The Housing Theory Of Everything: Why The Future Of Innovation Depends On Housing Affordability

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If you’ve read about the history of innovation, you know that advances in technology typically require a critical mass of people and resources to come together. It’s called agglomeration, and it’s happening right now with the development of generative AI. This geographical positioning of sectoral strength has played out many times before. And it’s more essential than ever to our ability to compete globally and develop the innovative technologies needed to meet commitments such as the energy economy transition. 

But today, we’re facing a situation in which perpetually inflating housing prices have become a barrier to bringing people together in innovation clusters. And while you may be thinking ‘doesn’t remote work solve this?’, no. While Zoom allows flexibility in our work environments, we still need agglomeration to build and sustain a competitive edge. The development of innovative technology depends on smart people working together in close proximity, but in many cities that’s become next to impossible. In San Francisco, where I live and been involved in lobbying for substantial changes to our housing policies, the cost of housing has risen well beyond the means of even well-paid tech workers, let alone teachers, health care workers and small business owners. A world where we don’t build housing means an ever escalating bidding war for the benefit of raising a family in an economically productive region. As thousands of residents have fled to more affordable regions, the city has suffered a dramatic decline in livability. Communities simply don’t work without accessible, affordable housing.

And neither do economies. Without a critical mass of workers able to afford housing close to innovation clusters and scaling companies, the innovation our economy depends on suffers. And it will get worse unless we adjust course. It’s time tech leaders help ensure that their economic success results in shared prosperity.

Even in a Zoom world, geography matters

The pandemic acted as a forcing function, enabling people to live wherever they wanted in a world where remote work had become widely available. The result? Remote workers moved away from cities that had not built housing to cities that have.

But successful agglomeration depends on the ability to physically concentrate people, and agglomeration is a powerful force. In the last several months, we’ve started to see a slight reverse in The Bay Area’s exodus of tech workers. Turns out the generative AI frenzy is now luring entrepreneurs back to San Francisco. These folks know they need to be geographically close to the core teams that are innovating on these technologies. The magic is happening, again, right in this region, even with Zoom’s flexibility.

But attracting enough people to work on innovations that will enable the U.S. to lead in the development of AI and other economic transitions – plus those who keep the rest of the ecosystem running smoothly – will require a coordinated effort to solve the crippling issues that have been affecting our region for decades. At the center of our country’s economic innovation we need a broad consortium of businesses, leaders and residents collaborating productively.

San Francisco’s housing history is deep rooted, but change is possible

The housing shortage is not exactly new. Through downzoning and NIMBY restrictions, it’s either illegal or virtually impossible to build housing in San Francisco and LA. And, as detailed in books like Golden Gates and The Color of Law, most of the housing laws were originally designed to prevent density and restrict development to racially and economically segregate neighborhoods.

But we are making progress on changing these laws. California YIMBY has passed 18 meaningful bills to legalize housing, including ending single-family zoning and legalizing duplexes and lot splits on single-family properties, as well as streamlining zoning ordinances for small apartments in transit-rich areas.

San Francisco city leaders are also implementing a plan to build 82,000 new housing units over eight years, which is a huge start. But beyond that, California will need to build 3.5 million more homes, and San Francisco will need hundreds of thousands. The only growing American cities solving these issues have well-designed housing policies – Houston’s progress is an example of what’s possible when a region’s leaders get to the root of these social issues.

Businesses have a major role to play as partners in solving public problems

When tech leaders engage productively with policymakers, it can set the stage for collaborative efforts that benefit everyone. Take OpenAI founder Sam Altman’s approach to AI regulation. There’s a saying in D.C., “if you aren’t at the table, you’re on the menu,” and this has proved true for the tech sector because our leaders haven’t shown up. Altman’s roadshow is what showing up looks like.

In addition to testifying at a recent AI Senate hearing, Altman has taken his engagement efforts global, where he’s met with heads of state to discuss an AI regulatory framework. There’s no question we need this kind of engagement between business and government as AI progresses. And I believe we can also tap into this approach to build trust and productive partnerships for other pressing public problems that intersect with industry – decarbonizing our economy, diplomacy with China and solving the housing crisis.

I’ve been fortunate to see the kind of progress organizations like California YIMBY can make on these fronts, and I believe we can move the needle even further with the involvement of the business community’s leadership, networks and innovative thinking. With a collective focus on public outcomes, we can reverse the housing crisis. But nobody is going to do this for us.

The last time government and businesses came together to transform society was in the decades following World War II. It resulted in a social contract that led to the policies and governance structures that exist today. But the world has changed, and a new social contract is necessary. Silicon Valley leaders should be invested in shaping this vision, considering their role in reshaping our economy. And given the stakes, they need to start with housing.

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