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Having >10K karma on here and knowing people involved in this restaurant and the SF scene in general.. I can make these observations: 1. The vast majority of p

Having >10K karma on here and knowing people involved in this restaurant and the SF scene in general.. I can make these observations: 1. The vast majority of people on HN are in complete denial about the impact of a massive sudden influx of demand on SF housing. 2. They will exclusively talk about supply constraints and also totally ignore the concept of price inelasticity due to inexhaustible levels of demand. 3. pg himself had noted the importance of a vibrant restaurant scene for startups.[1] 4. This truly is a widespread problem for all SF restaurants. Nopa, one of the most prestigious midrange restaurants, has been advertising for cooks in their menu for years now. 5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. (See point 2.) 6. Most tech workers don’t give a shit. They are here to hopefully make their fortune or at least get their career started in the next 5-10 years. A vibrant restaurant or working class community is not a priority. If they burn through it, it’s fine. Long term community development goals are a “nice to have”. 7. Only reserved means-tested housing for the working class will solve this problem. This is what divides the “market YIMBY” and “affordable housing PHIMBY” political groups in local SF politics. It’s not just about ethics.. If you want a vibrant city rich with interesting restaurants and cafes then you need to provide housing for the service industry. Otherwise you face a real macroeconomic problem. [1] http://www.paulgraham.com/pgh.html http://www.paulgraham.com/pgh.html

chrisweekly 8y ago
Some good points, but "vast majority... complete denial" is a bit much.
- abalone 8y ago
  Happy to be proven otherwise.
selestify 8y ago
Why can't they pay their chefs more until the chefs too can afford to live closer?
- tptacek 8y ago
  At least in part because restaurant margins are very slim, and customers are paradoxically price sensitive to menu prices despite being largely insensitive to rent (probably because everyone feels like they can go across the street to get a better value for food, but nobody feels like they can trivially move to a higher-value neighborhood).
  - abalone 8y ago
    There’s no paradox. Rent is a necessity, given that you want to live in and get your career going in SF. Restaurants are a luxury. Thus there are those who will spend as much as possible on rent (esp. if they think it will help them earn more later), taking it out of their going-out budget.
  - gamma-male 8y ago
    This. You can always get cheaper food and find it acceptable. Cheaper rent in SF is often no great...
- abalone 8y ago
  Is this not obvious? Seriously, this question always comes up in these discussions. The answer is it’s a macroeconomic problem: SF restaurants have already increased prices to $34 for a pork chop and $13 for a cocktail (Nopa.. which I attest is a very good value by SF standards). Restaurant margins are low. If they triple their cook salaries it will result in a net decline and they’ll close. What we’re seeing is a shift towards “fine casual” formats like Souvla that have lower labor costs. But there are just fewer midrange restaurants opening due to labor and rent and the ceiling on what they can sustainably charge. The high end and low end / fine causal are doing ok.
  - gamma-male 8y ago
erik_seaberg 8y ago
A city of 880k shouldn't regard demand as inexhaustible after grudgingly tolerating 4400 new units. They should try again with at least one extra zero.
tptacek 8y ago
I'm an ex-SF'er and a "just build more supply" person generally who is basically just not there for arguments about how tech workers are ruining SF, and this is the first formulation I've read of this argument that resonated for me. I get the argument now: the long-term health of SF is an externality to tech workers. Yeah, that does sound right.
- abalone 8y ago
  Thank you! I really appreciate that.
- gamma-male 8y ago
  Totally. This is why both the state and the companies locating in California needs to be held accountable for improving the situation. Not the workers.
  - int_19h 8y ago
    It sounds like something that could be trivially implemented by taxing high income brackets, and directing that money into subsidized low-rent housing.
    - abalone 8y ago
      Prop C baby! Although definitely not “trivial” to pass or implement. Took Marc Benioff to pour in millions and own Jack Dorsey on his own website which was awesome. And a lot of grassroots activism too. That targeted homelessness, the most urgent issue, and did so by taxing (tech) companies as opposed to wealthy individuals. More generally the approach the city uses is to negotiate with developers for affordable units as a condition of project approval. Taxing the wealthy is an interesting idea but very far from trivial.
      - closeparen 8y ago
        >Prop C baby! Although definitely not “trivial” to pass or implement. Took Marc Benioff to pour in millions and own Jack Dorsey on his own website which was awesome. And a lot of grassroots activism too. And all that to raise a paltry $300 million a year, enough to build ~700 subsidized housing units, or a drop in the bucket. >negotiate with developers for affordable units as a condition of project approval A scheme in which affordable housing activists are motivated to minimize total development to preserve their negotiating leverage, and we "address the housing crisis" by encumbering development to make sure it will never catch up.
jelliclesfarm 8y ago
I am tempted to draw a parallel with NYC. And London. NYC cleaned up and it used to be as gnarly as SF is now. SF is like 80s NYC. Both London and NYC have excellent networked public transport. The population is all kinds of diverse. We don’t. People are free to move around. We are not. SF politics is a stumbling block. Any kind of high density building plan will fail unless infrastructure and public transport network is bolstered BEFORE building more.
- gamma-male 8y ago
  London has a way better public transit than nyc. It's not even comparable.
  - jelliclesfarm 8y ago
    This is true. But there are good ‘bones’ in place for nyc. We don’t have that here in the Bay Area.
cwp 8y ago
Demand is not inexhaustible, just pent up. On the other hand, there is a lot of pent-up demand and market YIMBYs are certainly in denial about just how much building it would take to satisfy that demand. It would involve tremendous upheaval. Traffic would get worse. Many people would be evicted and have to find new housing before rents come down. Many people would find themselves underwater on their mortgages. We'd have to improve water/sewer/electric/gas infrastructure. We'd have to spend billions on transit. It would take at least 25 years. I would love to see that happen, but it won't. Too many people are too invested in the status quo. Instead, they'll make SF so unattractive to tech workers that they'll leave. As you say, they're more invested in the tech industry than SF.
- abalone 8y ago
  I think we’re saying some of the same things, but I’d argue the term “pent up” is not really the best fit for the condition of price inelasticity. That usually is the result of some extraordinary event. Boomtown economics qualify. We’re creating some of the most valuable companies here and are still in the thick of it. That’s just enormous demand for SF housing from all over the country and world. Any affordable housing for the service industry would be dirt cheap for tech industry workers. If SF was dirt cheap again and the tech boom was still underway, who in the industry wouldn’t move here or start their next company here? That’s how deep the demand goes. That creates price inelastic conditions. It’s Economics 101 for those who actually paid attention. If we want a vibrant restaurant scene moving forward, or housing for teachers and homeless and whatnot, we need to look beyond just building more market rate supply. There needs to be means tested and/or price controlled housing for the working class (or homeless, etc), and that’s where the market YIMBYs and affordable housing activists come to blows. That doesn’t equate to making SF unattractive to tech at all. Marc Benioff came around on a local issue here about funding housing for the homeless (prop c). He saw it as an existential threat to Salesforce. Maybe Salesforce is just a more mature (longer term) company than most startups. But he saw that homelessness was actually threatening their bottom line in SF.. in addition to being this huge moral imperative. It’s kind of the same thing with restaurants and that type of quality of life: you can optimize for lowest taxes and maximum housing for tech workers, or you can see the longer term macroeconomic picture.
thadjo 8y ago
Thank you - it’s very refreshing to see these points here. So many comments here miss the main points of the article or default to tired lines from Econ 101. Yes more affordable housing is good an important but it takes a long time. And there are a lot of folks suffering in the meantime. To me the core problem is your point 6 - despite our power and wealth, not enough of us give a shit about long term community goals.
avz 8y ago
> 5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. Suppose you take a fraction S of city's residential surface area and build it up by H times average residential height. Housing volume increases by S * H. Most housing in SF is merely 2 stories high. Let's assume average is 3 stories. Now, pick 1% of city's residential area and build it up by adding 30 stories, say from 3 to 33. Note that 33 stories is actually smaller than a few existing tall residential structures in SF [1]. This would give relative increase in housing volume by S * H = 1% * 10 = 10% which given SF's population of >880k [2] amounts to >88k increase in housing capacity. This is more than the entire global workforce of Google [3]. It's a lot of construction work, of course, but it looks feasible. Many cities build a lot higher and on a wider area than the figures above. [1] https://en.wikipedia.org/wiki/Category:Residential_skyscrapers_in_San_Francisco https://en.wikipedia.org/wiki/Category:Residential_skyscrape... [2] 884,363 (2017), https://en.wikipedia.org/wiki/San_Francisco https://en.wikipedia.org/wiki/San_Francisco [3] 85,050 (Q1 2018), https://en.wikipedia.org/wiki/Google https://en.wikipedia.org/wiki/Google Edit: formatting and correction
- abalone 8y ago
  I mean I don’t want to sound too discouraging but this is the problem with “plausible sounding” armchair urbanism. 1% of the surface area of SF is over one hundred city blocks of 33 story residential skyscrapers. And as you note, that’s not even enough to house the global workforce of the current tech companies, many of whom would move to HQ if housing became cheap along with crap tons of others. Well, sure, go ahead. The point is market rate construction alone will not solve the service industry housing problem. There needs to be affordable price-controlled housing to support a healthy local economy.
  - closeparen 8y ago
    >1% of the surface area of SF is over one hundred city blocks of 33 story residential skyscrapers. You're writing that like it's ludicrous. Manhattan's ~2500 blocks are much more than 1% covered in high-density residential structures. So it's not even close to touching the examples we already have. > market rate construction alone I'm not sure why you keep bringing this up. Market rate construction alone is not a thing in San Francisco. The requirement is 18% BMR. If we zone for more capacity, it will be 18% BMR.
closeparen 8y ago
>If you want a vibrant city rich with interesting restaurants and cafes then you need to provide housing for the service industry That sounds like a testable hypothesis. If we examine cities with interesting restaurants and cafes, we will find that most/all have substantial means-tested housing set aside for the service industry?
- abalone 8y ago
  You’re forgetting the all important factor of tech-boom fueled demand. Pretty major omission there. Also, means testing is not the only way of providing service industry housing. In SF what cooks and servers are left are hanging on to rent controlled units. As those are eliminated through gentrification (Ellis Act evictions, etc), the restaurant crisis worsens.
  - closeparen 8y ago
    The runaway success of an economy bringing lots of people to an urban area is not some sort of world-historical anomaly. Economic growth built practically every city on the map, and endowed many more than San Francisco with large professional services sectors. We should be interested in how they've dealt with these issues. Across the US, massive and centralized public housing complexes, for example, became catastrophic sociological failures. We probably shouldn't repeat those. Which is why we intersperse affordable housing in luxury buildings instead of doing towers in the park. In New York, price controls fell apart, but the region stays affordable through an effective train network serving places with lower land prices. Could that be a better ROI? In Germany, rent controls are widely successful at stabilizing people's lives while development catches up with demand. Are there examples of rent controls working well without the catch-up development? Centrally planned housing assignments are not self-evidently the best way to solve this problem. They could be! But other cities in the world have faced these pressures and come out okay. Mostly by letting their built environments grow. Let's learn from them.
deleted 8y ago
[deleted]
Camillo 8y ago
The tech workers aren't setting the rents, and they're not the ones taking money from the cooks. They're not the ones setting the politics, either (many of them can't even vote).
- seppin 8y ago
  > The tech workers aren't setting the rents They are the demand. The politics is the supply. Both are at fault for making SF unlivable for the people that were there from the start.
pcwalton 8y ago
> 5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. (See point 2.) No, that is oversimplified. The "worldwide demand for SF tech worker housing" is actually limited. Why is this supposedly uniquely true for San Francisco and not for other places with Google offices that are more affordable, such as Atlanta? > 6. Most tech workers don’t give a shit. They are here to hopefully make their fortune or at least get their career started in the next 5-10 years. A vibrant restaurant or working class community is not a priority. If they burn through it, it’s fine. Long term community development goals are a “nice to have”. Don't speak for me. I absolutely care about a vibrant restaurant and working-class community. I donate to local charities and patronize local restaurants and shops. I just bought a condo for the long term. Why would I not care? It is exceedingly annoying to be demonized as somehow less of a San Franciscan by your side because I happen to work in tech. You have no evidence to back up the assertion that we don't care; it's just a lazy stereotype. > 7. Only reserved means-tested housing for the working class will solve this problem. This is what divides the “market YIMBY” and “affordable housing PHIMBY” political groups in local SF politics. That is a very uncharitable way to describe the YIMBY movement. The YIMBY movement wants to maximize the amount of affordable housing, not just the percentage. The "PHIMBY" movement, by and large, refuses to adequately engage with this argument.
- abalone 8y ago
  > The "worldwide demand for SF tech worker housing" is actually limited. No evidence, just an "actually."

chrisweekly 8y ago

Some good points, but "vast majority... complete denial" is a bit much.

abalone 8y ago
Happy to be proven otherwise.

selestify 8y ago

Why can't they pay their chefs more until the chefs too can afford to live closer?

tptacek 8y ago
At least in part because restaurant margins are very slim, and customers are paradoxically price sensitive to menu prices despite being largely insensitive to rent (probably because everyone feels like they can go across the street to get a better value for food, but nobody feels like they can trivially move to a higher-value neighborhood).
- abalone 8y ago
  There’s no paradox. Rent is a necessity, given that you want to live in and get your career going in SF. Restaurants are a luxury. Thus there are those who will spend as much as possible on rent (esp. if they think it will help them earn more later), taking it out of their going-out budget.
- gamma-male 8y ago
  This. You can always get cheaper food and find it acceptable. Cheaper rent in SF is often no great...
abalone 8y ago
Is this not obvious? Seriously, this question always comes up in these discussions. The answer is it’s a macroeconomic problem: SF restaurants have already increased prices to $34 for a pork chop and $13 for a cocktail (Nopa.. which I attest is a very good value by SF standards). Restaurant margins are low. If they triple their cook salaries it will result in a net decline and they’ll close. What we’re seeing is a shift towards “fine casual” formats like Souvla that have lower labor costs. But there are just fewer midrange restaurants opening due to labor and rent and the ceiling on what they can sustainably charge. The high end and low end / fine causal are doing ok.
- gamma-male 8y ago

erik_seaberg 8y ago

A city of 880k shouldn't regard demand as inexhaustible after grudgingly tolerating 4400 new units. They should try again with at least one extra zero.

tptacek 8y ago

I'm an ex-SF'er and a "just build more supply" person generally who is basically just not there for arguments about how tech workers are ruining SF, and this is the first formulation I've read of this argument that resonated for me. I get the argument now: the long-term health of SF is an externality to tech workers. Yeah, that does sound right.

abalone 8y ago
Thank you! I really appreciate that.
gamma-male 8y ago
Totally. This is why both the state and the companies locating in California needs to be held accountable for improving the situation. Not the workers.
- int_19h 8y ago
  It sounds like something that could be trivially implemented by taxing high income brackets, and directing that money into subsidized low-rent housing.
  - abalone 8y ago
    Prop C baby! Although definitely not “trivial” to pass or implement. Took Marc Benioff to pour in millions and own Jack Dorsey on his own website which was awesome. And a lot of grassroots activism too. That targeted homelessness, the most urgent issue, and did so by taxing (tech) companies as opposed to wealthy individuals. More generally the approach the city uses is to negotiate with developers for affordable units as a condition of project approval. Taxing the wealthy is an interesting idea but very far from trivial.
    - closeparen 8y ago
      >Prop C baby! Although definitely not “trivial” to pass or implement. Took Marc Benioff to pour in millions and own Jack Dorsey on his own website which was awesome. And a lot of grassroots activism too. And all that to raise a paltry $300 million a year, enough to build ~700 subsidized housing units, or a drop in the bucket. >negotiate with developers for affordable units as a condition of project approval A scheme in which affordable housing activists are motivated to minimize total development to preserve their negotiating leverage, and we "address the housing crisis" by encumbering development to make sure it will never catch up.

jelliclesfarm 8y ago

I am tempted to draw a parallel with NYC. And London. NYC cleaned up and it used to be as gnarly as SF is now. SF is like 80s NYC. Both London and NYC have excellent networked public transport. The population is all kinds of diverse. We don’t. People are free to move around. We are not. SF politics is a stumbling block. Any kind of high density building plan will fail unless infrastructure and public transport network is bolstered BEFORE building more.

gamma-male 8y ago
London has a way better public transit than nyc. It's not even comparable.
- jelliclesfarm 8y ago
  This is true. But there are good ‘bones’ in place for nyc. We don’t have that here in the Bay Area.

cwp 8y ago

Demand is not inexhaustible, just pent up. On the other hand, there is a lot of pent-up demand and market YIMBYs are certainly in denial about just how much building it would take to satisfy that demand. It would involve tremendous upheaval. Traffic would get worse. Many people would be evicted and have to find new housing before rents come down. Many people would find themselves underwater on their mortgages. We'd have to improve water/sewer/electric/gas infrastructure. We'd have to spend billions on transit. It would take at least 25 years. I would love to see that happen, but it won't. Too many people are too invested in the status quo. Instead, they'll make SF so unattractive to tech workers that they'll leave. As you say, they're more invested in the tech industry than SF.

abalone 8y ago
I think we’re saying some of the same things, but I’d argue the term “pent up” is not really the best fit for the condition of price inelasticity. That usually is the result of some extraordinary event. Boomtown economics qualify. We’re creating some of the most valuable companies here and are still in the thick of it. That’s just enormous demand for SF housing from all over the country and world. Any affordable housing for the service industry would be dirt cheap for tech industry workers. If SF was dirt cheap again and the tech boom was still underway, who in the industry wouldn’t move here or start their next company here? That’s how deep the demand goes. That creates price inelastic conditions. It’s Economics 101 for those who actually paid attention. If we want a vibrant restaurant scene moving forward, or housing for teachers and homeless and whatnot, we need to look beyond just building more market rate supply. There needs to be means tested and/or price controlled housing for the working class (or homeless, etc), and that’s where the market YIMBYs and affordable housing activists come to blows. That doesn’t equate to making SF unattractive to tech at all. Marc Benioff came around on a local issue here about funding housing for the homeless (prop c). He saw it as an existential threat to Salesforce. Maybe Salesforce is just a more mature (longer term) company than most startups. But he saw that homelessness was actually threatening their bottom line in SF.. in addition to being this huge moral imperative. It’s kind of the same thing with restaurants and that type of quality of life: you can optimize for lowest taxes and maximum housing for tech workers, or you can see the longer term macroeconomic picture.

thadjo 8y ago

Thank you - it’s very refreshing to see these points here. So many comments here miss the main points of the article or default to tired lines from Econ 101. Yes more affordable housing is good an important but it takes a long time. And there are a lot of folks suffering in the meantime. To me the core problem is your point 6 - despite our power and wealth, not enough of us give a shit about long term community goals.

avz 8y ago

> 5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. Suppose you take a fraction S of city's residential surface area and build it up by H times average residential height. Housing volume increases by S * H. Most housing in SF is merely 2 stories high. Let's assume average is 3 stories. Now, pick 1% of city's residential area and build it up by adding 30 stories, say from 3 to 33. Note that 33 stories is actually smaller than a few existing tall residential structures in SF [1]. This would give relative increase in housing volume by S * H = 1% * 10 = 10% which given SF's population of >880k [2] amounts to >88k increase in housing capacity. This is more than the entire global workforce of Google [3]. It's a lot of construction work, of course, but it looks feasible. Many cities build a lot higher and on a wider area than the figures above. [1] https://en.wikipedia.org/wiki/Category:Residential_skyscrapers_in_San_Francisco https://en.wikipedia.org/wiki/Category:Residential_skyscrape... [2] 884,363 (2017), https://en.wikipedia.org/wiki/San_Francisco https://en.wikipedia.org/wiki/San_Francisco [3] 85,050 (Q1 2018), https://en.wikipedia.org/wiki/Google https://en.wikipedia.org/wiki/Google Edit: formatting and correction

abalone 8y ago
I mean I don’t want to sound too discouraging but this is the problem with “plausible sounding” armchair urbanism. 1% of the surface area of SF is over one hundred city blocks of 33 story residential skyscrapers. And as you note, that’s not even enough to house the global workforce of the current tech companies, many of whom would move to HQ if housing became cheap along with crap tons of others. Well, sure, go ahead. The point is market rate construction alone will not solve the service industry housing problem. There needs to be affordable price-controlled housing to support a healthy local economy.
- closeparen 8y ago
  >1% of the surface area of SF is over one hundred city blocks of 33 story residential skyscrapers. You're writing that like it's ludicrous. Manhattan's ~2500 blocks are much more than 1% covered in high-density residential structures. So it's not even close to touching the examples we already have. > market rate construction alone I'm not sure why you keep bringing this up. Market rate construction alone is not a thing in San Francisco. The requirement is 18% BMR. If we zone for more capacity, it will be 18% BMR.

closeparen 8y ago

>If you want a vibrant city rich with interesting restaurants and cafes then you need to provide housing for the service industry That sounds like a testable hypothesis. If we examine cities with interesting restaurants and cafes, we will find that most/all have substantial means-tested housing set aside for the service industry?

abalone 8y ago
You’re forgetting the all important factor of tech-boom fueled demand. Pretty major omission there. Also, means testing is not the only way of providing service industry housing. In SF what cooks and servers are left are hanging on to rent controlled units. As those are eliminated through gentrification (Ellis Act evictions, etc), the restaurant crisis worsens.
- closeparen 8y ago
  The runaway success of an economy bringing lots of people to an urban area is not some sort of world-historical anomaly. Economic growth built practically every city on the map, and endowed many more than San Francisco with large professional services sectors. We should be interested in how they've dealt with these issues. Across the US, massive and centralized public housing complexes, for example, became catastrophic sociological failures. We probably shouldn't repeat those. Which is why we intersperse affordable housing in luxury buildings instead of doing towers in the park. In New York, price controls fell apart, but the region stays affordable through an effective train network serving places with lower land prices. Could that be a better ROI? In Germany, rent controls are widely successful at stabilizing people's lives while development catches up with demand. Are there examples of rent controls working well without the catch-up development? Centrally planned housing assignments are not self-evidently the best way to solve this problem. They could be! But other cities in the world have faced these pressures and come out okay. Mostly by letting their built environments grow. Let's learn from them.

deleted 8y ago

[deleted]

Camillo 8y ago

The tech workers aren't setting the rents, and they're not the ones taking money from the cooks. They're not the ones setting the politics, either (many of them can't even vote).

seppin 8y ago
> The tech workers aren't setting the rents They are the demand. The politics is the supply. Both are at fault for making SF unlivable for the people that were there from the start.

pcwalton 8y ago

> 5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. (See point 2.) No, that is oversimplified. The "worldwide demand for SF tech worker housing" is actually limited. Why is this supposedly uniquely true for San Francisco and not for other places with Google offices that are more affordable, such as Atlanta? > 6. Most tech workers don’t give a shit. They are here to hopefully make their fortune or at least get their career started in the next 5-10 years. A vibrant restaurant or working class community is not a priority. If they burn through it, it’s fine. Long term community development goals are a “nice to have”. Don't speak for me. I absolutely care about a vibrant restaurant and working-class community. I donate to local charities and patronize local restaurants and shops. I just bought a condo for the long term. Why would I not care? It is exceedingly annoying to be demonized as somehow less of a San Franciscan by your side because I happen to work in tech. You have no evidence to back up the assertion that we don't care; it's just a lazy stereotype. > 7. Only reserved means-tested housing for the working class will solve this problem. This is what divides the “market YIMBY” and “affordable housing PHIMBY” political groups in local SF politics. That is a very uncharitable way to describe the YIMBY movement. The YIMBY movement wants to maximize the amount of affordable housing, not just the percentage. The "PHIMBY" movement, by and large, refuses to adequately engage with this argument.

abalone 8y ago
> The "worldwide demand for SF tech worker housing" is actually limited. No evidence, just an "actually."