

hueving• 12 years ago

That's because it wasn't opposition to the big government component. It was opposition to the highways. For example, someone protesting a war isn't viewed as opposing big government.

xorcist4• 12 years ago

Well, it shouldn't be _that_ odd, it is after all what the word means in the rest of the world...

DerekL• 12 years ago

The article does mention policies of other cities in the Bay Area. For instance: "Although cities in the Valley, such as Google’s home of Mountain View, have been eager to approve the construction of new office space, they’ve refused to allow new housing construction to provide places for employees to live near their offices."

muzz4• 12 years ago

Sadly the author seems intent on mischaracterizing Mountain View here.

The rejected project was 1,000 units in an area that is otherwise all office buildings.

6 times that number of units were approved by the city and are being built, yet the author makes no mention of that at all.

spopejoy• 12 years ago

Thomas Sowell?? On HN???? Please G*d no.

An old-school conservative op-ed--page troll who now looks moderate compared to tea-party FOX newsers -- boring but still toxic. Please leave him in his regional-newspaper dungeon where he belongs.

Fuxy2• 12 years ago

Stupid question but why don't big companies like Google and Apple just move the bulk of their office outside of San Francisco where there are no regulations and they could just build everything they need there.

If SF is being so hostile towards basically the driving engine of their local economy the best option is to relocate to a place where there are fewer restriction.

A build your own small city kind of situation. They can certainly afford it.

It's win-win Google gets their employes close to the office the employees get cheaper housing and if it's a large enough community you will be getting new people coming in opening shops and other stuff to take advantage of the demand.

The only one slightly worse off is SF with all the money leaving the place but it's not like they appreciate what they have now anyway.

fernly2• 12 years ago

As noted in the article, Google is in Mountain View, Apple in Santa Clara, both suburban towns well outside SF. Both towns have strict development laws, also described in the article, that throttle development. Apple has proposed building a new HQ and Santa Clara may actually approve it, but that does nothing to increase housing.

There is no land with 100 miles of Silicon Valley where you could "build a town". Supposing they went the necessary distance (500 miles, or even more, into Nevada perhaps) how practical would it be to get 1000s of employees to relocate to live in a "company town" in the middle of nowhere?

Fuxy2• 12 years ago

Seems pretty practical to me instead of fighting with the locals to do basic things spending god knows how much money trying to approve things.

Plus once you do it you have all the room you need to expand build towers, create housing etc.

It doesn't even need to be something very complex at first just something quick and dirty to see if it's a valid solution.

I find it amazing that there's no large areas of land for sale withing a 100 miles of Silicon Valley.

As for as employee relocation is concerned don't they already have to relocate to SF and the surrounding suburbs to work there?

hatbert• 12 years ago

It's not a stupid question. The problem is twofold: Any place that's nearby is already too expensive to make the move worth it; and any place that's cheap enough to be worth it lacks either the coastal climate or proximity to civilization, or both. Or worse (or better, depending on your perspective), it's a place where the Coastal Commission won't let you build anyway.

So, in practice, you're asking "Why doesn't Google just pack up and move to Nevada or Kansas City?" Such a move would probably be highly disruptive to business (probably at least two months of lost productivity (even if you pay relocation consultants to handle everything) for all employees being moved, and you're talking about moving substantially all employees).

mateo411• 12 years ago

Also the majority of the people won't move. Even moving an office from the South Bay to the City will cause a lot of people to quit.

Source -- I work for a company that moved it's office from the South Bay to the City and a lot of people quit.

chrismaeda• 12 years ago

It's already happening. You don't need to build a new city. You just open a satellite office in a place like Boulder or Austin. Your young, single employees would never live there in a million years, but once they marry and have kids they'll be lining up to relo there for the cheap housing, good schools, and lower cost of living.

muzz4• 12 years ago

Stupid question but why don't big companies like Google and Apple just move the bulk of their office outside of San Francisco where there are no regulations and they could just build everything they need there.

Because they've weighed all the options and decided that's not the best thing for their business.

This is what many people simply don't understand. Businesses are profit-maximizers and it simply makes economic sense for them to be located in the Bay Area.

One may not like the cost of housing, and businesses may have to pay employees more to live in the Bay Area, but overall the advantages outweigh the disadvantages.

visarga• 12 years ago

This is the tone of a now-dominant narrative among the city’s progressives—that workers in the technology industry do not belong here and are not the type of people who are supposed to be in San Francisco.

I find this kind of phobia as repulsive as xenofobia or discrimination against blacks.

Why are they so holy they can't accept the Google employees as regular folks?

Shivetya• 12 years ago

There is nothing in common with the plights of blacks in the city to tech workers, unless you count of course that many well off people moving in drove minorities and the poor into further substandard housing because the cost of living skyrocketed. Mom and Pop businesses folding so trendy restaurants and boutiques can take their spot.

For an industry that boasts connectivity it sure seems location bound at times. Frankly, the fact they have to have / desire to have charted bus services just for themselves should be a hint - your living in the wrong place, be closer to work.

However, many in the industry who like think they are open minded and above it all it must be fun to find out that your not wanted by people that are normally associated with open mindedness.

nerfhammer2• 12 years ago

Frankly, the fact they have to have / desire to have charted bus services just for themselves should be a hint - your living in the wrong place, be closer to work.

To be a real NIMBY is to be able to say with a straight face that those darn people ought to be fighting other NIMBYs somewhere else.

wutbrodo• 12 years ago

However, many in the industry who like think they are open minded and above it all it must be fun to find out that your not wanted by people that are normally associated with open mindedness.

You seem to think this says something about people in the industry; To me it seems the only sane reaction is to conclude that the association of the second group of people with open-mindedness is an illusion.

ojbyrne• 12 years ago

"When I moved to San Francisco in 2003, I found a place to live in one weekend."

But from what I recall after moving to San Francisco in 2005, you would not have been able to.

And from what I've been told, if you moved to San Francisco in 2000, you also would have had a difficult time.

boomcalifornia seems to be an appropriate name.

toufka• 12 years ago

Moved to SF in 2008 - stayed with a friend in Berkeley over a long weekend and found a place to rent on craigslist by the time I left. Was 'expensive' compared to my midwestern rents - but still within reason. Literally impossible now.

dba7dba• 12 years ago

When people claim it's too expensive to live and do business in California, I think some miss the influence of the geography.

Yes the tax in CA is higher than other states but not THAT high. CA state tax is not 100% or 200% higher than most states. But housing is.

The point of moving to CA for most people is to live on or near the coast, I think... Thus most centers of commerce in CA is relatively close to the beach, like SF or LA or San Diego.

What this does is it almost immediately cuts the the available land for housing by HALF. In midwest of US (including Texas), you put a dot and draw 30 mile circle around it. All of that land is available for housing. In coastal regions like coastal California, put a dot near coast and draw a 30 mile circle around it. You get HALF of a circle available for housing.

No wonder house price in coastal CA is easily double of equivalent in Texas and other cities.

Tax in CA is not that bad. But the geography is bad for making affordable housing available, and that's not the fault of the politicians or Democrats or etc.

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