Ed Lee was City Administrator for San Francisco when he became a somewhat reluctant interim Mayor of San Francisco, due to then-mayor Gavin Newsom being elected Lieutenant Governor of California. When he decided to run for mayor, he was adamant about rebuilding San Francisco’s job market. It was all about jobs.
After the dotcom bust many office buildings went into foreclosure, and by 2010 office vacancies in San Francisco were at an unheard of 20%. Ed Lee was set to fix that. And in 2011 when the self-proclaimed “socially responsible” Twitter threatened to leave San Francisco over a socially responsible payroll tax that really fueled Ed Lee’s fire. After Twitter, there was Zynga, and others followed suit.
In April of 2011 The New York Times reported:
Not willing to call Twitter’s bluff, the city offered a deal to the company, which now works out of space in the gritty but fashionable South of Market district where many Internet start-ups begin: move to a building in the even more gritty and decidedly less fashionable mid-Market neighborhood — on a section of Market Street that is marred by drug dealing, homeless encampments and shuttered storefronts — and get a payroll tax exemption.
Twitter, or any other company with a payroll of more than $1 million that moves into that “rehabilitation zone,” would have its payroll tax capped at its current level for the next six years. Hiring more employees would not increase the tax bill. And any stock option windfall would be exempt.
Twitter and Zynga, at the time, were both valued at well over $7 Billion. And so it went.
Now, in what is being described as a “ruthless gentrification,” these once gritty neighborhoods are becoming the land of the hipsters, who are arriving en masse in luxury buses, with a seemingly unending flow of IPO cash. These young workers and their laissez-faire attitude about spending are driving purchase prices and rents of homes through the moon.
The San Francisco housing market has always been tight. It is very densely populated–some might say overbuilt. With the year-round mild weather and spectacular natural beauty, real estate in San Francisco and the surrounding areas has always commanded a premium dollar. But things have gone from ridiculous to deadly.
San Francisco has laws in place like Rent Control and The Ellis Act that are supposed to protect renters from steep rent increases or evictions without just cause. Apparently, the way the greedy property owners are getting around that these days is arson.
Why continue to collect $963 per month from a tenant that has been in your run-down studio apartment for over two decades when you can get well over $2000? Over $2000 per month for a one room unit.
If you burn your building and remodel, you can get around The Ellis Act and Rent Control. You can also get a million dollars–or more.
As you might imagine this has created a great deal of resentment from longtime residents. One who created a facebook page entitled “Die Techie Scum“. They even have a name for the building burners: PyroFlippers. You can see messages like these posted around the neighborhoods:
As one facebook user wrote (sic):
Tech is driving up rents ridiculously. People being evicted left and right. They give back very little. Twitter et al pay no taxes. Google builds no new housing on the peninsula. Google’s buses to bring employees down the peninsula use our stops and streets with no payment and did no environmental studies on the impact of all the extra wear & tear. Ed Lee et al has given all tech a free pass including Air BnB who was absolved of paying $25million in back money owed to the city. The 20somethings who inundate the city from elsewhere to cash in are rude and spoiled and often have open disdain for the city – take their money and move back out of state having not given anything back to the city at all.
Meantime with evictions and rents at an all time high so greedy landlords can cash in on gouging the new people on rents – teachers, chefs, firemen etc literally can’t afford to live in San Francisco at all. Literally.
CBS San Francisco reports:
A fire could be a lucrative disaster for a landlord owning a rent-controlled building, the report mentions. Insurance covers the rebuild and tenants who don’t move back in, either because they died or can’t wait for reconstruction, makes room those able to pay market-rate rent.
While these fires, suspiciously clustered in the neighborhoods most affected the extreme rent increases, have taken more than one life San Francisco Fire Department has not been able to prove arson.
Apparently fewer than 5% of suspected arson cases even make it to court, with a retired fire captain stating that unless someone actually catches them in the act, arson is very difficult to prove.
And so it goes.
Featured image from CBS San Francisco.