The tight supply of global talent and its effect on local housing and economic development

by Ryan Streeter on April 23, 2014. Follow Ryan on Twitter.

What drives gentrification? According to Jim Russell, housing supply gets all the press but it’s actually something else:

A tight supply of global talent, not housing, is the problem. San Francisco is an old haunt for global talent. In 1970, the combined statistical area (CSA) of San Jose-San Francisco-Oakland sported the top per capital personal income in the United States. In 2010, the CSA was still number one. CSA income rankings are volatile, which doesn’t say much for the supposed link between nice climate and winning cities. For per capita income in 1970, New York was second, Chicago third, Detroit sixth, Minneapolis seventh, Cleveland ninth, and Philadelphia tenth. The global economy, not weather, favored those places. Wherever wealth agglomerates, you will find passive gentrification. For a Rust Belt city such as Cleveland, the global economy moved elsewhere. San Francisco has been sun kissed for almost half a century…Regardless of zoning, a neighborhood with residents working a global job will displace those working a local job. A massive increase in housing supply in response assumes status quo migration patterns. It also assumes status quo macroeconomic conditions. Zoning reform considers neither changes in migration flows, nor macroeconomic shifts. Just as manufacturing betrayed Detroit and Cleveland, innovation will betray San Francisco.