San Francisco, City of Opportunity

This past week Price Waterhouse Coopers (PwC) released the fourth edition of their “Cities of Opportunity” study that has been commissioned by the Partnership for New York City.

Cities of Opportunity Report

In the words of the report, its purpose is to:

Cities of Opportunity 2011 makes its fourth analysis of the trajectory of 26 cities, all capitals of finance, commerce and culture—and through their performance, seeks to open a window on what makes cities function best.

I was interested in the report because, obviously enough, the success and good fortune of a real estate market is strongly tied to the success of its surrounding area. All you need to do is take a look at Detroit, MI real estate price to see how tightly wed the two are. San Francisco also takes a lot of flack for our socially progressive positions, so I was curious to see what the report had to say about the negative or beneficial impact of such policies have on cities (and therefore, on real estate values).

While Republicans in America would have you believe that low taxes are the only thing required for success, the report does a phenomenal job of refuting that simplistic thinking by demonstrating that:

… the most globally competitive cities are almost always those in which the men and women who generate a city’s intellectual resources are offered professional and personal surroundings that can reasonably ensure their health and safety. Put another way, a city’s creators and innovators—those who design and devise its products (whether buildings, financial instruments, media or works of art) and set its trends—actually choose where they want to live.

The most successful global cities are no longer about the production or conversion of natural resources – who can make widgets for cheaper than anyone else – but instead are driven by intellectual resources that are created by women and men who place a high emphasis on their health and safety and the enjoyment of their surroundings, amongst other things. The report goes on to say that:

Intellectual capital and innovation has the highest average positive correlation with every other indicator. Health, safety and security has the second highest. And the two are more positively correlated to each other than is the case with any other indicators. According to the data, therefore, the successful modern urban economy is reliant on, if not yet solely the product of, intelligence and social well-being—a methodological conclusion that seems not so much to challenge any theory as to confirm common sense.

The report is 86 pages in total, and includes interviews with some of the thought leaders involved with the study. While all of the interviews are worth reading for their unique perspective on what makes a city great, I really wanted to highlight the following Q&A from Judith Rodin of the Rockefeller Foundation:

Q: [asked of Judith Rodin] At the Rockefeller Foundation, you’ve also been deeply involved in urban improvement. What makes cities more livable?

A: We’ve identified three critical types of infrastructure that make a city livable. The first is its physical infrastructure, which makes a city attractive and easy to navigate but also relates to its capacity to withstand climate related shocks and other emergencies. This physical infrastructure includes diversity of transportation options, good housing and access to clean water. Second, livable cities have a strong and resilient economic infrastructure, which means they must be diverse enough economically to withstand financial shocks and innovative enough to seize opportunities. Finally, cities must be sustained by a resilient social infrastructure. When all three of these infrastructures are strong, a city will not only create a better quality of life but also greater economic success.

I worry a little bit about San Francisco’s physical infrastructure, particularly when it comes to transit. As I wrote about a few weeks ago, efficient and accessible public transit systems are only going to continue to become more and more important. Muni has a long way to go towards being the world class transit system that the citizens of San Francisco deserve, and I hope that with continued public pressure on the agency they will take positive steps to reinvigorate public transit in the city.

That said, I think the report reflects well on many of the local initiatives San Francisco has taken to improve the quality of life for its citizens. From things like Healthy San Francisco, which strives to offer health insurance to every resident to taking a stand on behalf of marriage equality for its gay and lesbian citizens, I think San Francisco should be proud of our reputation of trying to care for every citizen, particularly those that are marginalized in much of “mainstream America.”

Just as interesting to me is the fact that even though we seem to be reviled as a horrible place to do business, the report put San Francisco in the top four cities when ranking cities on their “Ease of doing business.” The report notes that:

The four top cities in this ranking—led by Houston by a significant margin, followed by Los Angeles, Chicago, and San Francisco—are surprisingly affordable places to do business.

So yes, Houston is less expensive to do business in than San Francisco, but we hold our own quite nicely, thank you very much. And the gains we get in other categories because we can offer additional services far outweigh their cost in making us an attractive place to live and work. I should note, though, that when calculating total tax rate the report does not include the cost of employer contributions to healthcare coverage.

So while I know that there is plenty of gloom and doom about real estate, and I also recognize that there is plenty of structural uncertainty around how real estate will be financed and the government’s role in that process, I think that there is much to celebrate here in San Francisco. What are your thoughts?