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CNN Blames San Francisco's Booming Tech Sector for a Government-Created Housing Shortage

The news network largely ignores the role of government restrictions on housing construction

Alexandr Blinov/Dreamstime.comAlexandr Blinov/Dreamstime.comSan Francisco is one of the most expensive places to live and work in the United States, with average monthly rent for a one-bedroom apartment approaching $2,500. This is largely the result of the Bay Area adding a tremendous amount of jobs and people over the past decade, but failing to build housing for these new residents.

From January 2010 to January 2018, the city added 100,000 jobs, according to the U.S. Bureau of Labor Statistics, with many of those in San Francisco's booming tech sector. In that same time period, the city has added a little over 20,000 housing units. The predictable result of quickly rising demand and slowly growing supply has been a massive spike in rents, pricing some residents out of the city, and others on to the streets.

The increasingly widespread conclusion is that this failure to build housing is a policy failure, born from highly restrictive land use regulations that've prevented the construction of new units. It's a story that everyone can agree on, from the Cato Institute to some of the city's progressive politicians.

"When it comes to housing, yes, supply and demand is a real thing," said San Francisco Mayor London Breed during her inaugural address. "We often ask 'should we build more housing for teachers, nonprofit workers, or the homeless?' Then we answer with an unending system of laws and procedures that seem designed to say no."

Enter CNN, which manages to ignore the supply side of this equation in favor of blaming the tech sector for the city's woes.

"The Bay Area's tech boom is hurting businesses," reads the headline of a Monday piece by Ahiza Garcia, which argues that the rise of the cities tech sector "created an influx of companies, workers and jobs, but in 2012, it ignited a housing crisis that's made it difficult for many people, especially those in minimum wage or entry-level jobs, to live nearby."

For someone trying to grapple with the high housing costs faced by San Francisco's low-wage earners, however, Garcia is remarkably incurious about what—apart from tech-fueled demand—might actually be driving up those housing costs.

There exists a single, solitary mention of the fact that "it take[s] years for projects to get approved and for construction on new developments to begin" in the last paragraph of the article. The rest of the piece is mostly finger-pointing at the peculiarities of tech-sector growth, which has given the city a lot of high-income earners demanding services from low-wage workers, while simultaneously pricing them out of the city.

That's an interesting dynamic. It's also one that can't be understood outside the context of how difficult San Francisco's land use policies make it for housing to be built for low-income workers.

While permitting obstacles get a mention, San Francisco's zoning policies (which forbid more than two units of housing to be built on over half the private land in the city) and its laborious environmental review process (which ensures most sufficiently controversial projects will be mired in administrative appeals and litigation) are totally written out of the narrative.

What's more, pointing the finger at San Francisco's tech sector for housing costs manages to ignore the counter-example of Seattle, a city where rents are actually falling despite a sustained tech boom.

Unlike San Francisco, Seattle has somewhat begrudgingly embraced the need for more housing, upzoning swaths of the city's downtown, and being far more liberal with the number of housing permits it issues each year. Between 2010 and 2017, Seattle added 48,000 units of housing, more than double what San Francisco has managed to produce in the same time, and despite Seattle having about 100,000 fewer people.

The end result is that Seattle is finally starting to see rents go down after years of sharp increases. A report from the company Apartment List found that rents in the Rainy City declined a whole 1.6 percent in 2017. In San Francisco, where average rent is already $1,000 more expensive a month than Seattle, monthly rents grew another 1 percent during the same period.

Just look to local media for a sense of how the two city's are dealing with the high cost of living. A Seattle Times article from early October describes in great detail the construction boom going on in Seattle's downtown, where new apartment buildings have shot up, and rents for high-end housing have cratered.

Contrast that picture with an August San Francisco Chronicle story which found numerous housing projects had stalled and others were unable to find financing thanks to a mix of rising construction costs and onerous demands from community activists that these projects rent out upwards of 25 percent of their planned units at below-market rates.

Ignoring the role that restrictions on housing supply play in increasing housing costs, as the CNN article largely does, not only paints an incomplete picture of the problem, it also gives cover to politicians and special interests pushing expensive government intervention as a solution.

In June 2018, the National Low-Income Housing Coalition—a non-profit advocacy group*—issued a major report on the unaffordable nature of housing in much of the country. It mentioned zoning or land use regulations a total of zero times, while advocating things like a national minimum wage increase and a huge infusion of federal funding to build below-market rate housing.

A month later, Sen. Kamala Harris (D–Calif.) introduced her "Rent Relief Act" which excluded any mention of reforming local or state-level land use regulations in favor of giving cost-burdened renters refundable tax credits.

Come November, California voters will vote on a measure that would, if passed, give cities broad authority to reimpose rent control.

All these solutions are terrible, counter-productive ideas, but they are the kind of ideas that can easily gain traction when government's failure to allow sufficient housing production is written out of the media narrative on housing affordability.

Free-market types interested in ensuring America's booming cities continue to grow and thrive should not let this omission slide, not even for a second.

CORRECTION: The original version of this post referred to National Low-Income Housing Coalition a lobbying group composed of largely affordable housing developers and public housing agencies.

Photo Credit: Alexandr Blinov/Dreamstime.com

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  • ||

    In June 2018, the National Low-Income Housing Coalition—a lobbying group composed of largely affordable housing developers and public housing agencies—issued a major report on the unaffordable nature of housing in much of the country. . . . advocating . . . a huge infusion of federal funding to build below-market rate housing.

    Wait - developers who depend on government housing contracts suggest that the problem can be fixed by a huge infusion of federal funding for government housing contracts?

    I'm shocked!

  • OverWandersTelcon-tarian||

    Baptist, meet bootlegger.

  • Jerryskids||

    A month later, Sen. Kamala Harris (D–Calif.) introduced her "Rent Relief Act" which excluded any mention of reforming local or state-level land use regulations in favor of giving cost-burdened renters refundable tax credits.

    Breaking legs and handing out crutches.

  • Pro Libertate||

    You know, I bet Californian politicians yearn for the Cascadia-San Andreas "Big One," so federal money will flow in freely and property values will plummet.

  • Cynical Asshole||

    The news network largely ignores the role of government restrictions on housing construction

    Here, let me show you my shocked face.

  • Diane Reynolds (Paul.)||

    where new apartment buildings have shot up, and rents for high-end housing have cratered.

    That's because it's cheaper to live under a bridge. Everyone's doin' it!

  • OverWandersTelcon-tarian||

    A month later, Sen. Kamala Harris (D–Calif.) introduced her "Rent Relief Act" which excluded any mention of reforming local or state-level land use regulations in favor of giving cost-burdened renters refundable tax credits

    So, a Federal Rent Forgiveness program?

  • OverWandersTelcon-tarian||

    Come November, California voters will vote on a measure that would, if passed, give cities broad authority to reimpose rent control

    Wait, that sounds like something Venezuela would do. I guess this must not be real socialism after all.

  • Rockabilly||

    CNN, ahahahahaha

    CNN, loollalalaoalaal

  • SIV||

    It's like Britschgi is taking a motorcycle chain to the 1st Amendment!

  • Drave Robber||

    NPCNN

  • JFree||

    Ignoring the role that restrictions on housing supply play in increasing housing costs

    Well it's pretty obvious that Reason is ignoring much of the supply problem as well.

    If SF added 100,000 jobs and only 20,000 housing units - that ain't a shortfall that is likely caused by either an artificial restriction on vertical construction (we wanted a 50-story apt building but only got 10) or 80,000 units being slow-walked in some constipated pipeline.

    Far more likely, there just ain't anywhere near enough LAND being put into development. That has both a pull-factor (higher prices to induce a sale) and a push-factor (higher prop taxes to induce a sale). The pull-factor will tend to induce construction at the top-end - the push at the bottom-end. But the two 'rental markets' are not fungible.

    A lot of this is on Prop 13 - which eliminates most of the push-factor - and apparently Virginia Postrel is the only libertarian who gets it

  • Sevo||

    "If SF added 100,000 jobs and only 20,000 housing units - that ain't a shortfall that is likely caused by either an artificial restriction on vertical construction (we wanted a 50-story apt building but only got 10) or 80,000 units being slow-walked in some constipated pipeline."

    You don't know what you're posting about.
    The SF city gov't is more than capable of delaying thousands of housing units.
    --------------------------
    "A lot of this is on Prop 13 - which eliminates most of the push-factor - and apparently Virginia Postrel is the only libertarian who gets it"

    Ah, yes! The lefty's constant push: MORE TAXES!
    Fuck off, slaver.

  • JFree||

    I think CA could easily reduce sales and income taxes to offset whatever the increase in prop taxes is - or more.

    But have no fucking doubt -- Prop 13 is gonna turn CA into a neo-feudal state. Where landed nobility and their future descendants will suck at everyone else's tit. I suspect the only reason Silicon Valley is still there is because the VC/angel money from the first couple tech waves is now that landed nobility. As long as they are able to bring their tech serfs to them, they will do so. Once tech talent realizes they are far better off almost anywhere else, they will also find they have the actual power to force the money to come to them.

  • Sevo||

    JFree|10.18.18 @ 9:54PM|#
    "I think CA could easily reduce sales and income taxes to offset whatever the increase in prop taxes is - or more."
    I'll bet you "think" unicorns are really there if you look hard.

    "But have no fucking doubt -- Prop 13 is gonna turn CA into a neo-feudal state. Where landed nobility and their future descendants will suck at everyone else's tit. I suspect the only reason Silicon Valley is still there is because the VC/angel money from the first couple tech waves is now that landed nobility. As long as they are able to bring their tech serfs to them, they will do so. Once tech talent realizes they are far better off almost anywhere else, they will also find they have the actual power to force the money to come to them."
    As a lefty twit, your opinion is NWS.
    And then even if there is a possibility of that happening, the proper action is to extend P13 universally. P13 was just a good start.

  • JFree||

    the proper action is to extend P13 universally. P13 was just a good start.

    Extend WHAT universally? The complete randomness of property taxes paid - by NEIGHBOR within a single zip code??? Where a new resident pays $800 per $100k value and their old next-door neighbor can pay less than $200 per $100k value? And wait and see what that difference becomes once you cross generations.

    THAT was the only effect of Prop13. That was the INTENDED effect by those who actually knew how it would work. It is the creation of a landed nobility.

  • Sevo||

    JFree|10.18.18 @ 10:06PM|#
    "Extend WHAT universally?"
    The rollback of property tax to 1978 rates. Is that so hard to understand, even for a lefty imbecile?

    "The complete randomness of property taxes paid - by NEIGHBOR within a single zip code??? Where a new resident pays $800 per $100k value and their old next-door neighbor can pay less than $200 per $100k value? And wait and see what that difference becomes once you cross generations."
    Kinda like rent control, you fucking ignoramus?
    Read above; rolling back all the taxes would solve all of you (government-caused) problems.
    Try to keep up.

  • JFree||

    Fine. Eliminate prop taxes altogether. You will find no new infill development will EVER occur in cities. Ranches/etc will be developed - with nice 5 hour commutes to add to the traffic. And hey - since that no infill development also means no new roads - good luck in the traffic congestion.

    It's your state. PLEASE stay there asshole.

  • Sevo||

    JFree|10.19.18 @ 12:49AM|#
    "Fine. Eliminate prop taxes altogether. You will find no new infill development will EVER occur in cities. Ranches/etc will be developed - with nice 5 hour commutes to add to the traffic. And hey - since that no infill development also means no new roads - good luck in the traffic congestion."
    Gee! Look! Lefty fucking ignoramus invents all sort of hypothetical ills from less taxes!
    Can we presume fucking lefty ignoramus is fucking lefty ignoramus?
    No, we don't have to. Fucking lefty ignoramus has proven himself to be fucking lefty ignramus!

    "It's your state. PLEASE stay there asshole."
    Please stay away, fucking lefty ignoramus. We have enough problems without your abysmal stupidity adding to them.

  • Sevo||

    BTW, you fucking idiot, you have been called on EVERY ONE of your bullshit lefty proposals to 'solve' the 'housing crisis'. But as a lefty fucking ignoramus, you continue to propose more of the same.
    Are you really so fucking stupid you don't see that? What sort of abysmal stupidity does it take to continue the same failed practices? Are you totally incapable of learning anything?
    Pathetic...

  • JFree||

    EVERYTHING you morons are trying or proposing in CA will fail - including everything Britchgi writes about as a solution. Guaranteed.

    Do I care? Not at all really.

    I just want to make sure that when you assholes look to the feds for a free money solution (that will also fail - guaranteed) that enough people tell you to fuck off and eat shit.

  • CE||

    The land is open space or already developed. They need to go vertical.

  • JFree||

    But that means a developer will need to buy multiple lots in order to get a big enough footprint to go up. And that's what Prop13 makes near impossible because in every block now, there are dogs in the manger - long-time owners who don't pay much prop tax but who always bark the loudest at preventing development. There is no cost for them to do that.

  • Bubba Jones||

    Question. Why hasn't the wage for a barista kept pace?

    Is it because baristas are willing to live in squalor for the privilege of pouring coffee in SF? As opposed to Sacramento?

    If this is true, why should I give a fuck?

  • Sevo||

    Bubba Jones|10.18.18 @ 7:44PM|#
    "Question. Why hasn't the wage for a barista kept pace?"

    Two reasons:
    1) Rent control; some are paying 1/8th of market rate rentals. They're doing fine on the wages.
    2) A lot of their 'income' is not wages; it's benes which the SF gov't mandates whether that barista wants them or not.
    If there is something the SF city gov't has touched which it has not totally screwed up, it has yet to be found.

  • GeoffB1972||

    A certain percentage of baristas take a job in San Francisco to get into Starbucks. Then they transfer to a store closer to home the first chance they get. Or at least this is what I've seen in Silicon Valley where the good baristas transfer their way from Palo Alto to San Jose to Fremont, Gilroy and Santa Cruz.

  • 0x1000||

    Why doesn't Reason actually try buying some land in SF (or a similar city) and document the ridiculous processes of actually building housing there? It's one thing to find some guy whose intentions are rightly or wrongly inferred, but to actually be able to say "this is what it's like to build in SF" on an admittedly small scale would be really interesting.

    I've looked into some simple renovations for my house (in the desert, not SF) and found that I'd need to hire a licensed engineer to submit plans to the city for approval, followed by permitted electrical work by a licensed electrician and permitted plumbing work by a licensed plumber. To move one small non-load-bearing wall. The likely cost of asking for permission means this project will never happen, but it would be very interesting to see a publication actually try to do a project like this and report on the reality of what happens.

  • loveconstitution1789||

    Why anyone would ever tell the city they were renovating the inside of their house is beyond me.

    Get the qualified people you want to do the job right and a private inspector to make sure the contractors do what they are supposed to do. Then do it.

  • Sevo||

    loveconstitution1789|10.18.18 @ 9:10PM|#
    "Why anyone would ever tell the city they were renovating the inside of their house is beyond me."

    I'm guessing you live where you have no neighbors nor a local government capable of putting you into bankruptcy if the so choose.
    Simply, shut up if you don't know what you're posting about.

  • Longtobefree||

    Well, if electricians and plumbers are involved, there must be a lot in that non-load-bearing wall.
    Why not move to a different state?

  • Juice||

  • esteve7||

    Someone ask what's it's like to be economically illiterate and write about long discredited economic theories

  • XM||

    "Free-market types interested in ensuring America's booming cities continue to growth and thrive should not let this omission slide, not even for a second."

    It's Chinatown in places like CA.

  • chemjeff radical individualist||

    So their argument is that those darn capitalists in the tech sector are too successful and attracting too many jobs to the area? Really?

  • Sevo||

    No.
    The argument refers to the SF city gov't's ability to screw the housing market. Try to keep up.

  • GeoffB1972||

    But what gets missed is the government is screwing it up to keep the riff raff out and open space subsidized at the instigation of the people who gentrified it. That's why a poor person who misses a tax payment gets pushed out to make room for office space and luxury condos but Pelosi's neighbors got their driveway back.

  • Sevo||

    Ooops.
    If "their" refers to CNN rather than the article, I apologize for my comment. Mea culpa.

  • esteve7||

    It's because they don't want it to be true, so they blame something else.
    Like when they blamed Venezuela on low oil prices ....

  • CE||

    It's not just new tech companies locating in SF. It's also millennial tech workers from Silicon Valley who prefer to live in the City, and commute to work on company buses or the train, with valley tech companies providing commuter benefits. And cities up and down the valley having height limits on new apartment buildings.

  • CE||

    "We often ask 'should we build more housing for teachers, nonprofit workers, or the homeless?"

    And suddenly teachers and cops are deemed worthy of subsidized rent due to their thankless civic service for low pay and negligible benefits they endure.... with many new housing projects contingent on setting aside a portion of the units for our selfless government workers.

  • Olga||

    There are many issues that lead to high rents. Yes, the city should make it easier for developers to get more housing built. More supply will bring down price. However, it isn't all "the government's" fault. Some of it is NIMBY. In Palo Alto and areas south of the bay, the residents that purchased homes in the 1980s wants quiet suburbs near Stanford University. My aunt has a house there that they built in the early 1980s. Then many tech companies took off in the South Bay. Most current residents oppose the tearing down of defunct and under-performing strip malls to build high density apartments to house these tech workers and others. Many teachers and police officers for the area are commuting over 100 miles a day.

    Tech companies do have an effect and they can be part of the problem and solutions. When the companies were start-ups, no one knew how many works those companies were going to bring to the area. Now they know and they themselves can meet with local resident groups, HOAs and government officials. If more housing isn't brought online fast, they will move to a place where there is more housing. This has already happened. Many tech companies have moved to Portland and Texas so that their workers can actually find housing.

  • Miter Broller||

    "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." -Groucho Marx

  • Longtobefree||

    So in support of the oppressed, CNN will henceforth eschew the evil technology that is the root cause of all this suffering, and return to the manual press and print publication only?

    Yeah, I thought so.

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