Venture Capital’s Answer to High-Priced Housing: Dorms for Grown Ups
wsj.com
wsj.com
1. Similar models are popping up all over the city, including the much more sophisticated Panoramic just up a block. Beds starting at $1500. Yes Beds.
https://www.youtube.com/watch?v=3LI0tqVmGtI
2. They built the Panoramic in the time it took WeLive to do their interior improvements. And when they were working on it, it was just a skeleton crew. The whole time I was thinking ... how are they financing the building? This is insane.
3. WeLive has a main floor common space, where they've had two? events since they opened. Both were modestly attended, but certainly had a college dorm feel to it. Not anything anyone over 30 would be interested in.
4. There appears to be value-added services in the common area, a cafe, a juice bar, etc, but I hardly see it used.
5. They continue to putter around the building, putting a whole new set of scaffolding up, taking it down, putting it up again, doing some painting, taking the taping down, putting it up again, and I wonder ... what on earth are they doing? They had a year to get this right, what's the hold up.
6. Compared to the huge number of apartments going in across the street -- 1900? WeLive is a ghost town.
http://www.sfchronicle.com/bayarea/article/S-F-planners-back...
(ps. the Trinity has major problems going in to this as well. I see it as a huge bungle for the Planners. But I am waiting to see what the Market Street retail looks like. If it's anything like the Mission Street side, it'll keep that side of Market dead.)
So, in short, WeLive is some capital intensive problems, that a lot of smart people are trying to solve, just up the block and across the street, and nothing I see puts WeLive ahead of these guys.
Especially when landlords stop leasing to them at .5x, so that they can turn around and dormify the building and get 2x for it. Not with Panorama and Trinity right there.
Value added? Maybe, I guess. It's really just another way to drain more money from the tenants in the name of convenience. Dorm room too small for a coffee maker? Just pay $4 per cup in our handy cafe.
I wonder where the threshold is for people who would live in a situation like this. Is living in SF such a necessity? If you're consumed most of the day with your startup to begin with, how much of the city's culture are you really going to take in? Especially if you're in one of these dorms, where they drop a cafe and juice bar right in the building "so you never have to leave!"
He's also experimenting with the living space to figure out what's best while being as small as possible. The level of thought that goes into it is impressive.
And there's the problem. For $500? Sure, I'll do that.
In order of appearance in my brain:
1. So the infantilization (or at least very long childhood) of tech workers, that began with ball pits and video games and three meals a day served in the office, is complete. Tech workers may never become autonomous, functioning, adults at this rate.
2. This sounds kinda nice, actually. But, only for like a week. Then I would hate everyone I share a bathroom and kitchen with. I'm too old for room mates.
3. Oh! That's what's bugging me. Subtle age discrimination. People with families cannot possibly live in these things. People with families cannot possibly afford to live in actual housing in SF. So, older folks are pushed out of valley tech companies, without ever having to make ugly hiring decisions based on age. Younger workers are cheaper and will stay at the office longer hours (probably not more productive by doing so, but that's more difficult to measure).
So, yeah, this fits with what I know of the way a lot of VCs think about the problem of tech workers, as cogs in a money printing machine. This is a more efficient cog storage unit that happens to provide additional features, like filtering out older workers and people who want lives outside of work.
And, back to why this is approaching the wrong side of the problem: NIMBYs in SF and surrounding high rent areas keep housing prices astronomically high, by preventing construction of dense new housing. All of the valley has single family homes everywhere. Very tall buildings for housing are practically unheard of.
Not that I'd want to live there, but older workers might still stand to benefit.
I propose these dorms be called Nerd Storage Units (NSUs).
> Now he slept in the cheapest coffins, the ones nearest the port, beneath the quartz-halogen floods that lit the docks all night like vast stages; where you couldn’t see the lights of Tokyo for the glare of the television sky, not even the towering hologram logo of the Fuji Electric Company, and Tokyo Bay was a black expanse where gulls wheeled above drifting shoals of white styrofoam.
I really, really hope the $4M bungalow is an exaggeration, but I suspect if so, it's not by much.
What most people do when the company doesn't provide lunch is walk (or drive) as a group to some local restaurant and have lunch out, every work day.
What people with families is commute from the cheaper SFH suburbs into work. It means shitty 30-1hr commutes, but that is life for many americans already.
I feel like you're describing this as a negative when it sounds like a huge positive to me.
1. get car / gather people in 5m
2. wait in traffic for 15m
3. look for parking for 10m
4. wait in restaurant & eat for 1hr or get sandwich and eat in 30m.
5. get back to car in 5m
6. wait in traffic for another 15m
If you're close to restaurants then this is far more practical since you just need to walk for 10m. But if your office parks at least a 15m drive from the restaurants, it isn't. What I do is go out for lunch with coworkers at the company cafe.
But, breakfast and dinner, too? I begin to question the motives of the company. If it is to enable/encourage a flexible schedule so that employees can make their commute at low-traffic times, awesome! If it is so that employees feel compelled to be in the office 12 hours a day, it's much less awesome. I think Google is a decent example of the former (while still having some traits of the latter). Again, it's easy for it to be used to enable age discrimination and discrimination against people with children and lives outside of work, without ever explicitly doing so.
Anyway, I'm not actually trying to say a company feeding their employees is a bad thing. I'm trying to say that there's been a trend of taking tech workers right out of college and sort of continuing their dorm life well into their late 20s and even 30s, and I don't know that it is particularly healthy (for the workers or society in these areas). It's easy to lack empathy when every interaction is with people just like you, which is why I think there's been a recent clash against Google and other tech behemoths in SF communities. There's a lack of engagement in the rest of civil society when you live and breathe work, and live surrounded by people who do exactly the same kind of work, and are living exactly the same kind of life.
It's not that different from the factory housing of old, but with a modern twist emphasizing fraternity and sorority aspects as well as new modern, post consumer society.
In the end, if it takes off, the test will be better off. The new workforce will have their parties and music and other "entertainment" in their corner while those with families may be able to afford normal housing --again ic sufficient numbers take the pressure off housing stock...
I don't think they'll take off as a solution, people may see them as "transitional" housing you inhabit while single, but move on and into regular housing once coupled or reproductive.
The "factory housing" of old, found the factory worker to be so productive, that his spouse could dedicate herself to house work -- and the single salary would be enough to provide for the whole family. Now with more equal opportunity, even with both people in a household being "factory workers" -- suddenly giving people a flat suitable to raise children in isn't financially sustainable any more?
Or were you thinking about the Chinese factory "dorms" of the modern age?
"Startup-like profit"? So they plan to lose money for as long as investors will continue to write them checks?
I've hypothesized that technology bubbles are created by injecting large amounts of stored work (causality) into a system. Stock market, dotcom bubble, Bitcoin, fuses in your breaker box, etc. In some cases, this stored work allows for the creation of trust channels. These trust channels are not always trustworthy. Consider poker games.
I no longer trust VCs because I think their "game" is driven by a very small set of limited partner's desire to make even more money than they already have or need. That they are willing to stuff a whole generation into a dorm on the "ifs and buts" of an exit is ridiculous.
This "gotta have more" strategy isn't holistic and isn't scalable. When it pops, it's going to be messy.
Bootstrap it. Move home, if you must. Move to to a cheap Asian country and build your dream. Whatever you do, do it with your eyes open and your mind free of dissonance. And remember, profit puts you in charge, not them.
I live in 2 km² mansion, but you know guys I have these nice dorms for you to squeeze in...
Someone wanted to buy and then resell his neighbor's home with a selling point of living next to Zuckerberg.
Zuckerberg also rents the houses back to the original owners.
http://www.businessinsider.com/mark-zuckerberg-buys-4-homes-...
Sounds like a twisted reverse mortgage scheme where you get to pay rent on your old property as well.
Is this what is called financial innovation?
Suppose you work for Acme Co. Acme Co is a multi national conglomerate.
- One of Acme Cos subsidiaries operates the public transportation you use to get to work (The commuter trains in MA are operated by a private company)
- One of Acme Cos subsidiaries owns the building you live in (this is particularly interesting because the trend in Boston has been for real estate investment trusts to buy up large swaths of smaller multi family homes for their portfolio, homes that were typically used as owner occupied means of wealth generation)
- One of Acme Cos subsidiaries is the energy supplier you pay for electricity
- One of Acme Cos subsidiaries is the cable company you pay for TV and internet
- One of Acme Cos subsidiaries is the insurance company you use for your car/property/health insurance
- One of Acme Cos subsidiaries is the charter school network you send your kids to
- etc
Anyone else see this trend? What's the end game?
Being completely dependent on a single company like this for everything is not something I'd want to be a part of. Not unless the company had a strong commitment to its employees. My grandfather was a clothes washer repairman for many years, but eventually, his job became obsolete. In today's economy, the company would have "thanked him for his life" and then seen him to the door like a robber. In his case, the company invested in training him for another position. Without a strong commitment, this situation sets up a dependence that reduces a person's ability to handle transitioning when he leaves the company.
Shuts down social mobility. Acme helps raise the children of coal miners to be the coal miners of tomorrow, etc. They know how much you make and how much you can afford to spend, etc. There are a lot of reasons this model is a historical footnote.
"I owe my soul to the company store." We've been here before: https://www.youtube.com/watch?v=2zE1-48AAYc
"The Imperial Trading Companies such as the various East India Companies should possibly be considered corporate states, being semi-sovereign with the power to wage war and establish colonies."
I think layman translation of this marketing bullshit is "barrack"
Think about that for a moment. This isn't a new idea, it is a recurrence of an idea that existed before when there was a huge gap between the "working class" and the "middle class". Think about all of the variables that make the system work that way, first you have to have a weak enough government that a small number of people can shut down the production of market rate housing, then you have to have a growing income disparity that can "freeze out" and separate the existing housing that spans the gap.
If I were a city supervisor I'd see the success of "rooming houses" as a failure of city management.
I've never lived in SFO, but I've visited. It's a really nice place. But not nice enough to need this sort of nightmare.
When the economy yo-yos, these will turn into nasty SRO units for crazy/addicted people and blight the neighborhoods. I can't believe the zoning people let this go through. It took NYC years and years to clean these types of units up.
I may be stupid, but how is charging a premium an answer to high prices?
Most will do what they've always done - house or apartment share.
This country is massive and has plenty of open land. The U.S. is the 3rd largest country by land area (behind Russia and Canada), but excepting Alaska, virtually all of our land is quite habitable, something neither Russia nor Canada can say. There is no reason anyone here should be paying $4k/mo to live in a tiny apartment.
On top of that, California is one of the worst states for business in the country.
There are ~40 states that have a totally untapped pool of resources including people, housing and land and a business-friendly legislature. Get out there and use them. And developers, push back against companies that want to enforce an SV-centric working methodology.
That got me wondering: where does the US sit if Alaska is excluded? Turns out that Alaska is about 663,000 square miles (or 1.7 million square kilometers), which moves the US from #3 to #5, below China and Brazil.
Ranking: http://www.geohive.com/earth/area_top50.aspx Other interesting land area: https://en.wikipedia.org/wiki/Land_use_statistics_by_country
However, tech hubs are draws in and of themselves, and they could easily be located in friendlier states. People will come out to them.
As for those other tech hubs? Most are located in places where workers don't have basic rights, like the right to switch jobs (non-competes aren't enforceable in California) or the right to own the work they do on their own time (Employers in most cases cannot lay claim to work that someone does on their own time without company resources). Hence, they will never be popular as tech hubs or see the ecosystem of startups that Silicon Valley has.
No, it isn't. Unless you define "bad for business" as "not catering to the every whims of the 'job creators' and obliterating all worker's rights."
I would worry about the safety and quality of such living arrangements, though. Buildings like this were built many years ago called single-room occupancy (SRO) residences. They eventually became havens for vagrants and other hard-luck elements. As a result, SRO residences were outlawed in many cities.
How many resources do we waste on underutilized space? The US is more extreme here than any other country I've heard of.
Once a group of friends come together they'll get a house share of their own instead of sharing with strangers. Probably be cheaper too. Have they modeled for high churn rates in their already thin margins?
A premium service leaves your very vulnerable to the tide going out on disposable income. The co-living space will be left with higher long term leases they can no longer service. I really want to figure out a way to short services like WeWork at a 16b valuation.
If I were single and working 80 hours a week so my boss's boss can make billions on an IPO while I end up with barely enough to afford a Bay Area house, then maybe I would consider these arrangements for a little while. But instead I have a girlfriend and we value certain things more than money.
Wait, what? I always thought the sock on the door was the signal to join in.
You were one of those roommates, weren't you?
But, it seems like VC's have rediscovered that cutting edge Victorian technology, the boarding house. https://en.wikipedia.org/wiki/Boarding_house
Click "web" link below this thread title to open up Google search. Then follow the first link.
20-somethings are miserable enough already, no need to commoditize their misery.
http://www.theatlantic.com/international/archive/2012/10/ins...
It might seem bad, but Foxconn is actually one of the better choices for outsourcing in terms of working conditions. People in the US sometimes chose situations like that simply to send more money home.
PS: Or for the extreme version, hot bunking is still a thing for US subs. Where people on different shifts use the same bed. https://en.wikipedia.org/wiki/Hot_racking With more than one crew member assigned to a rack, it is possible that a crew member returning from a duty shift will lie down on a rack immediately after it is vacated by another crew member about to start a shift. The rack is therefore said to be "hot", that is, still warm from the vacating crew member's body heat. The term could also apply to individuals who get into the rack right off of duty without showering and smelling like a "hot" mess.
Could it be because software has a lower bar of entry, and with many young programmers starting work during college, right out of college, or dropping out entirely to start their own companies, there's less social development and growth than in other fields? In any case, having dorms be the solution to the housing crisis seems to fit with that college culture.
It's truly wonderful how the financial industry makes their money by inflating the price of things we need to live, through the mechanism of speculation, and then turns around to offer dystopian "solutions" like this.
I, for one, can't wait for a return to a more normal 2-3% fed funds rate. It'll give pensioners a chance at a reasonable retirement, and bring house prices down a bit, but we won't get it until the fed starts to see a bit of inflation.
As long as the locations can be reused for other housing, I'm perfectly happy to watch VCs invest money in the area. More housing stock is good. If investors make money, great. If they lose money, that's part of the risk. If the price point is wrong, the place will go belly up, someone will buy it out of bankruptcy and make a go of it at a lower price point.
SF will never have a shortage of young people in dire need of cheaper housing.
But it's a nightmare sharing with people who are strangers without some sort of authority to appeal to for noise / filth / shitty behaviour.
EDIT: seems people disagree. Well I've spent 2 years as a mature student living in that exact sort of housing in two different places. One with en-suite and one with shared bathroom.
Getting stuff clean and not having noise are constant irritations. Good luck getting the 6 friends sharing a dorm below you to keep the noise down.
From experience I would say a room + en-suite bathroom is the only way to stay sane.
The grind of the kitchen wears you down. Where I am now my roommate cleans his plate when he is preparing his next meal so there is always one dirty plate on the side in the kitchen. The stovetop always has bits of food on it.
One gets tired of saying "Can you not?" because it is petty and you become a pain in the ass.
I've stayed in plenty of hostels too. People there will leave what they can get away with but the occasional member of staff is enough to keep things in check.
I would be all for this kind of living arrangement if the "can you not" was externalised to an authority figure to whom you could complain anonymously.
I also sleep with foam earplugs in. Thank goodness for health and safety at work :) The noise isn't enough to warrant real complaint - just people living and having fun. I guess plenty of people live with that. My actual home is silent so when I'm on the road I notice the bustle.
Seriously VCs, what are you guys thinking? These poor kids.
[1] http://blog.sfgate.com/pender/2013/07/28/tim-drapers-boardin...
I suspect the graphic is really showing the ratio of "median rent in San Francisco" to "median income income in San Francisco for people aged 22-34", which is much less meaningful (though it does say something about how expensive housing is).
Does anyone have actual statistics on the percentage of income that young people pay on rent, i.e., "median ratio of rent to income for people aged 22-34 in San Francisco"?
Looks like StreetEasy agrees, putting the figure at 58.4% for all renters: http://streeteasy.com/blog/new-york-city-rent-affordability/
That means they have $750 a month for food, transportation, school loans, etc. If you don't have a car and your company provides weekday dinner and public transportation it's probably doable but clearly a terrible idea...
http://www.nytimes.com/2015/11/22/realestate/leasing-begins-...
That being said, both legalized weed and communal living are perfect examples of how counterculture ideas can become co-opted and corrupted by establishment greed.
As the old joke goes, "the two biggest things to come out of Berkeley are LSD and Unix. This is probably not a coincidence."
I take offense at this sentence. The author is criticizing co-living arrangements as if they were only for the young and poor, or the elderly who can't take care of themselves.
I think human connection is the key to happiness, and I hate the idea that a responsible adult must live alone, or only with their SO and family. I think living in a community can make life so much better. Whether that's a dorm at college, a retirement home, a coliving space in an expensive city, or an eco-friendly housing project where families live together and share common areas. They're all great. Don't bring in this ridiculous stigma against a new idea, when people living in the suburbs don't even know their own neighbors.
I've been seeing recent articles comparing the dying/aging VC scenes of Austin, Seattle, etc.
I just don't get why the head isn't being removed from the sand on this. It feels like when a founder gets funded their first concern is living expenses and food, not "how many people can I hire".
It's getting crazy, it's a race to the bottom it feels like.
I'm all for moving to a lower-cost area, but you can't deny the huge benefits that come from being near hundreds of funding sources and partners that SF/SV of today offers.
In time I believe innovation will follow the innovators (not the money guys) but that day isn't today.
I have to give it to VC's in the Bay Area. If anybody can take Soviet-style housing arrangements and sell them as "the next big thing", it's these guys.
I mean, it's terrible. But it is impressive.
Having lived in one, I don't recommend it.
Urban living means sense living. The best bet is to go for comfortable dense living.
I guess this is all a bit of a broken record but Tokyo has all the same potential problems as SF (Namely earthquakes), yet somehow has no housing shortage despite being denser. It's all a manmade issue.
Accepting this is acting as if there's no reasonable solution of just building normal apartments on more land. But of course that runs into social barriers.
... Terribly {im|op}pressive?
Although USSR had a lot of free space to build, I think new apartments made artificially scarce, especially with the start of the industrialization, when many people migrated from a villages to a cities.
People had to work many years at the same workplace in order to advance in a queue for a new private apartment.
There is plenty of room for suburban sprawl, but many cities desperately need an alternative to large houses and suburbs. I have provided it. You and others are not able to recognize it because it is actually a novel idea.
As many other commenters in this thread have indicated, this is not a new idea by any means. There are many examples of tiny units and condensed urban spaces all over the world, and they're not popular.
The units I portrayed are nothing like dorms and they are not apartments, so you probably didn't actually read it. Anyway it really doesn't matter what you think. Since this whole concept is in fact a new idea, it will be quite hard to market and easy for the average person such as yourself to dismiss.
If your site cannot explain the concept in an approachable way, saying "you're just too dumb to get it" isn't going to help. If you find that you have to say this to someone, it means that YOU'RE the person with the communication problem, not them. This is a very important principle to understand as you seek to gain traction for your concept. Instead of blaming people for their opinions, understand that this is a real, organic impression of the project and that it's likely representative of what at least some random segment of the population is going to think. You'd be wise to note the concerns and work toward addressing them.
I didn't read the full page word for word, no, but I did spend a good 3-4 minutes skimming it, and I watched the embedded video, which is much more than most people who come across a random website do. Please find a good mentor who can help you take criticism without being dismissive of a potential customer who is providing feedback.
You were never a potential customer.
I'm pretty lucky in hindsight to have landed that place, there really are not that many basic rentals like that available. Being able to live so cheaply really helped me accelerate my life situation (I wasn't even a student then and was literally starting from nothing).
If you click on "web" next to "flag" and "past", you'll be able to access an unpaywalled version of the article by clicking through the first link.
Clicking through to web doesn't work for me anymore. Even if I open in an incognito window, it won't let me read the whole thing.
http://www.wsj.com/articles/venture-capitals-answer-to-high-...
pm if you want to be CMO on this one
If you don't want it to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll only post civil, substantive comments in the future.