Return the Free Market to Bay Area Housing

This particular article (http://www.siliconvalley.com/mld/siliconvalley/business/columnists/4310498.htm), written by a decidedly bitter laid-off QA manager, is representative of a scary fact about the Bay Area: The cost of living (and therefore hiring) of employees is out of whack. Why is this so? Curiously, it's due to a factor right in front of our collective faces, which is the housing+real estate crunch. This crunch is because of poor development strategies across the area as well as a "not in my backyard" syndrome of regulations prohibiting higher density constructions. In order to keep the Bay Area a competitive region in which to do business, we must replace how our current strategy with one that accepts higher density housing.

Median home prices in the SF Bay Area are roughly three to four times the national average. This higher cost affects the entire economy of the Bay Area. To illustrate, the corresponding house payment is 4 times the national average for an average worker. This person must then make that much more cash per month in order to be able to afford their home. This process snowballs as local businesses must increase the amount they pay in order to continually attract talent to the area. The trickle down affect happens across the economy. Gas is more expensive because the driver to deliver it is more expensive. And so on. This results in the unfortunate reality today, which is that Bay Area salaries are double, if not triple equivalent salaries in other areas.

The Bay Area housing prices have skyrockted in the past two decades. The root cause is demand outpacing supply. Obviously, the market in that case will want to reach equilibirum and builders will be incented to create supply. Unfortunately, the regaulations and rules that the Bay Area (and San Francisco the City itself) enacted in the 70s and 80s mean that it's incredibly difficult for developers to actually create new, higher density construction. The problem is a "not-in-my-backyard" syndrome where it's impossible to remove antiquated housing and replace it with taller buildings offering greater living space on the same acreage. By passing these laws stifling development, earlier generations of residents ensured that their properties would see huge growth in value. Unfortunately, they sold out their own future and that of their children as many of these people are no longer able to afford to live here. You can't blame these folks for wanting to protect their views of the Bay, but the Bay Area cannot stand still as time passes by.

How do you solve this problem and ensure that the Bay Area will be healthy in the long term? It's reltively simple: While protecting historic buildings and keeping the character of the region, remove the shackles of the regulations that prevent development. Develop a strategic plan to identify areas where higher density housing (10-15 stories) can be built. You want affordable housing? Don't pay for it with government subsidy. Instead, free the market for developers to build again. Otherwise, we should expect growth to be stifled in the Bay Area in the coming years as jobs and entrepreneurs float away to cheaper areas.

Interestingly enough, this plan will also fix the traffic problem on our freeways. Today, the Bay Area is stuck in limbo today with regards to public transportation. The population density is high enough to cause gridlock on the freeways, but too low to support efficient mass transit. Higher density housing will generate the appropriate tax revenue to support a real mass transit system and take more people off the freeways.