How big tech's big money is dividing San Francisco communities
Technology giants are creating thousands of new millionaires as they list on the stock exchange through much-hyped IPOs. FT tech correspondent Hannah Murphy meets residents struggling to keep up as the city's wealth gap widens.
Produced, directed and filmed by James Sandy; edited by Richard Topping
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HANNAH MURPHY: Uber, Lyft, Airbnb, Slack, it's a bumpy year for San Francisco's tech IPOs. But in a city that's home to some of America's richest and poorest, there are questions over how far the big tech billions will spread.
MAN: San Francisco is the exemplar of inequality.
MAN: Most of the money we make goes to our living expenses and our work expenses.
JONAS JACKEL: There is a housing crisis. People can't afford to live here. The people who would normally shop here have moved out of the area.
KALENA MASCHING: We're seeing two bedrooms start at 1.6 million. And some of them going up to over three million.
HANNAH MURPHY: Between them, the latest crop of IPOs could generate $230 billion of wealth, creating as many as 6,000 new millionaires in the process. One way that money could benefit San Francisco is in real estate. The property market in some neighbourhoods is already going into overdrive.
KALENA MASCHING: We're seeing it to be really competitive [? movement ?] right now. People are just trying to get in before the IPO money. They're convinced that the IPOs are going to drive up the prices. But--
HANNAH MURPHY: But there's an urgency?
KALENA MASCHING: There's an urgency.
HANNAH MURPHY: [INAUDIBLE]
KALENA MASCHING: We're seeing five, 10 offers on most single family houses really depending on the neighbourhood. But we are seeing things on average still sell 100-200,000 over list price.
HANNAH MURPHY: For those living and working in these areas, the benefits of tech money are plain to see.
KALENA MASCHING: You can go up a couple of blocks and you can actually walk to almost every single tech company that's going IPO this year. And now you've got everything right here. You have a grocery store.
You've got bars down that direction, restaurant's all up and down this street. There's cafes, dry cleaners. Some of the parks are getting facelifts. So I think overall it's a positive impact on the feel of the neighbourhood.
HANNAH MURPHY: Other parts of the city are struggling, though. And here, the latest round of IPOs could ultimately do more harm than good.
JONAS JACKEL: Here we are again. Huckleberry Bikes has been on Market Street since we opened in 2011. It was an area where on a daily basis there were just thousands of cyclists riding by. So we thought it would be a good location for that kind of bike shop.
BRIAN SMITH: It was also just a more affordable neighbourhood than many other neighbourhoods in this city. This community just simply had different people living here when we moved here. It had primarily artists, musicians, who could afford to live in spaces like these where they lived and worked in the same unit. And they don't live here anymore. They can't afford to live here anymore.
JONAS JACKEL: Well, the ironic thing is that gentrification hasn't really been good for business. It hasn't really helped us grow. We did better in our early years before the tech companies really fully moved in. But they're not like encouraging their employees to come shop here or to spend money in the local economy.
BRIAN SMITH: Next door to us there used to be-- what do you call it? A topless venue--
JONAS JACKEL: Yeah, no, there was--
BRIAN SMITH: --if you will.
JONAS JACKEL: It's called a--
BRIAN SMITH: --a gentlemen's club, called the Market Street Cinema. It was here for many years. Our business was better when Market Street Cinema was open than when there was a condo building with a vacant retail space that's been vacant for I don't know, a year, two years.
HANNAH MURPHY: Jonas and Brian were once held up as poster boys for regeneration in mid-market-- an area home to Twitter, Uber, and many more big tech's big names.
Many moved in thanks to tax breaks offered by city hall eight years ago. Now, local government wants to change that policy with a proposal by city supervisor, Gordon Mar, to raise payroll taxes. So can you tell us about the proposal and why the city needs it?
GORDON MAR: I really commend all the companies and their executives and employees for their success. But there's been a downside to this tech boom that's played out over the last decade in our city, and that's the housing affordability crisis, gridlock on our streets, and the growing homelessness crisis in our city where tens of thousands of our community members live unsheltered on the streets largely due to the growing inequality in our cities.
HANNAH MURPHY: So what do you say to critics who might say that the tax might not raise very much funds or that it might deter tech companies from coming?
GORDON MAR: It's a very modest amount of tax, 1.5% on billions of dollars of wealth that's going to be flowing into these companies. And this is a tax that they would have already had to pay prior to 2012.
HANNAH MURPHY: If it's voted in in November, supervisor Mar's payroll tax reform could add hundreds of millions of dollars annually to an existing 500 million dollar affordable housing fund. For the thousands of homeless people sleeping rough on San Francisco streets, the money couldn't come soon enough.
DON FALK: We are three different residential hotel buildings. The ambassador are the two brick ones. Then the West next to the ambassador and [INAUDIBLE] where you can see the sign of the [INAUDIBLE]. They constitute nearly 500 residential hotel units, all of them occupied by people earning under $1,000 a month. So very, very low income population.
HANNAH MURPHY: Don Falk is chief executive officer of TNDC-- a non-profit organisation dedicated to providing social housing for some of San Francisco's poorest residents.
DON FALK: Here we have very, very low income people. And at the same time, right across the street, we're seeing a luxury hotel and high-end condominiums being built, leaving those who are marginalised with fewer options. Now we see the $5 cup of coffee. And who-- what Tenderloin resident can afford $5 for a cup of coffee?
HANNAH MURPHY: Right, the longtime residents who've been here.
DON FALK: Yes, yes.
HANNAH MURPHY: As Don sees it, TNDC's job is to keep their housing units affordable for the long term even as rents go up all around them.
DON FALK: The kind of thing that TNDC and many of our sister agencies is doing is not only building affordable housing but putting the ownership of the land into the hands of nonprofits so that the properties here will serve low income people in perpetuity.
HANNAH MURPHY: But housing is only part of the problem. As wages for the city's top earners soar, so, too, has the cost of living here. Low income workers are struggling to cope. Uber drivers have been among the most vocal.
WOMAN: Strikers, thank you for being here. [INAUDIBLE]
MOSTAFA MAKLAD: When Uber started, they actually used to take 5% from drivers. Then after a while, they increased that to 10%, then 15%, then 20%. When I started driving, we used to make around 2,000 by working for 30 to 40 hours a week, and that's before expenses. But to make the same amount of money and even less, we have to work between 70 to 80 hours a week and even more. We barely have enough money for ourselves. We are the one who actually build and help the company become what it is right now. And that company has always been trying to do everything they can to avoid taking responsibility for drivers.
HANNAH MURPHY: Tech IPOs will bring hundreds of billions of dollars to San Francisco this year alone. But that money stands to widen the city's wealth gap at a time when many residents are already feeling left behind.
MOSTAFA MAKLAD: If they're not going to take responsibility for the workers that they work for their company, we will force them by the law.
KALENA MASCHING: One of my teammates just got a studio into contract for about a million dollars. Their company hasn't gone IPO. But they chose to get in early to kind of avoid media bidding more later.
GORDON MAR: We're in an unprecedented situation where we have the median rent for a one bedroom apartment in San Francisco is now $3,500 a month, which is among the highest in the country or even the world.
DON FALK: Everybody-- it shouldn't be such a special thing. Everybody ought to be able to live in this kind of a place.
BRIAN SMITH: There's a lot of challenges in this neighbourhood that are encouraging us to look elsewhere. Time will tell, but I would say right now we're leaning towards moving on.