San Francisco Housing Affordability And The Google Bus Protests

It’s a well known fact that people are never happy. Housing prices go down and everyone bitches about the loss of wealth. Housing prices go up and people complain about housing affordability – or the lack thereof. Such is the case in San Francisco and Oakland these days, which seem on the verge of all out class warfare as people employed outside the technology sector find themselves being displaced by people employed in the technology sector who make a lot more money and are driving up rents. The disenfranchised are focusing their anger these days on the buses that transport the highly paid generation Y-ers from their homes in the bay area to their jobs in Silicon Valley each day. They have been staging protests in the bay area lately and just before Christmas these protests turned violent, with protesters blocking some of the buses and smashing a window on a Google bus.
Apparently the recent political rhetoric in the country has validated the belief among masses of people that the world should be fair and everyone is entitled to the same standard of living regardless of education or job. The result is a movement that might become known as Occupy Google and their rhetoric speaks volumes about who they are and how they see the world. In addition to demanding that Google pay $1 B for use of San Francisco’s public infrastructure by their buses they have created the Google bus protester’s manifesto that circulated about a week ago in Oakland – excerpts here:

In case you’re wondering why this happened, we’ll be extremely clear. The people outside your Google bus serve you coffee, watch your kids, have sex with you for money, make you food, and are being driven out of their neighborhoods. While you guys live fat as hogs with your free 24/7 buffets, everyone else is scraping the bottom of their wallets, barely existing in this expensive world that you and your chums have helped create….
…If you want a Bay Area where the ultra-rich are pitted against hundreds of thousands of poor people, keep doing what you’re doing. You’ll have a nice revolution outside your door. But if you want out then you should quit your jobs, cash out, and go live a life that doesn’t completely f___ up someone else’s.

Whoaa! First of all I sure hope that my daughter and her roommate, who live in San Francisco, are not paying guys to have sex with them and I hope the people having sex for money are not the same people watching the kids for the tech employees.
As you can see the rhetoric is pretty similar to the Occupy movement’s rhetoric in demonstrating a total lack of understanding of basic economics. My daughter and her “chums” spend a lot of their income in San Francisco – for rent, drinks, food, transportation, clothes, gym memberships, etc… According to the Bay Area Council Economic Institute every tech job creates an additional 4.3 regular jobs. So if all these techies got the f____ out of the bay area those protesters might just find themselves unemployed. Not to mention that $1 B for use of the public infrastructure is absolutely absurd.
The protesters have one thing right: the growth of the tech industry really is driving up demand for housing in San Francisco. If you will recall, I accompanied my daughter and her future roommate on an apartment hunting trip in San Francisco back in July just prior to them starting their jobs at Facebook and Google. Like all of their friends in the tech sector they didn’t want to live in Palo Alto or some other suburb. The action was in San Francisco and they ultimately found a place there that is surrounded by about 100 of their closest friends (I’m not exaggerating) within a one mile radius. Their social calendar is always filled.
So you have all these recent grads who want to live in San Francisco, and they can afford it, so their employers operate these shuttle buses from the city to their campuses one hour away as a means of attracting the best talent. Both my daughter and her roommate are totally dependent upon these shuttles to get to work. Supposedly these buses keep 327,000 cars off the road but this convenient transportation option essentially increases demand for apartments in San Francisco. Not to mention that in the last year San Francisco itself supposedly added 68,000 new jobs but only 120 new housing units.
Rapidly increasing demand and a rather stable supply results in rising prices. Since the bottom of the San Francisco housing market in February 2012 condo prices have risen 56% according to the Case Shiller home price index. But guess what? That is equivalent to only recovering 89% of the losses from the market peak. Now, I have to believe that over this time period rents have roughly tracked with condo prices. If not, something is wrong. But assuming that rents have followed condo prices what is the big deal? It’s complicated. I’ll get into it later this week after tomorrow’s release of the Case Shiller home price index.
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