11 ms·

Thousands of New Millionaires Are About to Eat San Francisco Alive

106 points by Slartie 8y ago

prewett 8y ago
According to the article, in a city of almost 900k people, only 5600 properties were sold?! I don't know what a normal number would be, but this seems incredibly low.
- huac 8y ago
  various incentives, e.g. waiting for more liquid cash to come in, also your property tax is tied to home value when you purchase the home, so if you bought a home in the 80's/90's and still own it, you're paying pennies in tax, which is a much better deal than you can get elsewhere, which disincentivizes people from selling
  - ndyg 8y ago
    Subjectively, this seems like a big deal. I was fortunate to buy a small condo before the last round of rocketing housing costs. My low property tax bill definitely influences the calculus whether to sell. If the intent for current CA property tax rules were to reduce inequality, I think they have the opposite effect.
- cylinder 8y ago
  If you owned a house in SF free and clear and capped property taxes would you sell?
toomuchtodo 8y ago
This is good. Those owners are going to have to pay more property taxes than those grandfathered in through Prop 13. It’ll also push the city to the brink faster, driving everyone else out to cheaper cities. Let SF eat the millionaires then (as a necessity, not punitively). You choose to live somewhere, these are the costs.
- thewarpaint 8y ago
  What an optimistic outlook.
  - toomuchtodo 8y ago
    The time for optimism has passed IMHO due to unresolvable gridlock and paralysis. Residents don't want affordable housing (NIMBY), politicians can't use eminent domain or go against the NIMBY desires without getting voted out of office, businesses create the demand for local housing through refusing to support remote work, and the lack of government doing anything leaves few options, but to watch things burn from afar. Residents who flee have the chance of a better life elsewhere, albeit not in their first choice.
  - mlindner 8y ago
    The best optimism available is to collapse the bubble that is Silicon Valley and get prices back to a reasonable value. Any software company looking to incorporate should stay out of Silicon Valley and San Francisco in particular.
    - Apocryphon 8y ago
      Would an earthquake help?
      - mlindner 8y ago
        Probably, but I'd prefer we not have to kill people to do it.
purplezooey 8y ago
Just get it over with. What's the difference between $1M and $5M for a starter home. Might as well be $50M.
- ohaideredevs 8y ago
  There is a difference if you plan to sell your heart, body, soul, dreams, and best years to Google for 300k one day and put down $200,000 on a house so you aren't just throwing away money and can leave with a million USD asset one day. Doubling the downpayment to $400,000 makes that absolutely unrealistic. Edit: I am pretty sure Google isn't paying 300k in Houston, or 200k (for jobs where it pays 300k in Cali)
  - stirfrykitty 8y ago
    Should one wish to work for Google, they have heaps of offices worldwide in much more reasonably-priced locales. I left California years ago and I will never return. My modest home here in Texas would go for over 2M in California, along with the ridiculous property taxes and other shenanigans there. Texas is not perfect, but Houston beats California hands down in terms of quality of life (with the exception of the heat). Everything here is fairly inexpensive. You can still buy a plot of land and build a house for under 200k. 200k wouldn't buy the postage stamp lot in California. Texas also doesn't have state tax. Politicians suck in both states. Traffic here is mild in comparison. I work 27 miles from home and the commute takes me about 30 minutes, even in decently heavy traffic. I pay $70 for 400/50 Internet connection, and I live in the sticks. SlingTV is another $30.
    - cschep 8y ago
      Living in Texas just isn't the same as living in CA. Some people prefer it, but it's cheaper for a reason. On the whole, fewer people prefer it.
      - stirfrykitty 8y ago
        I agree with you. I'm here because this is where my wife is from. She's a Houston native and wants to be near her parents. Mine are dead and she and our children are my family, so it works for me. Socially, Texas is a backwater. The culture here is fairly homogeneous. The cities are a little better, but not by much. Austin is touted as a more progressive city, but really it's not. I've attended a number of tech conferences there, done work in the area, and it's largely the same as Houston. Keep Austin Weird is their mantra, but what it really amounts to is we will not arrest the homeless, illegals, and occasional dope smokers. Every other aspect is the same. Austin lives and dies because of UT, 6th Street, and the live music scene. That's it. Were I to suddenly come into money, I could see myself buying a plot of land and building a house in Vermont near a lake.
throwaway-1283 8y ago
I'm honestly really skeptical that much will change. You would think prices would be edging up in anticipation of a bidding war for housing but nothing indicates that has been the case. Plus, with the limit on SALT deductions, liquidating shares as a CA resident will be especially painful. As a former employee of one of these companies about to IPO, anecdotally I have seen many of the earlier employees already move out of state. That, plus the lower mortgage interest rate deduction cap of $750k (studio status in SF!) and highish property taxes basically can't be deducted anymore (due to SALT cap you'll hit with an average base salary alone) makes it really unattractive to stay here. Most rank-and-file joining one of these cos in the last 4 years or so will be lucky to net $1-2m pre-tax (and below $1m post), which is a good amount of money but not exactly Wolf of Wall Street status. After taxes, you'll be competing for a run-down 1-2 bedroom in a bad location, if you choose to put a good chunk of that into a down payment. Honestly I think for most people the game in SF these days is to play the startup lottery for a few years, and then take your winning elsewhere, especially if you are at the age where you plan to or already have started a family.
- rayvy 8y ago
  > Most rank-and-file joining one of these cos in the last 4 years or so will be lucky to net $1-2m pre-tax Yea I'm confused as to where all these splurge-happy millionaires the article mentions will come from. There will definitely be people well off (as you mentioned), but I'm not sure if these folks will have the money (that they want to spend) on boats, and lavish parties. It seems like a good deal of these employees will get early retirement/nest egg money, and a few execs will get a few million, while founders obviously make out the best. Not sure why that would "eat San Francisco alive". A sensationalist headline if ever there was one {facepalm}
  - throwaway-1283 8y ago
    Yes, and the people who have really made a lot of money (the founders, execs, earliest employees) have likely already had several opportunities to cash out over the years, so the market is already priced accordingly.
  - 8y ago
nytesky 8y ago
So we expect successful IPOs all around despite unprecedented multi year losses by unicorns?
- bguillet 8y ago
  Even with unsuccessful IPOs, lots of people are suddenly gonna have access to liquidity. They may get 300k instead of 600k but still, this is going to be a change for thousands of people compared to the previous years.
kaycebasques 8y ago
> “Even if just half the I.P.O.s happen, there’s going to be ten thousand millionaires overnight,” said Herman Chan, a real estate agent with Sotheby’s. Does that figure sound right to you all?
- robertcorey 8y ago
  sounds right for a real estate agent hoping to drive market action.
- kingnothing 8y ago
  You'll have ten thousand people with hundreds of thousands of dollars. Probably less than half that will see a million.
mlindner 8y ago
The ones eating San Francisco alive are the local officials that block the building of additional housing. Those people are elected by NIMBYs that want to pour amber all over San Francisco and freeze it in time, like the author of this article.
- anarazel 8y ago
  A lot of formerly YIMBY people become very NIMBY as soon as they own property. I've seen that with a number of people succeeding in the startup game, for example. I don't think the lines are as clear as you make them to be.
mruts 8y ago
How is it that we live in a time in which more rich people is somehow a bad thing? People are always talking about wealth inequality, but why, exactly is it bad? Would it be better if everyone was dirt poor? What kind of probability density function due people want wealth distribution to look like? A normal curve? A flat one? I, in fact, live in a country in which almost everyone is dirt poor (Tanzania), and let me tell you, it's not very good at all.
- president 8y ago
  Rich people are usually spending their time trying to get richer or maintain their wealth, which is usually at the expense of people poorer than them. So yes, it's usually a bad thing.
  - buboard 8y ago
    > spending their time trying to get richer or maintain their wealth and poor people don't ?
    - Cyph0n 8y ago
      No, poor people are spending their time making money to ensure that their basic needs are met.
    - president 8y ago
      The difference is the poor does so in a struggle to survive. We could solve a whole host of issues in this country (crime, healthcare, housing, etc) if rich people decided to put their efforts towards the public good instead of being greedy.
      - restalis 8y ago
        The poor being in a struggle to survive may have a wealth of source reasons. Mismanagement (not necessarily limited to the financial aspect of their lives) is the first thing that comes to mind.
  - 8y ago
ajmarsh 8y ago
What percentage of people head home after a liquidy event? The bay area was great and all but the money spends a lot better back here in flyover country.
- gumby 8y ago
  How many people moved here for the payday? Feels like a lot over the past 20 years; when I moved here in the 80s it was all about the tech, so there was little sense of "just visiting" Of course it's not called the "golden state" for nothing: SF was really put on the map by the literal gold rush.
refurb 8y ago
Not a bad time to buy as the SF housing market is much softer than a year ago. Rather than going for 20% over asking, most are going for 0-5% now.
781 8y ago
Talk about a decadent society, where you hire 15 people to sculpt in ice, instead of being paid to do something a little more productive.
- cylinder 8y ago
  Consider that this bullshit is tax deductible too
mlcrypto 8y ago
Instead of complaining think about how to take advantage of the wealth available to spend money. Like an overpriced cat cafe
ATsch 8y ago
Maybe should eat them instead. EDIT: this is a reference to a quote from Rousseau: "When the people shall have nothing more to eat, they will eat the rich"
DigiMortal 8y ago
Not so related, but damn my dad was right about read everything that you can, the more you read the better. I'm finding new insights, through reading more and more. This site provides great links to read more and more. I hope to continue this path
camdenlock 8y ago
"In cities like Oakland and Berkeley and San Francisco, millennials obsess over Alexandria Ocasio-Cortez’s Twitter and attend Democratic Socialists of America meetings. But the socialist passion doesn’t seem to have impacted the city’s zeal for I.P.O. parties, which the party planning community says are going to surpass past booms." I can't be the only one repulsed by this display of hypocrisy... (edited)
- dang 8y ago
  Please don't call names in HN comments, regardless of how wrong someone is or you feel they are. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - camdenlock 8y ago
    Sorry. I've edited my original post.

106 points by Slartie 8y ago

According to the article, in a city of almost 900k people, only 5600 properties were sold?! I don't know what a normal number would be, but this seems incredibly low.

huac 8y ago
various incentives, e.g. waiting for more liquid cash to come in, also your property tax is tied to home value when you purchase the home, so if you bought a home in the 80's/90's and still own it, you're paying pennies in tax, which is a much better deal than you can get elsewhere, which disincentivizes people from selling
- ndyg 8y ago
  Subjectively, this seems like a big deal. I was fortunate to buy a small condo before the last round of rocketing housing costs. My low property tax bill definitely influences the calculus whether to sell. If the intent for current CA property tax rules were to reduce inequality, I think they have the opposite effect.
cylinder 8y ago
If you owned a house in SF free and clear and capped property taxes would you sell?

toomuchtodo 8y ago

This is good. Those owners are going to have to pay more property taxes than those grandfathered in through Prop 13. It’ll also push the city to the brink faster, driving everyone else out to cheaper cities. Let SF eat the millionaires then (as a necessity, not punitively). You choose to live somewhere, these are the costs.

thewarpaint 8y ago
What an optimistic outlook.
- toomuchtodo 8y ago
  The time for optimism has passed IMHO due to unresolvable gridlock and paralysis. Residents don't want affordable housing (NIMBY), politicians can't use eminent domain or go against the NIMBY desires without getting voted out of office, businesses create the demand for local housing through refusing to support remote work, and the lack of government doing anything leaves few options, but to watch things burn from afar. Residents who flee have the chance of a better life elsewhere, albeit not in their first choice.
- mlindner 8y ago
  The best optimism available is to collapse the bubble that is Silicon Valley and get prices back to a reasonable value. Any software company looking to incorporate should stay out of Silicon Valley and San Francisco in particular.
  - Apocryphon 8y ago
    Would an earthquake help?
    - mlindner 8y ago
      Probably, but I'd prefer we not have to kill people to do it.

purplezooey 8y ago

Just get it over with. What's the difference between $1M and $5M for a starter home. Might as well be $50M.

ohaideredevs 8y ago
There is a difference if you plan to sell your heart, body, soul, dreams, and best years to Google for 300k one day and put down $200,000 on a house so you aren't just throwing away money and can leave with a million USD asset one day. Doubling the downpayment to $400,000 makes that absolutely unrealistic. Edit: I am pretty sure Google isn't paying 300k in Houston, or 200k (for jobs where it pays 300k in Cali)
- stirfrykitty 8y ago
  Should one wish to work for Google, they have heaps of offices worldwide in much more reasonably-priced locales. I left California years ago and I will never return. My modest home here in Texas would go for over 2M in California, along with the ridiculous property taxes and other shenanigans there. Texas is not perfect, but Houston beats California hands down in terms of quality of life (with the exception of the heat). Everything here is fairly inexpensive. You can still buy a plot of land and build a house for under 200k. 200k wouldn't buy the postage stamp lot in California. Texas also doesn't have state tax. Politicians suck in both states. Traffic here is mild in comparison. I work 27 miles from home and the commute takes me about 30 minutes, even in decently heavy traffic. I pay $70 for 400/50 Internet connection, and I live in the sticks. SlingTV is another $30.
  - cschep 8y ago
    Living in Texas just isn't the same as living in CA. Some people prefer it, but it's cheaper for a reason. On the whole, fewer people prefer it.
    - stirfrykitty 8y ago
      I agree with you. I'm here because this is where my wife is from. She's a Houston native and wants to be near her parents. Mine are dead and she and our children are my family, so it works for me. Socially, Texas is a backwater. The culture here is fairly homogeneous. The cities are a little better, but not by much. Austin is touted as a more progressive city, but really it's not. I've attended a number of tech conferences there, done work in the area, and it's largely the same as Houston. Keep Austin Weird is their mantra, but what it really amounts to is we will not arrest the homeless, illegals, and occasional dope smokers. Every other aspect is the same. Austin lives and dies because of UT, 6th Street, and the live music scene. That's it. Were I to suddenly come into money, I could see myself buying a plot of land and building a house in Vermont near a lake.

throwaway-1283 8y ago

I'm honestly really skeptical that much will change. You would think prices would be edging up in anticipation of a bidding war for housing but nothing indicates that has been the case. Plus, with the limit on SALT deductions, liquidating shares as a CA resident will be especially painful. As a former employee of one of these companies about to IPO, anecdotally I have seen many of the earlier employees already move out of state. That, plus the lower mortgage interest rate deduction cap of $750k (studio status in SF!) and highish property taxes basically can't be deducted anymore (due to SALT cap you'll hit with an average base salary alone) makes it really unattractive to stay here. Most rank-and-file joining one of these cos in the last 4 years or so will be lucky to net $1-2m pre-tax (and below $1m post), which is a good amount of money but not exactly Wolf of Wall Street status. After taxes, you'll be competing for a run-down 1-2 bedroom in a bad location, if you choose to put a good chunk of that into a down payment. Honestly I think for most people the game in SF these days is to play the startup lottery for a few years, and then take your winning elsewhere, especially if you are at the age where you plan to or already have started a family.

rayvy 8y ago
> Most rank-and-file joining one of these cos in the last 4 years or so will be lucky to net $1-2m pre-tax Yea I'm confused as to where all these splurge-happy millionaires the article mentions will come from. There will definitely be people well off (as you mentioned), but I'm not sure if these folks will have the money (that they want to spend) on boats, and lavish parties. It seems like a good deal of these employees will get early retirement/nest egg money, and a few execs will get a few million, while founders obviously make out the best. Not sure why that would "eat San Francisco alive". A sensationalist headline if ever there was one {facepalm}
- throwaway-1283 8y ago
  Yes, and the people who have really made a lot of money (the founders, execs, earliest employees) have likely already had several opportunities to cash out over the years, so the market is already priced accordingly.
- 8y ago

nytesky 8y ago

So we expect successful IPOs all around despite unprecedented multi year losses by unicorns?

bguillet 8y ago
Even with unsuccessful IPOs, lots of people are suddenly gonna have access to liquidity. They may get 300k instead of 600k but still, this is going to be a change for thousands of people compared to the previous years.

kaycebasques 8y ago

> “Even if just half the I.P.O.s happen, there’s going to be ten thousand millionaires overnight,” said Herman Chan, a real estate agent with Sotheby’s. Does that figure sound right to you all?

robertcorey 8y ago
sounds right for a real estate agent hoping to drive market action.
kingnothing 8y ago
You'll have ten thousand people with hundreds of thousands of dollars. Probably less than half that will see a million.

mlindner 8y ago

The ones eating San Francisco alive are the local officials that block the building of additional housing. Those people are elected by NIMBYs that want to pour amber all over San Francisco and freeze it in time, like the author of this article.

anarazel 8y ago
A lot of formerly YIMBY people become very NIMBY as soon as they own property. I've seen that with a number of people succeeding in the startup game, for example. I don't think the lines are as clear as you make them to be.

mruts 8y ago

How is it that we live in a time in which more rich people is somehow a bad thing? People are always talking about wealth inequality, but why, exactly is it bad? Would it be better if everyone was dirt poor? What kind of probability density function due people want wealth distribution to look like? A normal curve? A flat one? I, in fact, live in a country in which almost everyone is dirt poor (Tanzania), and let me tell you, it's not very good at all.

president 8y ago
Rich people are usually spending their time trying to get richer or maintain their wealth, which is usually at the expense of people poorer than them. So yes, it's usually a bad thing.
- buboard 8y ago
  > spending their time trying to get richer or maintain their wealth and poor people don't ?
  - Cyph0n 8y ago
    No, poor people are spending their time making money to ensure that their basic needs are met.
  - president 8y ago
    The difference is the poor does so in a struggle to survive. We could solve a whole host of issues in this country (crime, healthcare, housing, etc) if rich people decided to put their efforts towards the public good instead of being greedy.
    - restalis 8y ago
      The poor being in a struggle to survive may have a wealth of source reasons. Mismanagement (not necessarily limited to the financial aspect of their lives) is the first thing that comes to mind.
- 8y ago

ajmarsh 8y ago

What percentage of people head home after a liquidy event? The bay area was great and all but the money spends a lot better back here in flyover country.

gumby 8y ago
How many people moved here for the payday? Feels like a lot over the past 20 years; when I moved here in the 80s it was all about the tech, so there was little sense of "just visiting" Of course it's not called the "golden state" for nothing: SF was really put on the map by the literal gold rush.

refurb 8y ago

Not a bad time to buy as the SF housing market is much softer than a year ago. Rather than going for 20% over asking, most are going for 0-5% now.

781 8y ago

Talk about a decadent society, where you hire 15 people to sculpt in ice, instead of being paid to do something a little more productive.

cylinder 8y ago
Consider that this bullshit is tax deductible too

mlcrypto 8y ago

Instead of complaining think about how to take advantage of the wealth available to spend money. Like an overpriced cat cafe

ATsch 8y ago

Maybe should eat them instead. EDIT: this is a reference to a quote from Rousseau: "When the people shall have nothing more to eat, they will eat the rich"

DigiMortal 8y ago

Not so related, but damn my dad was right about read everything that you can, the more you read the better. I'm finding new insights, through reading more and more. This site provides great links to read more and more. I hope to continue this path

camdenlock 8y ago

"In cities like Oakland and Berkeley and San Francisco, millennials obsess over Alexandria Ocasio-Cortez’s Twitter and attend Democratic Socialists of America meetings. But the socialist passion doesn’t seem to have impacted the city’s zeal for I.P.O. parties, which the party planning community says are going to surpass past booms." I can't be the only one repulsed by this display of hypocrisy... (edited)

dang 8y ago
Please don't call names in HN comments, regardless of how wrong someone is or you feel they are. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- camdenlock 8y ago
  Sorry. I've edited my original post.