Werd I/O

This afternoon, Greg Wester tweeted this screen grab:

Your eyes are not deceiving you. That's a 420 square foot studio apartment - not even a one bedroom - for $3,050 a month. That's a base cost: your bills, and most likely parking, are extra.

There are only two kinds of people who can afford this:

• Workers on a substantial salary (realistically $100K+, which would still leave you with a bi-weekly check of a little under $2500 after taxes, meaning rent would be well over 50% of your monthly cost)
• The independently wealthy

Let's leave aside the obvious social inclusion issues at play here, and the effect this has on diversity in the city. Let's ignore that this is killing the artistic temperament of the city and turning it into a primarily financial center like any other. Let's pass over the inevitable effect this will have on the city when these high-value residents start to ebb away. Let's pretend not to see the rising homelessness problem. Not because those are unimportant issues - they're vital to the future of San Francisco - but because it's harmful to the ecosystem that helped create this situation to begin with.

If only rich people can afford to live in San Francisco, it is impossible to really innovate. All the creative energy is being driven out. There's no way for ordinary people - people who haven't made it yet - to experiment. Everyone is either on salary or has raised money from institutional investors with a proven business model.

So the gentrification cycle turns:

Deindustrialization creates low-rent vacancies in industrial districts; artists are drawn to these districts by the depressed rents and spacious "lofts"; the district becomes a hub of avant garde creativity, generating media attention and foot traffic, both of which create a "buzz" around the neighborhood; shops and restaurants are drawn to the area to cater to the increased foot traffic and capitalize on the "buzz;" the introduction of these shops and restaurants in turn induces more foot traffic, more media attention, and more "buzz;" eventually national chain stores see the area as ripe for investment and begin to move in; finally, of course, each of these trends causes rents to escalate until, with the arrival of deep-pocketed chain stores, the very artists who made the district trendy are priced out.  The district ends up as nothing more than a high-end outdoor shopping mall with little street "cred," and the artists relocate to a new low-rent industrial area, triggering the process all over again.

We've seen this process start to rapidly transform Oakland:

Oakland neighborhoods that are experiencing "advanced gentrification," according to the study, include Lower Bottoms, Old Oakland, and Northgate/Koreatown. The researchers define "advanced gentrification" as areas that have experienced significant demographic changes and high levels of real estate investment. Those areas are also very vulnerable to gentrification due to their locations near transit, historic housing stocks, rising house prices, and high rates of market-rate developments. [...] The researchers also said “the crisis is not yet half over” and that the city can expect the displacement of lower-income households to accelerate in coming years.

The interactive map is worth exploring for yourself.

All of which means that the rents in Oakland are already rapidly increasing (partially because it's within commuting distance of San Francisco). So where's next? If I'm running a small startup that needs to lengthen its runway while I figure out my product / market fit - or better yet, if I'm an artist that wants to live somewhere nurturing, affordable and creative - where can I go?

My money's on one of two places:

Sacramento.

As Thrillist noticed this summer, California's capital has a plethora of food and culture, for a much lower living cost:

We have a hard time even talking about San Francisco rent anymore. We start sweating, breaking out in hives... yeah. Especially when we think about rent in Sacramento. I mean, look at this -- $1,650 for a four-bedroom HOUSE!? That’ll get you, what... a patch of ground under the freeway in San Francisco?

Pretty much. In fact, Sacramento is 36.5% cheaper to live in than San Francisco overall (and rent is 65% less). And, yeah, it's the seat of state government, which gives enterprise startups access to a different kind of infrastructure. The only real bummer is that if you do need to get back to the Bay Area for meetings, the drive will take you two hours in good traffic.

Santa Rosa.

Situated in the middle of wine country, Santa Rosa is also adjacent to a lot of the trappings of fine living, although it's a little less hot on live music and theater. (Those needs are met by Sebastopol, just a few minutes down the road, which is also a base for O'Reilly Publishing.) Overall, it's a little more industrial than Sacramento in itself, but is set in outstandingly beautiful countryside and high-class local amenities.

But here's the big plus: as well as being super-close to Petaluma (home of TWiT), Sebastopol, Sonoma, Healdsburg and Napa, Santa Rosa is only an hour's drive from San Francisco. The Smart Train will provide effective public transport for the north bay - something it's sorely lacking right now - and further reduce the commuting pain. The first stretch, between Santa Rosa and San Rafael, opens in 2016. It'll use the same Clipper card system used by BART and Muni, effectively linking the north bay to the greater San Francisco Bay Area transit system. And expansions will link the train to the existing ferry infrastructure.

My bet is that the Santa Rosa corridor will be the next place to look. Its top-tier office space is a third of San Francisco's cost, it's surrounded by beautiful countryside and some of the country's best food, and is still within a hop, skip and a jump of Silicon Valley.