If it makes sense intuitively, it’s probably wrong.

Shortly after Facebook moved from Palo Alto to east Menlo Park in 2011, a reporter from the New York Times contacted me about the alleged effect the move was having on home prices in the adjacent city of East Palo Alto and in Menlo Park’s Belle Haven neighborhood.  He’d heard that Facebook techies were driving up prices in these traditionally affordable areas.  I told him I didn’t believe it, and as I told him why, I could tell that I was ruining his storyline–and my chances of getting quoted in the New York Times.


The idea makes sense intuitively, right?

  • Facebook employees are well-paid, and
  • of course Facebook employees want to live near work, so
  • of course it’s Facebook employees who are driving up home prices in EPA and Belle Haven

Except that

  • Facebook employees are techies, and
  • in the past eighteen years, only one techie client has told me he wanted to live in EPA or Belle Haven, and that was two years before Facebook was even a part-time operation run out of a Harvard dorm room

But you can find all sorts of postings on the Internet claiming or implying that Facebook has driven up home prices and rents in the neighborhoods surrounding its campus, displacing the low-income residents of Belle Haven and East Palo Alto.

Because it just makes sense, intuitively.  And because every complex social issue needs (or gets) a simple emotional storyline and a face, and the face of the EPA/Belle Haven gentrification storyline is Facebook.

Except that a study requested by residents of East Palo Alto, alarmed by Facebook’s proposal to expand its campus to accommodate 6550 more employees, finds that of Facebook’s current 7475 non-contract employees, just 28 live in East Palo Alto and 18 in Belle Haven.  They’re roughly 1 percent of East Palo Alto’s population, and about 3 percent of Belle Haven’s population.

I mention this not because I favor Facebook’s expansion, although it occurs to me that we might be the only community in the country that would greet 6550 new well-paid jobs with jeers and catcalls.  Yes, it means even more traffic and even more pressure on the cost of living.  But I strongly believe that for most (but not all) people in most communities, development, with all its drawbacks, is better than the alternative.  Because the alternative usually isn’t what everyone thinks it is:  the status quo.  Communities are like people:  they either move forward into a challenging and uncertain future, or they fall back.  Stasis–“a state or condition in which things do not change, move, or progress”–isn’t achievable.

What do I mean?  Let me answer that with a few unanswerable questions everyone should ask.  Does limiting expansion guarantee that Silicon Valley stays 2016 forever?  Or does it mean the Valley loses momentum as development goes elsewhere?  If the latter, what happens to the wallets of the people who remain?  Do we turn into one of those rust-belt cities that loses 10 percent of its population every ten years?  Would that make the Valley a better place, or just Buffalo without snow?  Is there consensus on the level of economic activity that’s acceptable?  Is it 2010 Silicon Valley?  1995 Silicon Valley?  Or should we throttle it all the way back to 1967?  And do I hear the real old-timers calling for 1957?  Once at the ideal level, what delicate fine-tuning by bureaucrats and elected officials with one eye on the next election keeps it there?  Is the business tax proposed by the Palo Alto city council, to pay for transportation improvements that haven’t been identified and may not exist, an indication?

I don’t know the answers.  No one does.

It’s undeniable that home prices and rents have increased in EPA and Belle Haven since 2011–as they have everywhere else in Silicon Valley.  And it’s undeniable that the economic boom created by the tech industry (including Facebook) is responsible.  It’s also undeniable that the tech industry is changing the face of Silicon Valley (again).  And it’s undeniable that the tide of money flooding the Valley has negatively affected, yes, the low-income, but also the middle-income.  Yesterday a panhandler in downtown San Jose hit me up with “sir, you’re wealthy”.  Funny, I don’t feel wealthy.

But science has confirmed what I said in 2011:  that Facebook would have no direct impact on nearby home prices and rents.  Which confirms that the world is sufficiently complicated that if an idea makes sense intuitively, it’s probably wrong.

I could have told you as far back as 2006 that a “Facebook effect” was unlikely.  How?  Because in 2006 I had a listing in Belle Haven that came on the market just as home prices there were collapsing under the weight of the subprime lending crisis.  The house wouldn’t sell, so I had an inspiration:  put an open house sign on Willow Road during afternoon commute time, two Thursdays in a row.  I figured that of the zillion or so tech workers inching toward the Dumbarton Bridge on their way home to the East Bay, surely a few would be interested in ditching the commute from hell and living closer to work.

It just made sense, intuitively.  No one showed up.

copyright © John Fyten 2016








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