/ASan Francisco, CA—Before entering San Francisco, I’d heard that high housing costs were forcing even six-figure-salary techies into cramped apartments. But I found this hard to believe, until I actually met one, while attending a local activist event. His name was Steven Buss, a 30-year-old software engineer who earns over $100,000 in salary working for Google. He moved here from Los Angeles several years ago hoping to make more money, so that he could save up and start a business. His goal was thus to spend no more than $2,000 monthly on rent, while living within an hour’s commute of Google’s offices in the SoMa neighborhood.
In most cities, Buss would have found numerous centrally-located and expansive flats within this price range. But in San Francisco, it took him six months to find an apartment, and it wound up being an 850-square-foot flat in the Mission neighborhood, with a bedroom hardly bigger than Buss’ queen-sized bed. And there was another housemate living in the second room, ending any hope of privacy.
“I could’ve gotten a studio for $3,500 a month. But that’s insane.”
Buss’ situation, while not extreme by local standards, speaks to a larger regional crisis, both for workers, employers and anyone seeking a decent quality-of-life. Amid rapid job and population growth, San Francisco housing prices have skyrocketed to the nation’s highest by some metrics, with median one-bedroom city rents at $3,270 and median metro home prices at $833,600.
This means that knowledge workers like Buss, who can make money pretty much anywhere, often make calculated decisions about the payoffs of locating in San Francisco. While wages here are higher (the average Bay Area software engineer makes $132,000, tops in the country) general living costs are too, driven by housing prices. A Governing Magazine analysis found that in San Francisco, these factors cancel each other out, with the metro’s cost-of-living-adjusted wage rates sitting roughly at the national average.
Companies must respond to this by further bidding up for workers, or employing fewer of them and having them work longer hours. This explains why much of the tech industry is leaving Silicon Valley for cheaper but culturally-similar cities, like Portland and Austin. Given that other industries—both white-collar and blue-collar—are also hurt by these housing-induced wage mark-ups, it has stopped the Bay Area from forming business agglomerations that might otherwise exist.
It doesn’t have to be this way. Sure, San Francisco is a desirable place with new people flooding in yearly, many of them wealthy. But there are a lot of U.S. metros like this—between 2010 and mid-2015, seven of the ten largest metros added more population than San Francisco did, and some even had greater business growth. But none are this expensive.
The difference lies in housing growth figures, with Houston and Dallas, for example, complimenting their upward economic trends by allowing far more units. According to 2010-2015 Census figures, the Houston and Dallas-Fort Worth metros issued permits for 217,000 and 159,000 new units, respectively. The San Francisco-Oakland-Hayward metro area issued permits for 40,000 units—despite adding 321,000 people. As a result, the latter has seen median home prices increase since 2010 by $309,000, compared to a $43,000 increase in Houston and a $65,000 increase in Dallas-Fort Worth.
San Francisco’s lack of construction can be blamed on NIMBYism and anti-growth sentiment, which is strongest, perhaps not coincidentally, in the areas with the most jobs and highest demand for living. San Francisco proper, for example, is an 837,000-person city that in the last decade added just over 2,000 units annually.
“The city’s height limits, its rent control and its formidable permitting process,” wrote journalist Kim-Mai Cutler, in a landmark 2014 TechCrunch essay, “are all products of tenant, environmental and preservationist movements that have arisen and fallen over decades.”
The cities within job-intensive Silicon Valley—such as Palo Alto—sometimes keep these annual unit figures down into the hundreds. Some of the Bay Area cities most willing to grow, meanwhile, are outlying ones like Dublin that require 90-minute one-way morning commutes into San Francisco.
As mentioned above, this means that the organic process of business and workforce formation has been distorted. This has already caused the Bay Area’s recently robust job growth to slow, leading local economist Stephen Levy to claim that the region has reached peak jobs.
Even more, housing constraints mean the region isn’t providing decent living standards for people up and down the income ladder, often in ways that can’t be labeled with price tags or economic metrics.
Take, for example, the issues of over-crowding and long commutes. Buss, who suffers from both problems, says that his situation is actually better than many within his peer group, which he says can be divided into two segments. His first set of friends—consisting of fellow professional-class singles like him—live in the central city, and every last one of them has housemates. Some, he says, don’t even enjoy individual rooms, but instead sleep in closets, on couches, on bunkbeds, or in living rooms divided by curtains.
His second group of friends—professional-class families with children— must, because of the high living costs, move outside the city altogether. This means that parents have to balance long commutes and grueling work schedules while being far away from the children they’re raising.
And, of course, there are demographic groups that aren’t among Buss’ peers, don’t make six figures, and thus have worse experiences. Some are living in even more crowded inner-city situations or remote townships, like Antioch. Others are suffering from homelessness, which is rising in San Francisco while declining nationwide. And because many of these working-class groups grew up in San Francisco, they’re having to watch their old neighborhoods gentrify in the process.
There are, indeed, numerous problems occurring right now in San Francisco—loss of jobs, companies and innovative workers; overcrowding; long commutes; homelessness; and gentrification. All of them are tied to the unwillingness, by different Bay Area cities, to allow more housing. These problems, collectively, are a high price to pay for simple inaction.
[This article was originally published by HousingOnline.com]
Scott Beyer owns and manages The Market Urbanism Report. He is a roving cross-country journalist who writes regular columns for Forbes, Governing Magazine and HousingOnline.com.
A podcast on Market Urbanism, or the cross between free-market policies and urban issues. We discuss how a liberalized urban approach would lead to more housing, faster transport, improved public services, and better quality of life. Tap to listen.
Market Urbanism Report is sponsored by Panoramic Interests, a progressive developer in San Francisco. Panoramic, which is owned by Patrick Kennedy, specializes in 160 sqft micro-units (called MicroPads) that are built using modular construction materials. Panoramic has long touted these units as a cost-effective way to house San Francisco’s growing homeless population. But Panoramic also builds larger units of between 440-690 sqft. To learn more about Panoramic’s micro-unit model, read MUR’s coverage on the firm in its America’s Progressive Developers series. Or visit Panoramic’s website.