San Francisco's Gentrification Problem

San Francisco’s Gentrification Problem

June 1, 2014 | Real Estate News, Rental Trends and Real Estate News

By Reilly Willson

As the tech boom sweeps through the San Francisco Bay Area, many low-income families are finding themselves holding the short end of the stick. The city’s population is growing increasingly discontented with the perceived takeover by the “technology class.”

[Top Bay Area Rental Trends for 2014]

Companies like Google and Apple have brought much wealth to the area, but the ensuing gentrification has forced many people out of their homes as the cost of living increases. The situation is complicated by limitations unique to San Francisco including the city’s geography and building codes.

What is Gentrification?

High income tech workers are bringing a lot of wealth to the city of San Francisco. With this increase in capital comes an increase in the cost of living. This is the result of economics, as suppliers of goods and services find that there are now people willing to pay more for what they are offering.

Consequently, prices increase. Everyone now must pay more for the goods and services they enjoy on a daily basis. This includes landlords and property owners whose incomes are dependent on the amount they charge for rent.

Property owners, however, are not legally allowed to increase the rents enough to keep up with the rise in the cost of living. Therefore, they are starting to sell their buildings in an effort to cash in on the capital gains the properties have experienced over the years.

By appealing to a law known as the Ellis Act, which allows landlords to evict residents if they sell the building, property owners are getting out of the business as land developers swoop in to buy the buildings and renovate them to accommodate the new tech workers. Unfortunately, this has left hundreds out of a home as a result.

The Effect on San Francisco Apartments

The rental rates for San Francisco apartments are some of the highest in the country. As Silicon Valley jobs attract more and more high-income individuals to the city, current residents are angered by the lack of involvement on behalf of the giant companies on the future of the city.

[Median Rental Rates in San Francisco]

They feel that tech giants such as Apple and Google have a responsibility to invest in the city’s infrastructure to accommodate for the massive gentrification they have caused. Residents worry that cultural neighborhoods such as the Mission are losing their populations of artists and immigrants that make up the area’s distinct culture.

Meanwhile, economists are pointing to the market forces that make the influx of high-income earners beneficial to the community as a whole. Many residents remain unconvinced and continue to organize protests of the new tech workers in the area.

So, What’s in Store for San Francisco?

The city itself is limited by its physical geography. The peninsula can only support a fixed number of residents given its limited amount of available land. This, combined with local ordinances meant to protect the city from becoming Manhattanized​, leave the population relatively stuck. As a result. If more people continue to move in, others will be forced out to make room.

 

 

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