No, San Francisco is not losing its soul

The Guardian has piled on now about tech workers driving out artists in San Francisco. As a long time resident and techie who thinks the city has far too little in the way of tech jobs (vis-a-vis the Goliath that is Santa Clara county), I want to offer a different perspective. San Francisco has not lost its soul, the soul has been carefully preserved in amber, wrapped in a Grateful Dead t-shirt, and kept in the basement of a rotting Victorian. No one knows which Victorian, so all of them must be preserved as well.

“Tech workers” is a vague term. A tech company employs engineers, graphic designers, human resource personnel, accountants, lawyers, managers, cooks, etc. Is Johnson Controls a tech company? Is Walmart? So let’s focus on software engineering occupations, or the closest proxy for it. From the American Community Survey, in the 2009-2013 5 year survey, it was estimated that in 2013 there were about 457K employed persons in San Francisco, of which 27,251 or 6% were classified as being in “computer and mathematical” occupations. In the 2005-2009 5 year survey, it was estimated that in 2009 there were 443K employed persons of which 22,907 or about 5.1% were classified as computer and mathematical workers. That is an increase of about 4,300 software engineers + mathematicians over a 5 year period, or an average net influx of about 60 workers a month. Of course that could be 1000 workers coming in, and 940 moving out. Nevertheless, the net gain is very small, yet it is supposedly driving out all the artists who give the city its soul (apparently engineers have no soul). Well, what about those artists? They would fall under the category of “Arts, design, entertainment, sports, and media”, which decreased from 24,325 to 23,923, or a loss of about 400 such workers over the 5 year period, or net outflow of a bit less than 7 workers per month. Again, that could be 993 moving in and 1000 moving out. The above figures are for residents of the county, not jobs in the county (San Francisco is a jobs exporter, meaning that on net, more people commute into the city to work than the reverse), but I’m assuming that the complaints are about new residents in the county, not jobs in the county, as the Google Bus anti-meme was invoked.

How plausible is it that a net influx of 60 computer/mathematics workers a month and a net outflow of 7 art/design/media workers a month is destroying the soul of a city of 830,000 people?

OK, but there is clearly some agitation on the ground. Not as much as media reports would suggest, but there was a survey:

just under a third of those surveyed said that “limiting the growth of the technology sector” is an important or extremely important priority for San Francisco right now

What are we to make of this 1/3? Is their preference that no one move into the neighborhood, or that only the right kind of people move in? Certainly there is fear of change, of displacement, but why would such a successful city be afraid?

Here it’s best to think of San Francisco as a type of conservative gated community. Residents believe that they have something special, something different and better (for them) than what is outside, and at the same time something vulnerable that needs to be protected.  So the community erects gates to keep the outsiders out and imposes a web of restrictive HOA regulations to enforce conformity within. My sense of San Francisco is that the locals feel something similar to this.  There is a great sense that “The City” is a special place, there is a real sense of being invested in the each of the various micro-neighborhoods, and also that they are under siege from both without and within.

San Francisco has a web of regulations, each of which benefits the incumbents and places barriers against outsiders. In San Francisco, rent control is pervasive, limiting increases to 2/3 of the local area CPI change (but it only applies to housing built before mid 1979). This means that many long time renters, just as many long time home-owners, would not be able to afford their unit if it were put back on the market, adding to the siege mentality as displacement fears are amplified. But the locals don’t want anything built after 1979 either. Enormous community opposition is marshaled when even abandoned buildings are razed for new development. Sometimes the NIMBY opposition to development reaches absurd levels. This can be easily manipulated, such as when a small group of wealthy condo owners with views of the bay managed to initiate and win a city wide referendum to prevent their views being blocked by another set of planned condominiums. This was a very cynical exploitation of anti-gentrification sentiment that resulted in prime bay front real estate being occupied by some parking lots and tennis courts instead of high density housing. This story repeats all over the city as even in the face of sky-rocketing demand, few new units are added to the housing stock. From 1996-2013, an average of 2000 units was permitted each year, a gross increase of roughly 0.6% of the existing stock. But because many units are also removed from the stock, you have a situation in which, from 2010-2013, only about 900 net new units were added to the city. Of the existing housing units, less than 7% were built after 2000, and about half were built before 1940. The population of the city was about 775,000 in 1950, and about the same in 2000. The city is becoming more and more like a museum.

On the office space front, “anti-Manhattanization” protesters in the 1980s managed to artificially cap the amount of office space allowed to be added to the city’s stock each year. In the small business realm, incumbent restaurants joined together to ban the permitting of new restaurants in their neighborhoods. Local owners managed to exploit anti-corporate sentiment to ban chain stores (leading to the infamous frozen yogurt wars as well as high prices for local consumers). And of course, the (state-wide) anti-tax revolt capped property tax rates and forbade re-assessments as land values went up if the property was not sold. There is now an army of millionaire small time property owners who pay almost no tax (they pay 1% of the price back when they bought the property), but who collect significant rents and re-invest almost nothing into the units (rent control doesn’t incentivize competition based on quality).  The result is a byzantine web of nonsensical regulations and disincentives protecting incumbent renters, incumbent homeowners and incumbent businesses from competition with challengers. The result, of course, is that they become less competitive, less able to emerge from the protections set aside for them, which both increases the gated-community mentality and at the same time ensures that the only type of new entrant that is able to scale these gates is of the wealthy variety most feared by the sheltered locals. I think that’s the fear here, but with “wealthy” morphed into “knowledge workers” and this becomes tech workers because of the prominent name recognition of some of the employers involved.

This is unfortunate because for San Francisco to be a vibrant city of 2+ million people that has room for both rich and poor alike, it will need to abandon the gated community/preserve-it-in-amber model and embrace the model of the growing, courageous city. One that encourages increased density, infill development, increased competition with outside firms, and increased office space. The gold rush-Barbary-Coast city that is not afraid to wrestle with and absorb everything that the outside world has to throw at it.

 

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No, San Francisco is not losing its soul

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