As we’ve established and you already knew deep in your bones, the same house will be more expensive in Greenwich, CT, than in Fargo, ND. What you may not have known, though, is that the difference in price is not merely reflective of the difference of costs, specifically land and material costs in CT vs ND. There’s an X factor too, or, as the experts call it, a “shadow price,” that makes San Francisco so absurdly unaffordable it might as well be Mars.
The price of a house or apartment, the authors argued, is more than just the value of the land plus the value of the building. There’s a third, shadow price, which represents how difficult it is to get something built given local regulations. In highly restrictive places like San Francisco, regulations impede the supply of new buildings, and so raise the price of housing.
So, like, for example, materials and land cost 2x the national average in SF, and yet a house costs 3.6x the national average. The difference can be attributed to regulations. You know, bureaucracy, red tape, all that nonsense. The Economist flatly states, “the [Bay Area] is one of the most difficult places to build in the country. Prices are therefore soaring and neighbourhoods are changing, touching off some occasionally nasty social conflicts.”
DC apartments, though nutsy, remain more reasonable than SF’s, in part because, after our nation’s capital went through crisis after crisis between 1969 and 2001, it decided to get back on its feet by investing in tons of new housing — for DINKs. If you build it, DC figured, they will come, “they” being single, sexy, spendy types, which represent more short-term gain for an urban area. And lo, the city was right.
The Atlantic takes us to an interesting place this morning, asking us to consider whether we put more instinctive faith in the rich than in the poor and, if so, whether we’re mistaken. Here’s a thought experiment to go with your morning joe:
You’re standing on a corner in downtown San Francisco. It’s a four-way stop, meaning cars are supposed to pause before entering the intersection. As you’re sipping your latte, you look to your left before stepping off the curb. The car approaching is a shiny BMW. Do you cross? How about if it’s a Ford Fusion? The model of trust I’ve been describing suggests you might want to pause if it’s the BMW.
So, do you place more trust in the driver of a Bimmer or that of some midrange American car? What if there’s a third car, a real junkbucket, in the mix? Who’s more likely to hit you? Tell us, science!
Over on his blog today, Anil Dash offers a few timely “Stupid Simple Things SF Techies Could Do To Stop Being Hated.” He talks about how the New York tech community has escaped similar degrees of disdain and resentment because 1. Wall Street will always be worse, and 2. in New York, tech workers have a better “ethos of community involvement.”
His first suggestion is simple, but legitimate:
First, people in tech should use their voices to push the leaders of their companies and industry to do the right thing. It is just as easy for a CEO to ask the city to accommodate affordable housing as it is for them to demand tax rebates. And if a CEO believes their employees expect this kind of request, most tech company execs will do anything to keep their engineers happy. If Google is the symbol of entitlement in San Francisco right now, Larry Page could simply and consistently amplify the voice of those already working on housing solutions and make a huge impact.