Tighten up, San Francisco.

Photographer: David Paul Morris/Bloomberg

San Francisco Needs to Get Denser. Can It?

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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The San Francisco Bay area is doing pretty great, economically speaking. The region is the global epicenter of the digital economy with an impressive array of innovative, fast-growing corporations.

You can see this in the numbers. The two big metropolitan areas that comprise the Bay area (San Jose and San Francisco-Oakland) ranked first and second, respectively, in per capita personal income for U.S. metro areas of 1 million people or more in 2013. They came in second and third for fastest gross domestic product growth in 2014, and sixth and ninth for lowest unemployment rate as of September.

Not surprisingly, lots of people have been moving in to partake of this boom. The population of the San Jose-San Francisco combined statistical area (yes, the Census Bureau slices things up in lots of different ways) passed 8.6 million in 2014, up 5.6 percent from 2010. The U.S. population grew 3.3 percent during that time.

Still, other big metropolitan areas where the pay isn't as good, and for the most part unemployment is higher and economic growth slower , have been adding people at a much faster rate: Houston (9.3 percent), Raleigh-Durham (8.5 percent), Denver (8.2 percent), Orlando (8.1 percent), Dallas-Fort Worth (7.8 percent).

That’s mainly because, unlike all these places, the Bay area (where I grew up) is full. It is hemmed in by mountains with almost no developable land left within its six core counties. And while there's lots of flat land currently being used for agriculture east of the Coast Range in California's Central Valley, the commutes from there into Silicon Valley and San Francisco can be hellishly long. Not surprisingly, the San Jose and San Francisco-Oakland metropolitan areas rank No. 1 and No. 2 in the nation for median house prices.

There’s a long-running debate over whether sprawl is in itself a bad thing. I’m not going to get into that,  because the Bay area's options for continued sprawl seem so limited. If it is to keep growing -- and it seems important for both the regional economy and the national one that it be able to -- the Bay area needs lots more housing in cities that are already built-out.

Even now, the San Francisco and San Jose metro areas are among the nation’s most densely populated. Here's one Census Bureau ranking

You may scratch your head at the thought of metropolitan Los Angeles, San Jose and San Francisco being more densely populated than metropolitan New York. This is partly a reflection of the reality that lot sizes in the automobile-era suburbs of New York, New Jersey and Connecticut tend to be much bigger than those in California suburbs. It’s also partly an artifact of how the metropolitan-area lines are drawn.

In 2012 the Census Bureau tried another approach, taking the population density of every census tract in a metro area and then calculating an average density for the area with the tracts weighted by population. That resulted in this ranking (and no, I don’t know why the Census Bureau used different metropolitan area definitions and longer names in this ranking than in the previous one): 

The San Francisco and San Jose areas are still pretty high on the list, but it’s apparent that they could be much denser -- if they’re willing to be more like New York, that is. If San Francisco proper were as thickly populated as Manhattan, it would have 3.4 million people instead of 852,469. Manhattan’s a pretty big stretch, but even at Brooklyn’s density San Francisco could fit 1.7 million inhabitants. Ratchet Oakland’s density up to that of Queens and it could fit 1.2 million people. Bring San Jose’s density up to that of San Francisco: 3.2 million.

For a lot of reasons, this is really hard to do. The area's vulnerability to earthquakes used to limit density, but engineers now know how to construct tall buildings that can handle a lot of shaking. The main issue now is that building where there are already buildings brings many complications.  And California’s coastal cities were an early hotbed of no-growth, not-in-my-backyard sentiment.

There’s some evidence that attitudes are changing. In an election this month, San Francisco voters approved the city’s first affordable-housing bond issue in more than two decades, as well as proposals to build new housing on city land and on a parking lot owned by the San Francisco Giants. It seems a little absurd that voters have to decide on whether somebody can develop a parking lot, but the vote does seem to be an indication of progress.

San Francisco accounts for just one tenth of the region’s population. The Association of Bay Area Governments has identified a bunch of “priority development areas” around the region near train stations and other transit, so other cities are gingerly embracing new development as well.

Switching the Bay area as a whole over to a much higher-density, higher-growth approach, though, would likely require steps such as giant regional investments in mass transit and aggressive use of eminent domain that don't seem to be in the cards even if attitudes toward growth in the region continue to warm. Bay area innovations such as car-hailing apps and self-driving cars might solve some transportation problems, and if Elon Musk ever gets to build his hyperloop the Bay area's commuting boundaries could grow dramatically.  For now, though, one of the most economically dynamic regions on the planet is likely to see its growth crimped by the profoundly undynamic realities of real estate.

  1. The exceptions are Denver, with lower unemployment, and Dallas-Fort Worth, with faster GDP growth.

  2. Short version: lots of urbanist types say yes; Joel Kotkin says no; Richard Florida says it depends. 

  3. I actually pulled "Long Island" out of the New York region's name to keep the bar chart from getting squeezed even more.

  4. Matthew Yglesias said this first.

  5. Disclosures: my brother is a lawyer representing several Bay area developers; my dad has been fighting a development in my East Bay hometown, Lafayette.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Paula Dwyer at pdwyer11@bloomberg.net