Abandoned stores, empty homes: why San Francisco’s economic boom looks like a crisis

Adrian Daub – The Guardian Jan 9, 2020

At the beginning of this decade, one beloved block in San Francisco had a taqueria, a flower shop and a bookstore. Sparky’s diner, a favorite final hangout for night owls, queer teens and the blackout drunk, was open round the clock.

Today, this block of Church Street just south of Market has the kind of abandoned storefronts that are usually a shorthand for declining mill towns, not centers of the tech future. But all those closed shops are emblematic of today’s San Francisco, where even in upscale areas, the city’s economic boom can look surprisingly like an economic crisis.

What this represents is a strange, second-wave gentrification, in which an influx of well-heeled residents means not Blue Bottle coffee shops and Kinfolk-inspired interior design stores, but emptiness.

The intersection of Church and Market streets is where many San Francisco neighborhoods come together – from the historic Castro to the nouveau gentry in Hayes Valley and the hipster vortex that is the Mission District. It’s not necessarily picturesque, but it’s long been quirky, lively, easily reached by public transit and popular with young creative types. In the last decade, splashy apartment complexes have shot up all over the area. The neighborhood must have gained hundreds, if not thousands, of new residents. But the businesses in the area have been dying off.

In 2017, about one in every eight storefronts here was empty, and more businesses seem to have vacated since then. The diner was first to go: in 2015 rent suddenly went up, the diner’s owner refused to pay, and Sparky’s was no more. Our usual ideas about gentrification suggest neighborhood standbys get replaced by fancy boutiques and brunch-centric eateries. Instead, after Sparky’s came … nothing. Elsewhere, too, long-term leases timed out, rents increased, and the old neighborhood hangouts disappeared. Aardvark Books, which stood on Church Street for nearly 40 years, until 2018, is now a hollow storefront.

The fancy new developments along the upper stretch of Market Street have had a paradoxical effect, filling the area with people while depopulating it. The reasons have a lot to do with the tech economy that’s made San Francisco one of the most expensive cities in the world. Developers make their money with luxury apartments aimed at high-salaried tech workers, while ground floor retail is an architectural and economic afterthought: giant spaces that any business would have trouble filling with life and justifying financially.

As a result, a kind of noncommittal capitalism has moved in. Unlike restaurants that become long-term icons of gentrification, such as Marlow & Sons in Brooklyn, the fancy coffee shops and cocktail bars that pop up in these airy enclosures seem like tourists living out of their suitcases. People make dinner reservations on a Wednesday, only to have the restaurant abruptly close on Thursday.

Meanwhile, most of the residents in the lofty towers above are probably ordering their necessaries from Amazon Prime and their food from the delivery service Caviar. (Or no one is living in the condos at all: a recent report found there are roughly 38,000 empty homes in San Francisco – three to five times the city’s number of homeless people.)

Some might say this is all simply market Darwinism, just with more cold-pressed beet juice. But it’s interesting that the free market exists only on one side of the equation. Since California passed Proposition 13 in 1978, property tax rates for those San Franciscans who owned property back then have been severely capped. Owners may pay Nixon-era property tax rates, while renting out those spaces at rates that have exploded in the last 40 years. They, too, can afford to let buildings sit empty.

What has successfully moved in are brick-and-mortar businesses surrounded by a vague tech halo. The building at the intersection of Church and Market was rented by a startup called Sonder, which subleases individual apartments on a short-term basis. Across from it sits Compass Realty, which bills itself as “a tech company reinventing the space” but is pretty much just a traditional brokerage – albeit one funded by Silicon Valley VCs. Then there is One Medical, an HMO that has a tech-adjacent pedigree, though it is opaque how much that pedigree actually matters. It is backed by Alphabet, Google’s parent company, but its tech credentials seem to otherwise consist of its self-presentation and – get this – an app.

These are businesses trying to feed off the buzz that surrounds all things tech, but ultimately living off federally mandated insurance programs or venture capital funds willing to set money on fire. One developer who moved in and promised to open several restaurants along the corridor turned out to be a scam artist from Los Angeles. The ultima ratio of the untrammeled market, it would seem, is other people’s money. And while Sonder, One Medical and Compass may be solid businesses by comparison, it’s hard not to look at their showy offices and suspect that they protest too much: who knows how long they’ll stay in the neighborhood, or how long they are for the world.

Our standard narratives of gentrification, whether they fetishize or hate the glitzy sameness it produces, treat that glitz as a sign of capitalism’s relentless working. But the area around Church and Market suggests just how tenuous that capitalism has become. Whether you associate tech with utopian visions of generalized social uplift, or with a dystopian, union-busting hellscape, both views are premised on the efficacy of the transformations wrought by VC dollars and technological ingenuity. But walk through parts of San Francisco today, and you get a different sense altogether: not an uncanny effectiveness, but a panicked swirl of homeless capital.

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One response to “Abandoned stores, empty homes: why San Francisco’s economic boom looks like a crisis”

  1. 19th Century economist Henry George was no stranger to San Francisco He influenced not only many in the English speaking world such as the Liberal Party, but also the nationalist Chinese. He’s now relegated to someone less than Karl Marx, but at the time George published his seminal “Progress and Poverty” in 1879 he became much more famous than Marx.

    George put forward a view based on a very logical built up analysis of Land, Labour and Capital that economic cycles are driven by land speculation. With real estate this is much more explicit, but nevertheless implied within equities that incorporate land assets.

    As land increases in value its bought for speculative purposes and landlords hold out for what they believe are “fair rents”. Businesses pull away and as the bubble attains it maximum no more credit is generated by the private banking system and the economy collapses.

    Henry George’s other main contribution to economics was the proposal of a land value tax together with the abolition of all other taxes. This was based on Adam Smith’s Canon of Taxation. The land value tax would incentivise the proper use of land and take off the brakes that indirect taxation applies to productivity.

    More people should become aware of Henry George. He has been deliberately airbrushed out of history. A truly great American.