San Francisco legislators' complete inability to understand economics never fails to amaze me. There are twenty different taxes and bonds proposed every single year by the city to "build affordable housing." And every year, that money is squandered in regulation and red tape, while housing prices continue to rise.
The issue here is, first and foremost, supply and demand. San Francisco has made the process of building new housing so incredibly onerous that, once a developer finally succeeds in erecting a building, the only ones they can sell to are the wealthy. If it was easier to build in SF, with less regulation, less restrictive zoning, and less expense, then housing would be built for the middle class. Then, the city could apply affordable housing policies to reserve units in middle income buildings, and the housing crisis could be averted.
But instead, our legislature continually enacts nonsense like this, which accomplishes little beyond rabble rousing.
Do you have sources for these claims? I feel this narrative is often repeated on HN and it becomes kind of an echo chamber. Then I read in the SF Chronicle that there’s permitted and approved projects that developers are not moving forward with, like around the new hospital off of Van Ness, due to the “tightening of capital markets” and “soaring construction costs.”[1] Not NIMBYs or government regulations.
And then I dig a little deeper into the “it’s just supply and demand, dummy” narrative and find articles that document how luxury housing development actually is associated with a rise in rents for the working class.[2] Who would have thought macroeconomics is complicated?
I feel the narrative here is highly politicized around are particular market-driven philosophy, so much so that people feel comfortable posting unsourced polemics. In the spirit of HN I would like to steer us toward a real analysis of the facts in the ground.
Not OP, but Seattle is almost as big as SF [0] (825,000 people in SF compared to 775,000 people in Seattle), Seattle has 2.5x the number of cranes up compared to SF [1] (65 cranes in Seattle compared to 26 in SF), Seattle rents have actually gone down recently because of so much new supply [2], and Seattle's average rent is only 57% of SF [3]. I'm not going to say it's just NIMBYism, but whatever they are doing, they are a prime example of what not to do.
> I read in the SF Chronicle that there’s permitted and approved projects that developers are not moving forward with, like around the new hospital off of Van Ness, due to the “tightening of capital markets” and “soaring construction costs.”[1] Not NIMBYs or government regulations.
No doubt that construction costs exacerbate the problem. But there absolutely are people deliberately blocking housing construction. There was a proposition to outright block private housing construction in the Mission that got ~40% yes votes. For further examples, see the infamous case of the developer that wanted to replace a laundromat with an apartment building:
> And then I dig a little deeper into the “it’s just supply and demand, dummy” narrative and find articles that document how luxury housing development actually is associated with a rise in rents for the working class.[2] Who would have thought macroeconomics is complicated?
This is a fundamentally dishonest objection. New housing is "luxury" housing because the housing market is so expensive that even 1 bedroom apartments rent for $3-4K. Blocking "luxury housing" is blocking all housing, because the market is so expensive that even the smallest units are expensive enough to be considered luxury. Seriously, even 300 sq foot studios rent for 2.5K: https://sfbay.craigslist.org/sfc/apa/d/san-francisco-immacul...
Of course "luxury housing" is correlated with rising rents. When rents rise, newly constructed units get more expensive too and get pushed into the "luxury" price bracket. This is essentially a tautology, and it is not at all indicative that building more housing increases rents.
Soaring construction costs are in no small part due to government regulations and NIMBYs. Labor shortage is partly to blame, but labor is short partly because of the housing shortage. [1]
The amount of housing in the most expensive housing market in the world is going down because of lack of capital? That passes a sanity check for you?
Or maybe the regulations are so insane you spend millions in legal fees before you even have a glimmer of hope and eventually say “this isn’t worth it.”
I investigated into developing in Half Moon Bay, which is zoned by San Mateo County. There's wide swathes of land up for grabs, but the county or the council forbids development unless you buy enough land and come up with a proposal. This ends up costing in $5-$10 million of undeveloped land alone (no sewage line connection and no electricity). And these lands are planned unit developments, which in practicality means homes only for the wealthy.
Your first article attributes those quotes reasoning about the lack of construction to speculation by “neighbors”. There is also a traffic problem created in part by construction of a bus line that is 18 months overdue. It seems a bit quick to be using that as justification for SF housing policies, especially as they don’t seem to be working.
Your other article is paywalled, but I imagine that tightly planned cities introducing only new luxery housing is the same general situation and would be similarly vulnerable to the very arguments you’re responding to.
I think the onus is on you to disprove them, not just to merely question their veracity.
Anyone who has built a house in any urbanized area with an highly environmental conscious outlook can tell you that building a house is difficult - I think anyone can also tell you that San Francisco has a large amount of demand - I think there would also be universal agreement that San Francisco is also basically built out. Upmarket housing tends to get built first when market demand is high, and its expensive to build in a place, because its harder to recoup the costs on cheaper housing.
Without significant densification (which has proven untenable politically) no significant amount of new housing will be built - so you can pass all the affordable housing bonds in the world, but until you change the zoning (regulatory) construct - nothing will change.
To the extent that economics is about how incentives influence behavior, to assume that SF legislators don’t understand economics is itself probably a misunderstanding of economics.
There are people working for the City of SF who know economics, but that doesn't mean the people passing the laws do. I took an urban economics class taught by Ted Egan, the chief in-house economist for the City of SF, who knows pretty much everything about the subject and if he was put in charge of housing laws for the city I am certain housing quality and quantity would improve. However, he and people like him don't get to pass the laws. Instead, we have extremely vocal NIMBYs who lobby to get laws passed that benefit the rich minority of residents and harm everyone else.
How to make housing more affordable: 1) cut red tape 2) relax zoning requirements. Both are politically unpalatable, so around and around we go appropriating money that governments don’t even know what to do with.
I believe you’re misunderstanding the incentives and goals of these govt officials, and the people who vote for them. It’s much worse than a mere ignorance of economics, and totally intractable.
You'd be surprised how many socialist-minded people there are in SF, who always invent some cockamamie reason why more government requirements are the answer. Its always more and more regulation. Like the last twenty years of affordable housing regulation didn't do anything. So lets try another twenty years of experiments.
Though I live in SF, I really hope they do implement some of these asinine punitive taxes and finally kill the tech industry here. Then all these Nimbys can enjoy an empty city devoid of activity.
It’s a one party town. Whoever you vote in does the same as the previous supe. They’re into high-profile, low-impact pet projects the likes of which are reminiscent of ideas high school students would propose to solve issues.
Ban plastic straws, but don’t prosecute people who defecate on the street. That’s SF politics. Nothing of consequence happens except when something has the potential to propel them into state politics, and again it’s a high viz low impact issue.
It's not that simple in SF. Lots and lots of neighborhood associations and local groups like that who are really loud and who hold a lot more power than their equivalents in other cities.
There's a whole infrastructure on one half of the political spectrum in SF that you have to defeat.
You cant vote them out because the process is captured. This was recognized years ago and term limits were created but it is not the individual candidate, those are interchangeable, it is the machine. The machine keeps turning. The only solution is a revolution but no one has the stomach for that. And besides most revolutionaries are hopeless utopian romantics believing in silly ideologies.
Do you have source for calling it an "influx"? According to the city's annual survey (from 2017)[1], 70% of the current homeless population lived in SF county before becoming homeless, 21% lived in another CA county (which may include, say, Berkeley or Oakland), and only 10% came from outside CA. I'd hardly call 10% of the current homeless population an influx.
This is a really strange comment to unpack. On one hand, housing supply and people without homes are related, at least nominatively. So semantically it feels as if you're making a point.
On the other hand, I can't identify any logic or argument to your comment. As far as I can tell your unspoken logic goes a little like this:
"The difficulty in building housing causes a constrained housing supply. Making it easier to build housing would solve part of the problem. The other part of the problem with the constrained housing supply is people without existing housing moving to the city. But I don't mean people without housing who can afford housing. I mean people without housing who can't afford housing. They constrain the housing supply in the city further."
Oh they understand. They are not actually trying to solve the problem, but inflate the problem. They own real estate, the regulations give them a lever to get contributions from developers, higher property prices equals higher tax revenue, and doing something dumb like this IPO stunt makes foolish property-less people think that they are on the same side of them.
They are not -- they are on the side of property prices going up.
San Francisco has build way more housing in the last decade compared to rest of the Bay Area and the state. Look at the entire east side of the City. Areas like SOMA, Mission Bay, Dogpatch were industrial wastelands. Now they have so much housing. Blame really lies in the rest of the Bay Area cities that haven't built their fair share of housing.
Of course they understand economics. They just don't think it matters or don't care as long as their constituents support them. Well, their constituents do support them -- it's easy peasy anyway. People in California hate Republicans to the bones. As a result, we don't really have check and balance. Without check and balance, we get all kinds of ridiculous policies.
San Francisco is one of the most mismanaged major cities in the world and it's on such a negative trajectory. It's blessed with an incredibly successful homegrown tech industry, but there's only so much that can do to hide the underlying disfunction and the cracks are starting to show.
As a VC in San Francisco, I've recently given up my residence here, and am increasingly looking outward for tech and culture. I see many of my peers doing the same, moving east, south, or out of the country entirely.
It's bittersweet. I used to love San Francisco, but have recently entirely lost faith in it ever getting better. I've given up. And honestly, I feel a weight lifted from not having to care and constantly deal with the frustration anymore. There's so much tech & entrepreneurship worth promoting outside of SF, and it's so often overlooked.
Contrariwise, I see San Francisco as a city that is struggling with some of the worst demographic issues in the nation, mostly stemming from having an absolutely absurd amount of wealth inequality for various structural and temporal reasons, and doing an admirable job of it. The "homegrown tech industry" was intentionally fostered in response to the valley turning the city into its bedroom community, so the idea that the city is somehow corrupting your vision of what SF could be is disingenuous. I suspect the SF in your recollection is the SF you yourself had a hand in changing into what it is today.
30 year San Francisco resident. The issues San Francisco faces today are not from wealth inequality. That’s horse shit. It is in fact dysfunctional government. Also, you are mistaken about the genesis of San Francisco based tech versus the Valley. And you are wrong about the history of workers living in San Francisco and commuting to the Valley.
How has such a shitty local government not gotten voted out? I understand the NIMBYism driving it and perverse incentives for housing owners but the approval rate has to be crazy low
It's not just SF. The whole state of CA is woefully mismanaged. They just have enough money to smooth over much of the stupid stuff. When the money runs out (next recession?) they are gonna get hit really really hard (and they deserve it, stupid should hurt).
It is hilarious people think "money will run out" and CA is mismanaged. CA has a $30bn rainy day fund. It is incredibly managed. We have protected our shorelines, our mountains, our nature while other states have sold them off to the highest bidder. Our legislators pioneered equal rights and made LGBT mainstream in American politics. We pioneered action against climate change and kick started incentives towards alternative fuel, solar, and wind energy. We have the most generous healthcare coverage in America. We have the most generous welfare in America. We have invested billions in public transportation. We have the most upwardly mobile population. We pioneered recreational marijuana, and decriminalizing drugs. We are leading the revolution against mass incarceration. We have some of the most generous policies that are pro-women, starting from abortion to parental leaves. And we have the #1 economy in the world. That's quite mismanagement.
While I agree with you that stupid should hurt, I think one of the reasons the situation is so bad is that a lot of the stupid decisions haven't been hurting the people who make the make them and the people who cause them to be made. This isn't just a problem in CA, just look at the Boeing debacle. Tons of bad decisions, the people who made the decisions made 10s - 100s millions of dollars and laughing all the way to the bank. Same think with California's politicians and elite class ... public workers, on the hand, are probably screwed ...
CA is actually quite well-managed. One of the reasons we pay so much in taxes is precisely because CA legislators have a better grasp of financial realities than their counterparts in red states: if you want to spend more, you need to collect more money to pay for it.
And CA voters like to pay for things. Red-state voters do not; they like to pretend that people will do things for free (i.e., teachers) until things break and they accept the reality that nice things cost money.
Having moved from San Francisco to Champaign, IL myself. There’s something to be said for a 5 min commute, lower taxes, a yard. There’s still a fairly large tech community here. Wolfram has its headquarters here, and there’s tons of tech companies, albeit mostly remote offices.
Honestly, I’d have trouble moving back to a large city. It doesn’t have much more to offer, and what I’d have to give up is significant.
With the University of Waterloo and Conestoga College, Kitchener-Waterloo is a hot bed of engineering and CS talent. And the whole area is quite underpaid and pretty affordable despite a massive shoot up in housing prices.
I think my point, other than boosting my hometown, is that there's a lot of really affordable talent out there if startups and VCs would just dare to look elsewhere a little harder.
LOL at this hilarious post. SF is in a negative trajectory ? SF has absolutely destroyed every city in the last decade when it comes to job creation, economic engine, value creation, startup creation etc. SF is in such a positive trajectory that has very few historical precedence.
If SF wants more affordable housing, step one is to allow developers to build more freakin housing! Then sure, you can tax IPO lottery tickets if you want. Honestly it probably won't make any startup leave the city. The companies don't bear the tax burden, the employee does. And I don't think a company is going to lose out on employees simply because the employee doesn't want to lose an extra 1.2% in their stock comp.
>If SF wants more affordable housing, step one is to allow developers to build more freakin housing!
This... it's absolutely astounding how difficult it is to build housing in SF, then everyone complains about the lack of affordable housing and proposes all kinds of pretzel-twist solutions instead of adjusting supply towards meeting demand.
> The companies don't bear the tax burden, the employee does.
When employees increasingly leave the SF Bay Area or refuse to relocate to the SF Bay Area, driving up the cost of acquiring talent, the companies most certainly are bearing the burden.
I would be OK with such a law if it only applies going forward, to companies that are headquartered in SF and formed only on this date or later.
But to pass an IPO tax after hard-working employees have put in literally years of longer/more-stressful hours at reduced compensation levels (relative to working at established companies) to get to this payoff is unfair and unjust. Those employees have entered this arena (the startup game) with certain expectations and rules in mind, which made taking on risk and deferring gratification worthy to them. Pulling the rug out last minute to shore up the city's own finances is punitive and unreasonable, especially when the law is targeted so narrowly. And no, the fact that some of those employees will get large sums of money out of this does not make it less unfair or less unjust.
Agree completely, although I'd frame it differently. I'm not sure how much sympathy anyone has for the Uber folks specifically, but this would certainly be food for thought for anyone thinking of starting a company in SF, or contemplating shifting their headquarters.
Congress actually did something similar in 1980 when they passed a Windfall Profit Tax on oil to capture "unfair" profits in the wake of the OPEC oil embargo. It was wrong then, and it's wrong now.
They’re changing the tax rate from 0.38% to 1.5%. That’s not going to make a noticeable difference to these employees. Small fluctuations in the stock price will affect them far more.
The startup/IPO game is already incredibly unfair. How many people put in that same hard work only to be left broke at the end of it because their startup failed? Someone losing out on 1.12% of their IPO riches is pretty irrelevant by comparison.
It would actually be interesting if there was at least some reform that made exercising ISOs not have tax implications traded for a larger tax rate in the case of an IPO.
For anyone else immediately curious: the US's [ex post facto](https://en.wikipedia.org/wiki/Ex_post_facto_law#United_State...) law applies to retroactively deeming acts to be criminal. Challenges to retroactive tax laws on this basis have not succeeded.
Fear of citizens burning down city hall? It's usually difficult enough to pass ordinary tax increases. Trying something outrageously unpopular like that would probably be political suicide.
"Fun" fact: tax law is the one domain where "innocent until proven guilty" does not apply. If the government says you owe money, the burden is on you to prove that you do not.
> "Fun" fact: tax law is the one domain where "innocent until proven guilty" does not apply.
No, it's not the one domain. “Innocent until proven guilty” applies only in criminal law (neither “innocent” nor “guilty” even applies outside of the domain of criminal law, much less that maxim about the relation between them.)
Are you referring to civil or criminal law? Innocent until proven guilty is only relevant for criminal and in those cases the burden of proof is definitely on the state.
I'm always suspicious of politicians who either lack this basic understanding of US law or fully understand it, but are posturing. And that doesn't even get into the ethics of changing the rules after the fact.
I hope this dissuades any more startups from locating in SF. It's gotten to the point where even highly paid software engineers cannot afford to live in the city. The Caltrain is packed every afternoon with engineers evacuating to the safety of MTV and Sunnyvale.
The lack of affordable housing is the reason I moved from SF, since my wife and I wanted to start a family. I just wish more companies would do the same.
The rest of the Bay Area from Berkeley to Morgan Hill is not much better in terms of price. Perhaps more livable in terms of less density and less flagrant poverty as S.F.'s urban environment, but the region in general is already glutted.
That's not what he said. You can pass a law to remove/consolidate/correct regulations, which is what they should be doing if they want more affordable housing...
I said it before and I'll say it again... Japan has a great idea: make rent deducible from salary before tax. Then if the city wants some tax revenue they'd better have affordable housing!
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The issue here is, first and foremost, supply and demand. San Francisco has made the process of building new housing so incredibly onerous that, once a developer finally succeeds in erecting a building, the only ones they can sell to are the wealthy. If it was easier to build in SF, with less regulation, less restrictive zoning, and less expense, then housing would be built for the middle class. Then, the city could apply affordable housing policies to reserve units in middle income buildings, and the housing crisis could be averted.
But instead, our legislature continually enacts nonsense like this, which accomplishes little beyond rabble rousing.
And then I dig a little deeper into the “it’s just supply and demand, dummy” narrative and find articles that document how luxury housing development actually is associated with a rise in rents for the working class.[2] Who would have thought macroeconomics is complicated?
I feel the narrative here is highly politicized around are particular market-driven philosophy, so much so that people feel comfortable posting unsourced polemics. In the spirit of HN I would like to steer us toward a real analysis of the facts in the ground.
[1] https://www.sfchronicle.com/bayarea/article/Turns-out-SF-s-b...
[2] https://www.washingtonpost.com/business/economy/in-expensive...
[0]: https://en.wikipedia.org/wiki/List_of_United_States_cities_b...
[1]: https://www.seattletimes.com/business/real-estate/seattle-to...
[2]: https://www.oregonlive.com/business/2019/01/apartment-rents-...
[3]: https://www.investors.com/etfs-and-funds/personal-finance/hi...
No doubt that construction costs exacerbate the problem. But there absolutely are people deliberately blocking housing construction. There was a proposition to outright block private housing construction in the Mission that got ~40% yes votes. For further examples, see the infamous case of the developer that wanted to replace a laundromat with an apartment building:
https://www.youtube.com/watch?v=ExgxwKnH8y4
> And then I dig a little deeper into the “it’s just supply and demand, dummy” narrative and find articles that document how luxury housing development actually is associated with a rise in rents for the working class.[2] Who would have thought macroeconomics is complicated?
This is a fundamentally dishonest objection. New housing is "luxury" housing because the housing market is so expensive that even 1 bedroom apartments rent for $3-4K. Blocking "luxury housing" is blocking all housing, because the market is so expensive that even the smallest units are expensive enough to be considered luxury. Seriously, even 300 sq foot studios rent for 2.5K: https://sfbay.craigslist.org/sfc/apa/d/san-francisco-immacul...
Of course "luxury housing" is correlated with rising rents. When rents rise, newly constructed units get more expensive too and get pushed into the "luxury" price bracket. This is essentially a tautology, and it is not at all indicative that building more housing increases rents.
[1] https://www.bizjournals.com/sanfrancisco/news/2018/01/24/sf-...
Or maybe the regulations are so insane you spend millions in legal fees before you even have a glimmer of hope and eventually say “this isn’t worth it.”
Your other article is paywalled, but I imagine that tightly planned cities introducing only new luxery housing is the same general situation and would be similarly vulnerable to the very arguments you’re responding to.
Anyone who has built a house in any urbanized area with an highly environmental conscious outlook can tell you that building a house is difficult - I think anyone can also tell you that San Francisco has a large amount of demand - I think there would also be universal agreement that San Francisco is also basically built out. Upmarket housing tends to get built first when market demand is high, and its expensive to build in a place, because its harder to recoup the costs on cheaper housing.
Without significant densification (which has proven untenable politically) no significant amount of new housing will be built - so you can pass all the affordable housing bonds in the world, but until you change the zoning (regulatory) construct - nothing will change.
Though I live in SF, I really hope they do implement some of these asinine punitive taxes and finally kill the tech industry here. Then all these Nimbys can enjoy an empty city devoid of activity.
Whose fault is it?
Ban plastic straws, but don’t prosecute people who defecate on the street. That’s SF politics. Nothing of consequence happens except when something has the potential to propel them into state politics, and again it’s a high viz low impact issue.
There's a whole infrastructure on one half of the political spectrum in SF that you have to defeat.
[1] http://hsh.sfgov.org/wp-content/uploads/2017/06/2017-SF-Poin...
On the other hand, I can't identify any logic or argument to your comment. As far as I can tell your unspoken logic goes a little like this:
"The difficulty in building housing causes a constrained housing supply. Making it easier to build housing would solve part of the problem. The other part of the problem with the constrained housing supply is people without existing housing moving to the city. But I don't mean people without housing who can afford housing. I mean people without housing who can't afford housing. They constrain the housing supply in the city further."
They are not -- they are on the side of property prices going up.
Physicians want to get paid 300k/yr. Pharma is obsolete by computers and paid over 100k/yr.
Not to mention the pharma companies and hospitals.
Its why healthcare only gets worse with legislation.
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In a word, we get what we vote for.
As a VC in San Francisco, I've recently given up my residence here, and am increasingly looking outward for tech and culture. I see many of my peers doing the same, moving east, south, or out of the country entirely.
It's bittersweet. I used to love San Francisco, but have recently entirely lost faith in it ever getting better. I've given up. And honestly, I feel a weight lifted from not having to care and constantly deal with the frustration anymore. There's so much tech & entrepreneurship worth promoting outside of SF, and it's so often overlooked.
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And CA voters like to pay for things. Red-state voters do not; they like to pretend that people will do things for free (i.e., teachers) until things break and they accept the reality that nice things cost money.
Honestly, I’d have trouble moving back to a large city. It doesn’t have much more to offer, and what I’d have to give up is significant.
They pulled eminent domain no us to put up the new transbay terminal and infrastructure down town.
We tried to find a decent replacement but couldn't. Eventually we gave up working and converted the entire company to remote work.
Everyone preferred working from home. Some even bailed (like myself) and left SF. Some even went to Europe.
SF is dead.. it's bittersweet like you said of course... but it's died and has been reborn many times.
At least I don't have to smell shit and piss on the walk to work every day.
I think my point, other than boosting my hometown, is that there's a lot of really affordable talent out there if startups and VCs would just dare to look elsewhere a little harder.
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This... it's absolutely astounding how difficult it is to build housing in SF, then everyone complains about the lack of affordable housing and proposes all kinds of pretzel-twist solutions instead of adjusting supply towards meeting demand.
When employees increasingly leave the SF Bay Area or refuse to relocate to the SF Bay Area, driving up the cost of acquiring talent, the companies most certainly are bearing the burden.
But to pass an IPO tax after hard-working employees have put in literally years of longer/more-stressful hours at reduced compensation levels (relative to working at established companies) to get to this payoff is unfair and unjust. Those employees have entered this arena (the startup game) with certain expectations and rules in mind, which made taking on risk and deferring gratification worthy to them. Pulling the rug out last minute to shore up the city's own finances is punitive and unreasonable, especially when the law is targeted so narrowly. And no, the fact that some of those employees will get large sums of money out of this does not make it less unfair or less unjust.
Congress actually did something similar in 1980 when they passed a Windfall Profit Tax on oil to capture "unfair" profits in the wake of the OPEC oil embargo. It was wrong then, and it's wrong now.
[0] https://en.wikipedia.org/wiki/Windfall_profits_tax
The startup/IPO game is already incredibly unfair. How many people put in that same hard work only to be left broke at the end of it because their startup failed? Someone losing out on 1.12% of their IPO riches is pretty irrelevant by comparison.
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No, it's not the one domain. “Innocent until proven guilty” applies only in criminal law (neither “innocent” nor “guilty” even applies outside of the domain of criminal law, much less that maxim about the relation between them.)
If the government accuses you of j-walking or speeding, you need to go to court to prove your innocence otherwise they assume you're guilty.
I've heard that civil forfeiture is the same way. These are all unfortunate.
The only time taxes become a criminal matter is if you lie on the paperwork.
The lack of affordable housing is the reason I moved from SF, since my wife and I wanted to start a family. I just wish more companies would do the same.
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