Ed Lee became mayor as San Francisco emerged from the Great Recession into a boom phase rivaling the Gold Rush that first put the city on the map.
Both supporting and containing the excesses of the tech explosion became a central theme of his seven years as mayor. Lee was an unabashed supporter of bringing jobs and tech companies to San Francisco, which he called the Innovation Capital of the World. He oversaw years of dramatic growth that transformed the city’s skyline while also sending real estate values to stratospheric levels.
He also tried — and some say with little success — to tame the boom: higher rents have pushed San Francisco into a housing affordability crisis.
Lee, 65, died early Tuesday, hours after he collapsed while shopping at a supermarket near his home. The issues that he grappled with remain largely unsolved. And as San Francisco residents grieved the sudden loss of Lee, they were faced with the question of how economic forces in the city would change without him at City Hall.
Lee was able to navigate the political waters in part because he rose to power as a community activist and attorney who fought against unlawful evictions.
Constantly talking about “jobs, jobs, jobs,” Lee championed what became known as the “Twitter tax break,” a cut in the city’s payroll tax that persuaded tech companies to make home a seedy stretch of Market Street or stay there. By the time of Lee’s death, San Francisco’s new tallest building, Salesforce Tower, which replaced a malodorous bus terminal, symbolized the city’s turn in fortunes.
Yet the success in a turbocharged economy led him to focus on “housing, housing, housing” in his second term. Middle- and working-class tenants have departed San Francisco as property values have risen and as developers have sought to convert rent-controlled apartments into condominiums for the wealthy.
In 2014, Lee unveiled a plan to build or rehabilitate 30,000 housing units by 2020. Just in September, Lee said that more than 17,000 units have been brought online, and of those, 35% are permanently affordable.
Gavin Newsom was elected lieutenant governor in 2010, Newsom sought out Lee to replace him as an interim mayor appointed by the Board of Supervisors. Lee resisted.
By then, Lee had gained a reputation as an affable, humble, low-key bureaucrat, known for his chunky mustache and corny jokes. As city administrator, he somehow sidestepped the city’s pitched battles between moderate liberals and more left-leaning progressives.
“He did not always deliver a soundbite, or carry the room with unspoken charisma. Flash never mattered to him,” Breed said.
He said he would serve as interim mayor for only one year, until Newsom’s term expired. But later in 2011, he changed his mind and decided to seek a full term. Among those who pushed him to do so were former Mayor Willie Brown, the late Chinatown power broker Rose Pak, and Sen. Dianne Feinstein (D-Calif.), who was said to have persuaded him that San Francisco needed him.
Lee managed to overcome other hurdles in San Francisco. He managed to craft a sweeping law to retrofit about 5,000 earthquake-vulnerable wood-frame apartment buildings in the city, a policy goal that eluded his predecessor.
Lee leaves a legacy as the first Chinese American mayor of San Francisco, home to the oldest Chinatown in the United States. San Francisco was once the center of anti-Chinese sentiment, fostering anti-Chinese riots and attacks on Chinese-owned businesses.
Lee’s election was a milestone for San Francisco’s influential Chinese American population, many of whose ancestors came from China to San Francisco during the Gold Rush era but faced decades of ugly discrimination by both other residents and the government.
A local real estate expert compares those wanting to purchase a home in the Bay Area like “buyers … lining up [at] the Apple store.” Photo: Henrik Ahlen/Creative Commons
It’s a sellers’ market as home prices continue to rise, inventory falls
Despite some rumblings about a real estate bubble about to burst, home prices across the Bay Area’s nine counties rose by nearly 11% year-on-year to October 2017, according to the Mercury News, which reports that the region’s median sale price of a single-family home was $800,000. In Alameda County that number was $815,000, while in San Mateo and Santa Clara the figure easily surpassed $1 million. Home sales in the Bay Area fell in the same period. Some of that slowdown is attributable to the devastating North Bay wildfires, according to CoreLogic, which supplied the data, but it’s the cycle of low inventory and high prices that mainly accounts for sluggish sales activity, the article reports. The dearth of inventory is likely good news for those who do put their home on the market. As Tim Ambrose, president-elect of the Bay East Association of Realtors, put it: “Buyers are lining up like the Apple store.”
Where did all the hipsters go?
Customers at Arthur Mac’s Tap + Snack’s beer garden in Oakland. Photo: Sarah Han
While craft microbreweries and vegan restaurants seem to be proliferating at a rapid clip in the East Bay, this does not, it appears, signify that Berkeley or Oakland are hipster hubs. Neither is San Francisco, despite rumors to the contrary. According to the U.S. Hipster Index (yes, you read that right), compiled by MoveHub.com, the most hipster cities in the Bay Area are Santa Rosa, Modesto and Sacramento. The most hipster city in the country? Vancouver, Washington. How does one define hipsters you may well ask. MoveHub describes them thus: “… hipsters are a subculture of 20- to 30-somethings who position themselves as non-mainstream pioneers; free-thinkers and non-conformist conformists.” MoveHub uses five criteria to compile its ranking: number of microbreweries, thrift stores, vegan restaurants, and tattoo studios per 100,000 city residents, and rent inflation in the last year. Oakland ranks just behind San Francisco in the survey, which ranks 61st. MoveHub notes that bigger cities simply can’t compete in the index — Los Angeles is in 133rd place and New York is at 143rd — because “their hipsterness is diluted by their size.” Of course, there are many who would consider it a win coming in last in this particular league table!
The allure of the ‘petite’ size house — times three
1198 Cornell Ave. Photo: MLS/Red Oak Realty 1420 Harmon St., Berkeley. Photo: MLS/Marvin Gardens Real Estate 3750 Madrone Ave., Oakland. Photo: MLS/Red Oak Realty
Paying $800 per square foot for a home in Berkeley, where the average is nearer to $620, according to Redfin, may seem questionable, but there is something about diminutive houses — often referred to as ‘sweet bungalows’ or ‘cute cottages’ in real estate speak — that appeals. Curbed SF says the 786-square-foot, two-bedroom, “totally teal” bungalow at 1198 Cornell Ave., makes up with charm what it lacks for in size. Priced at $629,000, it has been on the market for 14 days. In Oakland’s Laurel neighborhood, its listing agents stress the charm of the 933-square-foot home at 3750 Madrone Ave., on the market at $649,000, putting it at $696 per square foot. Perhaps what it lacks in indoor volume is compensated for by front and backyard spaces that include a “protected vegetable garden, side yard, large deck area, dog run and a one-car garage.” Also coming in under 1,000 square feet is 1420 Harmon St. in Berkeley which is described as a “sweet two-bedroom, one bath bungalow on quiet street.” Listed at $695,000, the home is 928 square feet ($749 per square foot).
Don’t miss the Neighborhood Guides in Berkeleyside’s Real Estate section: from Albany to Uptown Oakland, these area profiles, curated by local real estate experts, include information on housing inventory, neighborhood hotspots, lifestyle, walkability and commutes.
Emma Carroll, a UC Berkeley grad student, is thinking about taking out loans just to pay what could be a substantially higher tax bill.
Jerry Pohorsky, an engineer in Santa Clara, might put off his plans to buy a new electric vehicle if a federal tax credit gets cut.
And John Hansen, an attorney in Castro Valley, is considering moving to Georgia in part to avoid paying some California income and property tax he could no longer deduct from his federal bill.
As Republicans square the last details of President Donald Trump’s massive tax overhaul before a final vote in Congress, many Bay Area residents are running the numbers and worrying that they’ll end up paying more.
The plan is the biggest rethinking of America’s tax code in a generation, though it’s still a work in progress, with a congressional committee ironing out differences in versions passed by the House and Senate. For many people around the country, it will mean lower tax rates and a simplified filing process. Trump and other supporters say it will jump-start the economy and generate jobs.
But the bill slashes many housing and state-tax deductions that are popular in the Bay Area. California’s high taxes and the Bay Area’s high home prices will likely make our region one of the most adversely affected places in the country, and accountants and tax experts say there’s not much taxpayers can do to avoid it.
“Given the way the tax bills are written now, the Bay Area is certainly a big loser from this plan,” said Jack Citrin, a UC Berkeley professor who has written a book about California tax policy.
Both bills will ax the deductions for state income tax. That won’t be a big deal for most Americans, but California has some of the highest income taxes in the country — and nearly half of Bay Area residents take advantage of the state and local tax deductions. Of the top 7 U.S. counties with the highest average state and local tax deduction, four — San Mateo, Marin, San Francisco and Santa Clara — are in the Bay Area, according to IRS data.
The tax plan also limits some of the biggest financial incentives for buying and owning a home. Both versions of the bill cap the property tax deduction at $10,000, while the House version limits the mortgage interest deduction to loans of up to $500,000, down from the current $1 million. (Existing loans would be grandfathered in.) The median Bay Area home price is about $800,000, compared with about $200,000 nationwide.
“This doesn’t affect 95 percent of homeowners in the country, but it affects basically everybody here,” said Joseph Salazar, a tax specialist and financial adviser in San Jose. “If you have a young couple looking to buy their first house, why would they want to move here?”
Salazar predicted that without these big financial incentives to buy a home, the Bay Area could see a slump in the housing market and a growing percentage of renters. However, he said people shouldn’t necessarily plan on selling their home, as the bill also makes fewer homeowners exempt from paying capital gains tax on the profit from selling their house.
John Hansen, 79, of Castro Valley, is thinking about leaving California. (Photo provided by John Hansen)
Losing the deductions is a big deal for Hansen. Though the interest deduction from his more-than-$500,000 mortgage would be grandfathered in under the tax plan, he would lose the state and local tax deduction that he says has helped save him “a substantial amount of money.” He expects his tax bill to go up under the GOP plan.
“Maybe the only answer is to move to another state,” said Hansen, who said this could be another incentive for him and his wife to move to Atlanta to be closer to their grandkids. As a Democrat, he said he thought Trump and Republicans were trying to write a tax bill with increases that “mostly affect people who don’t vote for them.”
Even some of Trump’s biggest local fans are questioning the tax plan’s effect on their pocketbooks. Lori Drake, the former chair of the Alameda County Republican Party, said she supported the idea of simplifying the tax code and most of the bill, but opposed getting rid of deductions for state income and property tax, which she uses.
“We should be against that,” she said, “because it’s not fair to get double-taxed on anything.”
Losing those deductions isn’t bad news for everyone in the Bay Area. The bill would nearly double the standard deduction, raising it to $12,000 for individuals or $24,000 for married couples, and most people who take the standard deduction can expect to pay fewer taxes under the bill. The Senate bill also would double the child tax credit, to $2,000 per child, while the House bill would raise it to $1,600.
The Bay Area residents who will benefit from the tax plan, accountants predict, include renters with relatively low incomes who don’t pay a lot of state income tax and retirees who don’t have outstanding mortgages. The super-rich will also likely see reduced tax rates outweigh their lost deductions, and will benefit from other provisions like a reduction of the estate tax.
“Looking at our situation, I think it’s going to be a better deal,” said Bob Jackson, 65, a San Jose Democrat and retired mail carrier. He and his wife take the standard deduction and have no mortgage on their mobile home, which they rent a space for instead of paying property tax. “It’s good for people like us.”
On the other hand, the bill could mean higher taxes for graduate students like Carroll, who’s halfway through her six-year PhD program in molecular and cell biology. The university waives $13,000 of her tuition each year for doing research. Under the House bill — but not the Senate bill — that waived tuition would now be considered taxable income, added to the $35,000 annual research stipend she currently pays taxes on.
Emma Carroll, a UC Berkeley grad student, studies the folding of proteins in her lab. She’s worried about having to pay a higher tax bill under the Republican tax plan. (Courtesy Emma Carroll)
She’s estimated if the House bill passes, she’d have to pay about $1,500 a year in new taxes, although some of that could be mitigated by the higher standard deduction. She’s planning to take out loans to pay for that.
“If I have to pay taxes on a considerably larger amount of money that I never actually make, it’s going to be hard to continue my studies,” said Carroll, who did not want her political affiliation disclosed.
Some students have called on Berkeley and other universities to help support graduate students if the tax change goes through, possibly by reducing their tuition. Meanwhile, the House bill also repeals a provision that allows current and former students to deduct up to $2,500 in student loan interest.
Other tax provisions that are popular in the Bay Area and could be lost include the $7,500 credit for the purchase of an electric vehicle, which helps make some EV prices comparable with gasoline cars. The Senate bill keeps the credit, but the House bill nixes it.
That’s bad news for electric vehicle aficionados like Pohorsky, a former president of the Electric Auto Association of Silicon Valley. He bought his current ride, an electric Toyota RAV 4, in 2002, when plug-in cars were still a curiosity. After 15 years, it’s losing battery capacity and showing its wear, so Pohorsky has been planning to buy a new Chevy Bolt.
But without the $7,500 credit, he’s not sure he’d buy the $36,600 car. It’s a calculation that could lead many like him away from EV purchases.
“It will slow down electric vehicle adoption for sure, and that affects all of us,” said Pohorsky, a Republican. “The number of electric cars on the road is only about 2 percent, so we still have 98 percent of the population to convert.”
The tax bill also cuts deductions for victims of disasters like earthquakes, wildfires and hurricanes. There are special exceptions for victims of Hurricanes Harvey, Irma and Maria — but not for those hit by the blazes that devastated the North Bay. (Republican leaders have said they plan to pass separate legislation for California wildfire victims.)
Still, there are many in the Bay Area like Jan Soule, a San Jose Republican retiree from the tech industry, who says the tax plan “makes sense.” The house she and her husband have owned for decades is paid off, and they have relatively low property taxes thanks to California’s Proposition 13 — so they won’t miss many of the deductions.
She doesn’t believe her party is using it to punish blue states. And if some Californians are angry about having to pay a higher tax bill, Soule said, “maybe they’ll wake up to the fact that our state taxes are out of control.”
