McNellis: Let Them Commute

Bay Area, 2018 Bay Area Council Poll, San Jose, Palo Alto, Santa Rosa, Hayward, Bay Area Council, California, Water Emergency Transportation Authority

McNellis, John Mcnellis, McNellis Partners, Silicon Valley, real estate, Palo Alto, Bay Area real estate, real estate development, San Francisco
By John McNellis

[quote]“The rich are different from you and me.” F. Scott Fitzgerald[/quote]

Rich cities are different, too, but—like rich people—they have their own seemingly insoluble problems. It’s just that their problems are different. At first blush, less fortunate municipalities would beg for their issues. While every other city from Bangor to Burbank is scrabbling to improve its sputtering job growth, a handful of charmed towns should be embarrassed by their employment riches.

From 2012 to 2014, the San Francisco Bay Area created 382,500 jobs while providing only 68,200 new dwellings (homes and apartments). The forecast for 2015 is roughly another 4 new jobs for each new dwelling. Even if you consider economists’ predictions on a par with those of shamans, you know the dismal science is dead-on about supply and demand. The 2014 median house price in America was $206,800. In San Francisco, it was $1,006,600, five times more. Median apartment rents nationwide are $1,231 while San Francisco’s weigh in at $3,396.

McNellis
McNellis

Once upon a time, when everyone had to walk, the rich lived on the flat land in the center of town and the poor lived atop the surrounding hills. No one with a choice was willing to trudge up and down hills every day. Henry Ford changed that. Once upon a nearer time—say from after WWII through sometime in the ’80s—the rich lived in wooded suburbs and commuted to the center of town. Gridlock changed that. The rich now live within close proximity to where they work. In fact, the CEO theory of corporate headquarters has it that a company’s main office will be located within a 10-minute surface-street drive of the CEO’s residence.

265,000 workers commute into San Francisco every day from out of town, handing the city, by some measures, the second worst traffic in the country. With a $1,000,000 median home price, it’s not only shoe clerks who are enduring the Sisyphean commute; it’s anyone making less than three hundred thousand a year. But the irony is that the reverse commute*, that is, out of the city to Silicon Valley may be even worse. Why? Because those who can afford to live in San Francisco—the techies—work in the Valley.

If it’s not the Valley’s capital, Palo Alto is surely its epicenter, home to its best and brightest minds and arguably its worst side effects. At 3.01 jobs per dwelling, Palo Alto has an unparalleled jobs-housing imbalance (Manhattan’s stands at 2.67). What do 3 jobs for every residence get you? A median home price of $2,200,000 (eleven times the national median), apartment rents 10 percent higher than San Francisco’s and roads that turn into parking lots twice a day.

What’s shocking is that this imbalance is getting worse by the day. With office rents among the highest in the country, Palo Alto is in the midst of a land-grab where developers are converting every lot and shack in town to office space (a new low was achieved earlier this year when a laundromat in a crappy strip center was turned into start-up space). What isn’t shocking is that the gridlocked citizenry is up in arms, demanding a cessation to the run-away office development. Sadly, what also isn’t shocking is that no one—neither the lunatic fringe that opposes everything nor the thoughtful people elected to run the city—is connecting the woes from our choking jobs growth to our jobs-housing imbalance.

Why? Because as socially liberal as Palo Alto may be, new housing for anyone—from the working poor to the idle upper class—is political cyanide. Merely uttering the word density in public is enough to get a politician recalled. If truth were a commonplace at public hearings, the vociferous no-growth forces might, instead of hiding behind their threadbare concerns for public safety, simply declare, “Let them commute.”

Sadder still is that this is a very old story. The Palo Alto Weekly’s former editor-in-chief, Jay Thorwaldson, pointed out in an insightful piece last year that this issue has been bedeviling Palo Alto for forty years and, despite the periodic public Sturm und Drang, has only become much worse.

Is there a solution? Piece of cake: Take urban planning away from local officials; make it a regional decision. As long as land use is decided by neighborhood-elected city councils, nothing will change. Short of that real-world impossibility, a big step in the right direction would be to reform the California Environmental Quality Act (CEQA), if ever so slightly. This well-intentioned legislation is, simply put, broken. Instead of being used to assure environmental compliance, it is relied upon as the final roadblock in the effort to defeat projects, regardless of their environmental quality. CEQA lawsuits contesting a city’s decision to allow a given development cost no-growth opponents virtually nothing to file and prosecute. They file these suits knowing that if a project can be delayed long enough, it will die or, at a minimum, be drastically cut back. If, as a prerequisite to filing their lawsuit, the opponents had to post a bond in a meaningful amount—say the actual cost of the project’s environmental studies—which they would forfeit in the event they were to lose their lawsuit, far fewer suits would be filed.

What Palo Alto’s raised-drawbridge crowd fails to realize is that ultimately they are condemning themselves to a life without family, without children and grandchildren. They may have a cracker box they bought for $90,000 that’s now worth $2,500,000, but their children—even their very bright, very hardworking children—will move away when it comes time to buy a home. How many young lawyers and doctors can save the half million you need for a down payment on a $2,200,000 house? And, unwilling to endure an hour and a half commute, they will move to Portland.

* “I have a reverse commute,” a very popular real estate lie in the 80’s, finally died out when even the criminally gullible began to scoff.

John E. McNellis is a Principal at McNellis Partners in Palo Alto, Calif.

Articles published in our Contributor section do not necessarily represent the views of The Registry or Mighty Dot Media, Inc. They represent a selection of topics chosen for the value of their editorial perspective. We welcome feedback and alternative positions on topics, and we will consider publishing those, as well.
West Coast Commercial Real Estate News