Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.
Strategies for overcoming the Bay Area’s growing inequality and increasingly unaffordable housing.
The San Francisco Bay Area—stretching from San Jose and Silicon Valley in the south to Oakland, Berkeley, and the city of San Francisco in the north—is the world’s foremost tech hub. But the city and region also suffer from deepening urban challenges such as an acute housing affordability crisis and rising inequality. Congestion in the area is rising, commute times have become unbearable, and long-time residents and even members of the creative class are being priced out of the city center. Protests have erupted over the private bus services that transport tech workers from their expensive apartments in downtown San Francisco to the sprawling office complexes of Silicon Valley. In November, a suite of ballot measures, some of which were defeated, aimed to limit high-tech growth in the city and provide for more affordable housing for residents.
The question remains: Can the Bay Area develop a strategy to meet these challenges and find a path to a more sustained and shared prosperity?
A new report from the Bay Area Council Economic Institute, entitled “A Roadmap for Economic Resilience,” takes a close look at the region’s key challenges. It analyzes a wide range of data, collects best practices from around the world, and draws on interviews and focus groups with local businesses, academics, unions, economic development groups, civic groups, and members of local government.
The Bay Area is increasingly gripped in a vexing crisis of its own success. Once known for its progressivism, creativity, and diversity, the region is becoming more divided, unequal, unaffordable, congested, and unlivable for all but a privileged minority. In an effort to help turn this around, the report lays out a series of recommendations for creating a more “adaptive and resilient” regional economy.
Build more affordable housing
It’s no secret that the Bay Area has a problem with housing—and affordable housing in particular. Housing costs have risen to record highs, and the value of a home in San Francisco has increased by nearly 15 percent in the past year alone. This has ramped up pressure on rents, too. As the chart below, from the report, shows, rents have risen steadily from 2010 to 2014. In 2014, the average rent price in the Bay Area was over $2,000 a month (and over $3,000 in San Francisco), with nearly half of Bay Area renters considered burdened by housing costs. The region’s housing crisis has fallen especially hard on blue collar and service workers.
The Bay Area has also failed to build anywhere near enough housing to accommodate its growing population. Since the mid-2000s, the region has seen an overall decline in the number of annual housing permits. From 2012-2013, only 193 new housing units were made available per 1,000 new* residents.
The Bay Area must do several things to address its housing crisis, according to the report. First, the region must overcome outmoded zoning and building codes that suppress development. Areas zoned for hotels and retail, for example, could be rezoned for much-needed housing. The permitting process must also be radically streamlined to allow for the construction of new housing. And housing density should be increased substantially, especially in priority areas and neighborhoods. At the same time, the region needs to increase construction of smaller, affordable units and reduce construction costs. Cities should not just be encouraged, but mandated to add units that include affordable housing.
Create more middle-skill, middle-class jobs
The Bay Area suffers from an increasingly divided workforce: Its tech workers do well for themselves (and are among the best paid in the nation), but its service workers are falling further behind. The region’s median household income has stagnated at around $75,000 a year, and the percentage of households with incomes below $35,000 has only increased since the recession. Like many tech hubs and superstar cities, the region lacks well-paying, middle-skill jobs that once made for a broad middle class.
To create more middle-class jobs, the report calls for a collaborative effort between public and private sectors to improve education and workforce training programs. More specifically, it suggests providing incentives to colleges and vocational programs so that they adjust their curricula to cater to the needs of employers. The report also proposes tax incentives to employers who agree to participate in apprenticeship programs, or tuition and fee reimbursements for students who graduate from critical skills programs. Finally, the report encourages community colleges to offer a greater number and variety of four-year degree programs.
Invest in infrastructure
The report calls for substantial new infrastructure to reduce congestion and commute times, and to facilitate the development of housing—including more affordable housing—around transit hubs. As the region has grown, more and more residents have been forced to endure long and punishing commutes. Over 20 percent of Bay Area commutes are longer than 45 minutes, according to the report. Just 10 percent of metro area* residents rely on public transit for their daily commutes—and nearly 70 percent commute to work by car alone.
To remedy this, the report calls for a new, integrated body for financing infrastructure that would receive seed funding and then loan money to public sector entities. This proposed body would have the power to design and build projects of its own and utilize private sector capital as well. Additional proposals include instituting a regional gas tax or a new fee on vehicle miles traveled (something Governor Jerry Brown already plans to implement by 2017). The report also suggests lowering the voter threshold to secure approval for these measures.
Furthermore, the report stresses the importance of making the region’s mass transit system more efficient and effective. This would allow the Bay Area to expand transportation networks and upgrade existing ones in order to cut back on commute times and alleviate congestion. The region must focus on uniting its 26 different transit agencies, which are run by independent transit operators and planning departments that lack coordination with one another.
A new economic development organization
To facilitate all this, the report calls for a new, broader-based, and more powerful regional development body that would carry out these recommendations and ensure that the Bay Area’s economy remains diverse, competitive, and resilient. This region-wide economic development organization would focus on three broad aims: marketing the region to businesses and investors, encouraging the development of public land, and better connecting businesses to local government.
For all its strengths, the report fails to deal sufficiently with worsening economic inequality and segregation in the region. The San Francisco and San Jose metros, after all, have among the highest levels of wage inequality in the entire nation. The report specifically neglects measures like establishing a higher local minimum wage and upgrading the vulnerable low-wage service jobs that employ more than 45 percent of the region. It also fails to address how to deal with the area’s chronic and concentrated neighborhood poverty—some of which was tackled in a SPUR report last year. Such measures will be required to ensure that those falling behind can once again join the ranks of the middle class—the backbone of a truly sustainable and resilient economy.
Overall, however, the report should be applauded for addressing deepening urban challenges facing the Bay Area. It is heartening to see a regional development body calling for this type of reform. As these challenges heighten, other superstar cities and tech hubs will have to do the same.
*CORRECTION: This post has been updated to clarify that commuting share figures cited were for the entire San Francisco Bay metro area, not just the city of San Francisco, and that the share of new housing units from 2012-2013 only applied to new residents.