EVERYBODY HATES SILICON VALLEY
The week of November 23, 2014

Is it already too late to save Oakland?

By Susie Cagle

Something ominous is happening in Oakland, Calif., as the influence of Silicon Valley money ripples across the Bay Area.

Piles of investment from the tech sector and wealthy foreign citizens have flooded the Bay, and the housing bubble has collapsed in near-perfect symmetry with the new tech boom. Landlords bought up whole distressed neighborhoods on the cheap. Speculators are evicting whole apartment buildings and turning them into Airbnb rentals. Buyers are outbidding one another $100,000 at a time, and they’re paying all of it in cash.

Oakland is gentrifying, and the results could be devastating for longtime residents. Oakland’s home prices are up more than 120 percent over the last four years. While San Francisco still has by far the highest rents, Oakland’s are rising even faster. Where the city was once dubbed “an Extremely Dangerous Urban Mad Max Wasteland,” it is quickly becoming a playground. (Soon you might even be able to take the school bus to the new bars.)

Daily struggles that defined life here are not an issue for new, moneyed residents. Who needs a grocery store when you have on-demand meal delivery? Who needs mass transit when you have Uber, Lyft, and a company shuttle? Who cares about environmental pollution when you have the resources to seal windows and rehabilitate yard soil?

The Bay Area is a beast of a metropolis, featuring nine counties, 101 towns and cities, and 7.4 million people across about 6,900 square miles (not counting the water). California has never exactly been a leader in forward-thinking urban policies. People moved to the West for space, not for dense city life—cars and ranch houses, not trains and high-rises. Laws limiting growth and protecting the natural environment and farmland spurred the region’s sprawl, while suburbs, especially those in Silicon Valley, have fought affordable housing and dense living for decades, driving workers of said regions further out, creating pressure on communities like Oakland.

Oakland’s home prices are up more than 120 percent over the last four years.

What is happening in the Bay Area is not the organic shift of neighborhood demographics or a massive capital conspiracy. It’s the result of decades of public policies and planning failures, decisions that time and again favored the landed gentry and left poor communities vulnerable.

The Bay Area may have a reputation for progressive politics, but the region has taken a decidedly neoliberal turn. Oakland is actively courting tech companies and the tax dollars and lucrative jobs that come with them, but the city’s growth has so far largely been in service to those well-paid employers. According to the Bay Area Council Economic Institute, Oakland’s fastest-growing sectors are food service, hospitality, and real estate.

A new higher cost of living has motivated some reactive progressive policies, including a new minimum wage. Starting next March, $12.25 hourly pay will certainly be welcome, but it will be a small dent in a workers’ costs, barely meeting accepted livable wage standards for single adults. Similarly, a new tenant protection ordinance will help to stem evictions, but it is hardly a panacea.

Oakland has weathered many crises with varying degrees of success, but this tide has been swift. Between 2007 and 2011, there were more than 10,500 completed foreclosures, with few if any efforts at stopping them and keeping people in their homes. Investors scooped up more than 40 percent of those homes, often in all-cash purchases. The average single-family house in foreclosure then cost less than $150,000. Today the median sale price for a home in West Oakland is $425,000, according to Redfin.

Oakland has weathered many crises with varying degrees of success, but this tide has been swift.

Other housing stock sits empty, for a host of reasons. The homes may need expensive upgrades beyond an owner’s budget. They may not want to get locked in to a less-than-ideal tenant, who would enjoy rent control and other protections under local and state law, or they might not want to be landlords at all and are waiting for the peak of the market to sell.

This class of absentee owner was largely made possible by California’s Proposition 13, passed in 1978, which set tight limits on property taxes and counties’ ability to reassess private property. Ostensibly meant to keep seniors on fixed incomes in their homes, Prop 13 also gave rise to a new class of land bankers, speculative investors, and profiteers. Thanks to Prop 13 and foreclosure fire sales, those empty homes I see in West Oakland are easy to keep empty, with annual property taxes adding up to an average month’s rent.

For some longtime Oakland residents, Prop 13 has been a boon: It’s kept their taxes low while their home equity rocketed. Among homeowners—and likely voters—Prop 13 is popular, with about 53 percent supporting; among renters, the law has 29 percent approval. The vast majority of Oakland rents, especially since formerly owned homes have been flipped into rentals.

“We want to bring in good, productive people and really change the area,” one investor’s leasing agent said in 2012. And change they did: More cheap real estate was purchased, residents were evicted in order to make upgrades, and rents were raised.

The Bay Area may have a reputation for progressive politics, but the region has taken a decidedly neoliberal turn.

Oakland’s western neighborhoods have seen some of the swiftest shifts. Their close proximity to San Francisco and beautiful housing stock made them especially attractive to would-be residents and landlords alike, especially those from the tech industry seeking starter homes they couldn’t afford across the Bay. The foreclosure crisis disproportionately affected the local black community, and between 2000 and 2010, Oakland’s white population more than doubled. The city’s famous ethnic diversity is crumbling.

Oakland may be feeling the economic effects of that new investment and the cultural effects of those new residents, but it remains a step removed. It’s long been home to B- and C-list tech, but the A-listers have yet to arrive. Meanwhile, cries of “die, techie scum” are scrawled across the streets. The city has so far seen little of the home-building boom that’s come to define San Francisco’s downtown, a collection of cranes set about on constructing a new skyline altogether. It’s also been largely spared the kinds of large Ellis evictions that San Francisco has seen.

Oakland’s newly elected mayor promises the city won’t go the way of San Francisco: “We are going to be much more aggressive about building new housing.” We do need homes. We should probably build some. But we should also use—and protect—what we’ve already got.

Editor’s note: This article has been updated for clarity. 

Illustration by Max Fleishman