"[Almost any city with a real tech presence]'s Home Shortage Could Stifle Startups"
Sama's tweet from about a month ago really resonated with me: "it's so unbelievably frustrating how hard it is to get lots of new housing built in the bay area. this one thing would solve so many probs."
There are so many factors at play here, but it mostly boils down to politics.
As more entrepreneurs start tacking big problems with lots of red tape (i.e. banking, brokerage, medicine, insurance, etc.), I wish more people would look to housing and how to keep costs sane.
PS - email me if you're in the space or have ideas. Real estate entrepreneur here. Would love to hear ideas, give my opinion, or chat about possible solutions.
The barrier to new development in SF isn't red tape per se, but democracy. The existing residents don't want to alter their neighborhoods through a massive increase in population, demographic shift, blocked views, etc. They vote in policies that artificially restrict the housing stock (40ft height limit, endless community generated red tape, low income housing requirements in new buildings, restrictions on evicting rent controlled tenants). This leads to dated, unmaintained buildings, higher rent, and decreased labor mobility, ultimately shooting everyone of the in the foot.
To 'disrupt' this you would need to eminent domain a good chunk of the city a la the Western Addition in the '50s.
True, all good points. Sama's second part of the tweet referenced above was, "homeowners don't want too see their home values decrease, and non-homeowners don't vote enough."
Yeah, I like Opendoor a lot. They have the potential to build a huge company because there's a lot of pain in selling homes.
However, this doesn't do much/anything in terms of 1.) creating more supply to meet the current demand of areas like Palo Alto, SF, Manhattan, Stockholm, London, etc. or 2.) making housing more affordable.
Are there historical parallels to the current situation? Has there been another time or place where a young population all of a sudden became rich in the span of only a few decades and wanted to live in urban areas, which were currently occupied by less rich communities?
1.) Mid-1940s - thousands of single soldiers came home to places like Detroit and Chicago after the war and wanted to buy homes and start families. Because housing development had slowed or been stopped for years, these soldiers came home to housing shortages. You can read online about this, but mostly these folks moved back home for a bit, and by the late-40s, early 50s, several massively successful homebuilders were either started or hit their stride (i.e. Levitt and Sons).
2.) Today - in parts of North Dakota and Texas - similar problems to the bay area. Lots of overnight fortunes being made from oil and gas (pipelines, drilling, transportation), and a big lack of housing stock.
The first was solved with plenty of cheap, vacant land; and the creation of suburban sprawl / planned communities. My sense is the second issue will be solved similarly (if the boom continues).
One obvious difference is that the bay area doesn't have much land left to develop, and what is left is mostly too expensive, or protected from development.
FYI, I talked with my friend, and apparently a similar situation happened after the Black Death in the middle ages. Since basic communication and transportation systems broke down, the rich were better off moving from country estates to living in urban areas so they could talk with each other easily. This centralization of intellectuals started giving momentum to the renaissance.
However, the situation was a bit different back then since much of the urban population had died and didn't need to be displaced.
I have no idea if similar situations happened in ancient Middle East or Asia.
It's easy to blame politics, but those politics are based in social reality.
"Keeping the costs sane" for tech workers would mean putting the housing out of reach of many ordinary people.
There is a finite amount of space, and the reason why housing scarce in many cities in Europe is because a large portion is reserved for rent controlled social housing (which unlike the US isn't just the extreme low end).
Not doing that clearly doesn't work either (see SF), and has so many negative social side-effects that are unacceptable in Europe, so you don't even have to bother trying to suggest it.
It simply comes down to too many people wanting to live where there's not enough space. To solve that, you have to look at social factors, not bureaucracy and real estate.
Personally I would suggest looking at the people who actually wouldn't mind getting out of those cities but currently can't for various social and economic reasons. Ironically, those are not the tech workers who could at least theoretically work remotely.
"It simply comes down to too many people wanting to live where there's not enough space"
No, I really don't think that is what it comes down to in Europe (maybe ex UK). More often than not, the reason why local authorities are planning for say 15,000 new homes instead of 30,000 new homes per year is funding not space. Not just funding for housing, but also for public transport, etc.
People in continental Europe will happily live in large appartment blocks if rents are affordable. You can easily buy a couple of single family homes in a sparsely populated area next to a big city and build 10 storeys high, or revitalize some brown field estate that is already owned by the government.
But as you correctly point out, housing in (contintental) Europe is typically subsidized, even for medium income folks. If a city is growing fast, building new homes has to be subsidized now but tax revenues are only going to come in later.
So we have three options: Raise taxes, increase government debt or deregulate to attract private investment. If you have a choice of public or private investment, which one do you choose? I think the answer depends on whether or not you know exactly how much demand there is for what type of supply and on how transparent and competent the local government is.
The demand for housing is pretty well known. We don't need much innovation in that sector. There is not a lot of uncertainty about what is required. All we need is money to build build build.
In my opinion, if national governments that can borrow for 1% they should take the opportunity to raise debt, tons of it, and fund housing and other infrastructures now. Or even better, introduce European infrastructure bonds to raise that money, so it can be spent in countries with higher interest rates as well.
Not to discard your comment, but wrt Stockholm: Build higher! Urbanize areas outside of the core inner city. Lots to do in planning and building to not create artificial social policy.
Has been done in many European cities in the 60's and 70's. Those are now places nobody wants to live anymore, and many of them have been torn down.
The only people who want to live "higher" are the people who want high end apartments in the inner city. And those are the places where height restrictions are there to protect the historical nature of the inner city.
I think it's a mistake to compare Le Corbusier-style "areas for living" with modern urbanised zones. The big issue there is that – sure – there's highrises, but no urbanisation. Usually because they are either lacking commercial space on ground floors or the density is too low, on aggregate, or the areas are too spaced out to support vibrant commercial centers. Look at stockholm, you have city, greenery, suburb, greenery, suburb. No urban connection, not enough density.
I've lived in areas like this myself, and I agree they're not nice. However, I have to think it's not only locality to city center that makes central areas good, it's also that they are self sustaining burrows. There's ample housing, parks, jobs, retail, restaurants, bars, etc.
This has been discussed at length on HN and elsewhere, but there definitely is a real estate problem in SF. Average height of buildings in the downtown area and the like are _much_ lower than they could be (earthquake arguments are bunk, see Tokyo).
The politics behind this is absolutely terrible zoning regulations in the US that make mixed-use zoning difficult, and the fact that people own their houses, and don't want to see the value go down. So basically rent seekers.
Sama's tweet from about a month ago really resonated with me: "it's so unbelievably frustrating how hard it is to get lots of new housing built in the bay area. this one thing would solve so many probs."
There are so many factors at play here, but it mostly boils down to politics.
As more entrepreneurs start tacking big problems with lots of red tape (i.e. banking, brokerage, medicine, insurance, etc.), I wish more people would look to housing and how to keep costs sane.
PS - email me if you're in the space or have ideas. Real estate entrepreneur here. Would love to hear ideas, give my opinion, or chat about possible solutions.