Why is San Francisco So Expensive? Here’s the Answer

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San Francisco has earned a reputation for being one of the most expensive cities to live in that can be found throughout the United States. However, the sheer extent of the problem can be rather difficult to grasp unless interested individuals look into the numbers. Something that can provide them with a meaningful basis on which to make meaningful comparisons. For starters, the federal government considers a family of four earning an annual income of $117,400 in San Francisco, San Mateo and Marin Counties to be a low-income family for the purposes of determining eligibility for federal programs as well as local housing assistance programs. This is the highest such threshold in the whole of the United States, beating out a wide range of places such as Honolulu, New York City, and even the heart of Silicon Valley in Santa Clara County. Needless to say, while housing costs have skyrocketed in San Francisco and its surroundings, food, utilities, and other costs have seen similar increases over similar time frames, thus pricing numerous people out of the region. For proof, consider the fact that the average household that gets direct housing assistance in the area makes just $18,000 on an annual basis, meaning that they are well below the low-income threshold.

Unsurprisingly, the relentlessness of this situation has produced notable changes in how San Franciscans live. One excellent example can be seen in how numerous restaurants in the region have been forced to make changes to how they operate because they can’t find enough staff for their staffing needs. In some cases, this means that these restaurants are now requiring their patrons to stand in line to place their orders. Meanwhile, in other cases, this mean that these restaurants are streamlining their menus by removing more complicated and more time-consuming menu items so that their cooking needs can be handled by a smaller number of cooks. As for why these restaurants can’t meet their staffing needs, the answer is a very simple and straightforward one. Simply put, restaurant workers can’t afford to live in the area anymore, which is actually a problem that has hit the restaurant industry in other parts of the United States as well.

Why Is San Francisco So Expensive?

As always, high housing prices in San Francisco and its surroundings are a product of the interaction between demand and supply. To be exact, there is huge demand for housing in the region but nowhere near enough supply with which to meet it. As a result, there is more and more competition for that limited supply, thus pushing the housing prices higher and higher. Unfortunately, there is good reason to believe that these factors will persist, meaning that the chances of imminent relief are not very high to say the least.

In any case, one can speak at length about the various reasons that people might want to live in San Francisco, with examples ranging from its scenic landscape to its vibrant culture. However, the single most important reason is that San Francisco and Silicon Valley are home to the high tech industry, which has seen massive expansion over time. The result is hundreds of thousands of new high-paying jobs, which in turn, means hundreds of thousands of people who are capable of throwing considerable sums of money around. On top of this, it should be mentioned that spending produces knock-on effects, thus making for even more businesses and thus even more newcomers with whom to staff those businesses.

Meanwhile, the supply of housing in San Francisco hasn’t been seeing a lot of increases. To an extent, this is because San Francisco sits on the tip of San Francisco Peninsula, meaning that it has limited opportunities for expansion compared to cities that are less restricted by the sea. However, it should be mentioned that there are policies in place that discourage the building of new housing with which to meet the high demand. One example would be policies that make it difficult for real estate developers to build skyscrapers, which would be the simplest and most straightforward method for increasing the amount of usable space with limited land. Another example would be the preservation of San Francisco’s historic buildings, which makes for beautiful neighborhoods that are pleasing to the senses but nonetheless means that the city isn’t making the best use of its available space for housing purposes from a purely numerical perspective.

Unfortunately, the problem has lasted for so long that even tech workers who make six-figure salaries are no longer capable of buying homes in San Francisco and its surroundings. After all, the average value of a home in the region was an astonishing $1.34 million in 2018, which in turn, meant that the median down payment was around $250,000 over the same period of time. When 70 percent of these tech workers say that home ownership in San Francisco and its surroundings is unaffordable, interested individuals should have no problems figuring out what this means for local residents who are less well-paid.

What Can Be Done About This?

There doesn’t seem to be a simple and straightforward solution to San Francisco’s housing shortage. If there was, one would expect it to have been implemented by now because this is by no means a recent problem. However, the fact that the housing shortage has continued for this long and is expected to continue into the foreseeable future suggests that what look like potential solutions have serious issues that are holding them back. For instance, one could say that the relevant parties should just build more housing in San Francisco, but chances are good that said process would produce fundamental changes in what the city looks like as well as how the city lives, meaning that it is bound to produce fierce opposition. Furthermore, one can’t help but suspect that said process wouldn’t be enough, particularly since the high tech industry is continuing to flourish and thus continuing to bring in more people.


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