This month San Francisco residents will vote on Proposition C, which would raise the affordable housing requirements for developers from 12 to 25 percent and set aside some of that housing specifically for middle-income workers. Middle income in San Francisco, of course, is wealthy most everywhere else. While I applaud efforts to help people stay in the city, I’m not convinced that’s going to happen through ballot measures.
According to data compiled by online financial management site SmartAsset detailing the annual income needed to “comfortably” cover housing costs in 300 cities, in San Francisco you need to bring home $201,171 to live in a market-rate, two-bedroom apartment. That apartment, by the way, will cost you $4,694 a month, making San Francisco the most expensive city on the list in which to rent. Real estate tracker Zillow says San Franciscans spend 40.6 percent of their monthly income on a mortgage payment, or 47 percent on rent. And, they say, homebuyers are spending more on mortgages now than they did before the real estate bubble of 2008. As we try to legislate our way out of another housing crisis, I’m inclined to believe the only real escape will be another downturn in the economy. After all, we’ve been there before.
LET THE BOOM BEGIN
When the first dotcom boom burst onto the scene in the 1990s, the very people who made San Francisco so attractive, so diverse, were driven out by gentrification. Monopoly money millionaires from companies with billion-dollar valuations were buying up housing and driving up rents. In a 2001 documentary about displacement in the Mission District called Boom: The Sound of Eviction, then-mayor Willie Brown happily took the blame for courting tech firms and developers. “People moving into the Mission are replacing Latinos,” Brown acknowledged in the film. “Latinos have taken in many cases money from those old rundown structures that they live in, and they’re buying in Daly City or they’re buying a better structure some other place.”
On the ballot in 2000, Propositions K and L asked if the city should institute new controls on office development, including “office space for computer-based services.” Proposition L went a step further, including live/work units. Both measures failed. During that period, I was hired as an editor for a startup called LookSmart. When they offered me the job, I was shocked at the low pay: just $35,000 per year. I made more than that as assistant to the creative director for Apple. I guess it showed on my face, because the HR woman quickly reminded me that working for a startup was all about the stock options. “When we go public, those $5 shares will be worth a lot more,” she assured me. It certainly seemed like things were looking up at LookSmart. We moved from an antiquated brick building on Townsend Street to newly constructed headquarters at Second and Brannan Streets, and we held our IPO celebration at the Captain’s House at Fort Mason where the founders lived (at a cost to the company of $15,000 a month). But the party didn’t last.
BURNING DOWN THE HOUSING CRISIS
In March 2000, Barron’s magazine ran a cover story called “Burning Up,” which charted the inevitable demise of web companies by looking at their burn rate, or how quickly they were burning through their cash. According to Barron’s, 74 percent of dotcoms were in the red, and a quarter of them would run dry within 12 months.
Barron’s pointed out that founders and early backers, such as venture capitalists, were eager to sell their shares. That year, 38 publicly traded Internet companies tapped the markets for $16 billion via secondary offerings. An alarming number of these deals involved insiders unloading their shares on the unsuspecting public, prompting Barron’s to compare the practice to “men on a sinking ocean liner pushing women and children aside to commandeer the lifeboats.”
The article sent shockwaves through those of us living in the dotcom bubble, and not long afterward the bubble burst. It quickly became apparent that employees knew nothing of this impending doom as they margined against their stock options to purchase real estate, cars, and boats. IPO chatter was replaced with tearful talks about repos and foreclosures. As the months wore on, more and more dotcom workers got the dreaded e-mails requesting their presence in a conference room, after which they received boxes to pack their belongings while security guards stood watch. When you saw the foosball tables go out the door with the engineers’ fingers still attached to them, you knew it was over.
DROPBOX AND THE GIANT PANDA
I would like to think the latest generation of tech companies has heeded warnings from history, but it doesn’t look promising. At DropBox, one of the high-flying “unicorns” of San Francisco’s current tech boom, employees recently found a memo placed next to the life-sized chrome panda statue at their fancy new digs on Brannan Street. In retrospect, the note explains, the statue (rumored to cost $100,000) wasn’t the right call because “When building a healthy and sustainable business, every dollar counts.” DropBox, with a valuation of $10 billion on an estimated $200 million in revenue, is feeling the pinch of a chilly IPO market and constricted VC funding.
According to Business Insider, DropBox also canceled its free shuttle and gym laundry service and limited previously unlimited employee guests to five per month, a savings of $25,000 per employee — that’s $38 million a year in perks alone. The panda, however, is off limits, and can be found preaching from the Twitter handle @AusterityPanda (“Ping pong tables take up SO much space, and we can’t afford them!”).
I have no doubt that the developers making billions off the latest tech bonanza can double the “affordable” units in their condo high-rises, but I don’t think that will solve the housing crisis. The only way that will happen is for this boom to go bust, and it will — because when it comes to boom times in San Francisco, we never learn from our mistakes. Isn’t that right, @AusterityPanda?