<\/p>\n
An affordable housing complex in San Francisco at\u00a0Geary Boulevard and Sixth Avenue is pictured in 2025. More housing at all income levels is needed to accommodate the demand for homes when\u00a0Anthropic and OpenAI go public.<\/p>\n
Lea Suzuki\/S.F. Chronicle<\/p>\n
After years of empty offices, shuttered storefronts and national ridicule, San Francisco is poised to experience an extraordinary infusion of wealth almost overnight.<\/p>\n
Anthropic and OpenAI plan initial public offerings of stock\u00a0with valuations that make previous tech booms look tiny. Uber, for example, went public with an $82.4 billion valuation in 2019. OpenAI is valued at $852 billion and Anthropic at $965 billion<\/a>.<\/p>\n The newly minted millionaires and billionaires who work at these San Francisco companies almost certainly won\u2019t all stay at their day jobs. Many will branch out to form companies of their own, creating an even broader constellation of wealth and industry.<\/p>\n Article continues below this ad<\/p>\n Whether this economic ecosystem brings relief to San Francisco\u2019s struggling budget or crushes what\u2019s left of our dwindling middle class is now up to city leaders.<\/p>\n San Francisco has repeatedly failed to manage the civic consequences of its previous technology booms.<\/p>\n San Francisco Chronicle Logo<\/p>\n Make us a Preferred Source to get more of our news when you search.<\/p>\n <\/p>\n Add Preferred Source<\/p>\n <\/a><\/p>\n Abundant housing is the puzzle piece that can allow San Franciscans and their tax base to benefit from the AI boom. San Francisco is not allowed to levy an income tax on the newly rich. But it can benefit from their property taxes and spending \u2014 if it creates room for them to live in the city.<\/p>\n And yet, once again, thousands of tech employees with newly liquid wealth are poised to dominate an already impossible real estate market.<\/p>\n Article continues below this ad<\/p>\n \u201cWe\u2019ve seen this play out multiple times over the city\u2019s history,\u201d realtor Austin Klar, who specializes in homes priced at $3 million and above, told the editorial board. \u201cWe\u2019re nowhere near prepared for what\u2019s coming.\u201d<\/p>\n Though tremendous efforts at the state and local levels have been made to streamline, expedite and incentivize new housing, we\u2019ve seen very little movement in new construction.\u00a0<\/p>\n We need aggressive housing production at every income level, including luxury housing.<\/p>\n A lot of people don\u2019t like this argument; many progressives, for example, push 100% affordable or nothing. But where exactly do they think these Anthropic guys are going to live?<\/p>\n When a company goes public, employees cash out. Bidding wars for homes accelerate. Neighborhoods once considered merely expensive become unreachable. Landlords see opportunity. Longtime residents feel the ground shift beneath them.<\/p>\n Article continues below this ad<\/p>\n The failure to recognize the importance of building housing supply at multiple price points has gotten us into the mess we\u2019re in now.<\/p>\n As UC Davis professor and housing law expert Chris Elmendorf told us, the economic gains of previous tech booms were unequally distributed in part because more people couldn\u2019t afford to live in San Francisco to participate in the boom.<\/p>\n \u201cThat was the traditional pattern of how things worked from 1776 to 1975,\u201d he said. \u201cThere would be an economic boom, people would move there, there was a general trend toward wage convergence \u2026 that\u2019s not happening anymore.\u201d<\/p>\n Supervisor Bilal Mahmood\u2019s recent BUILD Act (Balanced Update to Incentivize Local Development) was intended to address these challenges. The proposal would have cut the city\u2019s transfer tax on property sales in half to help projects pencil out.<\/p>\n \u201cThe controller said it would reduce the cost of construction by $32,000 per unit or 5% to 8%, which determines shovels in the ground or not,\u201d Mahmood told the editorial board.<\/p>\n Article continues below this ad<\/p>\n Elmendorf agreed. \u201cAny developer will tell you that the transfer tax is the single most important problem in the city.\u201d Of all the things the city is doing to incentivize new housing, he argued, this would have been the most helpful.<\/p>\n As Klar said, \u201cNobody wants to put money in rich people\u2019s pockets, but that\u2019s what spins the wheel.\u201d\u00a0<\/p>\n Yet Mahmood\u2019s proposal has been shelved \u2014 at least for now. Critics on the left saw it as an unnecessary concession to developers, with former Democratic Socialist Supervisor Dean Preston proposing a countermeasure to sandbag the effort. The Democratic Socialists claim<\/a> they \u201cwill fight to protect the interests of San Francisco\u2019s working class,\u201d but it\u2019s unclear how killing a proposal that was projected to decrease housing costs is going to do that. Instead, the politicization of housing will simply hurt those at the bottom of the economic ladder the most.\u00a0<\/p>\n Mahmood\u2019s effort is stalled, likely for years, but not necessarily dead. In the interim, what else can the city do?<\/p>\n San Francisco\u2019s inclusionary zoning rules mandate that developers include a high percentage of affordable units in any project, which too often makes new housing infeasible. Elmendorf suggested the city consider going in the direction of Oregon<\/a>, which now has a ban on unfunded inclusionary zoning (with that state\u2019s Democratic Socialists leading the charge), and Washington<\/a>, which now funds inclusionary zoning via a property tax abatement. Indeed, such moves treat mixed-income housing as something socially desirable that also needs to be paid for.<\/p>\n Article continues below this ad<\/p>\n Single-stair reform<\/a> would also spur new housing by allowing multifamily housing to be built more easily in residential neighborhoods. Building codes demand that any building over three stories contain two sets of staircases, which makes it impractical to build anything more than a duplex on smaller parcels. Elmendorf said that though building code is a statewide matter and cities aren\u2019t allowed to weaken it, there is a path forward to single-stair through the adoption of alternative materials and methods guidelines.<\/a> That\u2019s an idea worth exploring.<\/p>\n Ultimately, there is no magic wand for getting housing built in San Francisco. Just a lot of little unmagic wands, mostly involving boring but necessary policy interventions.<\/p>\n The editorial positions of The Chronicle, including election recommendations, represent the consensus of the editorial board, consisting of the publisher, the editorial page editor and staff members of the opinion pages. Its judgments are made independent of the news operation, which covers the news without consideration of our editorial positions.<\/p>\n There is no scenario where we build housing next week or next year. But smart moves by city leaders now might help us by the time the\u00a0shockwave from the next tech boom hits.<\/p>\n Fail to act, and we know exactly what the consequences will be. Because we\u2019ve seen it all before.<\/p>\n