March 29th, 2015
Only the Rich Can Save Us
The Sunday paper brings two related stories. Last year San Francisco was number one — it had the fastest-growing rate of income inequality of any city in the country. Now this year, it turns out that San Francisco's rich people are far richer than any other city's rich. Go us.
The other story is about a retired venture capitalist leasing a large industrial building in the Dogpatch district to create below market rate spaces for art galleries. San Francisco's art galleries are being priced out of the market, and once they're gone it will be almost impossible to bring them back. According to the article:
Andy and Deborah Rappaport, who have never been in the arts business, plan to invest “tens of millions of dollars” in a cluster of buildings that will include studios and other arts amenities under the umbrella of the Minnesota Street Project.
This for-profit business venture aims to lose as little as possible or at best break even. They have a 15-year lease and are offering galleries 3-year leases at below market rates.
One of the moral failings of the techno-rich, in the city with the richest of the rich, is that they've operated as though the city and the world around them has no relationship to them. They take no interest in the diversity of the city, the schools, the parks, no interest in the arts or culture, no interest local politics (except when it comes to tax breaks). It's possible that a few of these rich folks have looked up from their piles of cash and seen the city changing radically around them. The Minnesota Street Project was inspired by a conversation the Rappaports had with veteran gallerist Catherine Clark. Again, according to the article:
“We were talking about how we didn't want to live in a city that didn't have a vibrant arts community,” Deborah says. “There have to be galleries, and there have to be artists' non-profits, and artists have to be able to afford studios.”
Frankly, the real estate market doesn't care what kind of city you, or anybody else, wants to live in. The “market” gives the non-rich the option to move somewhere else, its invisible hand will determine what kind of city you will live in. If the market decides that art galleries, artists, non-profit workers, teachers, nurses, day-care workers and librarians are under-resourced to live in San Francisco, then they'll have to find somewhere else to put down stakes.
The non-profit achive.org has been studying the unaffordability problem and come up with its own solution to help its workers. According to their blog:
The Internet Archive and the Kahle/Austin Foundation are trying a new model to help. Foundation Housing as a name for a new housing class : Permanently Affordable housing for non-profit workers.
In this model, a new nonprofit, the Kahle/Austin Foundation House, has been set up to purchase apartment buildings. These rental units are then made available to employees of select nonprofits at a “debt free” rate– basically equivalent to the condominium fee and taxes. Typically, the debt makes up about 2/3 of the cost of a building and the other costs (tax+maintenance+insurance) makes up about 1/3. Since the employee does not pay the debt part, the monthly fee is now about $850-1000/month rather than $2700-3000 current market rent. This way, the fee to those employees is about 1/3 of the cost of market rent, and we believe more stable than market based rents.
In the face of ever expanding income inequality, these are the only solutions that seem to have a chance. Real estate is simply moved out of the real estate market to create affordability. If this kind of a proposal came from a community organizer it would be shot down as unrealistic — a socialist redistribution of wealth from the rich to the undeserving poor. And heaven help the elected official suggesting this kind of scheme. They'd be run out of town on a rail.
Tim Cook, the CEO of Apple, Inc., recently joined the ranks of the super rich who have pledged to give away most of their fortune. Warren Buffett and Bill Gates are two other notable members of that clan. Technology money rarely supports the arts. It's more disposed towards funding medical advances. The possibility of immortality is a primary fantasy of the techno-elite. While often quite smart, most of them have the cultural outlook of an adolescent boy. Some believe that Bill Gates will outshine Steve Jobs when we look back at these years because of his post-Microsoft charitable work. For most of the rich, helping the poor is simply beyond their control — the market will do what it will.
To address the issue of income inequality, wealth will have to be redistributed. The gap has grown so wide there's no other way to bridge it. Despite the fact that the poor are in the majority, they seem have no voice in the matter. For the moment it's up the the wealthy to do things like the Minnesota Street Project. archive.org needs to do what it can for its employees and other non-profit workers. Perhaps another retired venture capitalist can address the other half of the problem for artists. While they welcome below market rate studios and gallery space, artists still need a place to live.
New York City Mayor Bill de Blasio has proposed building 1,500 affordable housing units for artists and creatives at a cost of more than $30 million. This action came after musicians David Byrne and Patti Smith commented that New York was no longer a good place for young artists. The same could be said about San Francisco.
Great wealth confers the gift of being able to interfere with market dynamics without being called a socialist. The invisible hand can be shoved aside, and other priorities can be manifested. The Minnesota Street Project will bear watching. Let's hope they make a go of it. And here's hoping the peers of Andy and Deborah Rappaport are paying close attention. They're the only players in this game that are allowed to make a move.