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Actually, San Francisco’s Inequality Problem Isn’t the Tech Industry’s Fault

3 minute read

Widening wealth and income inequality have been a hot political topic for several years now, and nowhere more than tech boomtowns like San Francisco. In recent weeks and months, protesters have taken to picketing parts of the city where Google’s private luxury buses come to pick up their highly paid engineers in order to take them to work at the firm’s nearby campus in Mountain View.

The protests are ostensibly about Google’s use of public bus stops for private purposes, but they are motivated also by the impression that new tech money is raising home prices and forcing long-time residents out of the city they love. “You can say ‘I’m just a company, leave me alone, I’m creating jobs, why do I have to do anything else,’” San Francisco mayor Ed Lee recently told TIME. Well, no company can feel that way … Being a citizen of San Francisco, there’s more obligations.

The data, however, paint a more complicated picture. In a report released Thursday, Jed Kolko, Chief economist for the real estate site Trulia, dug into Census and home price data to see where home values are rising faster in tech hubs than the rest of the country and what is driving those increases.

Kolko used Census data to determine the metro areas with the highest concentrations of tech workers, and looked to see how price increases in those cities compared with the country overall. He found that “recent price gains in tech hubs are in line with national trends.” In fact, of the top 10 metro areas with the highest price increases, the only tech hub was Oakland, while four of the tech hubs identified by Kolko were below average in terms of price increases over the past year.

And while tech hubs are generally more expensive places to live, their being expensive predated the Internet boom. Writes Kolko:

“Today’s tech hubs had expensive housing before dot-commers, Internet bubbles, and all that came with them. Decades ago, many of the metros that would become tech hubs had advantages like major research universities, technically skilled workers, thriving computer manufacturing industries, or a nice climate. Places with advantages like these tend to be more expensive, and they turned out to be fertile soil for the today’s tech industry.”

So what’s the real culprit for sky-high home prices in San Francisco? Kolko points to a lack of construction. He writes, “Since 1990, there have been just 117 new housing units permitted per 1,000 housing units that existed in 1990 in San Francisco. That’s the lowest of the ten tech hubs and among the lowest of all the 100 largest metros even with the recent San Francisco construction boom.”

Compared to other tech-heavy cities like Raleigh or Austin, construction in San Francisco occurs very slowly. writes Kolko, “Geography limits construction in the Bay Area–it’s hard to build on the ocean, the bay or on steep hills–but regulations and development costs hurt too.”

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