Can San Francisco be saved?
The first city of the U.S. tech economy is grappling with homelessness, housing affordability, and deteriorating livability. If its leaders don’t get their act together, San Francisco just might chase out the booming industry that funds it.
Subscribe to unlock this article and get full access to Fortune.com
Already a member? Login
This article is part of a Fortune Special Report on Rethinking the City.
London Breed is making the case for tough love. It’s early January, and the first African-American woman to be elected mayor of San Francisco is giving an inaugural speech that neatly encapsulates the hope and despair that define San Francisco today. The city enjoys a thriving economy with low unemployment, a gleaming new arena for the multiple-championship-winning Golden State Warriors (poached from its less-wealthy neighbors across the Bay in Oakland), and its status as the “capital of the resistance” to Donald Trump (House Speaker Nancy Pelosi represents the city in Congress). But then, inevitably, there is the city’s battle with homelessness and housing affordability. “The suffering on our streets, it offends our civic soul,” says Breed, 45, evoking the plight of the unhoused but also their impact on everyone else. “We are no longer accepting that compassion means anything goes on the streets.”
Breed’s prescription is more housing—a goal that, she insists, can’t be thwarted by letting “disingenuous warnings of shadows and height get in the way.” This last bit is a nod to objections that all too often stymie construction projects in the city. She also directs her ire at the 11-member Board of Supervisors, seated in the fifth row in front of her, who recently voted their disapproval for a statewide bill that would have eased housing density restrictions. “Density,” says Breed, “is not a dirty word. We can’t say we need more housing and then reject policies that allow us to actually build housing.”
Hours later, Breed is onstage again, this time a block away at the Bill Graham Civic Auditorium, to swear in Chesa Boudin, a former public defender who’s been elected district attorney against a candidate favored by Breed. Boudin, 39, vowed during his campaign not to prosecute so-called quality-of-life crimes like public urination and sex solicitation. It has been much commented on that Boudin’s parents were members of the Weather Underground, the radical-left militant organization, who were sent to prison on murder charges when he was an infant. And the rapturous crowd that has come to cheer for him represents the city’s “progressive” wing, a left-of-the-left cohort that mistrusts Breed’s centrism. Housing isn’t on Boudin’s agenda, but social justice is. He promises to end the system of cash bail and blames a wave of car break-ins on wealth inequality. Breed, who grew up in San Francisco public housing, has called for a crackdown on lawlessness. But Boudin, who is white, a former Rhodes scholar, and a transplant to the city, tells the crowd that San Francisco “is ready to leave the racist, inhumane, ineffective ‘tough on crime’ policies in the past.”
It is tempting to call out the contrast between Breed and Boudin as a continuation of San Francisco’s unique left-vs.-left politics, a battle that has raged for years. Yet the city’s squabbles lay bare bigger problems. San Francisco’s crises are getting worse, with no end in sight and little indication its leaders plan to work together to solve them. Even as the local economy soars on the strength of the technology industry that dominates the Bay Area, homelessness levels have surged. Housing is so scarce and expensive that many lament the increasing inability of cops, teachers, and the like to afford a home.
If tech leaves, it could be like banking leaving in the 1980s.Chris Larsen, San Francisco native and executive chairman of fintech company Ripple
The city has become a punch line—and a punching bag. Official San Francisco takes umbrage at the scrutiny of outsiders who have weighed in on its dystopian cityscape: Trump, Fox News, and attendees at a JPMorgan health care conference, to name a few. Yet in the next breath these same boosters typically acknowledge, if quietly, that the criticism is valid.
Already there are signs of a business backlash. Companies from $35 billion-in-valuation tech-payments startup Stripe to stalwart brokerage Charles Schwab have announced plans to move their headquarters out of the city. They’re following in the footsteps of drug distribution giant McKesson, which relocated its HQ last year to tax-friendly Texas. Another gut punch came in December when Oracle announced that this year it would hold its annual OpenWorld developer conference—a massive tech gathering and mainstay in the city for more than two decades—in Las Vegas. Twitter CEO Jack Dorsey has told investors his company will look to expand outside its home city, saying “Our concentration in San Francisco is not serving us any longer.” And serial entrepreneur Chris Larsen, the executive chairman of fintech startup Ripple, frets that a tech exodus could mimic the earlier departure of another once-dominant industry. “If tech leaves, it could be like banking leaving in the 1980s,” he says, referring to a dark era in the city’s economic past.
Though colored by local politics, San Francisco’s challenges resonate well beyond the Bay Area. The city’s problems are hardly unique—either in California, where nearly 27% of the country’s homeless population lives, or in the rest of the U.S., where income inequality helps explain once-in-a-generation political upheaval. There’s also no denying that the city’s outsize success exacerbates its woes. “It’s still where everyone in the world wants to come,” says David Chiu, an assemblyman who represents San Francisco in the state legislature. “San Francisco is viewed as the beacon of openness and diversity and innovation, whether you are a first-generation immigrant, work in a restaurant, are a tech founder, or an LGBTQ kid not supported by your family.” The question is at what point the city’s many challenges begin to dim that light.
On a recent afternoon I go for a walk that most tourists in San Francisco stumble upon only accidentally—and then exit as quickly as possible. My tour guide is Joshua Bamberger, a physician who has devoted his career to public service. He’s 57 and wears a faded Boston Red Sox cap over his bald pate. A longtime official at the city’s Department of Health, he helped buy, build, or otherwise develop much of the city’s housing for the homeless. We start in the Tenderloin, a perennially down-on-its-luck neighborhood immediately next to the flashy Union Square shopping district. Bamberger, who worked for the city for 27 years, proceeds to show me many of the 43 apartment buildings where his department placed patients with a wide variety of ills and needs.
Last year Bamberger joined the University of California San Francisco, the state’s premier medical school, to study homelessness. His appointment was funded by a $30 million grant by Marc Benioff, the software titan, and his wife, Lynne. The idea is that a rigorous understanding of the problem would lead to solutions based as much on the data as on compassion. We pause in front of the Camelot Hotel, a dreary residential building with no private baths, and then the Windsor, a similarly downtrodden relic. Both are among the first efforts by the city to house the homeless. Nearby are newer, starkly different buildings, including the Curran House, a brightly painted apartment building. Bamberger says the medical services provided at the older and newer buildings are similar, as are the health issues its residents face. Yet one of the brighter facilities, 149 Mason Street, experienced a 2% mortality rate during a five-year stretch of his tenure, compared with 7% at the drabber Windsor during the same period.
Our tour runs through the good, the bad, and the ugly of San Francisco’s approach to homelessness. The “supportive housing” the city funded is a public sector triumph, putting roofs over the heads of 7,700 people at any given time. Everywhere, though, are squalid tent encampments that never fail to shock in such a rich city. I have lived in San Francisco for more than 15 years and share the prevailing concern that conditions have deteriorated dramatically. Bamberger and I step over human feces, a commonplace occurrence that, together with ubiquitous intravenous drug needles, has taken on metaphorical power for civic failure. “We are doing so much,” says Bamberger. “But we are not making progress. We cannot keep up with the disparity of wealth.” The dichotomy, he says, is “hard to reconcile. This city … ” he says, his voice trailing off. “It breaks your heart.”
The official charged with mending what is most broken is Jeff Kositsky, head of the Department of Homelessness and Supportive Housing. Mayor Ed Lee, Breed’s predecessor, who died suddenly in office two years ago, created the department in 2016 and tapped Kositsky, a former nonprofit executive, to take on an assignment several others had turned down. Kositsky’s unenviable task is to simultaneously figure out how to house a growing homeless population while also responding to community anger over the unsanitary and possibly dangerous encampments in their midst.
Kositsky’s overall approach mirrors the goals of the Benioff effort at UCSF by focusing on data. He has built a “coordinated entry system,” a database of people on the streets that documents their needs and problems. He says for too long the city hosted a kind of “homeless talent competition,” a system where the best nonprofit case managers, including himself, helped land their clients preferred spots—as opposed to a more efficient allocation of resources. “From about 2005 to 2016, the time our department started, San Francisco nearly doubled its spending on homelessness,” says Kositsky. “But during that time, we saw a 13% increase in homelessness.”
For all the years of trying, the city’s approach amounts to an endless series of experiments—and a tragic game of Whac-A-Mole. It has built a network of “navigation centers,” shelters with up to 200 beds that allow residents to bring their pets, belongings, and partners. (Other shelters have stricter rules, causing many to opt to stay outdoors.) Kositsky says in late 2016 there were 39 encampments with six or more tents. “Today there are zero,” he says. “There are no large encampments that have been in place for a month or longer.”
Statistics, of course, don’t always tell the full story, and it is Kositsky’s “for a month or longer” qualifier that undermines his assertion. The city’s public works arm, in conjunction with the homelessness department, conducts frequent sweeps of the camps—moves opposed by homeless advocates for their cruelty—that effectively serve to push people from one sidewalk to another. On a recent day cycling through the Mission neighborhood, for example, I see multiple squalid encampments, some above and some below the six-tent marker. For all the efforts, the city’s homeless population has grown from below 7,000 to more than 8,000 over the past five years.
As with everything else in San Francisco, solving homelessness is deeply political. A citywide ballot initiative in 2018 to tax businesses with more than $50 million in annual revenue to pay for additional homeless services won 61% of voter support. Benioff, whose Salesforce is one of as many as 400 affected companies, supported and helped finance the measure. Breed, as well as business leaders like Twitter’s Dorsey, opposed it, saying the city needed to make do with the estimated $380 million it already spends annually on homeless services. Although the city is collecting the tax, the funds are being held in limbo because of a court challenge by an anti-tax group. Says Benioff: “It’s an emergency situation. We desperately need more money.”
A portion of that funding, if it finds its way into government coffers, would go to yet more housing for the homeless. Margot Kushel, director of UCSF’s Center for Vulnerable Populations, as well as the research project Benioff is underwriting, decided as a young doctor to focus her career on the housing aspect of homelessness. “It became clear to me that health care is such a small part of the mix of what makes people healthy, and that with people who are homeless without housing, there was no health. It hardly mattered.” Her conclusion was that treating people for illnesses, only to see them return quickly to hospitals or clinics with ailments exacerbated by conditions on the street, made no sense. Says Kushel: “I often say there is no medicine as powerful as housing.”
It all seems so simple. If housing is the problem, then what’s needed is more housing. But in San Francisco, nothing is simple. Finding places to build has always been a problem in the city, surrounded as it is by water on three sides and packed into a scant 47 square miles. The politics of NIMBYism (“Not in my backyard”) exacerbated matters, pairing the strange bedfellows of homeowners wanting to preserve the tranquility of their neighborhoods with activists opposed to gentrification and the perceived greediness of real estate developers. Some 75% of the city, most of it in the western reaches approaching the Pacific Ocean, was “downzoned” years ago, meaning it is next to impossible to build anything there other than single-family homes.
Enter Scott Wiener, the state senator representing San Francisco, who for three consecutive years has tried and failed to pass legislation to stimulate construction statewide. Wiener’s most recent bill would have “upzoned” areas near mass transit centers, making it tougher for locals to oppose development. At 6-foot-7, Wiener looms over the housing debate in San Francisco in every way. He is a walking, talking, tweeting machine when it comes to housing statistics. “We rank 49th out of 50 states in homes per capita,” he says. “In the early ’60s, when we were a state of 15 million people, we were building between 250,000 and 330,000 units of housing a year. We’re now a state of 40 million, and we build between 70,000 and 90,000 units a year. So our population has almost tripled, and housing production has collapsed. We planted negative seeds, and we are now paying the price.”
The housing facts aren’t in dispute. What to do about it is. Opposition to Wiener’s bill, which was voted down in late January, came from affluent parts of the state but also from housing advocates who saw it as a boon for developers at the expense of sufficiently subsidized housing. The challenge, they say, isn’t so much improving density as ensuring that housing production becomes more equitable across income levels. Peter Cohen, codirector of the Council of Community Housing Organizations, sees a direct line from luxury housing development to income inequality to homelessness. “We’re continuing to see the very, very bottom of the economic spectrum get worse,” says Cohen, whose four-person outfit, which represents 24 member organizations, wields tremendous power over San Francisco housing policy. “And that ain’t going to be solved by building new condos” in the city’s fastest-gentrifying neighborhoods, including the South of Market district, home to his organization’s office.
It’s an emergency situation. We need more money.Marc Benioff, Salesforce founder, on why he backed a controversial new corporate tax to fund homeless services
Arguments can be made on every side of the debate, including the cultural and social benefits of preserving communities for the people who live there. Advocates in Chinatown, for example, have fought for years to keep market-rate development out of the neighborhood, which is enticingly close to downtown. “Our concern is that Chinatown is the Mission in 1998,” says Malcolm Yeung, deputy director of the Chinatown Community Development Center, referring to the Latino neighborhood that has become ground zero of techie condos, restaurants, and bars, a trend that began with the dotcom bubble. “Chinatown has a deep, historic identity tied to a people-of-color community,” says Yeung.
Newcomers and old-timers alike agree on the need for change but see little common ground on next steps. “We let the problem get so bad that all of the true solutions feel like whiplash,” says Laura Foote, executive director of a pro-housing organization called YIMBY Action (the “Y” stands for “yes”). Foote was a vocal proponent of Wiener’s failed housing legislation, Senate Bill 50. “I have sympathy for people who feel like SB-50 goes too far,” she says. “Those same people will say this isn’t going to solve all problems. But that’s true of all laws. There is no law that solves all problems.”
Seven years ago the University of California San Francisco’s medical school asked real estate developers to bid on a parcel of land it no longer wanted. Located on the edge of a leafy western neighborhood called Laurel Heights, the 10.3-acre site housed a 1950s-era office building and row after row of parking spaces. Prado Group, a local developer, together with another partner, won the ensuing auction and bought the land in 2015 for just under $90 million. Its plan, which requires an additional $700 million in financing, was to build 13 more structures, including 744 housing units. Twenty-five percent of those would be offered at government-defined “affordable” rates and set aside for senior citizens.
What happened next shows the difficulty of getting things done in San Francisco. Dan Safier, CEO of Prado, calls the Laurel Heights project a “poster child for process” in the city. His firm began holding community meetings in the middle of 2015, hosting more than 170 sessions, in places from auditoriums to coffee shops. It accommodated a city planning department request that the existing office building be cleaved in two to create a pathway to the neighborhood. The project finally made its way through the city’s planning commission last September. The full Board of Supervisors, whose members can torpedo projects they don’t like, approved it in November. Then, in January, a neighborhood association filed suit, arguing the project violates California’s environmental-impact law.
Suffice it to say that Prado has yet to break ground—and won’t anytime soon. Safier says the soonest the litigation could make its way through courts is September and that it will take an additional 18 months to get permits, arrange financing, and start building. The best-case scenario would see completion in 2027. Says Safier: “This represents 50 years of structural problems that have gotten worse over time.”
City governance itself is a structural problem. A municipality that is also a county of just under 900,000 residents, San Francisco has 37,000 employees and an annual budget of more than $12 billion. It is governed by a complicated and often duplicative web of 52 departments and 27 commissions. There is a police department and a police commission, for example. Mass transit, the airport, and the port are three separate entities. And a favorite response to crisis is to create more bureaucracy. In late January, when the powerful head of the city’s public works department was arrested by the FBI on corruption charges, a supervisor suggested creating a new commission to oversee the department and, for good measure, breaking it in two.
As a result of what doesn’t work, well-meaning San Franciscans take matters into their own hands, often with a spin on what locals call “San Francisco values.” Larsen, the Ripple cofounder and a San Francisco native, got so fed up with the car break-ins in his tony Russian Hill neighborhood that he personally funded security cameras to capture images to help the police. He stresses that the cameras he buys, a program he has expanded to other neighborhoods, don’t use facial recognition, automated license-plate reading, or audio. Says Larsen: “It’s the perfect balance between privacy and safety.”
San Franciscans have attempted novel fixes for even the most severe problems. Six years ago Doniece Sandoval, a veteran public relations executive, decided to help the homeless by creating a mobile shower service called Lava Mae. The nonprofit emulates the best practices of the hospitality industry by calling the people it serves “guests” and “unhoused neighbors.” It has expanded beyond showers by hosting periodic “pop-up care villages” outside the main branch of the San Francisco Public Library, featuring services including wound care, haircuts, massages, hot lunches, and even a snappy jazz band.
Sandoval says she figured her pilot program would serve as a temporary demonstration project for the city and that city officials would “push me out of the way and say, ‘We’ve got it.’ ” The city did institute a public toilet service, but not showers. She recently stepped down from running Lava Mae, which is focusing on training nonprofits in other cities on how to replicate its offering. Sandoval acknowledges exhaustion and frustration with the status quo. “The vast majority of people here care,” she says. “They just don’t know how to help.”
Lowell Caulder might be the most quintessential San Franciscan I’ve met. Black and gay, from a working-class family in Fort Wayne, he knew as a teenager he wanted to leave Indiana. (“Really quickly,” he says.) He interrupted his studies at Harvard Business School to start a mobile dentistry business in San Francisco. In its early days, Studio Dental parked a converted trailer in front of growing tech companies like Dropbox and offered care to their mostly young employees. When Caulder and his business partner decided they needed a permanent space, they found one in the Tenderloin for the same reason the neighborhood once housed longshoremen and other temporary workers in its residence hotels: It was cheap. “It was the only place we could find,” he says.
Despite having located his business in one of urban America’s most challenging neighborhoods, Caulder, 33, remains bullish on San Francisco. He’s at once a capitalist who craves the rewards of entrepreneurial success and a true believer in the values that make San Francisco unique. Over breakfast in December, I ask him if San Francisco needs its version of Rudy Giuliani, who before his turn as the Trumpian caricature he is today was “America’s mayor,” credited with cleaning up New York City. Caulder suggests he wants the cleanliness without the nastiness. “As an entrepreneur, I know rules spur creativity,” he says. “And if our rule is that I can’t stop you from shitting on the sidewalk, then that forces us to increase our cleaning services, to build 24-hour bathrooms, to meet people where they are. I’m okay with that.”
Caulder’s San Francisco, in other words, is at peace with its urban quirks while striving to be livable: “We don’t want to displace people who are here. We want to protect immigrants and the least powerful people in our community. We want it to be safe. I’m fine with those rules. But let’s accept them and then get creative with solutions. I think that’s the only way to do it and not have Giuliani’s San Francisco.” Listening to him, you just might envision a San Francisco—and a country—where well-meaning people listen to one another and work together on thorny problems. If only it were that easy.
Editor’s note: An earlier version of this article stated that London Breed is the first woman to be elected mayor of San Francisco. She is the first African-American woman to be elected mayor of San Francisco.
A version of this article appears in the March 2020 issue of Fortune.
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—5 big ideas for fixing global cities’ most daunting challenges
—Did the “techlash” kill Alphabet’s city of the future?
—20 maps charting the rise of the modern megacity
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.