For nearly five years, Sam Altman, a self-made multimillionaire and president of top Silicon Valley start-up incubator Y Combinator, had to live with his three siblings as roommates thanks to San Francisco’s astronomical housing prices.
“All of my siblings were living in my house in San Francisco because they couldn’t afford rent otherwise,” Altman tells CNBC Make It.
The tech boom has pushed real estate costs in Silicon Valley through the roof. The median home value in San Francisco is $1,204,700 and the median rent is $4,350, according to real estate data company Zillow. In the larger Bay Area, it’s $3,500. The surge is making it hard for even the most well-paid professionals to cover their expenses. Others, unable to afford the astronomical real estate prices, resort to living with untenable commutes.
But housing prices are a problem across California. The median home value in the United States is $200,400, according to Zillow. The median home value in California is $503,100. The corresponding median rent prices are $1,600 and $2,675, also according to Zillow.
Altman says he has an idea to fix this issue plaguing his state.
One option he has publicly proposed is shutting down the construction of the $64 billion bullet train, which is expected to run from San Francisco to Los Angeles by 2029 (two extensions, one to San Diego and one to Sacramento do not have projected completion dates). Instead of building a super-fast regional train, Altman suggests redirecting those resources to build up more robust local train systems, enabling people to commute more efficiently.
“If we make it easier to quickly travel longer distances in/out of work hubs, the intense demand for housing can be diffused to communities that can handle it,” says Altman, in a blog post published in August, on what he terms the “big housing problem in California.” He gives Stockton, Calif. as an example of such a suburb — according to Google Maps, it’s about 80 miles and, with traffic, over a two-hour drive from San Francisco.
According to Altman, California traffic is some of the worst in the country, and local public transit systems “are not very good.” Los Angeles and San Francisco cinch the first and second top spots respectively on a ranking of the worst traffic congestion in the United States compiled by navigation company TomTom.
“When we went around the state and talked to people about what they really need, just regular middle class people, what they really would like is better local transit systems,” Altman tells CNBC Make It of the state-wide focus groups Y Combinator conducted in March through June of this year. “So they’d like the ability to live an hour outside of San Francisco in a much cheaper area but be able to get into the city to work. So there’s a lot of enthusiasm for a much better Bay Area transit system.”
Altman also argues the bullet train will be outdated before it is even built. “By the time it’s completed, we will have new and much better technology, like high-speed self-driving cars, electric airplanes, and maybe even Hyperloops,” he writes. The Hyperloop is a transport system that Elon Musk’s SpaceX is working to develop, where pods would whisk people through tubes at speeds over 700 miles per hour.
Altman knows there is not a pot of $64 billion sitting ready to be redirected from the bullet train. Although the first phase, running from Silicon Valley to Central California, is expected to begin passenger service in 2025, according to the 2016 business plan, much of the future construction is still unfunded. The California High-Speed Rail Authority, the state agency in charge, says it will seek additional money when the first phase is finished.
According to the Authority, some of the money will be used to improve smaller, local train systems so that they can connect to the high-speed rail system, but it will not be used for more widespread local transit system improvements.
Altman says the system is not yet fully funded because many investors aren’t on board with the project. “There are people that would be willing to invest in a transit system they felt more confident about,” like his local idea, he tells CNBC Make It.
Altman is asking for digital signatures on his petition to redirect bullet train funding of those who support the idea as a way to measure its popularity.
Easing California’s housing problem is only one of Altman’s 10-point agenda for the state. The ambitious plan also includes creating a “fair government,” improving education and access to health care and shifting defense spending to research and development for innovation research. He is looking to identify candidates for Governor, Lieutenant Governor and US Congress who he can support.
“The goal of all these proposals is not to say like, ‘Here’s the thing we should definitely do,’ but to start conversations,” he says.
Altman himself is not struggling to pay for housing. In 2005, he launched Y Combinator backed Loopt, a service that allowed people to share their location with other people on their smartphones. In 2012, Green Dot bought Loopt for $43.4 million. Since 2014, Altman has been the President of Y Combinator, which has funded top-tier tech companies including Airbnb, reddit and Dropbox. Collectively, the companies Y Combinator has funded are worth $80 billion.
But the tech executive professes a genuine interest in improving life for residents of the Golden State. “I like to be a responsible citizen. California is my home. I think [expensive housing is] one of our great threats as a state, as a prosperous state. I think it’s in the way of people having the lives they want. To my friends, my neighbors, my family…I care about that.”
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Source: Tech CNBC
Silicon Valley exec wants to fix California’s housing crisis by scrapping billion bullet train