“Full-Fledged Housing Crisis” in Silicon Valley, Insider View

As long as local officials strangle housing starts, the mirage of affordability will be pushed further toward the distant horizon.

By John E. McNellis, Principal at McNellis Partners, for The Registry:

“A full-fledged housing crisis has gripped California” — New York Times.

Yes, our housing crisis is so critical those envious bastards at The Times are proclaiming it on their front page. So critical that a local politician here is more likely to come out against world peace than affordable housing. But she’s about as likely to vote for pro-housing laws as the USA is to unilaterally reduce its nuclear stockpile.

At the 30,000 foot level — it’s pretty in the clouds — a few politicians in Sacramento are trying to pass state-wide bills to force cities to allow more residential development. Not with champagne success.

It’s less pretty in the trenches, particularly if one focuses on Silicon Valley. Ground zero for the housing shortage, the city of Palo Alto is–not coincidentally–the reigning monarch of the Lucky Location club. Thanks to the happenstance of being Stanford University’s picture frame, the town has been the spawning grounds for almost every great tech company ever.

Zillow says $200,400 is the median house price in America today. Zillow multiplies that number by 12.96 to come up with Palo Alto’s median price of $2,598,200. And even that whoa number is misleading. According to the brokerage firm of Alain Pinel, a lot in North Palo Alto–the cool part of town–goes for around $2.5 million all by itself, that is, $2.5 million before you build your dream house on it.

Is this news to anyone in Palo Alto? No. In the town’s most famous resignation letter, Kate Downing quit the Planning Commission a year ago, saying she and her husband, both well-paid professionals, could simply not afford to live there.

“After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here.” Ms. Downing pleaded with the city to make affordable housing its top priority. “If things keep going as they are…a once thriving city will turn into a hollowed out museum.”

To no one’s surprise, things have kept going just as they were since her departure. Zillow says housing prices are up 2.54% and city permits have been issued for only 3 multi-family projects in the last twelve months, totaling 15 units. For a town of 67,000, 15 new units is a rounding error. Why focus on multi-family projects? Because if dirt costs $2.5 million a lot, new single family residences will never be affordable. Period.

The town’s only hope is apartments and condominiums. And while a slim majority of the city council favors affordable housing, no property has been rezoned in the last year to grant it greater density, the only possible way housing might become more affordable.

Density is like heaven: Everyone wants to go to heaven, but no one wants to die; everyone loves the benefits of density–the cafes, the walkability and cultural opportunities–but no one wants to pay its price: occasional traffic, noise, and congestion.

Despite the city’s talk of encouraging housing, the street reality is different. I have a friend* who is building one of the three projects mentioned above. Because his land–a small, unused parking lot downtown–was already zoned residential and his project only two units, no public hearings or meetings of any kind were required. All he had to do was prepare conceptual drawings, get them approved by the planning department, then prepare construction drawings, have those approved by the building department and start construction. In a town that wants development, you can get this done in 6 months. In Houston, maybe half that time.

*OK, I’m not going to lie to you–it’s me.

In Palo Alto, this approval process knee-walked for 18 months. The cost? The city charged a total of $210,481 in fees and exactions before it would issue the building permit. $210,481 for a pair of apartments. If this friend had paid that average $2.5 million for his property, his carrying cost for the extra year of processing would be $250,000, meaning his city costs alone for the duplex totaled $460,000.

Put another way, before ever turning a shovel in the ground, before counting the land, architecture, engineering, banking and construction costs, his units were already $30,000 more expensive than a median-value house almost anywhere else in the country.

Did it have to be this way? No. The truth is that since Ms. Downing’s sad departure, the city has made housing less affordable than ever. Of the $210,000 in city fees, $120,000 of it was attributable to a newly enacted “Parkland Dedication” fee, an exaction that went into effect only two months ago.

Ms. Downing may prove another Cassandra. Go to any “Housing Affordability Index” you like, do the simple math and you will find that, with a standard down payment, a buyer’s annual salary must be about 20% of the purchase price for a house to be affordable, meaning you now have to make half a million a year to afford Palo Alto’s median-priced house.

At that ticket price, the museum will hollow out, its visitors limited to the first 100 employees of the next Google to roll out of Stanford.

Few laws are as reliable as that of gravity. The law of supply and demand is one. Palo Alto–and far too many other cities in California–needs to both dramatically increase its allowable residential density and streamline its approval process. As long as local officials strangle housing starts, the mirage of affordability will be pushed ever further toward the distant horizon. By John E. McNellis, McNellis Partners, author of Making It in Real Estate: Starting Out as a Developer. The article was first published on The Registry.

That retail is overbuilt is obvious to anyone who has driven 20 miles in America. Less obvious is the why of over-building. Read… Over-Storing America

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  67 comments for ““Full-Fledged Housing Crisis” in Silicon Valley, Insider View

  1. Melissa Terzis says:

    Excellent article.

    My husband is a developer here in the DC area – primarily Maryland development. In every interaction with the public about any potential/future project, there is this perception that developers are laughing all the way to the bank. The fees and such that are imposed by the jurisdictions are the real enemy here, supporting (likely) bloated local governments full of people coming up with more ways to justify their jobs. I have to wonder when this bubble of nonsense just pops.

    I’m surprised they nailed you for the parkland dedication fee, typically here if a project is already approved you’re grandfathered in. I assume they can do whatever the hell they want out there though. Which royally sucks.

  2. Zelda Bronstein says:

    Coastal California does have a housing crisis, but former Palo Alto Planning Commissioner Kate Downing is hardly a source of illumination on the subject. After denouncing Palo Alto for refusing to “urbanize,” she and her husband decamped to suburban Santa Cruz, where they purchased a 4-bedroom house for $1.5 million.


    The source of the housing affordability problems is not local growth controls. Cities don’t build housing; developers do. And developers are not going to build (officially) affordable housing, because it doesn’t pencil out. It will take ample public funding, which has not been forthcoming from either Washington, D.C., or Sacramento.

    What’s driven up the housing crisis in the Bay Area is the influx of highly paid tech employees such as Downing and her husband, who works (or worked) for Peter Thiel’s Palantir. Wealthy, mobile hous holds have bid up the price of residential real estate. Plus the flood of international capital looking for a better ROI than what’s available at home.

    When outgoing Palo Alto Mayor Pat Burt (himself a tech executive) said last fall that Silicon Valley needs to stop chasing every job in the universe, and that tech growth needs to be metered, he was pilloried in the press (including the NY Times). Burt was right.

    • Suzie Alcatrez says:

      And yet Manhattan is able to build affordable housing (although they do put in side doors for the poor so that the hoi poloi don’t run into them ).

      • Gadi says:

        hoi poloi means “Common People”. I think you probably meant something else.

    • Chip Javert says:


      I’m honestly not understanding your snarky comment about Kate Downing: “After denouncing Palo Alto for refusing to “urbanize,” she and her husband decamped to suburban Santa Cruz, where they purchased a 4-bedroom house for $1.5 million”.

      How does buying a (little bit larger than average) house in Santa Cruze for $1,000,000 less than the San Jose median impact Kate’s credibility? What am I missing here?

      • Zelda Bronstein says:


        She wanted a big suburban house in Palo Alto; she just couldn’t afford it, so she moved to suburban Santa Cruz. It follows that she shouldn’t have complained about Palo Alto’s suburban character. (What’s snarky about my comment? I was simply noting the contradiction between Downing’s public position and her personal behavior.)

        As I indicated in the linked story, which I wrote, the housing prices in Palo Alto are obscene. But local zoning is a minor factor in those prices. If you disagree, please show me the data that proves otherwise.


  3. Ron says:

    rezoned to higher density, improved mass transit are basic parts for creating significant housing density throughout the Bay Area not just PA. The emphasis on 3 bedroom 2bath 1/4 acre lot in the 50’s to 90’s has made the transition to affordable housing in a high employment area almost impossible. I worked and lived in PA for many years it was always expensive but had a few clusters of old houses such as Barron Park that allowed a few to sneak in but now shacks are 3 million and counting. Yes it will end.

  4. Cali girl says:

    Maybe the answer is that not everyone can live in California and tech people are free to open shop in 49 other states. We don’t want high density in coastal California, that would ruin it for old timers as well as newcomers. Traffic in LA is a disaster. Go open your new app development company in Tennessee.

    • TJ Martin says:

      Exactly !

      Too bad those in charge of those Tech industries aren’t listening . The fact is across the nation there are all but abandoned towns , rapidly decaying cities and crumbling urban areas desperate for jobs etc that any one of the tech giants could invest in at well below bargain basement prices with multiple tax breaks on offer to boot … creating jobs and reviving areas finally taking some responsibility for the very country that brought about their success and wealth .

      But no .. even when they do venture beyond Silicon Valley/Seattle .. where do most of them go ? Already over developed and excessively over priced areas such as Boulder CO etc where if anything they become a burden to the overall community rather than a benefit .

      Proving time and time again when it comes to the tech giants … responsible capitalism and social responsibility are not a part of their vocabulary.. never mind their actions .

      • Wolf Richter says:

        Some of this is already happening. Year-over-year employment growth in the Bay Area has slowed to a crawl. In two counties — Santa Clara, where Palo Alto is, and Marin — employment was slightly down in June and July from a year ago, a first since the Financial Crisis. In San Francisco, year-over-year employment growth has dropped into the minuscule.

        I think this trend will continue to build momentum. We should get more clarity this fall and winter.

      • RangerOne says:

        Silicon valley already is not the ultimate destination for many tech workers for exactly this reason. We can all do math and any tech worker who wants a family and a home knows the bay is a transient place to which most will only venture for temporary top tier jobs.

        Tech heavy cities are kind of self perpetuating though once they cross a certain threshold.

        Any city that gains a sizable tech presence has seen its housing price rise above the national average. From Texas to California. Most wont become as broken as the bay, but many are racing to catch up to San Diego and Seattle.

        The only thing to my mind that will prevent tech work from clustering around urban centers will be if one day in the future, the vast majority of office workers begin to work remotely.

        This is already pretty much possible but it is still not the common mode of operation among most companies. There are still many advantages to working at least some of the time in a shared office.

        Those advantages in the future though may be greatly diminished as Virtual Reality and Augmented Reality potentially get used to make telepresence a near perfect alternative to co-location.

        The other factor that locks people into to cities is you still have to move where the job you want is. If you want to work for Facebook or Apple, they only have so many work sites and most in the US only exist in rather expensive cities. Mainly for the reason mentioned above, it is easier to recruit fresh talent and poach talent when you are located alongside schools and all your top competitors.

        • alex in san jose says:

          Ranger One – Great post.

          I have seen it time and time again, that you can’t really get business done unless it’s in person. If you can’t smell each other’s farts, it ain’t happening. Here in Silicon Valley, I can hop on my bicycle and go talk, in person, with the head of a really good “board house”; a place that will make circuit boards for you.

          I am looking at starting a business myself (don’t worry, it’ll be fairly low-tech) and in this area I can find materials for free, I can get Amazon Prime deliveries in a day or two, I can meet and learn from other people doing the same sorts of things, and I have TechShop.

          TechShop is going to play a considerable part in my getting a successful business going. For $150 a month I’ll have access to tons of machines and tools that I can’t afford nor do I have the room for. Nor do I want to deal with the swarf/sawdust/etc. Plus I’ll be in a cluster with other hobbyists and crafters, and probably learn a lot from ’em, just like I’ll hopefully be able to contribute ideas to them.

          Yes, for the kind of business I have in mind, it would make more sense to move to rural Idaho in terms of being able to own land and a building, but for every other factor, this place kicks ass.

          Since I keep mentioning it, you all know I only make about $12k a year right now. I live in a warehouse and get around by bike. But I’ve get access to all this “stuff” here, TechShop’s within my budget, and even if I were to get kicked out of here tomorrow I could be “street” homeless and I feel I could still get my business going without a lot of disruption.

          There’s just a “clustering” effect here where you’ve got a lot of people, materials, good shipping/transportation, and it just works very well.

          I’d love to see tech more evenly distributed. I’d love to see a Renaissance of small manufacturing in this country. These days, anyone can make, say, a better broom and sell it on Ebay or Amazon or their own site. They can make cute videos about it on YouTube and they can be in the middle of bumfuct nowhere and do this. It could rejuvenate so many of these beautiful little towns.

          But those of us who stick it out here aren’t doing it because we’re “stupid” or “stuck” or “elitist”. We like it here.

        • Raymond C Rogers says:

          People like you Alex are the New America pioneers, reminiscent of the rugged individualism need to settle barren lands.

          I’m a huge fan of the food truck industry. What you find in many locales (even rural) are land barrons who have bought everything up. To start a resturaunt you have to pay several thousand a month just to rent a sliver of space. The food truck industry says ‘f*** your rent, your not getting it from me”.
          That just makes me smile.

        • alex in san jose says:

          Raymond C. Rogers – I’ve had my problems with food trucks; it took quite a bit of yelling by me and by the other renter in this building to keep one from parking right in front where the buyers would leave trash all over, etc. Turns out there’s a “hotline” for food truck complaints and get the police interested enough and the problem tends to go away.

          There are very nice, gourmet food trucks. These are not those food trucks. These are the kind where you might find a nice shiny blue-green fly on top of your food (true story!)

          However, I did a little basic math and realized that that crumbbum is making big money with his lousy food. We’re talking something like $500-$1000 an HOUR.

          The laws have also been relaxed by quite a bit on things like brownies, cookies, etc. As long as it’s a sort of bakery product, cookies, stuff like that, you no longer need a professional kitchen to make them in, for sale. And I just realized that if I ever wanted to try something like that, if I use propane-based cooking methods I wouldn’t have a high electric bill as a giveaway. Probably a decent amount to be made taking fresh cookies etc around to offices around here. If I wanted to develop that kind of business.

      • Wilbur58 says:

        Hey TJ,

        I’d, um, like to live in Superior/Lafayette or other areas south of Denver. I visited this summer and really liked it. My wife and I hatch our plan out of LA all the time.

        That tech center region is really nice. If I were a young company, I’d take that over the Bay Area any day.

    • Suzie Alcatrez says:

      Non-compete clauses are not enforceable in California.

      Where as in Tennessee, once you leave your job at Jimmy Johns, your not allowed to work in the fast food industry for 2 years.

      How would your new high tech company find employees??

      • J Bank says:

        But California is bad for business! Everyone keeps saying it!

        (Except for California’s GDP)

    • Arizona Slim says:

      Chattanooga has screaming fast municipal broadband. Just what an app development company craves

    • Dave D'Rave says:

      Idaho is also a good choice.

      • Slynns says:

        Idaho has non-compete clauses too – hurting growth as new talent realizes they may have to leave state if they want a better job.

  5. JZ says:

    I never get all of these complains against palo alto.
    Everybody competes for resources and there will be winners and losers. Winners stay, losers leave. Fair and square. There is nothing wrong with PA council trying to limit supply to keep the PA “hot”.

    What is wrong is NOT the fair and square part.

    While those W2 folks spend their life working for $, they (the central banks, banks, wall street institutions) can just print it and pool it to compete out W2 folks. When things go bad, in stead of fire sale the houses, they lobby Washington for bail out, print money, hoard the houses.

    What saddens me is that the W2 folks thinks it is the local city council that makes them lose in the resource competition.

    All you W2 losers out there. If you are losing, it is because you spend time working for $, and they print and pool $ to compete you out. If you want to make more, you have to work better and harder. If they want to pool more, they just print more and reduce interest rates. Please at least get this part right.

    The 1990 savings and loans crisis, people went to jail. Nobody went to jail after 2009. When Elizabeth holmes made some millionaire to compete you out of your house by faking test results, nobody goes to jail. And get this, next time when things gets tough, you will bail them out again.

    • TJ Martin says:

      I’m sorry to rain on your parade but the simple reality is it has nothing to do with working harder , longer or better . Thats the myth of the American Dream propagated by the very people and entities that are pricing you out of the market unwilling to admit luck played a part in their success in hopes you’ll fall for the rhetoric bringing you down faster and harder than if you’d of maintained the status quo filling a niche void rather than going head to head with the big boys .

      Cause in reality … though intelligent and hard work are at the very core of success .. and without them you can be guaranteed of failure … ultimately it takes a whole lotta luck and circumstance to go beyond ” The Tipping Point ”

      And in case you’re wondering … I’m speaking from the perspective of one who did go beyond … not one crying foul .

      • JZ says:

        Luck is a statistical thing. Pringting/pooling money to compete out guys working for W2 is systematic.

        I am a supporter of risk taking and willing to eat the consequences.

        I am also supporting those who borrows money from me and do rent seekings, manipulate asset prices and try to make profits buy only on two conditions
        1. The money must be borrowed/pooled from people that works and saves. Not printed papers.
        2. When you fail, you eat the consequences, no bailouts.

  6. unit472 says:

    There is a considerable amount of virgin land that could be used for housing. It is called the San Francisco Bay. Much of downtown San Francisco is built on bay fill. It was the only flat land around and in an era without cars or even cable cars, flat land was valuable.

    Now, across the Golden Gate Bridge are the Marin Headlands. I’m not suggesting they be paved over and covered with ‘ticky tacky little boxes’ of the sort Daly City and Pacifica were covered with but… a few hundred acres could be used to build some close in high dollar homes that would not destroy the view or the environment and the money gained ( anyone remember Henry George?) used to pay for transportation improvements for more proletarian commuters struggling to make their way from their homes in Stockton and Manteca to the Bay Area!

    • polecat says:

      To ‘build’ on this virgin aquaspace, one would have to consider the possible effect of ‘liquifaction’ on said ‘bay’ housing. Your one major earthquake from swimming with the fishes …
      …. and the entire San Francisco Bay Area is nothing if not hella seismic !! ‘;[

  7. Petunia says:

    I don’t know why the SV companies, with their huge campuses, don’t build company housing. A couple of apartment buildings might be just what’s needed to relieve the housing pressure and help retain employees.

    Growing up, a neighbor became a nurse and eventually went to work for Mt. Sinai hospital in NYC. One of the draws was a couple of buildings the hospital owned in the neighborhood. She put her name on the housing list and eventually landed up with a 3 bedroom affordable apt in NYC. That apt was the reason she stayed with the hospital forever.

    • Wilbur58 says:

      I learned that for the resorts in and around Vail, CO, they do exactly that, Petunia. They’ve got housing for the staff. If it’s not free, it’s significantly reduced.

      • Harambe says:

        Speaking of ski towns, a number of years ago the town of Aspen decided to build low-budget housing for all the resort workers/fast food drones who couldn’t afford to live in town and were frequently unable to get to/from work in inclement weather. Within a year or 2 these workers had sold all of the housing to skiers who were rich, but not rich enough to afford the typical tony Aspen homes. Now they have the same problem they had before as well as an influx of nouveau riche.

  8. Kent says:


    Your comment:

    “Zillow says housing prices are up 2.54% and city permits have been issued for only 3 multi-family projects in the last twelve months, totaling 15 units. For a town of 67,000, 15 new units is a rounding error. Why focus on multi-family projects? Because if dirt costs $2.5 million a lot, new single family residences will never be affordable. Period.”

    If the city is issuing so few permits, that means you and the other 2 guys building stuff are having to pay for the entire Planning and Building Department (or whatever its called out there). Hence the horrific costs. You have a terrible feedback loop where wildly high land prices are discouraging building and leaving competition for available housing high. Which, of course, keeps land prices high. And the local gov loves high land prices.

    What I don’t understand, and perhaps you can help me with this, is how do people cope? On a $3 million mortgage with taxes and insurance, you’re probably paying somewhere around $200K/year. I can’t believe the average household income is much higher than that. So you can’t possibly be making money on rent.

    Is it just long time homeowners owning there?

    • Frederick says:

      Did you say three million dollar mortgage? That’s insane in itself I didn’t realize banks would loan that kind of money for a residence I know I had trouble borrowing half a million in the early 2000s but my income wasn’t 200K that’s for sure

    • Suzie Alcatrez says:

      There is plenty of remodeling requiring permits going in in Pali Alto.

      In California, as long as one wall is standing, it is not a new house, but a remodel.

    • Wolf Richter says:


      Just to clarify. The author of the article and the builder in the article is John McNellis (not me).

      “How do people cope?” you ask.

      Those with enough income who have recently moved to the area spend a huge amount of their income on housing. Those who have owned their homes for decades are doing fine. Those who want to move to the area but don’t have enough income ask themselves a question: do I really want to do this?

      Palo Alto is small … there are less expensive areas in SV to move to, but even the “cheaper” areas are expensive, compared to most of the nation.

      As I pointed out in another comment, plenty of people and companies are already at their wit’s end: total employment in Santa Clara County, where Palo Alto is, fell year over year in June and July. I suspect that this trend will get worse later this year and going forward. This trend I think will ultimately answer your question.

      • Ricardo says:

        Prop. 13 enables old-timers to oppose almost all new development without any personal consequences. They artificially restrict the supply of housing and don’t have to share in the associated costs because their taxes are artificially restricted. If property taxes were aportioned equitably, some old-timers would have to sell, other old-timers would stop blocking new housing and the market could slowly begin to heal.

        Its not a mystery.

        JZ “fair and square” to have local governments favor old-timers over newcommers by a factor of 2000%? I don’t see anything fair. I see a feudal system and a huge scam.

        Mrs. Snarky says “cities don’t build houses, developers do”. Wow, really? Cities BLOCK developers who would love to build anything, including housing.

  9. alex in san jose says:

    People are trying every housing “hack” they can around here. Tons of people living in RVs for instance. Since I’m in a scruffy area, there are lots of these vans and RVs. There are a lot of people living in business buildings too – we’re a secretive bunch, so I don’t know any of ’em and have only met a few, but I know they’re there as I’m sure they know I’m here.

    In my own case, I may lose my rent-free idyll soon. The building is co-owned by two guys, call them Dr. Jekyll and Mr. Hyde. Jekyll has always been a good guy, never raised the rent, and would be happy to let us stay here until the heat death of the Universe. Hyde, however, hates the idea of anyone going along happily running a successful business, and has been trying to destroy us for almost as long as we’ve been in here. He’s not been successful so far, because he can’t get the money together to buy Jekyll out. But now apparently he’s come into some money, and the schedule is for him to wholly own the place in a year and a half.

    So we’re in the market to rent another place, or preferably if we can, buy a place.

    And meanwhile, I am looking at exit plans myself. The move will be traumatic, but if anything happens to my about-70-years-old boss, I’m going to be left high and dry anyway.

    The new place, whatever and wherever it is, may not allow me to live in it. So one plan is to get the “business van” I talk about occasionally and sleep in that.

    But a lot can happen in a year and a half. I could start a business, for instance. Electronic surplus is OK, and my boss and I were thinking he’d be able to keep increasing my income until it got as high as a nose-bleedingly lofty $30k, but it’s leveled off at $12k and doesn’t seem to be going anywhere. I’m fairly certain I can beat that doing just about anything.

    (Whenever Hyde gets this place, he’ll try starting up his old business again, it’ll tank, and the building will get taken for taxes/fines. Mark my words. Hyde can’t stand to see himself succeed, either.)

    • Petunia says:

      Offer him services in return for free rent. It’s easy to sweep the hall or keep the front of the building clean and he gets security too. He might even thrown in some money.

      • Petunia says:

        BTW, the value of the “free” rent is tax deductible to him and you have to pay Social Security tax on the value of the rent, but not federal if staying there is part of the “job”. The extra SS tax can help you increase your retirement earnings.

        • alex in san jose says:

          Petunia – I don’t think you realize how horrible a person Hyde is. He’s run businesses, marriages, everything possible, into the ground. You’re probably old enough to remember the Peanuts character “Pigpen”. Imagine a guy who, instead of a cloud of dirt around him, it’s a cloud of failure.

          In theory, Hyde would want us to move into the back half of the building and he’d move into the front, where we are now. In reality, even if we did that, Hyde would (a) jack the rent ‘way up so it’d be no advantage to be here (b) probably lose the building in a tax judgement or through fines and (c) house his son here and have endless fights here with his psycho alcoholic ex-wife. Hot and cold running Sheriffs, anyone?

  10. Kevin says:

    I wish we could do some of the common sense things other cities around the world have done, like limit foreign investment, tax empty homes, crush Airbnb etc.

    • interesting says:

      how about we stop serial FED bubble blowing? That’s the crux of the problem.

      • junior_kai says:

        Gold standard. All these bubbles were birthed circa 1971 when we went off the gold standard.

  11. unit472 says:

    Allow me to return to my point about there being ‘no land’ to build upon in the Bay Area. If one were to take a pencil and extend the bay littoral out by 1/4 mile from San Francisco south to San Jose and, from there back up to the city of Emeryville you have about 100 X 0.5 miles or, roughly 50 square miles of new land. That is the area of the city of San Francisco or enough NEW land to house another San Francisco!

    San Francisco is no longer a port city and shrinking the SF bay mudflats by 1/2 a mile would not affect ocean going shipping at all. When was the last time a ocean going maritime vessel docked in Palo Alto or Sunnyvale? Filling in the SF bay would set off a construction and housing boom and actually make those waters more accessible to more people than today. Turning sea water into salt or housing derelict industrial and military facilities is not the highest and best use of waterfront land. Neither are 150 year old prisons in Marin!

    • Kevin says:

      If it weren’t for those bored old ladies who started the Save the Bay coalition we wouldn’t be in this predicament. An older Bay Area native I know told me that in the 50s it was just assumed that the Bay would eventually all be reclaimed over the next 50 or 100 years. Why do we have to be so sentimental about things? Literally half of the Netherlands is reclaimed land. Surely we could take back 100 square miles or so.

      • polecat says:

        Rightttt ! Turn the entire Bay into one 100 sq. mile concurbation of … BLIGHT! … Forget All about those wizardly externalities stacked up behind the development curtain …. Why, with the ‘heat island’ effect, that alone would entirely change the local climate on a once open bay, to say nothing of a multitude of other ecological blow-back effects !
        It would be smoggy LA Basin 2.0, just with a different series of fault lines !

        • Kevin says:

          Why would you assume it would be blight? Foster City and Redwood Shores are both quite nice. I think it would be cool to have our own Amsterdam between SF and Oakland.

  12. Scott says:

    I’ve increasingly come to the belief that housing prices in the major cities (San Francisco, New York, etc.) is not a local or even state-wide problem it is a national one. People want to live and work in these areas, but they can’t afford it. The biggest issue for people in states like Massachusetts is not high taxes but the high cost of living (which mostly falls on the cost of housing), this leads to people leaving the state and as the population falls, fewer jobs.

    So why is this a national problem rather than a San Francisco or Massachusetts one? Because large cities make up most of the economy. If local policies like those in Palo Alto continue, they will hurt growth and reduce taxes for the country as whole.

    • jon says:

      The price even in bigger cities depends upon the general economy.
      It wont and can’t stay at these levels for ever.
      It has gone down many times before and it’d go down again..
      if you don’t remember the recent crash, during 2009… the real estate in SFO went down more than 40%.

      • chip javert says:

        I could be wrong here, but having lived in the Bay Area in 2009, I don’t recall (the 49-sq-mile city of) San Francisco real estate declining 40% – were you referring to some of the real estate in the greater San Francisco Bay region (about 3,500 sq miles), in which real estate definitely crashed over 40%?

        • DKing says:

          Agreed. Some parts of Berkeley and Oakland didn’t decline at all. I haven’t looked at the data for Marin or the Peninsula but I’d bet there were cities/neighborhoods in those locations that didn’t decline. Sure, out in Livermore or Brentwood or Vallejo the price of some homes might have dropped 40%.

        • Wolf Richter says:

          Part of Oakland saw huge price drops. Friend of mine bought a house out of foreclosure in 2010 or 2011 for abound $150K. This stuff really varies widely. Financially secure homeowners who are not forced to sell might not sell during downturns. What causes prices to plunge is forced selling. In neighborhoods where there is a lot of forced selling, it can get brutal. But the median price for the city overall might not reflect that.

        • Wilbur58 says:

          I’m with Chip on this one. I don’t think LA sank too much either.

        • HudsonJr says:

          The peninsula didn’t get hit that hard. Maybe 15-20% off peak, but a lot of that was driven by low appraisals and tightened lending.

          In say 2009/2010, You’d have someone willing to pay 600K for a condo with 20% down. Appraisal would come in at 500-520k. Options are:

          – Buyer finds 80-100K cash to make deal
          – Seller drops price to appraisal
          – Seller drops price and buy adds cash

          Often this meant no deal and people would just stay where they were or rent the place out. So really there was almost nothing for sale.

          If there were 40% declines it was places with insane commutes or bottom of the barrel condos (tiny, old, original, ugly). I’d call these desperation buys that happened around peak.

    • Lori says:

      “I’ve increasingly come to the belief that housing prices in the major cities (San Francisco, New York, etc.) is not a local or even state-wide problem it is a national one. People want to live and work in these areas, but they can’t afford it.”

      Nope. Not a national problem. Housing is reasonably priced where I live and plenty of job opportunities (tech, finance, you name it). Perhaps people should live where they can afford to. It’s a personal choice, not a problem. And it’s certainly not my problem that people cannot afford a 2-3 million dollar home somewhere in CA when the median home price here is one tenth of that.

  13. Gershon says:

    The “full-fledged crisis” is in America writ large. We have a criminal private banking cartel handling our money issuance and monetary policy for the exclusive benefit of its oligarch patrons. When are the middle and working classes going to wake up and start resisting the massive swindles being perpetrated against them by the counterfeiters and racketeers at the Federal Reserve?

    • polecat says:

      When they achieve a nation-wide strike/boycott ….

      …. but the big players have the lumpen folk fighting amongst themselves, ($ee Charlotsville, or ‘Berniebros vs. the Deplorables’ as prime examples) negating ANY attempt at changing the status-quo conveyor belt !

    • VegasBob says:


      A huge part of the problem is the trillion$ of cheap counterfeit electronic money conjured into existence by the criminal central banks and their associates.

      An end to central bank money-printing would go a long way to allowing markets to normalize interest rates, which would promote rational asset prices.

      Home prices are set at the margin. Cheap money printed up by the trillion$ allows buyers to borrow more an bid up prices into the stratosphere.

  14. Truth Always says:

    Incendiary and misleading title for this blog post

    ‘Crisis’ for who exactly and ‘How’?

    I don’t see the Chindians leaving. On the contrary they are increasing.

    I am of Indian origin before someone jumps at me as White Supremacist ?

  15. raxadian says:

    Why live in the valley again? the big companies could easily move somewhere else. Heck most of Alphabet business is still on the cloud that means that the only reason they are still in Silicon Valley is inertia.

    Is just that no company wants to do it first because if any of the big ones moved away, the rest will follow and prices will crash.

    So really, while small and medium sized companies can easily move away, if Apple for example does it then it will drop the value of their propieties in the valley before they can sell them.

    Welcome to Catch-22.

    • Dave Kunkel says:

      What the country needs is a program along the lines of the one that created the interstate highway system in the 50’s. We need a project on the same scale to facilitate the movement of data instead of cars and trucks.

      The goal should be to have symmetrical gig Ethernet available to every house/apartment in the country at a reasonable cost. This would really enable remote working and relieve traffic congestion.

      I don’t understand why the environmentalists wouldn’t be all over something like this.

  16. FDR Liberal says:

    I recall reading about six months ago an article about Palo Alto and it was not flattering about the City Fathers/Mothers. The story strongly suggested that speed bumps in housing were installed to prevent development so home prices remained elevated/stable since the city council members lived there as did the mayor.

    The article also suggested that dealing with development agencies was similar to putting a bid into the Pentagon.

    This article only confirms what the article I referenced speaks to. Yes Virginia, there are vested interests everywhere that don’t give a hoot about you and your median income lifestyle.

  17. Gershon says:

    The Fed’s reckless and irresponsible monetary policies, while enriching its bankster cohorts beyond their wildest dreams, are blowing up dangerously unsustainable asset bubbles all over the world.


  18. AG says:

    I think two other ideas are worth considering:

    One, having the immense HQ campus centers setting up satellite offices with a much smaller staff. Those offices can focus on particular functions or programs, in effect a type of in-sourcing to an off-premises, out-of-state site, where employees can afford to live and not have to fight traffic. And since labor is around 80% of a typical company’s expenses, they wouldn’t have to pay as much for employees living in less expensive areas.

    Another big issue is that the NYT’s article had proposed solutions to the housing expense crisis but did not mention the increased traffic and other infrastructure costs. All the large cities and suburbs in California already have major congestion problems.

    While it’s easier to build more high-rise condos and apartments to alleviate prices, building more lanes on packed highways and main streets would be much harder. Noise would increase, smog would get worse, and commute times would increase in proportion to the congestion.

    I have a feeling some of those politicians wanting to pack the cities with more housing and employees are thinking mostly about getting more tax revenue. It’s doubtful they care that an hour outside of any major city house prices are about 25-50% less, and you get a yard, fresh air, less noise and no traffic. Kids can even own a dog and walk to school.

    • HudsonJr says:

      I’m not sure why there is such an infatuation with huge mega-campuses, versus using satellite or regionally dispersed campuses.

      I feel like it’s probably mid to upper management driven, as it allows more fiefdoms and empire building. I’d imagine if you are someone who spends all their time in meetings, they probably prefer that everyone be in the same location and time zone.

      For rank and file, not sure how much it matters.

  19. Rob says:

    Not surprising most voters hate do nothing career neo liberal politicians.

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