Tech’s Wealthy Enclaves Hurt the Country and Tech Itself
wired.com
wired.com
Even worse many even put people in large noisy factory-like rooms (open floor plans) where they commute to in the morning, so they can sit there and be distracted and unproductive, and then have them commute back at the evening.
There is a network effect as well, even if people work for companies which are remote, and they could move to a different state to be with family they won't, because most other companies are not fully remote so they stick to a tech hub just not to have to move again if they switch jobs.
You'd think Google, Facebook and Microsoft would lead the effort for working from home but that's not the case. If they switched you'd see very interesting side effects: areas of the country that are stagnating might revitalize, they'd be less traffic congestion, the whole IT work culture in US might change.
This is the aggravating concept of "face time" which is pushed onto engineers and people in areas who are not in direct sales or relationship roles.
It also harkens to the prioritization of Sales over Product.
At a prior job, a developer who worked with me had asked a director (non technical) why he couldn't work remotely more. He had been chastised in the past for it, despite the fact I could list his commits from our SVN. He was more productive at home, having removed commute and additional costs going to the office. This director could not provide a more ambiguous answer than "You work at the company so you should be visible here."
And then, like you said, the 3 companies provide a luxury campus for employees that are actually attractive. Any annoying little fledgling developer could get dismissed with a pseudo-falsehood "Google developers go in to the office every day - why can't you?"
Sort of. They still use open-plan offices (at least, to some degree; I can't know whether all 3 use them for all teams in all locations). All the free gourmet food and trendy furniture in the world can't increase productivity enough to make up for the effects of large open-plan offices.
But iirc a related study showed the relative effectiveness of voice or video communication, or once or twice a month face time holding back this trust erosion. So while complete remote work may actually have real detriments, it should be feasible to mitigate these drawbacks.
We ran a 130+ remote company, we found that even just meeting once a year in a big group meetup where half the company came every other year connected people so much for subsequent google hangout calls.
The first solution that comes to mind is to legislate that certain pieces of property must be the legal primary residence of the owner.
Developers of new buildings absolutely do not want rents to drop, because otherwise there would be no reason to develop the area. The cost of land is extremely high.
Overall, the total amount of housing increases which should drop prices.
Secondly, the Bay Area housing shortage is a phenomenon of hundreds of companies being located in the same area. No one company, even Google, could have that same impact on another metro area. You're only going to stand a chance of recreating the SFBA housing shortage (and it's a small chance) if the whole Bay Area market moves wholesale to a single new place.
SJ is over 3x the surface area of SF but has barely 20% more residents in that area. Imagine if they just doubled density --you'd allow for the absorption of an extra million residents. If they only upped the density by 50% they'd allow for over an extra 500,000 residents --that would alleviate the issue by itself.
There is so much poorly built stock from the 60s and 70s that it would not only renew the city but it would become the undisputed powerhouse of the bay area.
This is far and away not only an SFBA regional issue.
http://www.bizjournals.com/austin/news/2017/02/16/austins-ho...
Our problem with Austin has always been the city council artificially limiting development. We didn't allow 10k sq foot lots until last year which means we're JUST now starting to build those 3-4 story townhouses near downtown. If you go to Dallas or Houston they are all over the place and little neighborhoods will feel vastly more populated than they do in Austin. The unfortunate part of this is that now younger people who could afford these townhouses are pushed into tiny studio apartments downtown or into houses 12-20 miles away from downtown. There was no in between if you didn't have millions to spend but wanted to live in/near downtown like there is in Houston/Dallas currently.
A housing shortage is trivially easy to recreate; just stop building housing while trying to pack more and more people in the same space. An SFBA-grade housing shortage isn't that much harder then, you just need to convince a small handful of people on city and county boards to stop building housing, while trying to put more people in the same space. Sprinkle some income inequality that makes Rwanda look equitable and you've got a plot of dirt going for $200k in South San Francisco.
You could pack half the Bay Area's population into Santa Clara county if you made it as dense as San Francisco but there's not the will to go even that far, never mind somewhere actually dense. New York's not even all that dense in the scheme of things, but at that level of density, you could fit almost 36 million people into Santa Clara county alone, or the whole Bay Area, and then 3 more of them.
Hundreds of companies being located in the same area isn't the problem, the refusal to build more housing is.
There is no rational reason why Palo Alto should have detached houses with lawns, or Sausalito be a little town, except for terrible political decisions about land use and mass transit.
I am not sure I understand this solution. Are you saying that San Francisco's housing problems are not caused by demand that far outstrips supply? This proposal would just mean that prices stay high, but more people buy instead of rent.
Practical solutions that have a hope of actually taking effect within the next 2-3 years must be deployable without the aid of legislation. One way to mitigate speculators is to put up a credible threat that you (the company) wield the ability to unilaterally and virtually overnight make their speculation worthless. If you are able to structure a company town such that it is Google-level amenities and infrastructure attractive and physically entirely self-contained (even water sourcing, water treatment, energy generation, recycling/waste management, schools, parks, restaurants, and retail shops, etc., are part of the company town), then demonstrate the capability to move everything at a moment's notice within a month or two and leave behind just bare foundation ties, then after the first such move that bankrupts the speculators that call the company's bluff, future speculators will find it extraordinarily difficult to secure loans to speculate with.
Lots and lots of details I'm leaving out, and this wouldn't be without its problems and challenges, but if you really want to slice the Gordian Knot of high property prices inflating employee compensation, then it will take an outside-the-box action of this magnitude to do so.
That's already been tried -- unfortunately, it just moves the problem to the new place. Housing costs rise sharply following wherever you move the company. It's the same exact problem, moved to a new place and hurting new groups of people.
(See Portland, Seattle, Denver for examples)
Glancing at Denver, downtown 1 bedroom ~700 sq ft apartments seem to run ~$1500/mo. That's ~$500/mo cheaper than way out in the suburbs of SF; and in my experience at least $1000/mo cheaper than SF itself. And the Denver area has houses for less than $1M, so home ownership might even be an option, whereas in the Bay it's been rendered all but a pipe dream.
Once you include salaries in the inclusion, it could be worse than SF. For example, Michigan's urban apartments are already often more expensive than Seattle (when measured as percent of median income needed to cover average urban rents).
The sticker prices are vastly misleading because many folks get SF-level triple-figure salaries, and can pull those anywhere in the world. They can shop across entire housing markets. They see a $600k condo in say, Milwaukee, and think "wow, that would be so cheap (on my San Francisco salary)".
But 99% of regular people can't do any of that, they have to afford local housing using local wages. And regular people still need housing just as much as developers do. A $600k house might as well cost 6-million dollars, because they are both equally impossible to ever afford for a regular person.
> If they don't, assuming that the pay also doesn't drop too much, then it might be worth it for some individuals, no?
For a few individuals, yes absolutely. When we promote this idea of "fix housing affordability by spreading the problem everywhere", we do alleviate a little bit of pain for technology workers and give them a shot of home ownership (which is great).
But we do this at the expense of permanently hurting housing availability for a huge swath of other people -- something vitally important, but often gets overlooked when people talk about housing by hyper-focusing on just San Francisco's problem, and ignoring the crisis happening in all of the other cities nationwide.
Intel relocated a lot of their engineering to Portland (well, Hillsboro) a few decades ago. The strategy seems to have worked for the most part. Housing only got really expensive here in the last 5-6 years with the latest tech bubble out of SFBA.
On the flip side, I can think of two success stories. I'm a Pittsburgh native, and my family is still there. The influence of CMU has long been beneficial to the region. The recent fight for AI talent by the likes of Google and Uber have been a source of pride for Pittsburghers generally (though I'm sure folks in academia have concerns) when things like the Uber self-driving experiment launch on their roads first. My grandmother - who has never been on the internet - called me when she read it in the newspaper.
After undergrad, I worked for a large tech company that put an outpost in the Detroit area. There had been rumors this company may leave town (which did not happen), and the local papers and city were deeply disappointed at this possibility. When they ultimately announced they were actually expanding their office, it was considered a big win in the media.
So yeah, this is a very different cultural and economic experience than my current one in the Bay Area. I do agree with you though -- going into cities with competitive housing markets and trendiness probably just puts you on a crash course to similar problems in your new locale.
Fortunately, there are a lot more cities in America that do not have those issues and actively seek business development.
Remote on-shore side-steps a lot of these differences, plus time zone is not as much of an issue. If the team speaks the same language well and shares basic norms, as well as has shared company culture understanding, management becomes less of an issue (less management and more autonomy is better in my experience).
KCMO is cheap but that rate is absurd.
No private parking, if that helps?
(I'm very familiar with the St. Louis rental market. My last one-bedroom in Tower Grove South (for those familiar with the area) was $625/mo. It was a decent apartment, too.)
In general, a major way to fix the economy is to find and fix market inefficiencies which interfere with wealth creation.
The rent-seeking benefits the wealthy landlords such as President Trump at the expense of renters and those who wish to purchase homes. Meanwhile it harms the economy (as market failures do) by taking income that should go towards construction of new housing and also to buy goods and services to give wealthy landowners far more income they would earn in a market without market failures.
The fix is a simple one which is to remove these zoning law restrictions that benefit wealthy landowners.
One solution which was implemented in Japan was passed in 2002 to remove zoning density restrictions from local authority making the federal Japanese government in control. The results: In 2014 140,000 housing units were built in Tokyo, vs. about 20,000 for NYC or about 90,000 for all of California.
We need to lobby for a solution like that used in Japan. That will significantly stimulate the economy while helping to deal with a major cause of inequality.
See writings of Harvard Economist Edward Glaeser or Economist and Financial Times columnist Tim Harford (book, "The Undercover Economist"). Also read about "Green Belts."
You sure about that? There's no shortage of people willing to move to SV or NYC to fill up all that extra housing.
Funny how the same people that argue widening highways will have no effect because "more cars will just come along to fill it up" think additional housing supply won't similarly get filled up.
Tokyo's Affordable Housing Strategy: Build, Build, Build https://www.forbes.com/sites/scottbeyer/2016/08/12/tokyos-af...
What Liberals Don't Get About Affordable Housing: Filtering https://www.forbes.com/sites/scottbeyer/2016/02/19/what-libe...
While zoning doesn't help the problem, it's not the only factor (or even, the biggest factor). Look to the Midwest, where there's absolutely no rules or restrictions on construction of any kind, and plenty of free land or under-used land at cheaper prices, but urban apartments are still $1500-$2000+/month and there's still a housing affordability crisis.
It turns out, if you give away a permanent "YIMBY" attitude, developers won't commoditize themselves, and they won't build enough to meet demand, because it's still more profitable to constrain supply and rent-seek. If there wasn't an artificial scarcity problem already in place, developers would create their own artificial scarcity problem, to preserve their high rents.
Fixing zoning is a great idea, but fixing zoning alone won't decrease house costs for any but the priciest of properties. You won't get a Tokyo-style housing market by just fixing zoning.
Just curious if you read the articles referenced, for they mention large US cities where the prices have not increased because they don't have the zoning density restrictions.
Harvard Economist Edward Glaeser: http://www.nydailynews.com/opinion/build-big-bill-article-1....
With all due respect to you and the economists, "developers under-building to preserve high housing costs" is an ongoing event I'm witnessing live. The opinions of skilled economists is valuable, but I can't value their opinion higher than events I'm actually living through, witnessing in my own life on a daily basis.
> Just curious if you read the articles referenced, for they mention large US cities where the prices have not increased because they don't have the zoning density restrictions.
Your article mentions Atlanta and Houston, two cities which are cheap because of their vast suburban sprawl. Which I agree does lower prices, sprawl is great for keeping costs low. (I can only afford housing myself due to suburban sprawl).
But it is decidedly not urban, and the sprawl development model carries with it lots of bad side effects -- too many to list here. And I'm aware that these cities aren't entirely sprawl, but looking at Zillow listings, the areas of Atlanta and Houston dense enough to be considered 'urban' are almost entirely areas where housing isn't affordable at all.
---
It sounds like you might be very focused on NYC's housing problem. And, in NYC, zoning might be the biggest holdup to housing solutions (it is in SF). But affordable housing isn't just a problem in NYC, it's a problem in 99% of America's urban environments.
Atlanta and Houston, for example, both have affordable housing problems right now too, despite having the zoning changes your advocating for. (I live in the Midwest, which like Atlanta and Houston, has most of the zoning changes you advocate for already in place, but is still unaffordable).
That's why I continue to say that zoning alone isn't the fix for this problem.
True. That's why publicly-owned mass construction needs to be a thing.
Agree 100%. I would support a "public housing option" in a heartbeat.
If a developer can make a profit, I don't see why some enterprising firm wouldn't go ahead and do the construction -- if not incumbents then developers who are new to that market.
Again, this was already done years ago in multiple different cities and hasn't worked. (As you already mentioned yourself).
But sure, do a few more. I'm not against it, It just won't fix the problem alone.
> If a developer can make a profit, I don't see why some enterprising firm wouldn't go ahead and do the construction
If the empty / unused property appreciates in value more than the profit from construction would provide, then the housing won't get built. If the needs are greater for housing, but the profit is greater in other uses (like retail or tourism) then the housing won't get built.
This is a big reason why "filtering" doesn't happen in housing, but does for other things like automobiles. Developers can often make more money misusing property than using it. Eliminating zoning actually makes that problem slightly worse by incentivizing developers to speculate like this on even greater portions of every city.
I don't recall mentioning that it hadn't worked, precisely because the rent-seeking, market failure, zoning density restrictions are in place.
We need to remove them, at the federal level as Japan has done, if necessary.
It may be that the money of wealthy landowners is just too much to fix the problem at the local level and that federal action as in Japan may be necessary.
Because what your statement is missing is "still a housing affordability crisis for more desirable locations with decent commutes, lower crime, etc."
Rents are still relatively cheap in neighborhoods with lots of violent crime. Rents are likewise relatively cheap when you get far enough out to be an hour or two by train.
Safer urban centers where jobs are located will always have higher prices than locations without jobs.
That's right, for all the talk of disruption, innovation, and progressive thinking, the broad outlines of the economic structure of California IT is something that Hillaire Belloc or G.K. Chesterton would've recognized a hundred years ago.
The posted article and the comments in this thread make allusions to President Trump, so allow me to further scare you with this scenario.
Hillary Clinton won the popular vote by ~2.7 million votes in the previous national election, but she won the state of California by 4 million votes. So the entirety of Clinton's lead came from California. Imagine how the Trump administration must think of "the Left Coast." Do you doubt that men like Bannon, Pence, and Sessions have plans for California? Or are trying to get ideas for plans?
Put yourself in their shoes. "How can we divide and conquer California's most important power centers? Hmmm. The H-1B thing got us some votes. Yeah. What else can we do to set those nerds against each other? Hey, there's the fact that tech workers can barely afford rent even when they earn six figures. Let's see…"
Don't forget. Donald Trump is/was a real estate developer. His grasp of issues such as affordable housing must be non-trivial. It's his bread & butter, after all. He made his pile in New York City real estate; not an easy venue. Think of what he could do to the Bay Area with the talent and knowledge earned from that front (plus the incidental help of a few executive orders).
The housing situation in tech centers must be dealt with. If we nerds don't do it, then President Trump will do it for us.
EDIT: Upon re-reading, I see that my tone may seem a little snarky. I apologize. I've given this problem a little thought and I needed to vent.
Conservatives hate liberals far more than we dislike them. I think there is revenge on their minds, for sure. I have no idea in what form it will take, but I'm pretty sure it's being plotted.
Rents and housing prices in the Bay Area are insane and unless something is done, it will cause serious ripples in society and serious unintended consequences.
You know, I've seen conservatives making the opposite claim a lot lately too. Maybe (hopefully) neither side really hates the other nearly as much as you both like to imagine.
People need to chill the hell out.
I know my opinion is not popular here, but it sure seems to align with what happened in the last year.
(Not to say that there's total equivalency between positions, I do actually think one is much less empathetic than the other and centrism isn't automatically smart, but it's been interesting to notice.)
FYI, Massachusetts, Maryland, and Vermont (together...CA is a big state) have the same numbers.
Company culture will get more accepting of remote work and workers will be able to choose where they want to live. Eventually the demand for housing will drop to ordinary levels. Political initiatives will be dreamed up, but most won't have any effect.
Fundamentally, the real estate and job markets aren't broken, they're just responding to extreme circumstances. When markets work they tend to solve problems like these on their own. The situation just propped up overnight, relatively speaking, so it's taking awhile
Facets of the tech job market bring a huge influx of tech workers to the SF bay area, perhaps the workers would rather live somewhere else, but they make the choice to work in SF. No political constraints here, just people's power to choose at work.
The job market right now has a culture that keeps workers close to the companies, but that culture is malleable, and the thing that shapes culture the most is economic incentive. Other tech companies relocate, AmaGooFaceSoft's employees express a preference for escaping the Bay area, and eventually the incentives that created Silicon Valley will reverse.
The reality is the tech industry has gotten too big for SV.
Yes.
Off the top of my head...
- The weather
- Stunning beaches, world-class skiing, hiking/camping, wine tasting, and more all within a couple hours drive
- Incredibly liberal
- A plethora of amazing food options representing pretty much every cuisine in existence
- Easy transit to Asian countries and that half of the world
- Strong concentration of tech jobs, giving employees leverage and reduced risk even in a down market
Rent alone is not always a factor, and there are often many sound reasons for the differences in housing and demand.
however, this belies the point that led to many citizens relocating to these areas to begin with: the quality of life is better and the people aren't as closed-minded.
i am from the US South and grew up with extreme racism and intolerance.
there are still people in this country that think it would be OK to lynch me. that doesn't happen in the city where i live in California.
*in ways that I care about.
FTFY
The "tech industry" needs to divorce itself it's cultural baggage if it wants to decentralize.
Because jobs, obviously.
Talk to any politician or civic leader from a place like central Maine and all they can talk about is "good jobs". In the 21st century, good jobs are tech jobs, at least using an expansive definition of "tech" that encompass modern manufacturing (heavily digitized), modern healthcare (heavily digitized), etc.
> They can look to SoCal, Massaschusetts and see that that sort of society is not compatible with their values.
As rural counties continue to sink further into social decay, this excuse is wearing thin. There's practically no measure of social health where they aren't worse than wealthy liberal cities -- divorce, suicide, crime, teen pregnancy, drug abuse, lifespan, welfare dependency.
The best way to help out these communities is with tax dollars. Seriously.
For example,
* underinvesting in schools = poor employees.
* underinvesting in broadband = poor communication structure
* underinvesting in healthcare = lots of sick days.
* underinvesting in transportation = requires smart workers have enough money to buy a vehicle to get to the job.
* underinvesting in children's daycare = forces parents to turn down jobs
Yes it is nice to talk about private enterprise - however, only governments can drop hundreds of millions into the basic social / infrastructure that is needed to make it possible for a business to be successful.
https://www.theguardian.com/commentisfree/2016/jul/19/reveng...
Why does this virtuous circle (generally speaking, your point about wealth distribution stands) only happen in liberal states?
They are in different lines of business.
Yes, Wyoming has as much clout in the Senate as CA. And Wyoming, North and South Dakota have as much as CA, NY and MA and still we're crushing it that bad.
Perhaps the problem, such as it is, can be restated as instead of what are we doing wrong (that allows us to crush it so bad) to what are we doing right (that allows us to crush it so bad that talented people and money want to come here from all over the world). They can of course, take their talents and Bitcoins to WY, ND and SD. It's a free country.