In an opinion piece for Urban Land, ULI Foundation Governor and developer John McNellis argues that the lack of affordable housing in places like California’s Palo Alto hinders one of America’s fastest growing job markets.
“The rich are different from you and me.”—F. Scott Fitzgerald
Rich cities are different, too, but—like rich people—they have their own seemingly unsolvable problems. Their problems, however, are different. At first blush, less fortunate municipalities would beg for their issues. While every other city from Bangor, Maine, to Burbank, California, is scrambling to improve its sputtering job growth, a handful of charmed towns should be embarrassed by their employment riches.
From 2012 to 2014, the San Francisco Bay area created 382,500 jobs while providing only 68,200 new dwellings (homes and apartments). The forecast for 2015 is roughly another four new jobs for each new dwelling. Even if you regard economists’ predictions on a par with those of shamans, you know the dismal science is dead-on about supply and demand. In 2014, the median house price in the United States was $206,800; in San Francisco, it was $1,006,600—five times more. Median apartment rents nationwide stand at $1,231 per month while San Francisco’s weigh in at $3,396.
Once upon a time, when everyone had to walk, the rich lived on the flat land in the center of town and the poor lived atop the surrounding hills. No one with a choice was willing to trudge up and down hills every day. Henry Ford changed that. Once upon a more recent time—say, from after World War II through sometime in the 1980s—the rich lived in wooded suburbs and commuted to the center of town. Gridlock changed that. The rich now live close to where they work. In fact, the CEO theory of corporate headquarters has it that a company’s main office will be located within a ten-minute surface-street drive of the CEO’s residence.
Every day, 265,000 workers commute into San Francisco from out of town, creating—by some measures—the second-worst traffic in the country. With the city’s $1 million median home price, it’s not only salesclerks who are enduring Sisyphean commutes; it’s anyone making less than $300,000 a year. But the irony is that the reverse commute*—that is, out of the city and into Silicon Valley—may be even worse. Why? Because those who can afford to live in San Francisco—the techies—work in the valley.
If it is not the valley’s capital, Palo Alto is surely its epicenter, home to the valley’s best and brightest minds and arguably its worst side effects. At 3.01 jobs per dwelling, Palo Alto has an unparalleled jobs/housing imbalance. (Manhattan’s stands at 2.67.) What do three jobs for every residence get you? A median home price of $2.2 million (11 times the national median), apartment rents 10 percent higher than San Francisco’s, and roads that turn into parking lots twice a day.
What’s shocking is that this imbalance is getting worse by the day. With office rents among the highest in the country, Palo Alto is in the midst of a land grab where developers are converting every lot and shack in town into office space. (A new low was achieved earlier this year when a Laundromat in a downscale strip center was turned into startup space.) What isn’t shocking is that the gridlocked citizenry is up in arms, demanding a cessation to the runaway office development. Sadly, what also isn’t shocking is that no one—neither the lunatic fringe that opposes everything nor the thoughtful people elected to run the city—is connecting the woes from our choking jobs growth to our jobs/housing imbalance.
Why? Because as socially liberal as Palo Alto may be, new housing for anyone—from the working poor to the idle upper class—is political cyanide. Merely uttering the word density in public is enough to get a politician recalled. If truth were commonplace at public hearings, the vociferous no-growth forces might, instead of hiding behind their threadbare concerns for public safety, simply declare, “Let them commute.”
Sadder still is that this is a very old story. The Palo Alto Weekly’s former editor-in-chief, Jay Thorwaldson, pointed out in an insightful piece last year that this issue has been bedeviling Palo Alto for 40 years and, despite the periodic public Sturm und Drang, has only become much worse.
Is there a solution? Piece of cake: Take urban planning away from local officials and make it a regional decision. As long as land use is decided by neighborhood-elected city councils, nothing will change. Short of that real-world impossibility, a big step in the right direction would be to reform the California Environmental Quality Act (CEQA), if only slightly. This well-intentioned legislation is—simply put—broken. Instead of being used to ensure environmental compliance, it is relied upon as the final roadblock in the effort to defeat projects, regardless of their environmental quality. CEQA lawsuits contesting a city’s decision to allow a given development cost no-growth opponents virtually nothing to file and prosecute. They file these suits knowing that if a project can be delayed long enough, it will die or—at a minimum—be drastically cut back. If, as a prerequisite to filing their lawsuit, opponents had to post a meaningful amount in the form of a bond—say, the actual cost of the project’s environmental studies—which they would forfeit in the event they were to lose their lawsuit, far fewer suits would be filed.
What Palo Alto’s raised-drawbridge crowd fails to realize is that ultimately they are condemning themselves to a life without family—namely, children and grandchildren. They may have a cracker box they bought for $90,000 that is now worth $2.5 million, but their children—even their very bright, very hardworking children—will move away when it comes time to buy a home. How many young lawyers and doctors can save up the half million one needs for a downpayment on a $2.2 million house? And, unwilling to endure an hour-and-a-half commute, they will move to Portland.
* “I have a reverse commute,” a very popular real estate lie told in the 1980s, finally died out when even the criminally gullible began to scoff.
John E. McNellis is a principal at McNellis Partners in Palo Alto, California, and a ULI Foundation Governor.