In The Bay Area, Why ?The Rent Is Too Damn High?

Editor’s Note: Semil Shah is a contributor to TechCrunch. You can follow him on Twitter at @semil. The unraveling of the Enron debacle in 2001 became a symbol of corporate scandals of that era. The effects were so decimating to loyal employees vested in their employers? retirement plans and public investors, the Federal Government responded with legislation the following year, the Sarbanes-Oxley Act (SOX). Originally intended to protect employees and retail investors from cutting-edge white-collar crime, SOX placed onerous requirements on public companies — so onerous, in fact, it has effectively encouraged some of the most high-growth private corporations founded after SOX to remain private much longer, to tap secondary markets to access liquidity, and to file IPO papers after company insiders and private investors reaped the rewards. The result can be seen most recently in the Bay Area, where reports surfaced this week suggesting Facebook?s IPO was mostly responsible for catapulting San Mateo County past Manhattan in terms of wealth, and as I?ll try to argue, might be indirectly responsible for the rising house prices, increased traffic, transit strikes, and bespoke apps Bay Area residents enjoy today. The rent is, indeed, too damn high. Let me state upfront that I am not blaming Facebook, insiders, or investors. In fact, all actors acted rationally within their rights. Facebook is just one shining example of a trend where the technology sector is the real growth-sector of an American economy which has barely withstood two separate economic recessions within a few years of each other. As a result of money flowing into private technology equities and combined with the restrictions imposed by SOX, new technology companies have enjoyed more access to private capital and have thus been able to remain private longer. While SOX was originally designed to protect the public from ?the next Enron,? the unintended consequences of such restrictive legislation dampened the appetite of private shareholders and investors to tap public markets too soon. Unfortunately, one of the most harmful consequences of SOX can be seen through the story of Facebook?s IPO and the wealth that it generated — mostly residing in San Mateo County. When wealth is created but concentrated in certain ZIP codes, both local areas and the nation?s economy is affected. It all has a cascading effect. With more wealth locked into San Mateo and surrounding counties, the demand for assets rises quickly. House prices skyrocket. Individuals

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