What will it take to reduce Bay Area housing costs?

2016 academic analysis by David Albouy, Gabriel Ehrlich and Yingyi Liu estimated that, in general, rents decrease by 3 percent for each 2 percent increase in the housing stock. (This estimate is close to the estimate of a lengthy blog post analysis at Experimental Geography, done two years ago, looking specifically at San Francisco’s history over the last six decades.)

If our goal is to reduce the average market-rate apartment rent to 27.5 percent of median household income (the midpoint between the 25-30 percent range that is normal), that means reducing the rent from $43,200 to $24,895, a 42.4 percent reduction. Using our ratio of a 2 percent housing stock increase leading to a 3 percent decrease in rents, that means, keeping all else equal, the Bay Area would theoretically need to increase the number of housing units overnight by 28.3 percent. (Let’s round up to 30 percent to make the subsequent calculations more intuitive).

…For example, if it takes 20 years to make up our housing deficit, and underlying trend growth for the U.S. population is 0.7 percent per year (15 percent over 20 years), and the average household size remains 2.3 persons, then the Bay Area will need to grow households 30 percent more than the amount of households needed to accommodate trend U.S. population growth (i.e. 30 percent more than the underlying 15 percent population growth), for a total growth of housing stock of approximately 50 percent over 20 years.

Let’s state it plainly: The Bay Area must increase its total housing stock by 50 percent over the next 20 years to bring affordability down to a reasonable level.

That is from the excellent Patrick Wolff.

Comments

...and it's not going to happen. Although it's beautiful, the SF Bay Area is one of the world's most awkward places to build a really big city. Separated by huge expanses of water, the North, East, South, and central city areas are far apart and the engineering that would be required to make a single city of 12 million out of them would cost hundreds of billions. And people who paid 5x the national average price for housing would not support a policy that brought the multiple down to 3x. We are going to have to get used to SF being "special," a royal hunting preserve for high-paid tech workers, the rich retired, and those who serve them.

[sorry, double posted; please delete the other one.]

SB 827 died; many of the opponents to the bill were in Southern California, whose climate and good living is somewhat lower than San Francisco and its environs. So, I agree with you to an extent: SF homeowners and owners of homes in SF will not support a policy that brings values of property. On the other hand, I do believe that SF is becoming our Monaco in one sense:"a royal hunting preserve for high-paid tech workers and the rich retired." I do believe that the people who serve them will have to live elsewhere and transport themselves into the city, just as in Monaco.

The bill overroad zoning for "transit rich" areas, meaning low income housing served by busses because residents can't afford cars.

The ironic result would be tearing down buildings with 50 rental units and building a high rise condo with 40 units selling for $500,000 each and 60 parking space underground garage. Bus service would be ended due to lack of riders.

Mulp, that's simply not true. Nobody was going to tear down existing large rental units to build new buildings with fewer units. The math just wouldn't work.

The plan was to allow the construction of high-rises (or at least mid-rises) near major transit corridors and reduce parking requirements. If you actually studied the bill you'd know that.

I don't understand why it is so very hard to increase housing stock.

You just need to cut down all those trees. When I took the car ride from SFO to Sunnyvale, all that I saw on either side of me was trees ,trees, trees...Little else.

Why do we need all those trees.

To hide the road from the homes behind the trees and dampen road noise.

They're carbon-scrubbing machines, and more pleasant to look at. And unlike steel/glass buildings and roadways, they don't radiate heat.

I'm sure there will be a lot of comments on this thread about government preventing people from their God-given right to building 30-story apartments and lead smelters on their own property. But it occurs to me if you buy a house, aren't you also buying the package of governance that goes with the place, including the option to vote for a municipal government that enacts zoning?

+1

Btw, there are more houses under those trees than you realize. Not sure what route you took but hwy 101 S. from SFO is all urban, not a tree in sight. Maybe you cut over to 280, in which case you would have passed through the watershed for the reservoir. SF Bay is very urban and densely populated.

We have big traffic and water problems that are very contentious. Don't expect change anytime soon.

The solution is rent controls. Ask the gouverment to set a price ceiling.

"The solution is rent controls. Ask the gouverment [sic] to set a price ceiling."

Not just rent controls. There needs to be a ceiling on sales prices as well. No house should be allowed to sell for over $300k and no condo or flat for over $200k. Penalties must be severe. That should put an end to housing inflation.

And as a result, no one will be able to live in the city except the carefully vetted renters approved by the existing landlords. It should class the place up when the riffraff and immigrants can't live there at all.

And to create a totally constipated market, let's not forget to legislate an inheritable renter's property right in the rent-controlled property.

With suitably Draconian punishments for landlords who attempt to dislodge their "ain't never gonna move" tenants.

The solution is rent control.

Or carpet bombing which is much faster but the same result. See pictures of Dresden after WWII or the South Bronx after 15 years of New York rent control. Dresden looks better because carpet bombing will miss a little, rent control never does.

I assume this is a joke. Land costs in the region are very high and make building expensive as it is. Add in slow permitting processes (nine months for a small multifamily structure needing NO variances while you pay the land loan) plus 20 percent set-asides for "affordable housing" tenants make it even harder for a project to pencil out. We invested in that building several years ago; it's done now, but the only profitable way to complete it was to build units for the top of the market. Wouldn't do it again.

If you let bureaucrats set "fair" rents, nothing new will be built in the Bay Area. Ever.

'rents decrease by 3 percent for each 2 percent increase in the housing stock'

Why would any (potential) landlord have an incentive to lower rents by increasing the housing stock?

Is that a serious question? Because landlords do not care about the well being of landlords as a class. They care about their own well being. If they have a piece of land that has one home that rents for $500,000 a year, and the government lets them knock it down and turn it into a block of 12 apartments each of which rents for $200,000 a year, what do you think they will do? Even if it lowers the rent for everyone else as well.

'do not care about the well being of landlords as a class'

Depends what you mean by class. For example, an owner of a duplex is pretty much irrelevant. Someone who owns 16 high rise complexes, however, cares a lot about what is happening with other owners of residential property at the same scale, particularly when long term debt servicing is involved.

And landlords are not stupid, as a class - none of them have any interest in creating an environment that lowers rents, and thus ruins their financing. Though it is true that smarter landlords make sure to never be personally liable for such debt.

I admire the way that you are able just to pull this sort of nonsense from some convenient dark hole every time you need to. I mean, let's forget that there is a large body of work showing how hard it is for any free-ish market to maintain a cartel. Let's ignore the centuries of work that has gone in to proving that this is incredibly unlikely to happen. You made yet another bone headed claim and someone called you on it, so why not run with the bare-faced Elizabeth "Indian? What Indian?" Warren defense?

The rental market is made up of lots of people who own one building. Their decisions do change the market. Someone who owns 16 high rise complexes has the same problem someone who owns one does - he stands to benefit if he maximizes his rental. Even if that depresses the market for everyone else. Of course no landlord has any interest in creating a market with lower rents. But they have less of an interest in standing around while someone else does. It is a tragedy of the commons more or less in that if everyone agrees not to build more, the first person to cheat makes the most money. That is why cartels are not stable.

So despite all your wand waving and rhetoric, the fact is your claim is wrong. So very very wrong. As probably Lenin didn't say, the capitalists would sell the rope with which to hang them. The market forces them to. The market forces landlords to reduce rents too. Which is why these sort of cartels usually only survive if the smarter landlords lobby the government to enforce them by law. Which is just what the landlords of the Bay area have done.

'I mean, let's forget that there is a large body of work showing how hard it is for any free-ish market to maintain a cartel.'

You are seriously kidding, right? Cartels are as natural as breathing in a free market.

'Let's ignore the centuries of work that has gone in to proving that this is incredibly unlikely to happen.'

Maybe you should read this paper - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2889837

'Of course no landlord has any interest in creating a market with lower rents.'

Strange, I seem to remember a comment pointing that out.

'The market forces them to.'

I am unaware of the market forcing landlords to create inexpensive rental units, while I am familiar with the Trump (and many others, of course) business model of taking a building with inexpensive rental units, and then replacing those with more expensive units - to the profit of the landlord, of course.

Leftists (and you are at least somewhat left wing compared to the readership and commentariat around here) have a major blind spot here. Supply and demand is a real phenomenon. Cartels work where the members can (1) enforce compliance and more importantly (2) keep out new entrants. The existing owner of those 16 high rises can't stop an entrant from building more unless he gets city hall to pass a law to the effect of "no more high rises". This is effectively what has happened in New York City: a large fraction of the buildings in Manhattan could not be built today based on the cities zoning laws. Housing somehow managed to get built for the last 5000 years before zoning laws that limited development to the height and density of existing buildings appeared.

'and you are at least somewhat left wing compared to the readership and commentariat around here'

Hard leftist, apparently, even though my political affiliation to the extent I have one, is distinctly Pirate Party oriented. For example, I am a big fan of balanced budgets, and not allowing much in the way of debt to finance things like roads - the result of growing up in Virginia, which is a fairly well run state in many ways. Which would seem to put me far to the right of today's Republican Party.

'Supply and demand is a real phenomenon'

Yes, it is. As is the pursuit of profit. And given an alternative when planning a new building - 50 units of rental units generating 1000 dollars a month revenue, or 40 rental units occupying the same plot of land but renting for 2500 dollars a month, what choice do you think a landlord will make regarding that project? Not to mention the bank financing the project? Nobody is interested in the lower end of the market when they can rent to the higher end one. You can even see this in how trailer parks are being converted into residential housing - nobody is apparently interested in creating new trailer parks in a place like Fairfax County, even though when one can use this place as an example of lower cost housing - http://www.dwoskin.com/waples

'Cartels'

I did not use the term originally, and it is a bit of a distraction. I do not personally believe that the term cartel applies well in this case, but was responding to someone who used the term.

'The existing owner of those 16 high rises can't stop an entrant from building more'

No, but the bank providing the financing of the new project might just look at the impact on its loan portfolio if the result was to actually cause a significant reduction in rent revenue.

This started as a basic comment pointing out that the people involved in maximizing their profit are not interested in reducing it. And they are not stupid - there is extremely little chance of any single player destroying a major part of the edifice of the current system based on renting properties. If only because that single player just might find it hard to get financing.

That's an absurd suggestion. Such an entity would have no trouble whatsoever getting financing. They would have to be huge and would have access to national and international financial markets including equity funding. They're not walking over to the community bank and having a local yokel tell them they can't get a loan because it would hurt the community bank's portfolio.

"Because landlords do not care about the well being of landlords as a class. They care about their own well being"

In the Bay area, over half the housing is owner occupied single family housing.

So, tell me, as landlord of your housing unit, why will you want to rent your living space to 11 added renters, which would be about 20 more people.

Most people buy a single family single unit home to be their own landlord in control of the place they live, especially to get away from neighboring renters.

To these home owners and landlords, keeping their building single family is their top priority 90% of the time.

I'm not so sure about this. I see plenty of MLS listings in DC that advertise the potential to turn the house into condo's as a selling point.

Though of course your right--some people prefer stricter zoning which I have all ways thought odd. My best guess is its hyperbolic discounting. They only see the current cost as their neighbors convert their house and can't envision a massive payoff decades from now when they sell

A substantial fraction of those "single family homes" are actually being rented out to groups of strangers in a dorm-like setting.

Menlo Park, Palo Alto, Mountain View, etc. are full of these "hacker houses" where a single 4 bedroom house is rented out to 5 or 6 adults.

5 income earners can afford to rent a $10,000/month house. A single family with only 1 or 2 income earners cannot.

Just read through the Craigslist postings.

"$10300 / 6br - 2548ft2 - Large spacious 2 story Palo Alto Executive home Quiet street. Pool (palo alto)"
...
"Current tenants Stanford Grad Students."

https://sfbay.craigslist.org/pen/apa/d/large-spacious-2-story-palo/6570704093.html

I mean, a lot of us have seen Silicon Valley, but do we know how common this really is? I'd love to see stats on it.

"Why would any (potential) landlord have an incentive to lower rents by increasing the housing stock?"

The same way that Walmart had an incentive to sell for less than Sears.

Sure, a landlord might not want his rents to decrease, but a new player in the market doesn't see it that way.

'rents decrease by 3 percent for each 2 percent increase in the housing stock'

Why would any (potential) landlord have an incentive to lower rents by increasing the housing stock?

What do you mean? I am sure that you know, if he builds an apartment above his home making it a two family home, he can collect some nice rent. If he doesn't but all his neighbors do his home value will fall anyway.

It will be very tough to get the permit to build that apartment. Maybe you have never encountered a Bay Area planning department and the local zoning laws.

What about land value taxation?

Who cares? Almost everywhere and always, a landlord without further development opportunities is incented against a supporting an external supply increase for this reason. Is this relevant or interesting?

But that's not what you said, you said: "by increasing the housing stock" and the answer to this is, pretty much always, because if they can find a way to increase the housing stock there's a ton of money to be made. Whether a new development is profitable may depend on ever so slightly on how that development itself depresses current prices, but that's going to be an economically trivial consideration. If it makes economic sense at current prices, it's probably a good idea at (100 - epsilon)% of current prices.

So perhaps I've misunderstood you, but it sounds like you think the 3:2 "ratio" is relevant in some way (else why quote it?). Are you suggesting something that depends on the precise value of the tradeoff? Something that isn't nearly universally, trivially, true.

... attempted to response to clockwork_prior above; not sure why it ended up at top level. Need edit option!

'because if they can find a way to increase the housing stock there's a ton of money to be made'

Possibly. However, as can be seen for decades (Trump's NYC real estate business model being an excellent example of this), the trend has been to decrease the amount of inexpensive housing stock while simultaneously increasing the amount of expensive housing stock. Of course you could argue that this is essentially zero sum in terms of new buildings (though that is not quite true - older buildings with inexpensive rental units are often torn down to be replaced with new buildings offering more expensive rental units), but that is precisely what the desire for profit generates - higher profit by following paths that do not lead to a reduction in rent.

There is no question that if a single landlord can come up with a way to create a new building with 50 units compared to an existing 10, they will do so - and make money. It is just that generally, the new units are not intended to be rented by those being paid an average Starbucks wage, but instead are marketed in a way intended to generate maximum profit for the landlord - by targeting the new units for those being paid google level wages.

This should not be hard to demonstrate, after all - just point out all of the recent housing stock that has been built that is intended for your average lower paid retail worker to live in, instead of highly paid workers. Maximizing profit by taking actions to lower rent is just one of those things that never seems to happen in the real world.

Of course new housing goes in at the high end of the market. That reduces the price of the older, existing housing

I don't think it works that way. The new inventory creates a ceiling. As long as existing homes remain below that ceiling, their prices can rise. If an existing home sells for $300,000 and somebody builds a comparable new home that sells for $500,000, the price of the existing home can now rise to $400,000. However, if somebody builds a comparable new home that sells for $250,000, the existing home has to drop in price.

a. If the new house is selling for 200k more than yours, it's not comparable. b. think supply and demand.

If I buy a 10 dollar bill from the mint for 15 dollars, now a 5 dollar bill is worth 6?

"However, if somebody builds a comparable new home that sells for $250,000, the existing home has to drop in price"

The existing home had already dropped in price - the sale was a realization, not a cause.

After looking at the spatial distribution of rent, it seems rent is half or even a third near Google or Apple in SV when compared to neigborhoos around the SF's financial district. It seems there's a premium to enjoy living among the vibrancy of the city center. https://www.trulia.com/home_prices/California/San_Francisco-heat_map/city_by_neighborhood/ALP/nh/

I could not find the spatial distribution of jobs in the Bay Area. It would be great to compare the spatial distribution of rent and jobs. I'd expect higher rent where the jobs are, if not.....well, the human condition.

What are the penalties against contravening against local building codes in CA? With public opinion moving in favor of more density, what about just trying it? Knock down your own single home and build a 20 storey condo complex, then face the courts with the fait accompli overnight? Depending on the penalty you'll need to pay it may still be worth it privately. Also, 50% isn't that much. If the average is roughly two storey now, it's just about building a third one on top (most of the time it will be single family conversion to ca. 5 units with higher density areas staying similar).

How many renters buy single family single unit homes with yards to become landlords dealing with dozens of renters, and go back to living without having a yard?

"With public opinion moving in favor of more density, what about just trying it?"
Because public opinion isn't moving in that direction, even if some polls with certain wording indicate otherwise.

Most people don't favor density, which is why most people buy single-family housing as soon as they can afford it. Look at what people do, not what they say.

Mark Zuckerberg bought his four neighbors' houses and a 900 acre plantation in Hawaii as soon as he could afford it. Bill Gates bought plenty of house for his four-person family as soon as he could afford it.

I suspect that "most people" in the area support increased density, including very high density, for other people. This support gets stronger as the distance increased between their current low density neighborhood and the new higher density housing.

Its like mass transit; its supported to the extent it gets other people off the road.

The ideal solution from the SF point of view is a high density high rise complex 30 miles away, but connected to SF by mass transit, where other people (the SF resident's employees and service workers) could live. Out of sight (and their neighborhood school catchment area), but readily on call. Given the political realities, this may well be what happens.

It is happening, sort of, but without the highrise and train. Housing is being built in the valley - on some of the best farmland in the world - and people commute 2hrs to work or, if they are in high tech, work from home.

What is this "just build it" stuff?
Without permits, the city can and will send armed men out to stop the construction.
Oh, they have all sorts of tools in their legal arsenal to use prior to that, but ultimately they can and will use force if it comes to that.

Have either of you ever seen anything built beyond a Kazcinsky-style strugglehut?

Y'all wouldn't happen to write for Marvel Comics, would you?

if we increase housing/person by 30% and hold household size constant, does that imply a (something like) 25% vacancy rate? That doesn’t seem like an equilibrium

More people would move in from the countryside and outflows of people who can't afford the rents would decrease. There would be an equilibrium with a lower price (for a while).

Actually maybe the thought experiment is fundamentally flawed. The marginal elasticity can’t be extrapolated far along the demand curve: household size will go down as price goes down, and the demand curve will get more and more inelastic because people want to live together. So we’d reach that 42% price reduction much sooner.

(Put another way: the housing market doesn’t withstand a constant elasticity assumption because satiation is possible. And note i’m ignoring homelessness and a few other factors)

'...what about just trying it? Knock down your own single home and build a 20 storey condo complex...'

Not to particularly single this comment out, as Prof. Tabarrok is particularly notable for this style of thinking, but you do realize that there are a couple of details standing in the way of such a simple way of thinking. The utility infrastructure upgrades are not trivial, for example - unless you believe that the people in the 20 story building use about the same amount of water and generate the same amount of sewage as a single family home. Somebody needs to actually install the pipes of the proper size, for example, and that will not be done overnight by any reasonable measure. And will not be cheap either.

You missed the most obvious point. The landlord as owner of a single family one unit home bought it to live in a single family home with yard might be happy to turn it into a dozen identical single family one unit homes with yards of the laws of physics allowed access to 11 more universes.

Economists always get foiled by the externality of physics.

assume a can-opener.

And in all likelihood, fines for breaking housing code will be tied to time and number of units in an attempt to make the financial penalty ruinous.

Not editorializing on the wisdom/fairness/sustainability/whatever of this sort of thing. Just pointing it out as a likely outcome.

Those with skin in the game aren't interested in reducing Bay Area housing costs.

Many might be. They bought a home with yard 30 years ago and would love to see a similar home for their kid and his family and newborn for the same price in the neighborhood, or give minutes away even if their home dropped from $1,000,000 to $100,000 in market price.

Few people see value in their home market price increasing ten times when selling and moving means paying ten times the price of the house you didn't buy three decades ago because it was too small for kids, but perfect for when the kids are gone.

No, in all of America, not just the Bay Area, houses are what amounts to a high interest savings accounts, or at least that's what buyers like to think. When it looks like the value of the property has decreased in value, occupants with little equity let it go back to the bank, even if it's highly likely that prices will recover, as they inevitably have since the cataclysm of ten years past.

The corrolary of this study is that the next technological revolution won't come from San Francisco.

No, that cannot possibly be true according to several commenters here.

Well, that ended up in the wrong spot - should be for the comment made by chuck martel

"Well, that ended up in the wrong spot"

That seems to be an ongoing theme here. Did MR update whatever platform they use?

Yes. And it sucks.

The most promising technologies are in blockchain, AI and biotech. People working in the industry apparently don't require to be clustered.

This strikes me as an iSteve-y type question. I imagine lots of IT employees don't really care whether a place has sufficient food or art festivals or amateur theater so long as they can get high-capacity internet and 24-hour grocery stores. They can live anywhere and communicate electronically. Another tier of IT--the higher paid and more influential ones--are thinking more about meeting other high-paid, influential people and forming affinity networks, so they want to be in the cosmopolitan mix. If it weren't for the latter group, Google could just have their own company town in the sticks somewhere, like Walmart in Bentonville, Arkansas.

It would be nice if some good corporate citizens started locating in smaller towns. It would relieve congestion, not bankrupt their employees, and spread some money around.

Brooklyn added almost 1 million people to its population between 1910 and 1930.

With modern day technology we certainly could add a lot of housing; the question is really a political question.

Seeing that SB-827 failed, a good place to start might be encouraging more granny flats on single home properties. Easy to build, relatively affordable, and not particularly controversial.

I am sure that granny flats will be expensive; between complying with residential zoning restrictions, abiding by draconian city building codes, and NIMBIYSm many homeowners might not be incentivized to build those flats. There is also the issue of street parking. In cities like Santa Ana, SilverLake, Lakewood and Long Beach in California many residential neighborhoods are places were street parking spaces are at a premium. Where will the residents of the granny flats park in such neighborhoods?

So hang on everyone, let's recap:

MR made repeated posts about how the housing costs in San Fran absolutely NEED to come down.... then made repeated posts about how California SB527 will address this, and is the greatest bill on Earth, and has attracted widespread national support.

SB827 was killed by California Democrats on April 18.

With absolutely zero mention of this fact, MR has now returned to step 1, and is now posting about how the housing costs in San Fran need to come down.

What's the matter, boys? Having your perfect solution murdered by Dems is not worth mentioning? Doesn't fit your narrative?

A quick look at the comments on the link explains why this is never going to happen (and probably also why SB827 failed). People hate this stuff, even if it's correct. And that's got nothing to do with the technical feasibility of building that much stock either. Asia doesn't seem to have a problem building stock.

The unstated impact of increasing the housing stock is of course that average dwelling size is almost certainly going to come down and urban densities will go up a lot. That's much more egalitarian and cost effective, but I suspect that is a large part of the public's intuitive hatred of this type of analysis.

Real estate talk for cramped and crowded

much more egalitarian and cost effective

"What will it take to reduce Bay Area housing costs?"

The maturation the tech industry. Which I expect to see well before a 30 year timeline (and, in fact, appears to me to be already underway).

Maturation or migration?

Probably a bit of both, I suppose. As the money flows less freely, the incentive to look for lower-cost places to do business should get stronger.

What's interesting to me is the industry built on eliminating physical location can't solve the problem of physical location.

Funny how that works.

Frances Cairncross:

https://www.amazon.com/Death-Distance-Communications-Revolution-Changing/dp/157851438X

Any decrease in rents created by an increase in supply would only be temporary.

Alternatively, government might destroy housing value by (for example) erecting concrete view-blockers between sea-view property and the sea, or installing car-destroying potholes in streets and highway while discouraging transit, or encourage the residents of pricey urban real estate to move out by releasing harmless but stinky gas regularly in upscale neighborhoods.

I'd add "make provision of internet service illegal," but one would need the approval of FCC to do that, and I doubt they'd permit it.

Perhaps they could encourage large numbers of homeless people to congregate in the area ... and spend a lot of time at all the local Starbucks

The presumption should be that any residential building that increases density should be allowed. I don't see why a 50% increase in housing cannot be easily achieved in the next 20 years.
Remember the post about the growth of Chicago. https://marginalrevolution.com/marginalrevolution/2017/12/chicago-fact-day.html

So, how to evict those living in that sea of Eichler's.

But then again, everything has its price.

Re: What will it take to reduce Bay Area housing costs?

Land fill the Bay (housing on maglev foundation to counter the jello effect) and flatten the surrounding coast range.

That oughtta do it. Just a little tech, ya know.

The fill dirt can be from the flattened mountains. Quite easy, really.

This is a problem that will fix itself. A lage company recently attempted to build a 'software center of excellence' in silicon valley. They couldn't find enough quality people to staff it, and wound up bringing in a lot of H1-B employees who don't know what they are doing. In the meantime, they closed down small software office around the country - offices full of experienced engineers close to the customers they are serving. The result was a disaster. This whole fiasco came out of the misguided notion that serious software companies have to be in silicon valley - a notion rapidly being disproved.

In the meantime, the infrastructure in San Fransisco is deteriorating, the homeless problem is growing, the streets are filthy, and prices are skyrocketing. What can't continue, won't.

Silicon Valley is ironically one of the most vulnerable places to disruption by technology. For instance, if we get high quality virtual reality, you will be able to build virtual offices that have as much information bandwidth as do brick and mortar offices. Telecommuting today works, but it's still relatively low bandwidth compared to face-to-face meetings, which limits the usefulness of remote offices. If that changes, there will be no need for workers to co-locate, and we could see a diaspora out of the big cities built on information work, and especially the poorly managed ones.

Regardless of what happens, I think it's safe to say that the San Fransisco of 50 years in the future will be so different than the one of today that studies relying on straight-line trends are bound to be laughably wrong.

Once again I ask "WHY IS GOOD FOR SO MANY PEOPLE TO BE PACKED INTO THAT SPACE?"

The real questions are around why aren't we inducing ("forcing") the peak job companies to move elsewhere?

agglomerationis the root of much evil.

Re: "agglomerationis [sic] the root of much evil"

Nonsense. Clusters and resulting agglomerations are the primary source of progress in the world. The Bay Area, really, is the ONLY source of positive progress of humanity, currently, and in the future.

The interconnection, flow, and interplay of ideas, resources, and expertise--that which is only found in the Bay Area to the extent it is so--is essential for the progress we see, and hope to see in the future.

I have an idea by which a small city or neighborhood (such as East Palo Alto) could be brought to support massive upzoning and densification.

Imagine if the city removed all height/density restrictions for new housing, but any housing above the current zoning envelope had to pay a double property tax. Half of that tax would go to the municipality, half of it would go to a "sovereign wealth fund" which would be split up equally among all residents of the city at the time this law was passed.

This would be great for house owners, because they could build much higher and sell all but 1 of the units on their property. It would also be great for renters, because they would receive lots of free money, for the rest of their lifetimes .

A numerical example: In East Palo Alto, the median house/condo price is about $1 million, so property tax is about $10k/year. The city is mostly made up of single family houses. Imagine if 1/5 of the residential area of East Palo Alto were converted to 6 story condo blocks, which would approximately double the city population. Then every current East Palo Alto resident would receive a $10k check from the city, every year, for the rest of their lives. (For every new resident paying excess tax, there would be exactly one old resident receiving money.) If the city population tripled rather than doubled, everyone would get a $20k check. If the city population stayed constant (maybe the double property tax scared off developers?) then the law would have no effect positive or negative.

The city would still get the usual property tax, so it could fund improvements (road, sewage, schools) to support all the new residents.

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