The bubble is back

City policies are encouraging a new tech boom — but have we learned any lessons from the last one?


San Francisco's future is in the process of being written, once again using lines of computer code and blips on the screens of electronic gadgets, the same as during the last dot-com boom. Its proponents insist it will be different this time — that Boom 2.0 won't displace the working class, that the bubble won't burst — but critics have their doubts.

After all, the city completely screwed up the last boom by favoring flashy tech development and growth over the needs of existing, often vulnerable residents. There are already signs that displacement is creeping back, rents are soaring, housing prices are driving people out of town — and even the city's own economist admits that nobody knows whether the tax-cut driven development will pay for itself.

In many ways, Zendesk, which recently moved to the area, is a poster child for the main obsession of Mayor Ed Lee and other city leaders, who are pushing policies that will make San Francisco the center of a new high-tech expansion. They hope to use that economic growth to create good jobs and address challenges such as revitalizing the mid-Market area.

Lee and Sups. David Chiu and Jane Kim a year ago led the creation of a business-tax exclusion zone intended to keep Twitter from leaving town. The company's planned growth and relocation to mid-Market, they argued, would be a magnet for more tech companies. The city would give up payroll taxes on the new jobs and provide other taxpayer-financed incentives — but big companies in the zone would be required to enter into community benefits agreements that would help low-income residents and small businesses benefit from the influx of well-paid tech workers.

In fact, a Guardian review of documents ("Behind the tweets," 3/15/11) found that Twitter resisted the city's efforts to get a substantial community benefits package, and that deal was pushed back to a later time. The agreement isn't actually due until the company occupies the new site, and Twitter officials are upbeat about their interactions. Twitter spokesperson Robert Weeks told us by email that the company is working with others to improve mid-Market: "Based on early meetings we're having with various entities, it's clear there's great collective energy that can bring positive change to the neighborhood."

But Zendesk — a Danish company that makes help-desk support software from an airy third floor office near Market and Sixth streets — seems to be offering a lot to the gritty neighborhood where it opened up shop last year. In January, Zendesk became the first company to take advantage of the tax break and sign a community benefits agreement with the city.

"This is about forming a longstanding relationship with the neighborhood," said Tiffany Maleshefski, the company's community benefits manager who negotiated with the city.

The agreement has both general goals and a number of specific requirements. The company will contribute $5,000 to mid-Market community gardens, use local businesses for at least 40 percent of its events, hire two paid interns from the neighborhood, donate equipment to local groups, coordinate several specific outreach events a year, help staff the Tenderloin Tech Lab, and participate in local nonprofit organizations and ventures.

Avoiding payroll taxes on the 66 new employees it's hired will save the company about $30,000 in its first year, Maleshefski said, and the company plans to grow from about 110 employees in San Francisco now up to about 200 employees by the end of the year.


Is it more feasible to build in an already dense environment? Or is it more feasible to expect all of the less dense cities ringing the bay to build more densely.
These are cities which have no interest in being as densely populated as San Francisco, and are places which are often populated by people who enjoy the relative density of their chosen home.
To expect other cities to densify to the degree SF has - even in places like the outer richmond, is an extreme pipe dream.

To the other poster who thinks that if we build some housing then we should build for 5 million people because thats what will happen:
It's nice to think that everyone in the US wants to live in SF, but thats just not reality. Not everyone wants to live here. We can do a better job with housing both the people who already are here, as well as a portion of the people who want to move here than what we are doing now. There is no valid reason to leave development lots undeveloped in prime SF other than peoples irrational need to control their environments.

Posted by Greg on Feb. 16, 2012 @ 11:45 am

Is this some kind of bizarre over-long troll? You don't want Stanford, Cal and UCSF because they lead to an educated successful population?

You are the one who should move, hopefully to someplace like Cleveland, so you can see what kind of economy your madness creates.

Posted by Guest on Feb. 20, 2012 @ 9:42 am

But of course the NIMBY's and activists don't really want affordable housing, because then they'd be out of a "job".

Posted by Guest on Feb. 15, 2012 @ 4:08 pm

who don't rent out their properties. Progressives are always opposed to the tyranny of the judicial system - except when they want to use it for their own means.

Posted by Guest on Feb. 15, 2012 @ 7:00 pm

Guest wrote: "And the city's economist is surprised rents would rise so quickly? Wow, apparently anyone can be an economist, no matter how dim-witted."

So funny and so true.

I heard someone from the city's economic department (I think it was Mr. Egan) testify in front of the BOS last year that a rent tax would cause rents to increase. What?? Where did he make that up?

Apparently Mr.Egan studied economics in Soviet Russia where they tried - and failed miserably - to match prices to costs. If he knew about the real world in the US and other capitalist countries, he would have learned that rents are already as high as the market will pay because - guess what - landlords are profit maximizers and costs have NOTHING to do with the rents landlords charge.

Anyone - including even a "trained economist" - who can't compare two reasonably similar apartment or commercial buildings - one with a low Prop 13 value and no mortgage, and one with a high Prop 13 value and huge mortgage - and not see that the rents charged are EXACTLY THE SAME, obviously is not very well-versed in the way economics works in the real world.

He sounds like a perfect hire for SF, a city famous for its mayors and BOS who give great soundbites about an "inclusive, progressive city," while in reality the city rapidly morphs into a place where only millionaires and multi-millionaires (and a few token poor people) can afford to live. Hell yeah Mr. Mayor and (most) BOS members: we need more high-paying technology jobs, more millionaires, and ever more multi-millionaire transplants from India and China. There's $3 Billion of "free" real estate money" for landlords and property speculators just by getting rid of the lower and middle income "off-brand" San Franciscans and replacing them with shiny new million dollar "brand name" replacements. The politicians and city bureaucrats are doing a great job, so please keep up the good work.

Posted by Guest on Feb. 15, 2012 @ 9:46 pm

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