Housing Crisis, Silicon Valley's Dark And Shiny Underbelly
SAN FRANCISCO — A billboard for a new housing complex being built in San Francisco caught people's attention last spring. Its sales-pitch slogan? "From the low 1,000,000s."
Some may have chuckled at the absurdity, but the price of the new units reflects the current reality of the market. The median price of a house in San Francisco is $1.13 million, an increase of 70% in five years, according to Zillow, a company that analyzes the real estate market. For renters, prices are outrageous too: You need almost $3,500 per month for a one-bedroom apartment, according to Zumper, another real estate firm.
The cost of living has always been higher in California than in other states in America, explains Brian Uhler, who recently penned a report about the housing crisis for the state Assembly. "The temperate climate, the closeness to the sea and the rich cultural life have always made San Francisco and Los Angeles very attractive cities," says Uhler. "But the cost differential with the rest of the country has grown over the years."
Why? The boom of the high-tech sector in the region has brought in top-end employees, but it has not been matched by a boost in new housing. Whereas 450,000 jobs were created in the region between 2010 and 2014, only 54,000 new housings were built, according to Egon Terplan, an analyst at Spur, a local think tank specialized in urban development. "In recent decades, only a few cities, such as Detroit, Cleveland or Pittsburgh, have built less than San Francisco, but these cities doesn't have the same economic growth,"notes Uhler.
During this same period, young employees' lifestyles have also evolved. The American dream, with wife, children, and dogs in a pretty garden in the suburbs is over. The Millennials, stay single longer, and want to live in an "exciting" cosmopolitan area, explains Sarah Karlinsky, head of public policy at Spur.
This mismatch between a tiny supply and enormous demand has led to higher prices, leading to very difficult situations for employees with modest income. In California, households in lower-income brackets often dedicate up to two-thirds of their monthly budget to pay rent. This is 11% above the median of households in the same situation across the United States, says Uhler.
Crossing poverty line
Consequently, if including the weight of housing prices, California becomes the state with the highest percentage of people below the poverty line, according to the California Housing Partnership Coalition. Tipping Point, another NGO fighting poverty in the region, estimates that at least four median salaries are needed if you want to live in or around San Francisco. Thus, don't be surprised to encounter a teacher or nurse driving an Uber to make ends meet.
This housing crisis is not hard to see on the streets of San Francisco. With housing prices up to 64% over the past decade, San Francisco now ranks highest in the U.S. for the number of homeless people who sleep in the streets. On the sidewalks of the city's downtown, not far from the headquarters of such tech giants as Twitter, Airbnb and Uber, dozens of men and women wander the streets, some with swollen feet and dirty clothes. One woman talks to an imagined mobile telephone, which is in fact her left hand, another sings a lullaby to a Donald Duck doll, as if it was a child, while a man jumps on the floor, lowering his pants and imitating a frog. Nearby, employees at Twitter meet for lunch inside the company's shiny cafeteria that offers quinoa and kale salad.
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Homeless woman with dogs in Haight Street, San Francisco — Photo: livenature
The two worlds have never been so close. Because the gap between rich and poor households continues to rise. The median salary of the wealthiest one percent increased of 219% over the past quarter-century, as the tech boom created many millionaires and even billionaires, while the remaining 99% saw their salaries increase 34% instead, according to a study of the California Budget & Policy Center.
One result of this is a creeping gentrification. The popular Mission neighborhood south of downtown, a prime destination for employees of top startups, is emblematic of this transformation.
For the owners of buildings built before 1979, the only way to raise rents that remain frozen until tenants move out is to offer generous "packages" to them, to make them leave. Elise Zareie, who is 25, and works in an environmental startup, had to leave the neighborhood in 2013, after her owner gave $35,000 to her roommate to not renew the lease. The rent then doubled.
Tommi Avicolli Mecca, a longtime LGBT activist in San Francisco, has lately focused on the housing issue. He now works for Housing Rights Committee, an association for the defense of tenants. "After having been beaten because of my sexuality in several cities, I came to San Francisco in the 1980s for its reputation for tolerance and I found an apartment for $750. Nowadays, I fear that the San Francisco that used to be a shelter for so many communities will disappear. What can a young LGBT do, when he arrives here, with hope that he will be welcomed, and find rents at $5,000?"
For Avicolli Mecca, the blame rests with the attitude of the technology giants that dominate the region. "These companies assumes no responsibilities in the crisis that they have created," he says. Another culprit is the city government, which gave tax breaks to companies to lure them away from other cities, to the south, in Silicon Valley.
There are even new associations forming of employees in the high-tech sector who themselves are victims of the housing crisis, as well as articles in the local press about an engineer from Google who sleeps in his car or a Facebook developer leasing a closet-like apartment in San Francisco.
"Rich people don't want to see poor people move in their neighborhood, and vice versa " quips Sarah Karlinsky, from Spur.
One direct consequence is that for the first time since 2011, the number of inhabitants moving away from the city is higher than the number of newcomers. This news brings smiles to the cities that dream of being a new Silicon Valley: Austin, Seattle, Portland. And yes, Californian biggest tech's giants are busy opening offices there.