Antagonizing the tech worker

An emerging attitude in San Francisco ignores a more complex family of failing policies, and solves nothing.

Context: Protesters block, vomit on Yahoo bus in Oakland, Protesters block Silicon Valley shuttles, smash Google bus window, Bus Vandalized as Protesters in S.F., Oakland Target Silicon Valley Shuttles, Activists Slam Gentrification and Police, Douchebags like you are ruining San Francisco, Why the tech industry is ruining San Francisco, San Francisco’s unique character crumbling, Why are all my friends moving to Oakland, How much tech can one city take, Backlash by the bay: Tech riches alter a city, Techies must nip growing scorn in the bud, Tech workers aren’t all evil

Ignoring Complexity

We see this again and again… A populist movement rises from the anxieties and frustrations of a community beneath a growing weight of political neglect. It seeks to harness the stored emotional energy of those who are struggling, but tragically misfires by galvanizing them against those who are not. Each of these movements seeks a compelling scapegoat to rally people against. In San Francisco, the tech economy being the most visibly successful engine of growth in the community is an obvious fit. But to buy into this fallacy is to turn a blind eye to the policy failures that led to this situation, and it gives the policymakers a free pass to do nothing about it. Yet for all the psychic energy poured into them, the only thing these precipitous movements accomplish in the end is delivering the opiate of emotional satisfaction at the expense of a better outcome.

It is important to recognize that rarely in life are social issues as simple as the loudest critics make them out to be. The populist demagogue sets out to present a caricature to put on trial by exaggerating the aesthetically appealing features of an argument while erasing the inconvenient ones, and by ignoring complexity is able to draw visceral imagery of an unequivocally despicable archetype for the lowest common denominator to chew on. This is all accepted without much scrutiny by those who are angry, confused, and afraid, with no better frame of reference to explain the dire situation unfolding around them. But it is this inability, or perhaps unwillingness, of the grandstanding populist to correctly identify the fundamentals of his struggle that so often leads to its characteristically poor outcomes.

Yet this is the sort of myopic narrative that brings us to where we are today. In the context of San Francisco’s commercial and residential real estate crisis—where the price of any plot of square-footage in this city is soaring out of control to unsustainable heights—the only simple thing about it is the economics of supply and demand that applies to every population center that runs out of open space and has nowhere to expand but upward.

Adding Context

According to the San Francisco Center for Economic Development, the city of San Francisco created 26,700 jobs in 2013. 10,600 of these jobs were in the tech sector and another 13,000 were created in attached sectors such as transportation, trade, leisure, and hospitality. This enviable rate of growth accounted for San Francisco’s 4.8% unemployment rate at the end of 2013, third lowest in all 58 counties of California just below neighboring Marin and San Mateo counties. New jobs create new demand: demand in goods, demand in services, and demand in housing. Yet over the past two decades, San Francisco has only added an average of 1,500 new housing units per year, much of which was converted from existing commercial stock. This is as simple it gets: 26,700 new jobs, 1,500 new housing units. Do the math.

What we are dealing with fundamentally is a decades-old reality that the supply of the local real estate market has been overwhelmed by the demand of the marketplace and no one with the power to change this has stepped up to the plate. A big reason for this imbalance can be traced back to the post-war era of the 1950s where the national trend was for families to flee the cities for the suburbs. In the wake of this exodus was a large supply of cheap housing stock in the city, which drew in a flood of young artists, activists, and bohemians throughout the 1960s and 1970s. It was their involvement in local politics that resulted in a legacy of slow growth and anti-growth measures meant to ensure an unchanging character to the city.

In the decades since, the paradigm has shifted out of the suburbs and back into the cities. San Francisco has been one of the most sought after targets of this shift, and for many good reasons: its temperate climate, majestic vistas, and storied history, but also its cosmopolitan demographics. With its envious brand of opportunities, activities, and varieties of people, it is a destination city for the bold and the intrepid who are attracted by the same moorings of its robust entrepreneurial engines of growth in sectors such as tourism, finance, health care, and technology. Millions of people would love to live here, yet only some 840,000 are able to. It’s not hard to trace how the economics of this reality leads us to where we are today.

Resisting Change

Ironically enough, some who identified with the tectonic change of the 1960s in their youth have since hardened into the most vehement force against change in the city today. Yearning to preserve the city like a historical diorama frozen to their liking, they see the issue as a problem of demand. However, by focusing on measures that work to reduce demand, their approach becomes about deflating the local economy and destroying a vibrant interconnected marketplace with countless lives, years, and dollars invested, which would still do nothing to stop displacement since it is a regional issue with the city at its forefront.

You see San Francisco is not the only city in the Bay Area experiencing a jobs boom and a lack of new housing to support the influx of new workers. As mentioned before, Marin County to its north and San Mateo County to its south had even lower rates of unemployment at the end of 2013 while Santa Clara, Alameda, and Contra Costa trail closely behind all three. For the most part residents of these communities love job growth, but they are not very receptive to pro-density and pro-development policies that would keep property value and cost of living affordable. We call this NIMBYism.

For better or for worse, the San Francisco-Oakland-San Jose population center is projected to grow from just over 7.2 million people today to about 9.3 million by 2040. San Francisco alone is projected to grow from just under 840,000 to 1.1 million. The only relevant question we face now is how will that growth occur? The fact is, if you identify as a liberal, a progressive, or an environmentalist, or if you simply value the goals of efficiency, diversity, or sustainability, then you would be a proponent of smart growth infill development as well. Infill development is the growth strategy that Seattle took when it decided how it was to accommodate its population boom. Was it going to deforest, denature, and sprawl outwards creating vast suburban deserts of tract homes, strip malls, business parks, and gridlock? It decided rather to build for density from the city’s center and become one of the most walkable cities in the nation. Today it is a model for sustainable development and an affordable place to live with a very high quality of life.

Blame Game

When the median cost of housing rises relative to median income, the economic driver of this increase is supply scarcity. On this point I think all parties, from the demagogues and their protesters to the landlords and their tech tenants, can agree on. The knee-jerk reaction is who can we blame for that? For some it is obvious the tech companies and the tech workers are to blame because they are the only ones who can afford the rate increases that result from this scarcity. But if not the tech companies, it would be the next guy that makes more than the guy being pushed out, and there will always be that guy being pushed out because even without the tech sector, the city and the region has been creating more jobs than housing for decades, which means there are plenty of non-tech people out there, including those who have been expatriated to Oakland or elsewhere nearby, capable of displacing some other renter who is barely able to afford living in the city today.

Maybe it’s the financial analyst or the sales executive or the civil attorney or the business owner. All of these professions produce consumers that have more financial leverage than the struggling artist or the teacher or the non-profit worker that we all value the presence of. So if we want to be honest with ourselves, then anyone who is currently living in the city is in effect displacing someone else who wants to but cannot. By choosing to blame, we should really blame anyone who can make happen what someone else can’t. What does that accomplish though? Rather than a divisive model of blame, a constructive dialogue must be built on a model of contribution.

Displacement is an unfortunate outcome that has many contributing factors: The NIMBYs prevent their neighbors and any prospective developer from meeting square-footage demand with supply, even where it makes sense to. The real estate speculators from every corner of the state, the country, and the world are allowed to arrive and flip property at higher premium without any consideration to socioeconomic parity. The city’s own housing policy currently ignores middle income wage earners by creating a gaping duality where the Below Market Rate group tops out at $44,000 annual income and the market rate group begins at around twice that income level. The city’s job creation policy subsidizes productive sectors of the economy, which only exacerbates downstream economic pressures. The local media continues to harp on community tension and class warfare as the low hanging fruit of readership engagement. The politicians and pundits peddle red herrings to fuel the most outspokenly vitriolic. And when it counts, idealistic attitudes take place of pragmatic policies in a reality where the property market has no place to expand but upward.

Reform Needed

Pragmatic policies are not out of reach, but they do require that the conversation and the attitudes of stakeholders change. The current dialogue is an attack on the demand side of the equation, offering to suppress any engine of growth and class mobility that shakes up the neighborhood. This is not an attack limited to tech jobs and tech companies however; No, this conversation will manifest to attack any economic agent of growth that can be associated to displacement for as long as we continue to overlook the real causes and focus attention on attacking its symptoms. However the displacement of tenants that we are witnessing today can only be resolved by rapidly and thoughtfully increasing the supply of available units while ensuring an income-based parity in all of many future development projects.

There are currently 4,800 new housing units in San Francisco’s construction pipeline with some 45,000 others having met city approval over the next ten years. Many of these are the towering cranes seen across SoMa. Yet today every tower that goes up and every building that is wrapped in scaffolding is ultimately redeveloped as luxury condos and apartments with pricing that makes them attainable only to those renters making over six figures and those owners making at least double that. This only happens because better alternatives that involve higher density and onsite affordability are not currently possible because we don’t demand more from our policymakers.

The Inclusionary Housing Program—a policy that requires larger housing projects to allocate a percentage of units to affordable housing or pay for an affordable housing project offsite—only credits developers for onsite units at below-market-rate (BMR). In practice the developer almost always cuts a check instead of building affordability onsite because of the enormous cost to value per premium square-footage. Where existing zoning laws restrict building heights to just three to six floors, there is no opportunity to mix affordability, as defined by the city, into a project. The result is stratified neighborhoods when the goal is mixed occupancy communities. If the policy expanded the definition of affordable housing or “BMR” to include middle income workers earning any annual wage below six figures, and if zoning laws were revisited to allow higher density, these mixed income housing projects may actually get built onsite as intended. From there a more sharply tiered luxury tax could be levied to discourage the unchecked allocation of so-called ivory towers while helping to offset the cost of an expanded BMR program. It is a critical policy that is broken, but fixable.

Prop 13

I save the worst for last though as the great big elephant in the room of failed housing policy is also the untouchable third rail of California state politics: the 1978 People’s Initiative to Limit Property Taxation, known more commonly as Prop 13. This piece of legislation, meant to protect older fixed income property owners from incurring a progressively higher tax burden, had the unintended consequence of reducing affordability in every developed neighborhood (thereby encouraging suburban sprawl) by creating an economic disincentive against selling or expanding the square footage of those properties. Prop 13 tethered the assessed taxable value of existing properties to their 1975 value with the only qualifying events for reassessment being either a change in ownership or new construction.

Naturally most owners lost all motivation to build or sell when they were locked in on a tax rate that effectively got cheaper by the year. In many neighborhoods entire buildings and blocks sat unoccupied or underutilized for decades to avoid reassessment. That in turn increased the cost of constructing anything new over anything old because a developer trying to turn a condemned cottage or warehouse in the middle of downtown into a mid-rise apartment building first had to purchase the existing property at an inflated price to incentivize a sale before having to demolish and dispose of what was just paid for. The resulting project would have to cover those higher costs, often by furnishing and marketing them as luxury or premium condos, making the retail product less affordable to prospective residents. This describes the history and development of much of the city’s newest housing development activity across SoMa and Mission Bay.

On the other side of the coin Prop 13 also reduced state and local tax bases since the two percent maximum tax cap never kept pace with the increase in Consumer Price Index. The state and local government would have less and less buying power to operate social programs like the Inclusionary Housing Program described above, as well as public education. Many experts credit Prop 13 with the defunding and decline of the public school system in California. A movement to reform or repeal Prop 13 is desperately needed.

Cultural Ruin

In discussion forums across the local news media spectrum you can almost certainly find a running theme to the public comment, which stems from either a classist or nativist platform and funnels into the vilification of the “tech people” archetype. A frequently levied attack against tech workers that seeks to dehumanize them, strip them of any value, merit, or consideration and thus avoid the hard work of developing a creative and inclusive solution, is that the tech worker is somehow un-San Franciscan and is thus eroding the culture and character of what San Francisco is. Out group homogeneity bias is invoked to define the “tech monoculture”. It is a stark reminder of just how out of touch some people can be when they begin to stereotype a class of people so foreign to their personal experience. Quite frankly it derides the spirit of openness and acceptance that truly defines San Francisco.

Gentrifier is another popular label attached to the class. Tech workers are labeled as wealthy elites because frankly only wealthy elites would take WiFi enabled shuttles to work. But let’s not be naive here. Adding WiFi to a two-hour commute is what an employer does to increase productivity just as every other perk the company offers is designed to do. Let’s also take a moment to recognize that (1) half of all workers in the Bay Area cross at least one county line to get to work every day, (2) the tech shuttles collectively eliminate 327,000 cars and 10,000 tons of carbon every year at no cost to the taxpayer, and (3) public transit options like Caltrain and BART already run at full capacity during commute hours and could not possibly handle this movement of people.

A six figure salary does not make one wealthy in this city, nor this region, nor this state. It would perhaps up until the late 1990s, but the median cost of housing has been rising faster than median income meaning nobody but incumbent land owners are winning here. What a $100,000 salary is here, today, is solidly middle class. The traditional blue collar work of the last industrial age no longer fits in the middle of the working class. Those jobs they ranked above have either disappeared or off-shored and their wages have remained stagnant over the last forty years during which time inflation, the cost of goods, and the cost of housing have steadily risen. The resulting decline in net disposable income for these households has only been mitigated by rising debt and leverage, but this unsettling trend belongs to a completely separate set of issues that predates the Internet altogether. Robert Reich recently wrote a fantastic book about this historic reality.

Social mobility

By contrast, the more contemporary STEM wages that built the finance, aerospace, semiconductor, software, Internet, info tech, biotech, renewable, sustainable, and disruptive economies of the modern west have done better at keeping up with the cost of living over this period because the nascence of these industries, the value, the demand, and the lack of substitutes for these specialized skills. The smartest workers know that as tools evolve so too will these dynamics, and those skills must continue to evolve with the pace of technology to maintain their value and remain at the leading edge of the modern economy. It is in the space where opportunity and class mobility are defined. These labor forces have always been the heart of the middle class. Today their bounty is anywhere from $75,000 annually at the entry level to $150,000 as a high impact player—a livable wage by today’s standards. The average engineer salary in San Francisco hovers around $110,000 because the competitive nature of the start-up space demands that every new hire is an 80-hour-per-week-capable impact player. Many of these workers are younger and tend to live Epicurean lifestyles that give the impression of lavish wealth, but to the contrary they are actually spending their earnings more freely and to a larger extent on local businesses. It is why you haven’t heard any criticism from the small business community.

San Francisco and Silicon Valley’s white-hot job market is the envy of the world. Having the highest concentration of highly-skilled workers on the planet, it persistently produces vast amounts of wealth that is continually reinvested into the local economy to carry the middle. Look no further than Detroit to see the state of a community where this cycle of productivity is absent. At the same time there is no ivory tower here; the barriers to entry in tech are extremely low thanks to massive online open courses and other public repositories of knowledge across the Internet. The irony is that the sweetest fruit of the tech boom today is the liberalization of the tools to class mobility—the knowledge economy—where all that is required to lift yourself up to prosperity and purpose is a commitment and a competency in those valued STEM (Science-Technology-Engineering-Mathematics) skills. A well-known fact is that today a Ruby or Python or Java developer can fetch a six figure salary with no college degree or experience by nailing a technical interview that proves high degree of competency. These skills can also be learned in weeks with nothing more than an Internet connection by excelling at one of many free online courses. That is serious class mobility.

Economic impact

Yet tech workers are not just STEM-educated engineers, data scientists, network architects, and visionary entrepreneurs; they are also the support personnel: the creative, sales, marketing, finance, accounting, legal, HR & management organizations within these organizations. Decent people from different walks of life who are no less deserving people than any of the finger pointers. Their companies also support the livelihoods of the construction workers, electricians, plumbers, painters, HVAC technicians, custodians, window washers, catering companies, hotel staff, convention center employees, and many other industries that they shell enormous operating expenses out to all the time. In fact research published by the Bay Area Council Economic Institute shows that each tech job in the Bay Area has the effect of creating an additional 4.3 jobs in the local economy.

Besides building technologies that connect people and helps them achieve their goals better, upends status quo institutions, and creates the crowd-funding, micro-finance, sharing, incubator, sustainability, and triple bottom line economies whereby people are empowered with better tools to cast larger nets and make more of a difference, these tech workers also spend money on local businesses that make up their communities, they pay taxes that fund the city and county’s outreach programs, and they use their wealth, their time, and their energy to pursue and support philanthropies and causes they believe in. What more do the antagonists want from one sector of workers that they don’t expect out of other local businesses and residents? Without all of this added economic activity driving the gears of the city day in and day out, San Francisco would be in a financial and economic bind that would hurt the people at the margins the most.

Forward Thinking

If anything is un-San Franciscan, it is the us-versus-them mentality that seeks to attach more value to one person over another on the basis of the label of occupation. The idea that a person who went to college and received an education that armed her with the hard skills that high-growth employers and the leading-edge of the economy demand is somehow less deserving of making a life in a world-class city than the person who followed another path in pursuing those soft skills that employers and the economy under-appreciate, has never reflected the values of San Francisco.

San Francisco’s real story is one littered with entrepreneurs, innovators, progressives, and visionaries. An individual with the drive to pursue a discipline in demand to meet the challenge of the highly abstract thinking required to become a builder of technology is no less deserving of making a life in San Francisco than the artist or the bohemian that is unable to find success in life because their abilities never meet the standard of their audience’s wallet. Every person has an equal right to make a life in this city, regardless of background, and also an equal right to fail in doing so.

It is the existing housing and development policies, and the policymakers that resist improving them who fail us. To offload the responsibility of a multi-generational social issue onto a specific business sector whose mandate it never was to manage the health of an entire community is to kneel before the laziness and wickedness of identity politics. It may be cathartic to approach the issue in such a manner, but history compels us to recognize that it solves nothing to scapegoat the benefactors of a poor policy. If we are unhappy about the situation—which I imagine everyone from the evicted artist to the engineer that pays through the nose to make it in the city is—then we must first correctly identify our systemic failures in order to arrive at a real and lasting solution. Otherwise we will go on to yell and point fingers like a bunch of stodgy emotional robots as the conditions around us continue to deteriorate. Eleanor Roosevelt summarized the way forward most eloquently by asserting that “Great minds discuss ideas; average minds discuss events; small minds discuss people.” The San Francisco I know is not a place built for, or by, these lesser minds.