Reshaping the American Dream

By Bruce Newman

Alumni and faculty experts on Silicon Valley’s housing crisis

Illustration by Jon Chester

Homeownership is the insistently stubborn, recklessly romantic, unassailably American dream. We are a nation of settlers, who mostly won’t settle for anything less than a 3 BR, 2 BA with granite upgrades. Property rights formed the foundational mythology of classic Hollywood westerns such as Shane and El Dorado. And even now, most Californians pour their hopes for the future into a rectangular box called a “ranch-style” home.

Few places have experienced the virtues and vicissitudes of homeownership more acutely than the Bay Area, with its urban sprawl and traffic crawl. As the region’s economy has gone from boom to bust and back again over the past decade, its housing market has been subdivided, retrofitted, gated, Zillowed, flipped, re-fi’d, under water, and overpriced.

From tear down to tilt up, Silicon Valley has disrupted its way into a housing crisis, one so severe that the workers needed to power tech’s growth engine are being priced out of a future here. That is a matter of particular concern to San Jose State, which sends more of its graduates to work at Silicon Valley companies than any other school.

“If we don’t do something, we’re going to lose our brain trust—our graduates, our future—because they can’t afford to live here,” says Neil V. Collins, ’94 Business, CEO of the Santa Clara County Association of Realtors. “It’s going to be a bunch of Baby Boomers and Gen Xers, aging in place.”

Unless Google, Facebook and Apple want to extend their gourmet grazing on campus for employees to dormitory housing—similar to Chinese technology companies like Foxconn, where workers never leave—Collins believes startup competitors will begin to turn away from the Bay Area. “And then you’re going to be in a spiral that’s very hard to get out of,” he says. “We already have companies that are setting up in Texas, Colorado, Nevada and other states.”

“It is that detached single-family home, afloat on a sea of grass, that for decades gave a sanctified shape to the American dream.”

In a region overrun with math nerds, it’s surprising that local officials could get the numbers so wrong. The state set guidelines for how much new housing it expected cities to build, and for decades local leaders simply ignored those guidelines without fear of reprisal. When the state published an interim report on whether California was meeting its need for housing this March, it revealed that 97 percent of counties and cities had failed to meet their housing quotas.

“What’s been happening is that the cities have been turning in their housing plans to the state, but really never intending to build to those levels,” Collins says. When the state legislature finally chose to recognize the problem, members began churning out proposed bills aimed at creating high-density housing around transit hubs. “That’s why these bills are coming out of Sacramento, threatening to take away local control from the cities,” Collins says.

The resistance to that loss of local control is often a fierce “not in my back yard,” or NIMBY, pushback, in which smaller cities often torpedo projects designed to solve a crisis affecting the entire region. “The basic problem in the U.S. is that we try to solve a regional problem at the local level,” says Shishir Mathur, professor of urban and regional planning at San Jose State. “You can’t have a region with about a hundred cities saying, ‘No, we don’t want any more housing.’ Then the onus is on two or three large cities to provide almost all of it.”

That has been the pattern in the Bay Area, where many smaller cities like Cupertino, Los Gatos and Brisbane have resisted large-scale development, shifting the burden to San Jose, San Francisco and Oakland. “We see opposition even to condominiums that go for $1 million-plus,” points out Mathur. “In many instances, it’s almost a blanket opposition to any kind of non-single-family development.”

It is that detached single-family home, afloat on a sea of grass, that for decades gave a sanctified shape to the American dream. But as the value of even modest suburban bungalows soared to more than a million dollars, families refused to budge from their moneymakers. “My mother-in-law is a widow, and she lives in a five-bedroom, two-story house by herself,” Collins says. “The single-family, detached home with a backyard in Santa Clara County is almost like gold.”

And their scarcity is only likely to increase. “What we have to think carefully about is whether we can afford as a society to keep developing single-family homes in the Bay Area,” Mathur says. “Because within the core of Silicon Valley, I don’t think we have the land at this point.”

Illustration by Jon Chester

As panic over the current housing crisis produces a flood of new zoning and planning regulations, cities are being asked to accept large housing developments, based on the promise that BART and high-speed rail is coming. “Traffic has been a pushback for a lot of the NIMBY folks,” Collins says. “They’re already stuck in long commutes, and they can’t fathom having more people here. But if we develop smartly around these transit hubs, we may be able to actually take vehicles off the road.”

That battle is already being waged in San Jose, where a downtown building boom erupted during the past five years, but the arrival of a promised BART station to whisk commuters to and from there is still years away.

Google has proposed building a new campus for 25,000 employees near Diridon Station, which neatly fits the model of designing density around transportation hubs. But Fred Barez, a San Jose State engineering professor, worries that highly compensated engineers from the company may create an affordability crisis for his students. “I’m not very pleased to see Google guys making up to $200,000 coming to downtown San José,” Barez says. “All of a sudden, everybody’s expenses are going to go up.”

Santa Clara County Supervisor Cindy Chavez, ’87 Political Science, has proposed that the county look at joint development opportunities near college campuses that have land close by. “You already have problems with homeless students,” she says. “You shouldn’t have to live in your car when you’re going to college.”

Many Bay Area commuters already feel as if they do live in their cars, spending hours each day in grinding traffic. Some come from as far away as the Central Valley, where homes are more affordable. In addition to residents making the daily roundtrip from San Jose to Mountain View, Chavez says there are now 84,000 “mega-commuters,” who are traveling three or more hours each day to get to jobs in Silicon Valley. “We have to do the math,” she says. “Do we want to spend hundreds of thousands of dollars a year to help people suffer? Or do we want to be driving solutions?”

Illustration by Jon Chester

A group of San Jose State engineering students has responded to that question quite literally, converting an old school bus into a “tiny home” that could soon be occupied by a homeless family—possibly even members of the university’s faculty or staff. After weeks of planning that involved interviews with Ellen James-Penney, ’13 MFA Creative Writing, an English lecturer who recently found herself living in her car, the industrial technology students began turning the faded yellow hulk into a magic bus.

The same crushing cost of housing that can send a college professor spiraling into homelessness seems to be driving students to consider a future far from the Bay Area. “I definitely see myself in five years moving out of the Bay Area,” says Austin Allen, a senior who led the bus rehabilitation project. He has a job lined up after graduation in May, but that won’t permit him to shed more than a couple of his five college roommates. “Getting my own place would be way out of my reach,” Allen says. “So I’m not saving anything for a down payment.”

Alexander Tam, a senior who also worked on the project, can imagine a future in which he would live in a converted school bus himself for a couple of years, hoping to save money for a down payment. “After I’ve saved $40,000 or $50,000, I could move somewhere in Texas,” Tam says. “Or maybe East Bay-ish.”

Converting a school bus into inexpensive housing was the idea of Barez, who recently returned from a visit to China, where vastly more workers must be housed or moved from place to place. There, Barez says, government officials encourage startups to meet one condition: They cannot open in Beijing, Shanghai or in crowded coastal cities to ease the traffic there.

“They say, ‘Can you please go 400 to 600 miles away and start it there?’” says Barez. “I wish we could do the same thing. When Google says they want to come to downtown San Jose, I wish the city would say, ‘Could you please go to Merced? Can you go to Redding? Or Stockton?’”

But like all cash-strapped cities, San Jose has delighted in watching its tax base swell as Silicon Valley companies added thousands of new jobs each month since the 2008 recession ended. And, like almost everywhere in the Bay Area, Santa Clara County did not come close to meeting state-mandated housing goals. “I think 350,000 new jobs, with only 57,000 new homes, was a recipe for disaster,” Chavez says of a population surge from 2010 to 2015. Years of stagnant wages increased pressure on people already struggling to pay the rent. “And now we have more people than at any time in recent history spending 30 percent or more of their income to live in our community,” she says.

In fact, statewide, there are about six million renters, of whom roughly a third spend more than half their monthly income on rent, according to census figures. Renting an apartment was once considered the best way to save enough on living expenses to set aside money for a home purchase. But since 2000, rents have shot up 61 percent, while according to Apartment List, incomes for people under 35—the unlucky millennials—have increased only 31 percent. And the down payment for that median-priced single-family home in San Jose? According to the city’s annual housing report, it’s now $228,000.

“To buy a house here, you need a suitcase full of money,” says Barez.

Money alone won’t solve the problem of too many people competing for too few homes, not even in Silicon Valley, where venture capital usually solves everything.

“Technologically, it all could be done in 10 or 15 years,” says Mathur. “If we have the funding in place and the political commitment, it can be done. Otherwise, it might never happen.”

With little or no indigenous middle class for two generations, innovation would wither away. On the upside, by then housing prices would be a lot more reasonable.

 

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