Facebook and Silicon Valley’s Gated Boomtowns

Facebook has just announced its plans to build an old-fashioned “company town”—except that these days, since Millennials are never expected to act as if they leave college, it is called a “campus.” Facebook’s proposed Willow Campus in Silicon Valley’s Menlo Park won’t just have offices. It will have 1500 units of housing, along with grocery stores, restaurants, and retail space, so if you work there, you may never need to leave.

Which either sounds nice, or kind of creepy.

In fact, these plans have already drawn some tut-tutting from those who see Facebook Town as a kind of Silicon Valley Cloud Cuckoo Land, where the elites live in blissful separation from the rest of us. A writer at The Guardian, responding to an earlier version of the plan, saw yet another sign of the tech industry’s “conscious decoupling” from the communities around it.

But don’t blame Facebook or Mark Zuckerberg. They’re just responding to the incentives and obstacles created by local governments in Silicon Valley and San Francisco. You can see hints at this in Facebook’s announcement, which describes the new company town as “an integrated, mixed-use village that will provide much needed services, housing, and transit solutions as well as office space. Part of our vision is to create a neighborhood center that provides long-needed community services.” The hint is subtle, but it’s there: “long-needed”—because the local government hasn’t been providing for it.

The message is a little more blunt later: “The region’s failure to continue to invest in our transportation infrastructure alongside growth has led to congestion and delay. Willow Campus will be an opportunity to catalyze regional transit investment by providing planned density sufficient to support new east-west connections and a future transit center. We’re investing tens of millions of dollars to improve US101.”

Yes, this solves the problem—for a select group of Facebook employees, in the same way Google’s notorious private bus system in San Francisco solves a problem for Googlers. And what else do you expect? For Facebook, this is about employee retention, keeping young coders hard at work by giving them the opportunity to live and eat nearby without the bother of a long commute. But the new Facebook boomtown also looks a bit like a gated community, a pleasant, perfectly planned playground for the tech elite, separate from everything and everyone else.

That is the larger problem, and it didn’t happen by accident or by the natural forces of the market. It has become fashionable to worry that the rise of big technology companies like Facebook will increase economic inequality and leave the rest of the country behind. But the people who worry the most loudly and dramatically about this prospect are often the ones who back the government policies that are leading to this very result.

As I have recently explored in more depth elsewhere, today’s big technology boomtowns are the great new centers of wealth and prosperity—but they are also walling themselves off with restrictive housing and transportation policies.

The biggest barrier walling off the middle class and lower middle class from high-tech boomtowns is the price of housing—which is massively inflated by local regulations. By one estimate, the actual cost of building a new home in San Francisco, just in terms of land, labor, and materials, should be about $280,000. What you will pay for one is about $800,000. The difference is due to the artificial restriction of the market due to regulations, zoning, and explicit limits on growth.

The big irony of cities like San Francisco, or areas like Silicon Valley, is that just about everyone there thinks of themselves as extremely “progressive.” They care so much about poor people and the blue-collar “working class”—so long as they don’t have to live anywhere near them. So they propose slow-growth regulations, restrictions on high-rise apartments, and so on. In what one resident describes as San Francisco’s “hyper-participatory democracy,” residents will turn out in droves to oppose any new real-estate development.

The problem has gotten so bad that the California Senate has passed a bill that would force local governments to loosen their restrictions if they don’t meet state-mandated quotas for housing. Central planning on the local level has to be countermanded by less restrictive central planning on the state level. But you can see why it requires this kind of regulatory hammer from above. The very thing that is the problem—the astronomically high cost of housing—creates a constituency that never wants to see the problem solved, because they would experience it as a catastrophic loss of their property values.

We can laugh at the irony of a bunch of kids raised on “Hunger Games”-style dystopian warnings about a two-tier class society, who then go off to work in the technology Capitol of Silicon Valley, leaving the folks back home in Ohio to rot. But it is an earlier generation, those for whom the appropriate pop-culture reference would probably be “Logan’s Run,” whose NIMBY-ish opposition to development and whose belief in heavy-handed urban planning—there is hardly a municipality that does not have a literal Five-Year Plan for what development it will permit—has walled off their utopia from anyone not fortunate enough to enjoy the patronage of a big technology company.

If they really want to be “progressive,” Silicon Valley’s young idealists should take on the NIMBYs and central planners, campaign against the restrictions on development in their hometowns, and knock down the barriers that wall off the middle and lower-middle class from participating in the prosperity of their boomtowns.

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