Critics of San Francisco Mayor Ed Lee believe they have found a dark cloud in the city’s creating new tech jobs: these well-paid workers are said to be driving up rents, displacing tenants, and forcing the working class out of San Francisco. But there are some problems with this reasoning. First, annual rent increases on tenants in place have been less than 1% in recent years, so sharply rising rents on vacant units does not affect the vast majority of tenants. Second, Ellis evictions are still down from the housing boom high, and are driven by factors other than new tech jobs. Third, the city’s rising housing costs reflect high-paid residents in medicine, law, financial services and many other fields outside of tech. If you think new tech jobs are bad for a city, try San Jose, which has laid 20% of its public employees because it lacks the revenue stream Mayor Lee has helped bring to San Francisco.
As San Francisco announces new business openings and expansions when much the nation still suffers from high unemployment, it’s perhaps understandable that the media would seek out a contrary, man bites dog angle. But challenging the value of creating tech jobs in the city drives logic into the ditch.
Last week, we saw the Bay Guardian
devote a cover story
to all of the terrible consequences allegedly impacting San Francisco due to the new tech boom. The paper argues, “there are already signs that displacement is creeping back, rents are soaring, housing prices are driving people out of town — and even the city's own economist admits that nobody knows whether the tax-cut driven development will pay for itself.”
The Guardian’s familiar villains in this saga are Supervisor Jane Kim, Mayor Ed Lee and the Mid-Market/Tenderloin payroll tax exemption. The weekly has long and vigorously opposed all three. Its opposition to the exemption has not stopped the policy from being overwhelmingly popular among city residents; Mayor Lee aggressively promoted it during his campaign and handily won the Tenderloin and the overall election.
The Bay Citizen, also no fan of Mayor Lee, also sees a dark cloud to the tech boom. In a February 16 column primarily devoted to arguing for the abolition of rent control
, Scott James notes, “Thousands of people are expected to become rich in the latest Bay Area tech boom…. And with so many tech nouveau riche around, that could make matters even worse for those of ordinary means.”
James does not describe how tech employees "make matters worse for those of ordinary means," but repealing rent control would certainly achieve this result.
The San Francisco Chronicle's John Cote is apparently working on his own “dark cloud to the tech boom story.” Based on his anti-Lee coverage during the mayor's race, an article based on anecdotes rather than facts would not be surprising.
San Jose v. San Francisco
Before examining the factual basis of the “dark cloud” perspective, let’s look at a nearby city that is not enjoying a high-tech jobs boom: San Jose. The New York Times on February 19 wrote a very sad story about San Jose’s loss of 1,592 jobs
in the past four years. That’s more than 20% of its total city employees, whose departure became necessary due to declining tax revenues.
Some of these employees face eviction and even potential homelessness due to the inability to secure new employment. Yet if critics of Mayor Lee’s job creation strategy had their way, San Francisco could be laying off public employees, cutting services, and causing resulting tenant displacement as well.
Fortunately, San Francisco is going in a different direction from its more populated South Bay neighbor. Controller Ben Rosenfield reported on February 14 that the city has brought in $122 million more revenue
than was anticipated just three months ago. He said, “It’s the first time since 2008 that we can really see positive continued trends in almost all of our major tax revenues in San Francisco.”
That’s great news, particularly for the city’s nonprofit workers who have gone five years without a raise due to the city’s fiscal problems. Due to job creation and its related economic impacts, San Francisco has the opportunity to boost workers pay and enhance vital services, while San Jose and most American cities are doing the reverse.
Job Creation and Displacement
San Francisco’s housing prices began sharply increasing in the late 1970’s and with some interruptions (roughly 1989-1995 and 2008-2010) have shown greater appreciation than any major United States city outside New York City. The tech sector did not exist until the dot-com boom, which did contribute ----along with the influx of high-paid workers in many fields during these years--- to rising rents on vacant units and single-family home prices.
But after the dot-com bubble burst, San Francisco rents on vacant units and home prices continued to skyrocket. And that’s because the city attracts many highly compensated workers in fields outside of tech.
Critics of the tech sector ignore that many high-paid employees work in hospitals, law firms, and in financial services. The notion that high paid employees are the problem is nonsense, but if the Guardian believes this it should have waged an all-out struggle to stop the expansion of USCF – with its well-paid medical staff – to Mission Bay. Guardian progressives should also have protested the growth of downtown law firms, whose associates earn more in their first year than even the most senior legal services attorneys.
Tech jobs get criticized while other well-paid work does not because young people are making a lot of money without obtaining post-graduate degrees, and this makes some folks jealous. But jealously is not a basis for sound economic policy, especially in one of the world’s great cities.
Impact on Non-profits, Small Business
In the late 1990’s dot-coms hurt non-profits and small businesses by evicting them from places like the Bayview Federal Savings building at 22nd and Mission (the evictor went bankrupt soon thereafter). But Twitter, Zendesk and others coming to Mid-Market are occupying long-vacant space. These long empty buildings have hurt neighboring small businesses, which depend on office worker patronage to survive.
I clearly talk to a different group of small business owners than those espousing the dark cloud view, because all I hear are positives about high-tech jobs in Mid-Market. In fact, businesses like Pearl’s Hamburgers (owned by a minority woman who grew up in the Tenderloin) came to Sixth and Market with the expectation of gaining customers from nearby high-tech businesses.
Ellis Act evictions that largely emerged after the dot-com bust have always been a function of easily deceived consumers thinking they can get a too good to be true deal on “ownership” at a below-market price. Until San Francisco eliminates incentives for Ellis evictions by enacting a permanent ban on condo conversions, such evictions will continue. But there is no evidence linking such evictions to the new tech boom.
As for the impact of the tech boom on nonprofits, their budgets regularly increased under both Mayor Brown and Newsom. The reason former Supervisor Chris Daly could be so incredibly effective at redirecting money to nonprofits is that job creation, real estate development, and the resulting increased tax revenue made such budget reallocations possible.
The city’s nonprofit sector faced a dark cloud of inadequate funding for years prior to the new tech boom; its now odd to see some progressives describe this period as if it were the good old days.