The Sheridan Report

by Matthew C. Sheridan

 

Volkswagen has been running a zippy new television ad featuring a happy young hipster couple. They’re enjoying their cool apartment by playing some real loud tunes and dancing around when, lo and behold, the super shows up to complain about the disturbance. The animated couple promptly vacates their rental, jumps in the Jetta, and zooms to a store to purchase new stereo speakers. The closing shot pictures them jubilantly dancing around the front window of their new home with a “sold” sign out front.

In the Bay Area, or California for that matter, such a fabulous final scenario is hard to obtain. In San Francisco, it's impossible. Facing over-inflated rents, the city's young hipsters occupy our apartment buildings; commuting on MUNI or walking to the Financial District for their 9-5 jobs, or serving "the cause" in the nonprofit sector, or working in the tourism and service industries. They peruse the pages of The Guardian, at first embracing the newspaper's agenda, later abandoning the rag’s tired causes, such as municipalizing PG&E, once they wise up. Many are current or past college students from area schools. The magic of the City by the Bay has pulled them in.

Drawn here by the city’s beauty and diversity, these kids seek a chance to live a cosmopolitan life, sans the daunting skills needed to survive in such Gotham-like cities as New York. At night they spill out across the city, patronizing the city’s hip hangouts in the Mission, Mid City, the Haight and the Marina. They serve as critical components in the engines that drive commerce in this city. They hold steady low- to mid-salary jobs, avoid government work, and are driven to succeed. Apart from state-income tax and sales tax, they contribute little in taxes locally; but generally have little use for city services, except for MUNI or an occasional trip to the local park.

But should these idealistic, dedicated hipsters ever wish to truly settle here, start a family and buy a home, political and economic forces are united in preventing them from ever accomplishing these goals. A large segment of them—the hard-working downtown types—are often labeled as "outsiders" or “not real” San Franciscans. Ostracized by the Left, their options start to dwindle as they age (hilariously though, most these old-school Lefties were once transplants themselves, who participated in the gentrification of neighborhoods like the Mission, Castro, Bernal, Mid City and South of Market. Discouraged by a city that does little to encourage family life, good schools or homeownership, they turn elsewhere for a community to settle in. Some return to their hometowns, but many land in towns like Albany or Oakland. They take with them their dreams, their dedication, their liberal beliefs, and their taxes.

They are not wanted here.

In voting down the reasonable proposal to allow certain tenancy-in-common arrangements to qualify for condominium conversion, the Board of Supervisors signaled its continuing unwillingness to address the loss of middleclass families and children from San Francisco. As a leading city supervisor recently told an acquaintance, “If you're middle class in San Francisco, tough! They knew what they were getting into when they moved here.”

Population
Meanwhile, San Francisco continues to lose residents at an alarming rate. Since 2000, the city's population has decreased 32,425, dropping from 776,655 to 744,230 according to the U.S. Census Bureau. The latest numbers show an exodus of 7,678 residents between 2003 and 2004, continuing a three-year decline; no other major California county has experienced such a steady decline in the past few years. In fact, with the exception of San Francisco, San Mateo, Santa Clara counties, all major counties in the state have incurred steady gains in population since 2000. What is so shocking about these numbers is that, as the mass exodus of residents were swept out of San Francisco over the last four years, the level of city services essentially remained the same. Only recently did our policy makers even consider layoffs or reducing services based upon these losses.

The pending battle over MUNI’s budget best illustrates this situation. While MUNI was busy maintaining that ridership would continue at levels experienced during the dot-com, ridership steadily decreased, buses ran empty and budgets skyrocketed. Now, years later, the stark reality of situation has caught up to MUNI, and in their attempt to sustain employment levels for MUNI workers, supervisors like Chris Daly are proposing another round parking-fine increases to help offset the woes at MUNI. Cuts, layoffs—out of the question.

Schools
The city’s public schools continue to show serious signs of decline showcased by the school district’s ongoing fiscal turmoil and steady reduction in students. Over the last ten years, enrollment in San Francisco’s public-schools has dropped by 5,211 students. Since 2000, enrollment levels have continued their historic slide downward, a trend begun in the late 60s and 70s. Coupled with the Census numbers showing a persistent drop in families with children living in San Francisco, the data serves as evidence that the city is failing miserably in providing for its families and children. San Francisco’s housing policies—including stringent rent control and the zealot-like need to preserve the city’s rental housing stock—have, in my opinion, worsened this situation. City-sponsored studies reveal the true beneficiaries of rent control are overwhelmingly white, and largely single. Meanwhile, the city’s drive to preserve “diversity” is resulting in housing policies that are actually working against this goal. While I have not examined in detail the Census tracts, I would hedge my bets that the neighborhoods with strong homeownership have both larger segments of minorities and families, while those with large renter populations have a disproportionate amount of white and single residents.

Employment
San Francisco Metro Area’s unemployment rate dropped to 4.3% in April, down from 5.4% a year ago. The area, which also includes the counties of Marin and San Mateo, has added 3,000 jobs since January, or a 1% annualized growth rate. The rates for Marin County were 3.5%, 4.8% in San Francisco County, and 4.1 % in San Mateo County. According to the California Employment Development Department, the area posted its largest March-to-April job gain since 1998, and only the second such gain since that year, “largely due to the absence of significant job losses.” But not everything is rosy. In March, the state released its annual benchmark revisions for payroll data, and the numbers weren’t pretty for San Francisco. According to UCLA’s Anderson Forecast, the revisions for the San Francisco MSA showed a loss of 13,900 private-sector jobs or a 1.7% decrease.

Vacancy Rate
In the first quarter of 2005, San Francisco Metro Area’s residential rental vacancy rate, ticked up to 6.9%, from 5.2% in the fourth quarter of 2004, but down 9.8% from a year ago. The increase, reported by the U.S. Census Bureau, represents, for San Francisco, a total of 15,000 rental units that sat empty during first quarter. But with the winter months behind us, and evidence of a strong spring for the rental market, the second quarter should turn out to be stellar for most landlords, especially with the launch of the busy summer rental season.

So, that cute couple in the Volkswagen ad has an opportunity to live here, but only if they work, play and then go away before growing up.

San Francisco Index

SF PMSA Unemployment Rate	5.2 %
SF PMSA Employed	940,308
Help-Wanted Index	17
Housing-Affordability Index	11
Median-Priced Home/Condo	$679,000
Residential Rental Vacancy Rate	6.3%
Average Asking Rent	$1,810
Tenant-Demand	$1,761
Lowest-Priced Rental	$660
Office Vacancy Rate	16.4 %
Gallon of Gas	$2.36

(All data listed are one-year averages, except for lowest-priced rental)

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The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. The Sheridan Report does not make any guarantee, warranty or representation as to the completeness or accuracy of the information contained herein. Matthew C. Sheridan is the editor of the San Francisco Apartment Magazine and Rental Housing. For more information, please visit www.sheridanreport.com. Copyright © 2005. All rights reserved.