If you live in the San Francisco Bay Area, you are almost certainly aware that available housing is extremely expensive, and that there is a lot of fuss about the ‘tech’ industry – by ‘tech’ I mostly mean companies which have something to do with the internet and associated devices. The connection between the ‘tech’ companies and their cash, including their employees and their cash, and the high cost housing, is widely understood. The (Inner) Mission is being gentrified, South of Market (SOMA) is being gentrified (for people who aren’t familiar with San Francisco, these were once poor / working class neighborhoods), and the high cost of housing is the top political issue. Meanwhile, there is a lot of buzz around companies which make content/apps for the internet and smartphones. Some of these companies are actually in Silicon Valley, yet their employees live in San Francisco.
All of this gives me a powerful sense of déjà vu.
I was in San Francisco during the dot-com boom. I was a lot younger, and I wasn’t aware of a lot of issues at the time, but a lot of the things I see and hear now feel like flashbacks.
Housing has been expensive in San Francisco for as long as I can remember, but during the dot-com boom, it got even more expensive, and commercial rents also went up. A lot of people talked about how San Francisco was turning into a bedroom community for the tech employees. Heck, I’ve heard anecdotes about young tech employees buying condos in the Tenderloin back then (the Tenderloin is another neighborhood known for having a concentration of poverty and crime).
The cost of housing became so expensive because the demand became so great. One of my high school teachers described the dot-com boom as a time when you could show up in San Francisco and get a job – the tough part was getting housing.
Of course, now the rents are even higher than they were during the dot-com boom, but as far as I can tell, the difference is only a difference of degree – pretty much every angle of today’s housing crisis in the San Francisco Bay Area seems like something which was going on in 2000.
One of the things about the dot-com boom is that very few of those companies ever made a profit. Likewise, very few offered any good or service which was more helpful to people than the alternatives. However, investor money kept on pumping in, for a while.
Once again, in the present day, we have companies with a lot of buzz and … no profits. I hear people making pitches for their startup which will make some type of app on public transit.
Speaking of public transit, about a month ago I saw an ad for an app which allows you to pay you rent with a debit/credit card at Van Ness Station. Assuming one has enough money to maintain minimum balances, it’s not hard to open a checking account and write checks to landowners, yet this company still thinks there is a market for this service. Aside from the high cost of the credit card fees, there are legal questions. I am not a lawyer, but my understanding on San Francisco law is that, even if there is no clause in the contract barring third-party checks, a landowner can legally refuse any check which bears the name of any party other than the tenant whose name is on the contract. The only potential market I can think of for this expensive service are young people with high salaries who are intimidated by the thought of learning how to deal with checks. Will their salaries remain high indefinitely?
Just as I was in San Francisco during the dot-com boom, I was also there for the dot-com bust. I’ll discuss that in Part II.
The Notes Which Do Not Fit 
Re: the check thing – the main advantages are that 1. you can probably schedule payments ahead of time so you don’t risk missing a payment because you forgot to mail it in time or went out of town without a checkbook (which I have done when visiting family); 2. they mail everything for you; and 3. if you use a rewards credit card responsibly, you can use your rent to earn rewards (which, when many people pay 50% of their income in rent, is a lot). I don’t really see it being a big legal risk, assuming they probably have a refund policy for if that occurs.
What actually surprises me is that people don’t realized that many banks offer the same services, often for free or at least very minimal fees (at least, for withdrawals from a checking account – you’d probably still need an outside service to use a credit card). I don’t know anyone who uses radpad, but I do know a lot of people who use the equivalent services from their regular banks. I think radpad is just trying to get all the people who would like such a service but didn’t realize it was already an option.
The RadPad website says that credit card rewards are a reason to go with their service, but with a 2.5% fee, it would have to be one heck of a reward.
I actually have never needed check mailing services, since the one time I wasn’t living in the same building as the owner was in Taoyuan, and my landlord didn’t accept checks (nor did he accept credit cards). I paid him through ATM transfers.
I know it can cause legal problems, because I know of a case where a landlady refused a check because there were names which was not the name of the tenant on the contract. The same landlady also refused a check which came from the tenant’s boyfriend rather than the tenant herself (the landlady knew that the tenant was sick, and waited until the tenant could writer who own check and did not charge late fees). In San Francisco, if X is a tenant under rent control, and X decides to put their own name as well as the name of their friend Y on the check, and the landowner accepts the check, then Y might get rent control protection too. Because of this, landowners are allowed to refuse this kind of check if they do not want Y to have rent control protection, and that was why the landlady refused the check. Granted, if it went to the Rent Board, they would probably find that RadPad does not get rent control protection even if their name is on the check, but some landowners have a policy of refusing any kind of legal document which could conceivably expand rent control to additional parties (especially since, if they have a very consistent policy such as ‘no third parties on the check no matter what’, they have less legal liability with regards to harassment, discrimination, etc.). Furthermore, if, say, a landowner wants a tenant with rent control protection to move out, and they have a legally acceptable reason for refusing a rent check (the name of a party other than the tenant appears on the check), they might do so just to encourage the tenant to leave.
I sometimes also wonder how all these apps intend to make money. It’s hard for me to judge though because I’m pretty sure my consumption habits are atypical.
I’m sure the tech boom is a major cause, but I also think of the restriction on housing supply as being a more long-term cause of housing prices. Lately, I’ve taken to joking that people in the bay area believe in stopping gentrification by pricing the gentrifiers out.
Of course, both demand and supply affect the cost of housing, but given that demand has changed a lot more than supply, the rising cost has clearly been driven by increased demand rather than, say, the destruction of a significant amount of housing stock (which has happened more than once in San Francisco history, but not recently).
It should also be noted that the impact of the high cost of housing is very, very uneven. For example, my mother already owns a house in San Francisco, so our housing costs only go up with things like property tax (limited by Prop 13), insurance, maintenance, etc. In addition to the people who already own their own homes, there are also a lot of people who live in rent-controlled apartments. Of course, this leverages the demand for housing on the fraction of homes which are available for sale/rent, or which are rented but not under rent control.
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