The spectre haunting San Francisco | Hacker News Reader

The spectre haunting San Francisco

economist.com

76 pointsmjohn78 comments

I find it strange that the protesters target tech workers. The real class war seems NIMBY-supported landlords vs everyone else, not crappy-paid vs well-paid workforce. But well, I'm not even in US so what do I know.

It's because mob psychology chooses targets based on visible availability. A Google employee boarding a special bus is visible - literally - in a way that his landlord is not. The reason mob psychology behaves that way in turn is because the coordination mechanisms used are very basic; thus, while individual members of the mob may be as intelligent as you or I, the mob as a collective entity necessarily behaves as though its intelligence were much more limited.

What to do about it?

At an individual level, if you're being targeted, say if you're on the receiving end of hostility from your neighbors, try talking to them, present yourself as a human being rather than a target. Read up on nonviolent communication. Explain what the real problem is.

At a collective level, fight fire with fire. Make the correct targets more visible. Find out the names, addresses and faces of individual landowners who have been primarily responsible for the political corruption. Publish them. Make them targets.

Or else get out of San Francisco. Seriously, tech workers have more intrinsic mobility than nearly anyone else does. Google could just decide to move its operations to a friendlier city tomorrow, and its net cost for doing so would be negative. If your startup has to be in San Francisco for the moment while you're raising capital, plan on getting out as soon as you have done so.

But don't move to San Francisco unless you are willing to get into the political fight; as things currently stand, that's like stepping into a boxing ring and then standing there with your eyes closed. You're just setting yourself up as a target.

Finding a usefull scapgoat to blame is a very common tactic by the 1% look at how beneift cliamants are demonised in the UK and simarly the scare stories the tabloids run about how polish plumbers cause cancer, killed lady diana eat swans and so on.

Nerds are trivial to beat up for their lunch money. Sad, but still true.

Inequality in the United States doesn't have to do with capital accumulation and wealth, at least not yet.

It has more to do with income inequality and a larger share of total income going to the very highest earners. The key driver of this upward distribution of income has been the steep rise in executive compensation.

The United States also redistributes far less through taxes than Europe. This leads to a wide gap between the very highest earners—those in the top 1.0% or even top 0.1%—and everyone else, including other high-wage earners.

But they are not going after the executives are they FWIW a bart train driver makes as much as a googler and after overtime probaly more.

I've seen the salaries of BART train drivers and I'm pretty sure you're wrong. That or Googlers don't make as much as I thought.

Either way I'm not buying this statement until I see some actual numbers.

Many Bart drivers appear to be making around $110k http://www.mercurynews.com/salaries/bay-area?Entity=Bay%20Ar... and Google apparently pays an average base salary of ~$125k, and Microsoft at an average of ~$100k.

http://www.businessinsider.com/the-worlds-highest-paid-softw...

As lotsofmangos has found average is 110k plus OT and a much better FS pension.

And in the UK Tube Drivers basic is £60k (plus OT Plus FS pension ) average dev salary in london is £50k (and that includes a lot of high paid city it types)

I don't have your numbers, but when you get them, remember that with government workers like BART employees, there's categorically more non-salary compensation - things like defined-benefit pension plans instead of 401(k) contributions getting deducted from your paycheck. Likewise the health-care plans.

This is all on top of some of the best job security in the world, too.

As of last strike (mid-2013) the average BART worker make around $130,000 including benefits but not including overtime. Including overtime one train operator made $175,000. And both these number are likely to underestimate future pension and medical costs.

http://www.bizjournals.com/sanfrancisco/blog/2013/07/are-bar...

Considering that, my guess is that the drivers are unionized and that it is really, really hard job to get, possibly harder than getting a job as a Google engineer (although for completely different reasons).

Its a valid target for the protestors. The tech workers have sufficient funds to become part of the existing class that supports the restrictions. Since they can't do anything about those already here they merely target those who increase the problem. The downward pressure increases as more and more people with the ability to pay the high rates move in causing prices to move up.

Face it, the protestors have a point. I have watched postings on this very site deride the suburb gated community members yet they turn around and defend the same if the setting is city based. Guarded/gated/etc condos/apartments are all fine, zoning rules forcing many to go to the suburbs to afford housing are fine, but damn if picking on techies living in the city who simple increase the problem is.

As before, they don't want YOU or THEM as neighbors so they will invent all sorts of politically correct sounding terms to insure that outcome.

There are times where it really makes sense to take zoning authority away from cities, especially when costs are demonstrably affected.

Gated suburbs are themselves NIMBY types that seek to exclude certain classes of people through politics and restrictive land use policies. Rich tech workers are generally not like this.

The secured condo building reflects the economic reality that land is expensive in San Francisco, and that housing requires security unless you like needles on the doorstep and bums pooping in your side alley. This is not hyperbole: housing in San Francisco carries a significant alley-pooping-bum risk. The only exclusion involved is a result of economic reality, and there is no way around it: someone has to be excluded from San Francisco, and you won't fix that situation by not building houses and not providing convenient transportation. That will just exclude more people. Which I think is what the protestors actually want (so long as the "right" people are excluded), but they haven't really pondered whether they are doing the right thing to achieve their distasteful ends; making them morally questionable and economically wrong.

Yes, the secured condo building is a symbol of wealth and exclusivity, just like the gated community, but to declare that these two things are essentially similar is a serious misunderstanding of the situation, probably motivated by a rich-vs-poor sort of thinking.

> The secured condo building reflects the economic reality that land is expensive in San Francisco, and that housing requires security unless you like needles on the doorstep and bums pooping in your side alley. This is not hyperbole: housing in San Francisco carries a significant alley-pooping-bum risk.

So the reason people need secured condo enclaves is to avoid people of a different class.

> The only exclusion involved is a result of economic reality, and there is no way around it: someone has to be excluded from San Francisco, and you won't fix that situation by not building houses and not providing convenient transportation.

Someone has to be excluded, it must certainly not be those new high paid workers colonizing the area!

> Which I think is what the protestors actually want (so long as the "right" people are excluded), but they haven't really pondered whether they are doing the right thing to achieve their distasteful ends; making them morally questionable and economically wrong.

Of course, these people are protesting for their right to exclude the rich because they are mean. Losing their homes, being priced out of where they grew up, and being unable to access the new tech wealth has nothing to do with it, these protesters are just spiteful.

> Yes, the secured condo building is a symbol of wealth and exclusivity, just like the gated community, but to declare that these two things are essentially similar is a serious misunderstanding of the situation, probably motivated by a rich-vs-poor sort of thinking.

When people of a higher class mobility move to a location and erect barriers physical and economic to prevent "undesireables" from living or existing there, its the same phenomenon regardless of building type.

> So the reason people need secured condo enclaves is to avoid people of a different class.

Well, I guess if you put it that way, yeah: the class that leaves human waste in your alley-ways and might break into your home to steal your laptop. Everyone excludes them if they're in your neighborhood. There are plenty of historic iron bars on the windows of historic homes in San Francisco.

Are there locks on your door?

That is the same argument the dockers used when they marched for Enoch Powell against black emigrants in the UK back in the 60's think about what your saying this is like saying well the KK have a point about these uppity <ethnic slur>

I agree with you. The First Estate (landlords, investors and executives, paid enough to own houses) has been dicking over the Second Estate (engineers, able to live in SF but not save or buy houses) through no-poach agreements, collusive arrangements (note-sharing among VCs) blocking them from starting new businesses, and increasingly mean-spirited HR policies (stack ranking). The Third Estate (everyone else) is being evicted and abused by the rent-seeking First Estate.

Somehow, the First Estate managed to convince the Third Estate that it's the Second Estate's fault, hence the bus attacks. It's not. I'm not so out-of-touch that I'd call $120,000 per year, in any city, "poor" because it's not; but neither is it "rich" and these tech workers are not responsible for this NIMBY nonsense.

A similar situation is behind the Economist existing, as about 200 years ago in the UK they had a strange setup with land owning aristocrats, free market industrialists, and proto-communist "Chartists". The aristocrats found unlikely allies in the Chartists, though it didn't help in the long run.

The free market types were concerned about the Corn Laws, and formed the https://en.wikipedia.org/wiki/Anti-Corn_Law_League , and their journal ended up becoming the Economist. The Corn Laws effectively subsidised the aristocracy, and prevented free labour movement, first by keeping cost of living too high (through cost of food) secondly by keeping people working on otherwise unviable farms to produce corn. The Chartists were so preoccupied with the idea that the industrialists wanted to drive wages down they missed the bigger picture.

This seems to always be the case - people turn on neighboring socioeconomic classes, not the ones at the extreme top of the pyramid. During the Jim Crow era, the worst discrimination against blacks came not from the elite (many of whom had been abolitionists during slavery and equality-minded liberals afterwards), but from poor white sharecroppers who were one degree removed from slavery themselves. Nowadays, the conservative movement within the U.S. is composed of the ultra-wealthy plus the lower-middle-class and working-class Religious Right. The targets of the LA race riots were not rich white people, but Korean shopkeepers in minority neighborhoods.

I suspect it's because it's generally impossible to "skip" social classes and jump directly from the bottom to the top. Even rags-to-riches stories usually involved a period of a few decades where the person enters and assimilates into the intervening classes. Jan Koum went from immigrant to middle-class tech worker to aspiring entrepreneur to multi-billionaire. Henry Ford went from farmer to machinist to engineer to captain of industry. Andrew Carnegie went from immigrant to bobbin boy to telegraph operator to bookkeeper & investor to steel magnate.

As a result, each class views the class directly above them as their impediment to upwards mobility, and they're not wrong in that belief. In times of scarcity, resentment usually flows upwards to their immediate neighbors. The more distant causes of the socioeconomic structures that hold people down are effectively invisible to the rioting classes; all they see is people who are not very different from themselves doing better than them.

All salaries should just be spoken of with respect to their purchasing power, not qty of dollars per year.

A 120k salary in sf has the same purchasing power of a 50k salary in other states (according to some studies from a few years ago, and id suspect it has gotten worse)

The annual income required just to afford a monthly rent in SF is insane. Assuming that many 1bed apts are ~3,000 per month, youd need to make north of 50k just to cover the rent - let alone all other living expenses...

yeh i am loking at a well paid job in london uk and I will still end up geting paid a lot less than a tube driver does and a much worse pension.

Btw I am not saying that tube divers dont deserve thier sallary just pointing out how poorly techies are treated in the UK

> Somehow, the First Estate managed to convince the Third Estate that it's the Second Estate's fault, hence the bus attacks. It's not.

Tech workers most certainly share some blame. When you accept work with those companies and move out to the valley, you are contributing to the culture of evictions and hyper gentrification that affect that area. You don't get to wash your hands clean.

I don't think I can be held accountable for the higher order consequences of my normal, everyday decisions. Researching the complex interactions of a local economy and deciding to disincentivize things by not moving there? Not buying the yoghurt from a food corporation that's 'evil' in one category, yet trying to be exemplary in another?

I that doesn't work morally, nor practically.

Whether you want to be accountable or not, you are to a certain degree complicit in those things if you choose to pursue them. Obviously systemic issues are hard to deal with as an individual, but nobody should have blinders on about what exactly is going on when they move, when they take a new job, or when they consume a product.

The question is the size of the degree of complicity. That degree, for a salaried tech-worker, is really fucking tiny. There is no alternative choice he could make that would have visibly better consequences, nor would there be any power in an attempt to have tech-workers in general boycott living in overly-expensive metros (since there are no nongentrifying metros with tech jobs).

On a bit of additional thought, the best move anyone could make in that position would be to seek a tech job in a metro area or municipality that has pro-proletarian housing/development policies, and to try to effect such policies in general.

Paying more for something than someone else isn't a moral dilemma, even when it is housing. A renter just doesn't have ownership rights when it comes to rising prices.

If you got a job driving the Bart and moved there you would be getting about the same as an engineering start wage at google. Are Bart drivers also to blame, given the wages are similar? And if not, why not?

I wouldn't say "blame", because blame carries a whiff of malfeasance that just isn't there.

But "cause"? I do see a different cause, mainly because of scale. Dental Hygienists earn about as much as software developers in SF (about 106k vs 110k a year, according to use news best jobs). But do Dental Hygienists displace people to the same extent? Of course not. Dental practices, which draw most of their business from the local population, just can't create enough six figure DH jobs to displace the population they serve.

Tech, on the other hand, sells outside the region. Not sure what Facebook's SF-based revenue is as a percentage of total, but it's got to be minuscule compared to a dental practice.

Tech workers may not earn much more (median) than nurses or DH's, but they can exist in vastly, vastly larger numbers in a particular region. This can cause large scale displacement that other low six figure jobs can't cause.

Where should the companies relocate then?

And why should other cities act differently to San-Francisco?

And if other cities do act differently to San-Francisco and expand and take on these new people, then why isn't San-Francisco also able to do this in the first place?

You seem to think they have a choice. Most tech workers don't want to live in the Bay Area. They're forced to live there because their careers require it.

VC is a feudalistic, oligarchic reputation economy, concentrated in a tiny (now congested and overpriced) geographic area. Since they're not content to be passive investors (although their portfolios would perform better than they were) but want to actively manage, they only fund companies within 30 miles of them.

Tech workers don't have much of a choice. If you want to have a career in this game, you have to live where the jobs are.

While agree about VC being feudalistic and oligarchic, that doesn't mean tech workers don't have choice in where the work to some degree. There are many kinds of software development for many different companies in different locations, not to mention remote work. If you choose to pursue an opportunity in the valley, that has very real consequences and realities and that should be fully examined, and that includes knowing that you may be contributing to displacement and gentrification.

EDIT: For the record, I've been a tech worker for a while and have never lived in California (except when I was a wee child).

I worked for 7 years in NYC, considered the #2 tech hub. (Obviously, there's a huge gap between #1 and #2.) I'd almost certainly be an angel investor by now if I spent that time in SV. People about as talented as I am (and, some, significantly less) are now EIRs and partners at reputable VC firms, or even able to found. Place matters.

I'm not poor, but I'm not where I should be, and probably not where I would be if I'd started in SF. (Why I chose NYC would take too long to explain. It's not relevant.)

Once you have a national reputation and can get $250+ per hour consulting rates, you can live whereever you want. It takes a while to get there. Most people have to put in their decade in a congested, expensive, and not very pleasant region of the country before getting there (and some never do).

As for remote work, it has the same issues. If you have a national reputation already, you can get away with it. Most places, remote workers don't really advance their careers and are the first ones axed.

If your goal is to assimilate into certain wealth classes, then it probably doesn't matter to you about the socioeconomic conditions of people you displace or how a city changes as people like yourself pursue that wealth. I those things do matter to you, I would expect that you'd be highly critical of VCs and investing culture.

> Once you have a national reputation and can get $250+ per hour consulting rates, you can live whereever you want. It takes a while to get there. Most people have to put in their decade in a congested, expensive, and not very pleasant region of the country before getting there (and some never do).

> As for remote work, it has the same issues. If you have a national reputation already, you can get away with it. Most places, remote workers don't really advance their careers and are the first ones axed.

For what it's worth, I started my career in NYC in a really depressed market and made peanuts for my work as a software dev. I command nowhere near that kind of money now nor do I want to, but I'm paid very well compared to many friends and people in NYC and I have no trouble surviving gentrification effects on rent. But that survival is a privileged, I've seen tons of people driven out of the city because their skills and credentials are not valued by business. To that end, I am highly privileged, I don't have to flee because I'm part of a career class that is riding high right now.

This article's position in this part strikes me as mostly rubbish:

... Housing affordability activists like to point out that most new construction is for luxury housing, meaning that supply of non-luxury units is not growing by very much. Others love to say that price declines have historically gone hand in hand with falling construction.

These arguments are both nonsense. The latter point gets causation the wrong way around; given an unexpected decline in demand due to financial crisis or other shocks prices fall and interest in new construction dries up until existing inventories are cleared. The former point misses the fundamental fungibility of housing. When new construction of luxury units lags, the very rich buy up older housing stock at exorbitant prices and pay to have them redone. You see this in London, for instance, where literally every house in the city is now being rehabilitated, including those that were rehabilitated last year. Residents have to actively shoo away the builders trying to erect scaffolding, on the assumption that the owners will be wanting an extra floor or two on their house. It is a headache. There is a team of wildcat subcontractors digging us a new wine cellar as we speak. The point is that if demand for high-end housing is not satisfied with new construction, that demand will flow to existing supply, putting upward pressure on prices right across the housing stock.

Yes the rich will buy older housing stock if they build new affordable housing rather than luxury housing but the affordable housing should be higher density producing more homes on the same land so there will still be affordable houses freed up even when the rich have displaced others into them.

Im no economist, but ive observed two things in SF; there are a ton of new, high-end high-rise apartment buildings being built in SF right now. (See all the cranes)

These will have high rents to pay for their high construction costs.

All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces.

The rents in SF right now are absolutely insane.

> All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces.

Don't be absurd. Owners are already well aware of the fact that there are rich Google engineers beating a path to their door, and are glad to charge said engineers as much as they think they can get away with. Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock.

History disagrees with your theory. I moved back to the bay area in 1997. There have been thousands upon thousands of new homes and apartments built since then. I have yet to see one drop in rental prices.

Your statement only looks good on paper.

If there are thousands of units built, but demand increases by tens of thousands, prices are not going to go down.

NYC is building at a much faster pace than SF, but according to the census on the order of 300,000 people moved into the city between 2010 and 2013. That is exerting huge demand pressure on prices even with the new buildings going up. The only way for prices to go down would have been adding housing stock for more than that increase - which didn't happen.

Maybe you missed it but rents dropped in the early 2000s when demand decreased after the first internet bubble popped and were flat in the mid-2000s.

That is because even as supply rises, demand continues to increase above supply.

EXACTLY my point. Which invalidates FennecFox's comment where he said:

"Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock."

No, that's not your point, or at least it wasn't. Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false. High rents cause construction, not the other way around. The thing that makes San Francisco more expensive is advertising revenue collected by Google and Facebook or whoever, paid to software engineers and then to landlords.

Add something making it a lot more expensive and something making it a little cheaper, and you still get "quite a bit more expensive", go figure. Apparently I need to spell that out! Truly this thread is a bastion of intellectual excellence.

"Your original point was that adding housing would make renting in San Francisco more expensive. That point remains false."

No, it does not. Look at the actual cost of rents in SF over time.

You're arguing that adding these properties is causing competition and in addition, "google engineers" could migrate from housing in the mission to these new luxury condos, thus freeing up the mission places for (presumably lower rent/income) others...

I gaurantee you this will not happen.

Assume that some googler DOES move out from their vitorian apt in the mission to a glass tower near twitter... their new rent will be higher than what they paid in mission - and the apt they left will charge a higher rent (or possibly equal) to what they paid.

My landlord has 85 properties she owns and rents. She speak of the $3,300 single-room rents she is getting in SF with glee.

> Assume that some googler DOES move out from their vitorian apt in the mission to a glass tower near twitter... their new rent will be higher than what they paid in mission

And when a thousand Google engineers move out of the Victorians into the new glass high-rise, there will be a thousand vacancies, and a thousand fewer engineers on the open-house circuit trying to outbid each other in the negotiations. (New Google engineers can also just move to the glass apartments straight away for an approximately-equivalent effect). This isn't that hard to reason about, honestly.

You ARE probably right about the place they leave charging higher rent than it used to be. On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P

On the other hand, you're a fool if you think that the sweetheart deal that the established Google engineer enjoys (almost certainly as a result of city rental ordinances) will be an ounce of comfort or of any material benefit to the next person who needs to find an apartment, engineer or no. Believe it or not, landlords don't lower their asking price for an open apartment just because the guy who moved in downstairs five years ago is paying peanuts. :P

I am pretty sure you are confused as to what you believe my point to be, considering you just restated what I have been saying.

Rents in SF will keep going up until another bubble bursts.

Okay. I see you technically have a point, and maybe I should be stupidly pedantic again:

You know the numbers that show up on Craigslist when you search for a given set of apartment configurations in any one particular neighborhood? New housing, even luxury housing, will cause these numbers to go down and not up. These numbers are also what most people are talking about when they talk about "the rent is too damned high" and that's also the number that everyone in the market for a rental actually cares about.

Yes, rents will almost certainly keep going up, that's true, because the new construction in San Francisco is pathetically small. But prices for a new rental of each and every extant apartment will be lower than they would if there were no new construction at all (or if there was negative construction).

A lot of that new construction is for more office space. This city generally values creating more room for jobs than housing and that only makes the problem worse since the people filling those new work spaces are going to be looking to live near work.

Reading the article, I just kept asking myself whether San Francisco really needs more people. Despite all of the talk of economics and regulation, it isn't so bad when people develop new hubs when a hub like San Francisco becomes saturated. Maybe its better to have more of them than a megapolis.

Bah. San Francisco is an inanimate geographical region. It has no needs, and inanimate objects hate it when you anthropomorphize them.

Instead of asking "does san francisco need more people" let's put actual actors into these decisions. Would it be beneficial to the set of individuals currently residing in San Francisco to have more housing stock in San Francisco? Would it be beneficial to others in the Bay Area, or to humanity at large?

The answers to these questions may be different. Indeed, that is sort of the premise of the article: existing residents benefit greatly from the various restrictions on building, to the detriment of all others. :P

That is what I meant. The anthropomorphism was a shorthand. :)

I disagree, but if that's how it's going to be, then let it be done by immigration quota. If something isn't actually going to be a free market, it is better to be honest about that. A pretend free market is the worst of both worlds.

As much as I believe in free markets, I think zoning is useful thing. I live in South Florida and we have a couple of areas with very little zoning. They are funky and great to live in now, but eventually they will gentrify. On the other hand, there are heavily zoned areas don't have the sort of quirk I love and never will. The sweet spot is hard to achieve with or without zoning.

I think that if zoning was pulled completely from San Francisco it would turn into a glass and metal city within 20 years - something as (to me) monstrous as Canary Wharf in London. I'd hate to see that happen.

For what it's worth, I used to be rather libertarian until I realized that ultimately there's a market in governance too: http://en.wikipedia.org/wiki/Schr%C3%B6dinger's_Cat_Trilogy#...

It's nice when there's enough diversity for people to pick the sort of place they want to live in, zoned or not zoned.

The world population is growing. People have to live somewhere and one place stopping growth locally just means twice the problem somewhere else.

It's just planting new saplings instead of overgrowing a tree.

Do that and they will merge into low density sprawl with no space left unpaved. We desperately need to build up.

Census Bureau: 94.6 Percent of U.S. Is Rural Open Space http://news.heartland.org/newspaper-article/2003/07/01/censu...

I'm baffled as to how an article at the Economist somehow got through that many words without mentioning that land isn't entirely a "market" good - barring some pretty major civil engineering, increased demand for land in SF isn't going to make more land come on the market...

They address that directly:

Housing is not really like that. There are cheaper or more expensive ways to build homes, but in the cities facing these crises construction costs constitute a relatively small portion of the expense of housing. The rest is rent.

You could easily fit twice as many people in SF if zoning codes allowed Brooklyn levels of density. And with Manhattan levels of density you could fit many more still. It's not land that's the limiting factor but the right to build.

Seeing as San Francisco is already more dense than Brooklyn, I question that. However you could over 3 million people in San Francisco if you built up to Manhattan levels of density. That would be impressive.

San Francisco's density is 17,867/sq mi (6,898/km2).

Brooklyn's density is 14,182/km2 (36,732/sq mi).

Brooklyn is a lot more dense— there are numerous subway lines all the way to the Atlantic, and essentially all of them are built up with 4-story+ apartment buildings near the stations. Many former single-family homes (especially enormous brownstone mansions) are split into multiple apartments.

In San Francisco, there are neighborhoods of single-family homes with a single story of living space (built over a garage) a couple stops out from the Mission along the single subway line. Even core urban neighborhoods like the Mission are mostly 2- or 3-story buildings of the sort that are seen something like 10 subway stops into Brooklyn.

sorry, you're wrong on Brooklyn vs. SF

Brooklyn Density: 36,732/sq mi San Francisco Density: 17,867/sq mi

Both figures pulled from Wikipedia for 2013 population estimates from the census bureau.

If you want land to farm crops on, sure; for that purpose you really want the ground. If you want land to live on, of course increased demand will cause more to come on the market. We build up from the ground, layer by layer. I haven't lived at ground level in many years.

That is partly true, but planning and zoning restrictions prevent building up as well.

If you think about it, increasing the amount of dwellings on a plot of land has a cost, that can be amortized over a number of years. If the market was free, the price / rent for a high rise dwelling would tend towards this cost.

However, if you want to erect an apartment block, you have to apply for planning. Local objections generally prevent it from being built (hence the references to NIMBYs).

So it isn't a free market, because supply is controlled by the city government.

There is some acceptance that planning laws don't work - it is implicit in the overriding laws that kick in for major infrastructure projects like freeway builds (called compulsory purchase here).

You could say maybe this needs to be extended to apartment building. But I think it shows the planning system's criteria are broken. Rather than balance cost and benefit, it only takes into account the reasons not to build.

You're correct, but I was responding to the claim that land was somehow a special commodity -- in the words of my parent, "land isn't entirely a 'market' good - barring some pretty major civil engineering, increased demand for land in SF isn't going to make more land come on the market".

I reject that claim entirely, and your comment doesn't address my reasons. The supply of cocaine is controlled too, but I suspect that it's a fairly clear example of a 'market' good in the sense of my parent comment. Residential area is not limited any more than cocaine is.

Economist has a penchant for writing a wall of text and not telling you anything new.

Personally, I stopped reading when they referenced techcrunch.

Unpaywalled: http://archive.today/RlaNR (or access with fresh cookies)

Here's another factor: extreme price inelasticity. We saw inelasticity in the 1970s oil shocks. Supply was only reduced by about 5%, but that caused 4x price surges, putting elasticity (E) at:

    -ln(0.95) / ln(4) = 0.037

If E < 1, then reducing the quantity supplied by X% will increase prices by more than X%, with no other change to the innate desirability (demand curve) of it. With housing, E << 1. It's probably in the same range as oil: 0.02 to 0.04. This means that things can simultaneously destroy value, but drive up prices enough to increase the value of the total stock.

Let's say that an earthquake hits Manhattan or San Francisco, destroying 5% of all housing. Ignore the (highly unpredictable) short-term effect on prices; there will probably be deals in the immediate aftermath due to panic selling. Assume zero effect on the local job market (that's not true, but it's actually close enough that it won't affect the conclusion). Six months out, rents (and, although not by as much, property prices) will be much higher because of the reduced supply. Let's say that prices double. Wealth was destroyed. It's unambiguously a bad, value-destroying, thing when 5% of the housing stock falls into ruin. However, the bulk price of the total housing stock has gone up by 90%.

That's what 95% of these housing pundits don't get. They look at a spiking housing market and think, "Wow, people really want to live here, this place is doing well." They think that increasing desirability (local job market) is the primary cause of the housing price increase, and that the NIMBY corruption is just a supporting actor, and it's not so. At one time, Luanda was the most expensive city in terms of real estate. Angola is not a wealthy country (GDP per capita around $7,000) and it's consistently in the bottom fourth for the HDI. Moscow sometimes edges out New York and San Francisco for real estate prices, and neither weather nor the job market explain that.

Half a century ago, NIMBYism was more explicitly racist than 2014-style classism and it did immense damage to American cities. Just ask Detroit, Baltimore, Newark, or even Pittsburgh. NIMBY policies benefit a small number of wealth-destroying rentiers, but inelasticity makes a system more brittle. It means that price impulses magnify (rather than dampening) and cause undesirable feedback effect. The term "shock" is accurate, and it can bring a city to its knees in a short amount of time.

"in a very good explainer"

Apparently written by "W"? I'm a bit surprised to see grammar mistakes in the economist since it's not just someone's blog.

It's an Economist blog entry, not an official Economist article, so it doesn't get subedited. The whole prose style of the piece would be notably different once the subs were finished with it. The initial-letter monikers are a compromise between the anonymity of Economist articles, (almost) all written in the editorial voice, and the personal voices of the blog.

"a very good explainer" is just a colloquial phrase, meaning "explanatory piece of expository writing."

I think you're just noticing and reacting to an example of the rather casual writing style that appears to be replacing the expected traditional presentation of pieces in The Economist.

Where are you from? To me (US), as apparently to grandparent, "a very good explainer" is an error, not a colloquialism.

UK here. It's definitely been in use as journalistic jargon for a while, typically in the form of a headline "Explainer: <topic of article>", e.g. http://www.theguardian.com/commentisfree/libertycentral/2009... (2009); here's a trend graph that shows that usage has picked up in the last decade: http://www.google.com/trends/explore#q=explainer

Earliest citation I've been able to find (1998): http://books.google.co.uk/books?id=kw9lAAAAMAAJ&q=%22an+expl... - note that this is US, not UK.

Article on "explainer" journalism; a little informal but demonstrates usage: http://www.theawl.com/2014/03/eleven-questions-about-explain...

Wow ... apparently I'm ignorant twice with this comment (at least the last one I made was well-received):

a) Culturally ignorant - I had no idea that "explainer" was in common use in the UK. I would have called the rest of the article "an explanation".

b) Literally ignorant - How did I miss that this wasn't an Economist article?

Sorry!

Here's a relatively recent example of it being used in US headline writing to mean an explanatory pamphlet -

"Republicans to Distribute Shutdown Explainer"

http://www.rollcall.com/news/republicans_to_distribute_shutd...

And here's another from The Washington Post, to mean the text of the article -

"Who is Daft Punk? A quick explainer for confused Grammy-watchers"

http://www.washingtonpost.com/blogs/style-blog/wp/2014/01/27...

I'm from the US, but "an explainer" is a UKism from what I know. I've seen it used elsewhere.

I'm pretty sure s/he's from Earth, where use of language often changes not only according to geography but time, profession, or social milieu. Where is that not the case? Where is it traditional to go on so much about one phrase instead of addressing the ideas in an article? I don't think I'd want to live on Pedant Planet.

"explanatory piece of expository writing."

Or "an explanation" in English.

Although to be honest I would have read "a very good explainer" as being someone who is good at explaining rather than a thing. I don't believe "explainer" is a word in English.

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