Technology is inevitable. Advancement in technology is unavoidable, and has permanently transformed the human experience. We can take our work wherever we go on our laptops, we can store and access family photos on the Cloud, and we have the entirety of human knowledge literally at our fingertips; our internet-connected smartphones assure it. It’s hard to envision our 21st century existence without technology as an integral part.
According to MSN, California’s technology industry contributed $93.1 billion to the state’s GDP in 2017, and employed 264, 698 people (nearly as many as the entire workforce of Wyoming), making it the largest industry in the state.
Undoubtedly, the technology industry, much of which is housed in Silicon Valley and San Francisco, has been a bastion for the state. However, there have been unintended consequences resulting from a glut of specialized, technical, high-paying jobs. Displacement of low-income and blue collar workers and the gentrification of old neighborhoods is one such consequence. San Francisco in particular has been hit by rising housing costs and high demand.
This is an investigation of how the technology industry has contributed to gentrification, defined by Whittle, et al, as “the process by which higher income households displace lower income residents of a neighborhood, changing the essential character and flavor of that neighborhood.”
I will use Neil Smith’s rent-gap theory of gentrification as a guide. Smith’s theory posits that gentrification happens when a site’s actual (current) value is measured against a site’s potential value at ‘best use’. When the gap in an area grows large enough to offset the cost of capital reinvestment, landowners and real estate developers will capitalize.
From 2011 to 2014, the technology industry in San Francisco grew 90% (Stehlin). To put this in perspective, it grew by a “mere” 30% in Silicon Valley during the same stretch. 1,800 new tech companies brought 42,000 new high-wage workers into the San Francisco Bay Area (Rosen, et al). Demand for housing increased along with the jobs.
60% of housing in San Francisco is renter occupied, and 70% of that is protected by rent controls (Stehlin, Rosen). Areas like the Mission and Chinatown concentrate low or very low income populations (Opillard). Real estate developers and property owners recognized that the demand for property was an untapped source of larger property incomes, due to the influx of higher-paid, specialized workers coming into the city, but rent controls and ordinances precluded many of them from making changes.
The San Francisco Residential Rent Stabilization Ordinance (Rent Ordinance) and Condominium Conversion Ordinance are intended to protect renters from unreasonable rent increases or evictions. The Rent Ordinance applies to multi-family units built before June 1979 and limits rent increases to 2% per year for existing tenants. The Condominium Conversion Ordinance (CCO) was intended to limit the number of rental conversions to no more than 1,000 annually, which would keep renters in their homes instead of being displaced by wealthier buyers of refurbished or rebuilt condominiums (Rosen, et al).
However, there are loopholes. California law includes a provision called the Ellis Act. The Ellis Act allows landlords who wish to get out of the rental business the unconditional right to do so. Following certain guidelines, landlords can evict all of their tenants. This law creates the opportunity for developers to convert rental units into condominiums. Corporations are able to buy out entire buildings, evict the tenants, and sell each apartment, piece by piece, as condominiums.
An example of how this works is the case of Elba Borgen. In 2006, Borgen led a group of speculators purchasing and evicting (under the Ellis Act) a property at 1530 McAllister Street. However, Borgen did not exit the rental business. She has continued to buy properties and serve residents with Ellis evictions. Borgen’s attorney, Lyssa Paul, told KPIX that evicting people is dirty work, but someone has to do it.
“If there is a six unit building and it’s Ellis-acted, then I have six new first time homebuyers who now have a place to live,” Paul said.
Of course, homeownership is a positive development for the city’s coffers. Homeowners pay property taxes. Selling each apartment piece by piece as condominiums also exempts the building from rent controls, enriching the landowners. The human cost, however, is hard to ignore. Since 2013, 79% of Ellis Act evictions concerned properties that were bought five years earlier or less (Opillard).
How does this relate to the tech boom? Since 2008, large tech firms have sought offices in San Francisco to take advantage of the rapid growth. In 2011, Mayor Ed Lee attempted to spread this growth to the Tenderloin/Mid-Market areas. As a response to Twitter’s threat to leave San Francisco, Lee enacted the Central Market Payroll Tax Exclusion. The exclusion allowed any employer with an annual payroll of $250,000 or greater, located within the district, to have their payroll taxes waived for six years (Stehlin).
The Tenderloin/Mid-Market area has long served an impecunious population. Single room occupancy hotels, discount stores, and vacant storefronts have long been the face of this district. With the tax exclusion, Twitter’s offices have anchored a “turnaround” of the district, and at least 18 other firms have moved in since, among them Yahoo, Uber, and Pinterest (Stehlin).
The efforts to woo these corporations led to more neoliberal policies around private ownership and public funding. The tax exclusion is just one example (Whittle, et al). By 2014, over 40 new, privately-owned housing developments were planned or under construction. In short, what was once home to a host of “scary” urban subjects was becoming gentrified with more palatable “street life”, one that was appealing to the higher-income crowd.
As Dan Hammel points out, rents are raised by positive neighborhood effects. Public investment in streetscape encourages the reevaluation of real estate at the parcel level, yielding higher rents or property taxes. The Rent-Gap Theory.
Another way that the tech boom has affected gentrification is with the introduction of private bus lines, “Google Buses”. The huge, unmarked, unregulated buses carry high-paid workers from the homes in San Francisco to their jobs in Silicon Valley, and have become symbolic of a gentrified Bay.
Alexandra Goldman, a researcher at UC Berkeley, examined the rental prices within one-half of a mile of five Google Bus stops around the city. She looked at rental prices for one- and two-bedroom listings in those areas, and found that the prices have risen drastically there. For example, from 2010 to 2012, the price of a two-bedroom rental near the Lombard stop rose 14%. More enlightening still, Goldman found that listings for these homes were very likely to list proximity to a Google bus stop as an amenity. This certainly implies that landlords are targeting tech employees, and that they can raise their rents accordingly.
Goldman, A. (2013). The “Google Shuttle Effect”: Gentrification and San Francisco’s Dot Com Boom 2.0. 43. Retrieved May 6, 2018, from http://svenworld.com/wp-content/uploads/2014/01/Goldman_PRFinal.pdf
Hammel, D. J. (1999). Gentrification And Land Rent: A Historical View Of The Rent Gap In Minneapolis. Urban Geography,20(2), 116-145. doi:10.2747/0272-3638.20.2.116
Opillard, F. (2015). Resisting the Politics of Displacement in the San Francisco Bay Area: Anti-gentrification Activism in the Tech Boom 2.0. European Journal of American Studies,10(3). doi:10.4000/ejas.11322
Rosen, M., & Sullivan, W. (2012). FROM URBAN RENEWAL AND DISPLACEMENT TO ECONOMIC INCLUSION: SAN FRANCISCO AFFORDABLE HOUSING POLICY 1978-2014. Retrieved May 6, 2018, from http://www.prrac.org/pdf/SanFranAffHsing.pdf
San Francisco Real Estate Investor Tops ‘Dirty Thirty’ List Over Ellis Act Evictions. (2014, April 24). Retrieved from http://sanfrancisco.cbslocal.com/2014/04/24/san-francisco-real-estate-investor-tops-dirty-thirty-list-over-ellis-act-evictions/
Smith, N. (1996). The new urban frontier: Gentrification and the revanchist city. London: Routledge.
Stebbins, S. (2017, August 17). Largest Industry in each state. Retrieved May 6, 2018, from https://www.msn.com/en-us/money/markets/largest-industry-in-each-state/ss-AAqgcef#image=6
Stehlin, J. (2015). The Post-Industrial “Shop Floor”: Emerging Forms of Gentrification in San Franciscos Innovation Economy. Antipode,48(2), 474-493. doi:10.1111/anti.12199
Whittle, H. J., Palar, K., Hufstedler, L. L., Seligman, H. K., Frongillo, E. A., & Weiser, S. D. (2015). Food insecurity, chronic illness, and gentrification in the San Francisco Bay Area: An example of structural violence in United States public policy. Social Science & Medicine,143, 154-161. doi:10.1016/j.socscimed.2015.08.027
A Fool Speaks Loudest 