The real estate angle behind San Francisco’s Smart City ambitions
Fri 10 Jun 2016
There’s an interesting moment in the promotional video for San Francisco’s Smart City challenge (embedded below) which reveals one of the most enticing aspects of the concept of ‘smart’ urban pilot schemes – the possibility to reclaim the enormous real estate value of parking space in some of the most densely populated and expensive cities in the world; cities which are attracting controversial levels of transcontinental investment in property, and where pressure to surrender potential building space has become a major economic battle.
The moment comes at breakneck speed with a Sims-style graphic at around 1.33 in the video, and with the words “…and we reduce the need for parking so that we can start converting some of our parking structure into affordable housing”.
If the video had just said ‘housing’, I might not have even registered it; but since the current real estate market in the world’s major cities was placed at the centre of the west’s plans for economic recovery after 2008, ‘affordable housing’ has become a short-hand sop to facilitate desirable foreign-investor development, not to enable socially-conscious municipal schemes; it’s a phrase that rarely describes the project in question after the nascent PowerPoint phase.
San Franciscan parking space is already worth a fortune – in one case $82,000 for a space near AT&T park. But that can’t compare with the potential investor fortunes to be made from freeing up the city’s parking lot allocation for development. Homes in the popular Bay Area, one of the central western hubs of technological innovation, are worth six times the national average in the U.S., and the city also hosts the most expensive rental market in the States, with rent for a one-bedroom apartment averaging at $3,590.
You may feel a moment of discomfort
While the new wave of semi-amateur middle-class landlords are more committed to short-term market scarcity, the more visionary major-league investors, well able to ride out a temporary price fall if San Francisco should relax its protective zoning laws, would seem to have their eyes on the potential for property value overheat in the time after SF reaches maximum saturation – a time when many of the innovations that the San Francisco Municipal Transportation Agency are touting in the Smart City Challenge have come to pass.
In fact the SFMTA was the first authority in the U.S. to conduct a really exhaustive inventory of city parking spaces. It took four years, concluding in 2014 that San Francisco has 166,500 non-streetside parking spaces. If each of them was worth $82,000, the tally would be $1,361,200,000 of real estate. That’s not realistic – but it would be for equivalent actual accommodation.
San Francisco is currently ranked 34th in the Wall Street Journal’s estimation of the most expensive cities to live in. A look at this list, and similar lists across the media, reliably places Singapore as the most expensive city on the planet, and it’s no coincidence that Singapore is trialling some of the most innovative and vanguard transportation and IoT innovations under its ‘Smart Nation’ scheme – including self-driving taxis and unparalleled experimental civic surveillance.
Many of the cities in the global top 50 are considered to have long ago reached critical mass in terms of vehicle-based infrastructure for geographical or historical reasons; these include London, whose Victorian forebears did not anticipate demand even in the optimism of the industrial revolution; and New York, whose most valuable real estate was always limited by geography. But some of the north American entries, including Los Angeles and San Francisco, which remain dependent on non-civic automotive transport, seem unlikely to surrender to the new urban concentrations promised by Smart City schemes intended for urban centres which were genuinely developed around the car.
It remains amazing to me that the full force of current technological progress is bent on turning a limited number of overpoweringly crowded urban centres around the world into cramped Blade Runner-style conurbations, when the very same forces could open up hundreds of thousands of miles of more agreeable landscape into the economy via teleworking. But that unproven (and fiercely-resisted) commercial prospect isn’t part of the current economic model.