January 20, 2000
by Lenny Siegel

Silicon Valley is a victim of its own success. Our housing shortage not only creates hardship for renters and new or newly arriving homeowners, but it now threatens the ability of high-tech industry to hire the best and brightest from an internationally competitive labor market.

The Silicon Valley Manufacturing Group, which was formed two decades ago to take on - among other challenges - the "jobs-housing imbalance," recently called once again for more in-fill housing in Silicon Valley cities. I'm one of the few long-time residents who support the Manufacturers' call for higher residential densities. However, as long as local policy-makers and the private sector focus only on the housing side of the equation, the jobs-housing problem will only get worse.

We need to find mechanisms to promote the creation of high-tech jobs in nearby areas where housing is relatively plentiful or inexpensive and unemployment is relatively high. This would not necessarily serve the interests of individual companies or cities, but it would help preserve both the economic vitality and quality of life of the Valley as a whole.

The numerical imbalance is impressive. This year Palo Alto is expected to reach 2.5 jobs per employed resident, while the city of Santa Clara will have 2.2 jobs per employed resident. Other north County cities - Sunnyvale, Mountain View, Milpitas, and Cupertino are projected to be at or above 1.5. That means housing is scarce; prices are expensive; and the in-commute is overwhelming.

High-tech corporations, particularly start-ups and foreign companies such as Microsoft, benefit from the concentration of employment. These firms can attract talent from other companies in the area, establish relationships with adjacent supply and service companies, and create joint projects. Though the Manufacturing Group, since its inception, has argued for the rezoning of industrial property to residential, member companies have contradicted the association when they had their eyes on parcels of land near their existing plants and offices.

The cities benefit not only from property tax income, but from sales tax. Even before the rise of Internet commerce, Mountain View brought in more revenue from industrial sales tax than from commercial - that is, shopping - taxes. Housing, on the other hand, creates a greater demand for tax-supported services, from schools to parks to public safety, than commercial and industrial uses.

This pattern started back in the fifties, when Stanford created its industrial park, and it cascaded slowly down the lower Peninsula. It's hard to blame San Jose for promoting job growth within its limits in an effort to rectify its early, costly role as the Valley's bedroom community.

But the limits of competitive growth are upon us. Whether it be the traffic on the Sunol Grade or the cost of a home in Sunnyvale, the worsening jobs-housing imbalance marks an unsustainable development pattern. Even if the Manufacturers overcome local opposition to massive new housing construction, the problem will get worse as long as concentrated job growth continues, unchanneled.

That's because, as each new housing complex is completed or as each new lane is added to a freeway, the impact of the shortage will be reduced just enough to encourage more job growth in the Valley core. If we don't take common actions to shape job growth, we will find ourselves, like Alice in Wonderland, running as fast as we can only to end up in the same place.

Policy-makers, including representatives from local government, industry, labor, and community and environmental organizations, need to put their heads together. Fortunately, they don't need to figure out ways to create jobs - we're in a fortunate position compared to the rest of the world - but to consider WHERE to create them.

I vote for the East Bay, which has never fully recovered from the decline of heavy industry. Jerry Brown seems to be leading a new booster brigade for high-tech development, and there are already promising signs of life. High-tech industry, of course, would have to overcome its reticence to locate in or near communities with large African-American populations. But revitalizing vacant or underutilized Brownfields (properties with or perceived to have toxic contamination) along major transportation corridors makes a whole lot more sense than urbanizing unique agricultural regions such as the Salinas Valley and piling more homes along the highways into the Central Valley.

And if we agree on the ideal location for high-tech job growth, we would still have to find ways to establish incentives to make it happen. Creating a better balance of jobs and housing is in the interest of the WHOLE Valley, but it's still not in the interest of the PARTS - individual cities and companies.

Furthermore, it will take a great deal of effort to counteract the displacement of long-time and low-income residents, which is already being fed by Silicon growth throughout the Bay Area. As the recent mayoral campaign in San Francisco pointed out, "gentrification" is a big issue there, and further development in the East Bay could drive out large numbers of people. Such displacement is not only unfair, but it denies the high-tech economy the lesser skilled workforce that it needs to flourish.

There are many potential solutions to undesirable gentrification: Ensuring that a mix of housing is included within each new development; Providing training and job opportunities to low-income workers and their children; Guaranteeing a living wage to sales, service, and clerical workers; Boosting housing subsidies for people, such as senior citizens, unable to generate the income growth necessary to keep up with rising housing costs. Such policies must be in place as areas are targeted for economic growth, not left as an afterthought. Otherwise, that growth will work against, not help meet, key social objectives.

Whenever the housing shortage or jobs concentration problems re-arise as issues, some leaders trot out the solution of regional government, since these are in fact regional problems. I favor regional dialogue and regional politics as a way to develop regional solutions, but accessible local government remains the best protection people have against either housing or job-producing developments that they think will degrade their quality of life.

The key is to focus first on the geography of employment growth. If we do, the challenges of housing, infrastructure, and services will be easier to surmount.