Gentrification in San Francisco Packs a Particular Punch

Source: Joseph Rabinovitsj

Joseph Rabinovitsj

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Two weeks ago, demonstrators protesting the gentrification of San Francisco, marked by the influx of wealthy people into the city displacing poorer people, gathered in front of a Google bus, prevented it from bringing employees from the city to the Google headquarters in Mountain View.


Gentrification has been at the forefront of issues directly affecting San Francisco for the past few years, the most convincing evidence of which is the 30% increase in housing prices in the past year. Many, including these demonstrators, blame much of San Francisco’s gentrification on the trend of wealthy people working for technology companies in Silicon Valley living in San Francisco.


In the past year, Silicon Valley companies – namely Google, Apple, and Facebook – started providing a free commuter shuttle service for their employees living in the city. The demonstrators blocking the Google bus blame this service for encouraging wealthy people to move to San Francisco, and by extension, for contributing to the gentrification of the city.


The first thought that crossed my mind when I heard this story was, “What’s the big deal? Sure, I’m definitely not a fan of cities losing their character when a bunch of rich people move in, forcing poorer folks out. However, big cities all over America are becoming gentrified – San Francisco is no different, and it doesn’t seem like there’s anything we can do to stop it.”


But San Francisco’s brand of gentrification is different from that of other cities.


Let’s look at New York and Chicago. New York housing prices rose by 68% in the past year and Chicago housing prices rose by about 50%. The signs of gentrification in these two cities are numerous and include signs as small as the disappearance of Laundromats and the emergence of high heels and suits in New York’s  historically middle and lower-class meatpacking district and Chicago’s Andersonville to the replacing of public housing projects with condo complexes.


So, based purely on the numbers, it seems that the effects of gentrification may be even more exacerbated in New York and Chicago than in San Francisco. And this may be so. However, there is one distinct difference between urban gentrification in the former two cities and the latter: the direction of peoples’ commutes.


Young, wealthy, educated people gentrify New York and Chicago, for the most part, in order to be close to their jobs in these cities.


These same people, on the other hand, gentrify San Francisco exclusively because it’s a hip place for twenty-something’s to live. Although there are a number of tech start-ups in San Francisco, the majority of these young so-called gentrifiers commute down the peninsula to work. If you don’t believe me, just hop on a northbound and then a southbound train in the morning during rush hour. The train leaving San Francisco will be jam packed with young-ish people in collared shirts, hunched over laptops. Trains going the other way will be almost empty and be host to a more diverse group of people.


The difference that makes San Francisco’s brand of gentrification more harmful than that of Chicago and New York has to do with the location of the employers of the wealthy gentrifiers.


In most cities across America, corporations, in addition to paying federal and state taxes, must pay taxes directly to their city’s government. This tax goes under the guise of many different names; in New York it’s called the General Corporations Tax, in Chicago it’s the Employers’ Expense Tax, and in San Francisco it’s the Payroll Expense Tax. Basically, each of these taxes are charged to businesses above a certain size (measured either by number of employees or net income) and paid directly to the city in which each business is located.


These municipal corporate taxes are the elements that make the distinction between gentrification in San Francisco and other large cities.


When young gentrifiers move to New York and Chicago, although they inflate these cities’ markets (namely housing and retail markets) and in turn buy out the less wealthy inhabitants of these cities, their employers (who drew them to these cities in the first place) directly contribute to the welfare of the city itself through the form of these corporate taxes.


San Francisco, more often than not, does not reap the benefits of gentrifiers’ employers’ corporate tax money: these businesses are located farther down the peninsula.


So, in San Francisco, young, wealthy people (most often) working in the technology industry move in, inflate the economy, and in no way contribute to the city’s welfare. Sure, some of their money makes its way to the municipal government in the form of sales tax, cigarette tax, and liquor tax, but such a sum is only of marginal significance.


Now, you may ask, “How can municipal revenue in the form of corporate taxes ease the effects of gentrification? This revenue doesn’t change the fact that municipal markets are still inflated and the rich are buying out the poor.”


Well, municipal governments, given adequate funds and straight priorities, can do quite a bit to curb what most would agree is the worst effect of gentrification: families and individuals with low to middle-of-the-road incomes being bought out of, or even evicted from their respective residences. Municipal governments can ease this effect by funding public housing.


To see how funding public housing helps soften the blow of gentrification on low- to mid-income city-dwellers, let’s look back to New York.


Now, it is true that if we take the inflation of the housing market to be our unit of measuring gentrification, New York has been hit much harder than San Francisco. However, if we take number-of-poorer-people-leaving-the-city-because-of-high-prices to be this unit of measurement, New York (including all five boroughs) does not seem that bad. Sure, housing prices in most of Manhattan and parts of Brooklyn are outrageous and people with low incomes are leaving these areas with out-turned pockets every day. However, because the New York City Housing Authority (NYCHA) funds 8.2% of all the apartments in New York (it is actually the largest municipal public housing authority in the country), these displaced people do not have to move far; they can continue living in the same city and most importantly they can keep their respective jobs because they won’t have to commute from another city.


Unlike the NYCHA, the San Francisco Housing Authority (SFHA) is in tough straits: last year the U.S. Department of Housing and Urban Development (HUD) audited SFHA and because of the decrepit state of many SFHA housing units and the city’s poor management and allocation of SFHA’s budget, put SFHA on the list of “troubled” housing authorities in the country, making certain federal grants and loans unavailable to them.


San Francisco Mayor Ed Lee recognizes the city’s need to strengthen SFHA, demonstrated by his replacing six of the seven SFHA commissioners last year and his acquisition of some federal grant money for severely distressed public housing to re-model five housing complexes.


However, the fact remains that in San Francisco, public housing is inadequate for the needs of the people being bought out of the city, who are forced to move elsewhere (most often to the East Bay) and often lose their jobs as a result of the logistically difficult commute.


If the city of San Francisco would be able to make money off of the companies that attracted the young, wealthy gentrifiers who contributed heavily to the inflation of the housing market in the first place, based on the mayor’s recognition of SFHA’s need to be strengthened, the city would be able to significantly curb the effects of gentrification.


Therefore, San Francisco’s brand of gentrification by which the gentrifiers move into the city, inflate the housing market, yet commute to companies outside of the cities, off of whom the city is not able to make corporate tax money, is particularly harmful to low- to moderate-income people who have an inadequate public housing system to fall back on, and thus are often forced out of the city and away from their respective jobs.

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3 Responses to “Gentrification in San Francisco Packs a Particular Punch”

  1. sparish on February 7th, 2014 9:07 pm

    What a great, in depth article!

  2. shoover on February 8th, 2014 1:53 am

    This may not be a reliable fact, but I have heard that the NYC government also taxes all residents in addition to the business taxes you refer to here. I wonder if something like that might alleviate the situation in San Francisco, but then there’s also the issue of having to tax the lower-income people who are losing their homes as well as the wealthier gentrifiers. This situation is definitely not an easy fix.

  3. J. Senigaglia on March 6th, 2014 3:53 pm

    This is such an excellent, in-depth article. Well done.

Gentrification in San Francisco Packs a Particular Punch