SF’s Unstable Housing Equilibrium

Much as I hate to say it, TechCrunch has a surprisingly thoughtful and insightful piece on the housing crisis in San Francisco.  I loved living in San Francisco, and what’s happening there makes me sad.  Unfortunately, I think that rather than a realistic reassessment of housing policies, it is more likely that the city will drift into a de facto historical museum inhabited solely by the rich.

However, the endgame seems fairly obvious to me.  There will be some insightful mayor somewhere on the Peninsula who realizes the deadweight loss generated by restrictive housing policies in SF and the Peninsula.  Backed by huge amounts of real estate dollars, he steamrolls over NIMBYs and throws the gate open to development in his municipality.  Skyscrapers start rocketing up and urbanization (or “Manhattanization”, as SF residents disdainfully call it) takes place in the blink of an eye.  VC money and residents start flowing in, and in the space of a few years the nexus of energy and investment has moved from Palo Alto and SF to our new tech metropolis.  My guess is one of the relatively worse-off towns or cities mostly missed by the tech boom – perhaps South San Francisco?

The current equilibrium is unstable, and price pressures are building to incredible levels.  And if a trend is unsustainable, it will stop.  Either the tech industry will leave the Bay Area, or someone somewhere will break the dam on development and reap the rewards.  The latter simply seems more likely.

As a side note – if “anti-capitalist” protestors are currently fighting a development that replaces a Burger King with mixed market-priced and affordable-housing, it seems like their priorities got awfully strange along the way.

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