You know how I mentioned that a lot of Silicon Valley workers were living in San Francisco? One of them was my dad. He was a computer programmer, and he would drive or take the train down to places like Menlo Park, Mountain View, and Redwood City. He was living in San Francisco partially because my mother owns a house in San Francisco, but partially because he doesn’t like Silicon Valley, and does not want to live there. Silicon Valley reminds him of how the semi-rural town he grew up in got developed into a suburb full of generic houses and businesses, ripping out most of the natural environment in the process. He prefers San Francisco because, as he puts it, “San Francisco has history”.
Anyway, what happened during the dot-com bust?
Rents fell. Housing remained expensive, but there was much less talk and protest about gentrification, and housing was no longer the top political issue. What became a more important political issue? I’ll give you a hint: according to the California Employment Development Department the 1999 unemployment rate in San Francisco was 3.1%. In 2002, the unemployment rate was 6.9%. And then a year later the municipal government started issuing same-sex marriage licenses, which both provided a welcome boost to the economy and gave everyone another political issue du jour…
2002 was the year my dad lost his last job. His plan was to live off his savings until he could get another job – but he never did get one. Luckily for him, a combination of Social Security (once he became eligible), his savings, and what he inherited from his parents has been enough for him, and I now describe him as ‘retired’. Granted, he had ageism working against him, so his employment situation can’t be entirely blamed on the economy, but I don’t think it’s a coincidence that he dropped out of the workforce around the time of the dot-com bust.
The fall in both housing and commercial rents were a boon to some folks who were hurt less by the dot-com bust than by the heights of dot-com era rents. I knew some of these folks. Nonetheless, there is a reason why nobody says ‘Let’s reduce the rents and the cost of buying a home by doubling the unemployment rate!’.
I think, however, that an economic downturn is going to be the very thing which brings down the cost of housing in San Francisco, just as it was in the dot-com boom-bust. I see signs that the downturn is already beginning – such as the layoffs at Twitter (note that Twitter has never turned a profit). And I fear that, just as this housing crisis was more extreme than the dot-com one, the coming economic downturn will also be even harsher than the dot-com bust.