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San Francisco Economic Boom: A Class Analysis

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Hieronymous
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Dec 8 2013 11:49
San Francisco Economic Boom: A Class Analysis

It was announced in November, 2013 that San Francisco had surpassed New York City to become the most expensive city for housing in the U.S.

Here are some statistics:

    1. San Francisco's median household income is $74,922 a year, the 2nd highest in the U.S. (after Washington, D.C.)
    2. San Francisco's median home price of $850,000 is the highest in the U.S. There is a 48% gap between the median income and what it would take to afford a median-priced home (which would take an income of $110,000 a year), which statistically defines the housing crisis for the working class (making San Francisco the least affordable city in the U.S.)
    3. San Francisco is the single most expensive place in the U.S. to rent an apartment, the median rent on a two-bedroom apartment is $3,250 per month.

My own experience is instructive here. My partner and I pay $1,455 for 1-bedroom apartment; our neighbors across the hall pay $2,345 for an identical, mirror-image unit. Our place has a wonderful view of the trees in the park across the street and indoor parking for us is free; theirs is a Honeymooners view of the airshaft and the wall of the building next door and they would have to pay an additional $250 for parking. Why the difference? Rent Control. We've lived in our apartment for 9 years and our rent is locked-in. In San Francisco rent control was legislated into existence in 1979 in response to California's neo-liberal property tax revolt of Prop. 13 in 1978. Conversely, Berkeley's rent control laws came out of citywide rent strikes in the early 1970s and these gains were codified by municipal ordinance with successful rent control initiatives in 1980 and 1982. The cities with the strongest laws -- like Berkeley, Santa Monica and West Hollywood -- had "vacancy decontrol," meaning rents were still controlled even if the tenants left the unit. These were outlawed with Costa-Hawkins Act by the California state legislature in 1995. So today, once a tenant vacates an apartment, the rents shoot up to market rates -- like my neighbors across the hall who just moved in this month.

    4. San Francisco has the lowest percentage of children of any major city in the U.S., as it's simply too expensive for working class people to raise kids here.
    5. There are 376,653 housing units in the city, but only 341,721 are them are occupied. Which means that, for whatever reason, 34,932 housing units are unoccupied. Activist groups focusing on homelessness point out that the city counted 6,436 homeless people in 2013 -- meaning there are 5 empty housing units for each homeless person!

The most affordable cities? The depopulated ones, like Detroit (-25%), Cleveland (-17%), Pittsburg (-8%), Toledo (-8%; the median house price is $87,500, the lowest in the U.S.), and St. Louis (-8%).

    6. Unemployment is at a low of 5.3%. But IT jobs in San Francisco have risen 25% in the last 2 years, now making up 8% of jobs in the city.

Booms are nothing new in San Francisco. In 1847, the year before James Marshall discovered gold in Coloma (near Sacramento) on January 24, 1848, San Francisco's population was 469 (having doubled when a boatload of Mormons arrived in 1846). With word of the Gold Rush gradually spreading around the world, there were 25,000 people in San Francisco by January 1849 (the infamous 49ers). Yet 90,000 only passed through the city on their way to try to strike it rich in the gold fields of the Sierras.

But there have also been busts, with -- temporary -- bouts of depopulation. Like in the aftermath of the 1906 Earthquake. Or suburbanization in the post-World War II period. From 1950, when San Francisco's population was 775,357, only to drop to its lowest in modern times at 678,974 in 1980 -- a 30-year drop of almost 100,000, or 12.5% of the population. During that drop, San Francisco became the bohemian magnet that attracted tens of thousands of beatniks, hippies and gays looking for relief from the middle-class McCarthy-era conformity of Cold War America. Which was easy, with widespread vacancies and rock-bottom rents.

With the population now back up to 825,863, the present boom is nothing new.

Prior boom-bust cycles are reflected in the Urban Renewal projects of the post-World War II period. They were also known as "negro removal," as their class-coded language targeted "blight," which in their more transparent moments the city's politicians would admit is "too many" African Americans. The worst of this zeal bulldozed a whopping 66-square blocks in the Fillmore/Western Addition, giving off the appearance of a bombed-out war zone. And class war it was. The African American population peaked at 13.4% in 1970, but has declined to 6.1% today as Blacks were ethnically cleansed from the city as it became whiter.

But people resisted, first with the Freeway Revolt in the 1950s, then against urban renewal in the 1960s and 1970s, which succeeded in some cases in pushing back the bulldozer and wrecking ball. At best, they got the city to build one-to-one replacements, at bellow market rates, for housing that urban clearance destroyed.

The video below is an amazing documentary account of those struggles, that went up not only against real estate speculators and developers, ruling class interests and city politicians, but also went up against unions -- especially the building trades and ILWU -- who wanted to fill their pockets with lucrative contracts for rebuilding the city. It should serve as an inspiration for struggles over housing, seen within a class dynamic, as well as other battles of the working class fighting to survive in the city today.

Mayor Joe Alioto, who broke his teeth as a lawyer breaking the Communist Party-led Fisherman's Union, bought labor's vote with political patronage to get elected in 1968. So, despite his anti-labor pedigree, he enticed unions that were mostly non-white to campaign for him. He got an endorsement from the Laborers Local 261, which was 65% Black and 20% Latino. He got the endorsement from ILWU Local 10, the longshore workers, who at the time were 70% Black. Alioto won all the Black and Latino districts in the city.

Alioto's payoffs:

    Harry Bridges, president of the ILWU International, appointed to Port Commission
    Stanley Jensen, of the Machinists Union, appointed to the Redevelopment Agency
    Joe Mosely, Black dispatcher in ILWU, appointed to the Redevelopment Agency
    Hector Rueda, of Elevator Construction Workers Union, to Planning Commission
    Bill Chester, Black ILWU official, made president of BART
    Pastor Wilbur Hamilton, Black former ILWU clerk, appointed to Redevelopment Agency in 1968 and soon after was made project manager for the West Addition A-2 total-clearance project (the largest in the city)

ILWU and other union bureaucrats, many of whom were African American, gave a black, pro-labor face to the white-led and racist "slum clearance" plan that was devised in the ruling class boardrooms of San Francisco's Financial District. Trade unions and the Democratic Party were in the process of forming a cozy relationship based on a pro-development consensus.

Leading the charge against the clearance of Single Room Occupancy (SROs) hotels in the South of Market district, were veterans of the San Francisco class war of the 1930s.

Chester Hartman writes in City for Sale: The Transformation of San Francisco:

City for Sale wrote:
For the many retired trade unionists living in the area, organizing their fellow residents against the bulldozer harked back to organizing efforts in building the labor movement three and four decades earlier. TOOR's [the anti-gentrification group's acronym: Tenants and Owners in Opposition to Redevelopment] elected chair was eighty-year- old George Woolf, an organizer and first president of the San Francisco-based Alaska Cannery Workers' Union and earlier president of the Ship Scalers Union (later an affiliate of the ILWU). Woolf was intimately involved in the San Francisco progressive labor movement in the late 1920s and 1930s and had his front teeth knocked out during the city's 1934 General Strike. After his retirement in 1954, he organized his fellow ILWU retirees into the Pensioners' Club, a "union with the union"[footnote #1]. He described himself by saying, "I've lived my life so that I can look any man in the eye and tell him to go to hell." His attitude toward the Redevelopment Agency was uncompromising. A newspaper interview with George Woolf note that "it was a casual remark by Redevelopment director M. Justin Herman which started him in battle." Herman had reportedly called the residents of the South of Market area "nothing but a bunch of skid row bums." Woolf was indignant -- "I'm not a bum and I resent being discredited and discounted." He responded by helping to create TOOR." (pp. 69-70)

Footnote:

footnote #1 wrote:
Woolf's historic relationship and close ties to the ILWU were of no avail in seeking help from his union. He wrote ILWU international president Harry Bridges asking for support and got this 26 November 1969, reply: "Dear George: I want to tell you frankly that I don't feel sympathetic to the position outlined; and the enclosed fact sheet from Redevelopment truly does set forth the facts as far as I have been able to check. Harry."

Footnote:

footnote #2 wrote:
Mendelsohn' s [another retired former working class militant fighting gentrification as a member of TOOR] attempts to secure union support were no more successful than Woolf's John Elberling, later to become head of TOOR's housing development group, provided this vignette: "Before he died in 1988, Peter Mendelsohn showed me TOOR's letter to Harry Bridges appealing for help to stop Redevelopment' s demolition. . . 'We are your Brothers,' they wrote. 'We fought the bosses together. We stood with you against the police and the strikebreakers on the Embarcadero during the General Strike. We sailed with you in the Merchant Marine during the War. The Redevelopment Agency is taking our homes. It's all we have. We need your help.' Bridges had returned the original letter, with a handwritten answer in the margin, 'Sorry, but I'm on the other side [in] this, Harry.' Peter cried. I asked him the next week for a copy, but he said he burned it because he was too ashamed."(p. 70)

These total "slum" clearance projects were attempts to destroy the heart of African American and multiracial working class neighborhoods. This was done in nearly every major urban center across the U.S. The resistance in San Francisco spread waves outwards and it began to be challenged elsewhere, but by the time the destruction stopped the damage had already been done.

Details about REDEVELOPMENT: A Marxist Analysis:

[It] is the result of a three year collaboration [1971-1974] between the Resolution film group and a number of community groups struggling to save their home and neighborhoods from "urban renewal". In San Francisco, as in most other cities, "urban renewal" means destroying minority and working class neighborhoods and building lucrative luxury developments. As usual, the key government people have been bought and paid for by the big developers.

Redevelopment was produced by Andy Fahrenwald and Richard Smith in their group Resolution Film collective--the production arm of, initially, American Documentary Films and then San Francisco Newsreel. Bruce Schmiechen was another key member of the Resolution Group.

Andy Fahrenwald (1942-2013) was instrumental to the re-emergence of San Francisco Newsreel in the mid-1970s and oversaw the development and writing of its expanded catalog of some 148 films, and was involved in the production of several early Newsreel films. He co-produced Redevelopment, (doing much of the design, filming and editing work), organized screenings for the film in working class communities and helped people in those communities organize their own screenings. Andy also collaborated on the sound-track for the film with musician Barry Glick and members of the San Francisco Mime Troupe. Andy's banjo playing can be heard in the background of some key scenes.

Andy Fahrenwald was a community activist with a strong sense of social justice who put his heart into this project. (Thanks to Red Hughs for uploading it to the Internet Archives)
_____________________________________________________________________________________

Some other excellent films about San Francisco Gentrification:

    Fall of the I-Hotel (1983). About the struggle to save Manilla town along Kearny, from the bulldozers. A gut-wrenching account. Then the hole where the I-Hotel once stood was empty for 20 years. Thankfully now it's senior housing for Filipina/os.
    Take Over Homes, Take Down Jails (1993). The definitive documentary history of squatting in San Francisco. Made by a German Wildcat comrade.
    The Hidden Cities of San Francisco --The Filmore (1999 by PBS). An excellent documentary history of the ethnic cleansing, first of the Japanese by imprisonment, then African Americans with wrecking balls and bulldozers. Has gruesome scenes of the 66-square blocks leveled for the A-1 and A-2 urban clearance project in the Western Addition, looking like it was hit by an atomic bomb!
    Boom: The Sound of Eviction (2001). Extremely well produced, but verges on liberal lobbying politics at times. Still worth watching.

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What's lacking in all the bemoaning the loss of the San Francisco all these activists know and love (the tears shed for the closing of their favorite petty-bourgeois shops and all their corny nostalgia for a once benign capitalism -- that never was) is a class analysis. And an inability to situate contemporary San Francisco in the circuit of global accumulation of capital. And an analysis of the changes this makes on class composition.

This work-in-progress is an attempt to do that (more analysis to follow in subsequent posts in this thread).

First, where is all the money coming from? Despite all the billions flowing into Twitter and Facebook IPOs, or into investments into old -- and new -- school Silicon Valley firms like Adobe Systems, AMD, Apple, Cisco, eBay, Google, Hewlett-Packard, Intel, Nvidia, Oracle, Saleforce.com, SanDisk, Symantec, Western Digital, Yahoo!, etc., etc. Most of this capital flows through firms on Sand Hill Road in Menlo Park, which is where most Silicon Valley venture capitalist do business. That's 30 miles from San Francisco's Financial District, who obviously also fund IT, biotech and other new technology ventures. The center of gravity for the tech boom remains Sand Hill Road but with the new Twitter headquarters near San Francisco' civic center, it is creeping northwards. Google has also been floating the idea of a San Francisco "campus," hoping that like Twitter they will be granted exemptions to the city payroll tax in the name of "job creation."

So where does the money funding San Francisco's building boom come from? The biggest chunk is from Chinese capitalists.

And why is foreign capital so eager to flow into San Francisco? Because it's still considered cheap. Here's an example:

Wall Street Journal wrote:
September 26, 2012. Overseas investors put $685 million into commercial real estate in San Francisco during the second quarter as the local economy improved, making the city second only to New York in the U.S. in attracting foreign capital to real estate . . . Rob Hielscher, managing director of capital markets at Jones Lang LaSalle, says investors from Asia and Europe are increasingly going after real estate in San Francisco as part of a broader surge in interest in "gateway" markets—major cities with thriving economies, along with airports and ports that are hubs for international travelers—by institutions, wealthy individuals and sovereign-wealth funds. One perk of investing in San Francisco is that its real estate is relatively affordable and has strong growth prospects compared with cities like Hong Kong, London, Tokyo, Paris and Singapore . . . In the 12 months ended in June, office space sold in San Francisco cost $371 per square foot, compared with $928 in London, $1,193 in Hong Kong and $1,247 in Tokyo . . . "San Francisco also offers investors the combination of the transparency, legal system and liquidity of the U.S., with rent growth and capital-appreciation prospects more typically associated with an emerging market," says Mr. Hielscher.

But some of this inflow is residential speculation by IT capitalists:

various sources wrote:
(including Wall Street Journal)A 5,542-square-foot home in San Francisco’s Mission District (3450 21st Street) has sold for $9,999,000, according to public records . . . bought by Facebook founder Mark Zuckerberg . . . was originally purchased for $1.2m in 1997 and only estimated to be worth $3.2m by Zillow, meaning the holding company -- registered by a lawyer who specializes in forming trusts for rich folks -- overpaid by nearly $6.8m for the privilege of quick access to artisanal chocolate

And:

San Francisco Chronicle wrote:
February 14, 2013. A home on Lapidge St., a Mission-Dolores remodeled 5 bed, 4 bath, listed at $2,550,000 in early January in and sold for $2,800,000 a mere eight days later. More dramatic still? Sales records show the property sold in 2011 for just $700,000.

And:

Redfin.com wrote:
"Which Neighborhood Will Be the Hottest in 2013?": #9 Bay Area: The Mission, real estate listings -29% [the local market is contracting because everything is getting bought up], sales +17%, and price +80% [the greatest appreciation in the U.S.]

And:

Wall Street Journal wrote:
"A Hot Spot for the Rising Tech Generation" (March 16, 2012). A bidding war broke out in November when a small house in San Francisco's tightly packed Noe Valley came on the market. Twenty-two people, including employees of Facebook, Zynga, Google and Pixar, battled for the home. The winning offer was $1.5 million—40% higher than the asking price. . . Housing prices in the San Francisco Bay area are once again soaring, thanks to an infusion of cash from the rising shares of Apple and Google and the initial public offerings by Zynga, LinkedIn, Yelp and soon Facebook, expected to be the largest in Internet history. But while a previous generation of dot-com executives opted for mansions in wealthy San Francisco neighborhoods like Pacific Heights and tony Silicon Valley suburbs like Atherton, this generation is gravitating to modest homes and condos in grittier parts of the city. Ground zero of the current tech-fueled real-estate boom is the Mission, formerly a majority Hispanic neighborhood on the southern edge of San Francisco that's close to the main arteries that link San Francisco to Silicon Valley. Median home prices in the Mission grew 44% in December compared with a year earlier. Adjacent Noe Valley had a rise of 31% over that same period . . . The hottest properties are near corporate shuttle bus stops—where employees for companies like Google, Facebook, Genentech, LinkedIn and Apple line up daily for the ride to Silicon Valley. Real-estate agent Amanda Jones calls it the "Shuttle Effect" and said proximity can command as much as a 20% premium. Some real-estate agents said they're dying for a map of where the buses pick up. "When a listing gets deluged with people—that tells me it's close to a stop," said Ms. Jones.

Current Redevelopment Projects Citywide

    • Treasure Island: 10,000 new homes proposed to be built, the funding possibly coming from the China Development bank
    • Bayview-Hunters Point: 10,000 new single-family suburban style homes to be built on the former Navy shipyard, based on free land and corporate handouts to the housing developer Lennar.
    • 8 Washington Street development: more yuppie condos on the waterfront was defeated at at the polls earlier in November (2013)
    • 55 Laguna: the original SF State College, later given to UC Extension and soon to become suburban-style street retail below and luxury condos above
    • Pier 70: the former massive Union Iron Works/Bethlehem shipyards proposed to become yuppie parks, offices and luxury condos
    • Mission Bay: the ongoing massive genetic engineering/bio-research complex centered on UC Mission Bay
    • Mid-Market: a huge suburban shopping mall along Market Street, between 5th and 9th Streets, with Twitter taking over the block-long former SF Furniture Mart at 9th Street and IT headquarter offices to be other anchors

Lately, the largest of group buying into San Francisco real estate has been Chinese investors. Why?

Because there are currently 2.7 million "high net worth" (earning $1.5 million or more) Chinese investors looking to invest abroad. There's also a middling class of 60 million (sociologically, an "upper middle class") who have money to purchase property overseas.

The U.S. is the most popular country for Chinese investors. Chinese buyers spent $30 billion buy property on internationally in 2012 and $9.08 billion of that was invested in the U.S. Chinese real estate investors were only second to Canadians, accounting for 11% of overseas buyers purchasing homes in the U.S. (in the last real estate boom, Chinese investors only accounted for 5% of purchases).

Over half of the homes sold to foreign buyers in California are to Chinese citizens. In San Francisco this has been increasing steadily over the last year, as Chinese investors favor bourgeois neighborhoods like the traditional home of robber barons (like the Southern Pacific's "Big Four") Nob Hill, but also buy premium properties all over the city.

Why do Chinese buyers like San Francisco?

San Francisco Chronicle wrote:
Joel Goodrich, Realtor with Coldwell Banker Previews International, says “It would be an oversimplification to say that all Chinese investors seek the same type of property.”

“However, in San Francisco, investors seeking properties for their own use typically seek out places where their children can be near good schools and universities, as well as be close to transport, shopping and amenities. Because San Francisco is a relatively expensive local market, Chinese investors active there tend to be wealthier, snapping up property in the $700,000 to $1.2 million range, in the $1.5 to $3 million range, or in the $5 million and above range.”

San Francisco, since it became an "instant city" with the Gold Rush, has always been a real estate boom town. Nothing is different now.

Spikymike
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Joined: 6-01-07
Nov 28 2013 11:00

The 'finished' product of this post should make a valuable library addition though this first section might be best linked to others on 'Capitalism and the City', 'Urban devastation' or similar tag. Although some of the specifics will be of more interest to those in North America the underlying dynamics will be familiar to those with experience of the effects of global capital flows on other world cities and the resulting capitalist reshaping of the wider environment.

Hieronymous's picture
Hieronymous
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Joined: 27-07-07
Dec 11 2013 05:09

Thanks for the suggestion, Spikymike. I agree and think it would be invaluable to compare notes and track how capital flows into our areas and affects working class living conditions where we live.

Also, with the global system of production, distribution and consumption in constant flux, I think we need to be aware of how these changes are altering the built environment of different regions. City limits are being exploded as capital is increasingly more structured on a nodal system of "hubs." Shippers (meaning importers like Walmart, Target, Home Depot, etc.; "carriers" are the sector that does the actual transporting, like Maersk and other steamship lines) in North American long ago abandoned the "land bridge" idea, where the West Coast ports loaded most incoming containers from Asia onto trucks and trains for ground transportation acting as a bridge across the continent. With the expanded Panama Canal slated to open in 2015, shippers like Walmart, have adopted a "four corners" strategy, where they'll get the goods as far as possible with waterborne transportation, then offload them at the port nearest the distributions centers (DCs) or retail stores. Hence the jockeying for possible increased traffic through ports like New York/New Jersey, Norfolk, Charleston, Savannah, Jacksonville, Miami, and Houston.


Other changes to working class living conditions are increases and decreases in the cost of reproducing our labor power. With imposed austerity since the crisis of 2008, these have fluctuated wildly -- especially for necessities like food. Further analysis is required.

The costs of reproducing labor power in San Francisco (in graphic above) has outstripped wages. Again, there is a need for further analysis.

Also, we need to factor in how what were once part of working class -- or countercultural -- traditions of solidarity and mutual aid have been commodified. And the IT industry in San Francisco and Silicon Valley is leading the charge.

Where we once could hitchhike or had ride boards and college radio announcements for sharing transportation, now you can use an app for services like Lyft to pay casualized drivers who are using new technologies to create an new informal sector that competes with taxis. Lyft can be identified by pink mustaches hanging on the front of cars. Competitors in the informal transportation sector are UberX and SideCar.

Where we once could couch surf or crash with friends, now you can rent your couch or whole apartment or house with Airbnb and cash in on a whole new informal sector for accommodations.

Where we once could ask friends for a favor, now with Taskrabbit we can pay someone to do the mundane like doing errands or shopping for us.

Retail and other forms of consumption have been going through massive changes with the internet. Cities that were once full of new and second-hand bookshops, have seen them disappear with the proliferation of web-based services like Amazon (see Allentown, Pennsylvania's The Morning Call expose of conditions of Amazon warehouse workers). Where books and recorded music once faded from existence or rotted in remainder bins, the "long tail" has given them new life -- and pushed online retailers to start taking market share from world-dominating brick-and-mortar ones like Walmart.

Where hippies once made an exodus from places like San Francisco's Haight-Ashbury to grow marijuana undisturbed in the rural mountains of Humboldt County, it's now run by international drug cartels who are raping the landscape with hilltop clearings and toxic agribusiness practices to fulfill the demand of the semi-legal (the federal government still considers them illegal) medical marijuana clinics that dot the landscape of cities like San Francisco and "Oaksterdam" across the Bay. It's become a $415 million a year industry in Humboldt County alone.

mangoman
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Dec 11 2013 04:35

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