The Daily - The Billionaires’ Secret Plan to Solve California’s Housing Crisis

Episode Date: March 11, 2024

For years, a mysterious company has been buying farmland on the outskirts of Silicon Valley, eventually putting together a plot twice the size of San Francisco.At every step, those behind the company kept their plans for the land shrouded in secrecy. Conor Dougherty, an economics reporter at The Times, figured out what they were up to.Guest: Conor Dougherty, an economics reporter for The New York Times.Background reading: Tech industry investors spent roughly $900 million buying land to build a dream city in a rural part of the Bay Area.In Solano County, Calif., a who’s who of tech money is trying to build a city from the ground up. But some of the locals whose families have been there for generations don’t want to sell the land.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Michael Barbaro. This is The Daily. For years, a mysterious company has been buying farmland on the outskirts of Silicon Valley, eventually putting together a plot twice the size of San Francisco. But at every step, those behind the company kept their plans for the land shrouded in secrecy. Until my colleague, Connor Doherty, figured out who they were and what they were up to. It's Monday, March 11th.

So, Conor, this story begins as a real estate mystery that you took it upon yourself to try to crack wide open. So, tell us about where this mystery unfolds. Okay, so if you imagine you're in San Francisco and you drive north further up into the Bay Area into an area called Solano County. And then you go way east and you end up in this very rural corner of the Bay Area that not a lot of people know about. And it's over here in this rural corner of Solano County where our story takes place. And it's these open sort of rolling landscape of yellow hills with almost nothing on it.

The largest structures there are wind turbines. And a lot of the families out there are farmers. They farm sheep, feed crops, and cows. And many of the people out there have been there since like the 1860s. This is a place where families stay in the same place for generations and pass the farms down several times. This is a place where not a lot changes. But then, in 2017, something very unusual starts to happen.

A company called Flannery Associates, which nobody in the area has ever heard of, starts buying land. And they buy more the next year, the year after that, the year after that, more and more and more and more, until pretty quickly, they're the biggest landowner in the entire county. So all these neighbors are at supermarkets, they're at church, they're at schools. I mean, this is a place where everyone knows everyone. They're all on community boards together. They all talk to each other all the time. They all sort of simultaneously get these offers for their land. And like you said, they don't even know who the offer is coming from. All they know is that a very aggressive, as we say in New York, highly motivated buyer is in their midst.

Exactly. Highly motivated buyer. So they not only want everyone's farm, they start offering people these incredibly sweetheart deals, which say, okay, well, I'm going to buy your land, but you can stay there for the next decade or two, depending on how old they are. And for all that time, you can collect all the income from this land.

I don't even want the income of the land. So one thing everyone realizes pretty quickly is these people are not interested in farming. Because if they wanted to farm, they would kick the farmers off the land they had just bought. Or they would want to make money from farming. Right. Like, they don't care about the price that reflects the income, and they don't even care about collecting the income. So they very obviously have a plan that has nothing to do with farming.

And so the question is, what's the plan? And who are these people? Right. So then the county starts to get curious who this is. But because this Flannery Associates is incorporated in Delaware, which has some specific rules that kind of cloak who is behind a company, nobody can figure out who they are. And they send a bunch of letters to the company Flannery Associates lawyer, and this lawyer kind of just puts them off and says, oh, don't worry about it. This is a group of wealthy families who are looking to diversify their assets and they just want to park it

in farmland, basically. Local mayors, concerned citizens are going down to the libraries and pulling property records and, you know, looking up corporate LLCs and stuff to sort of try to figure out who is behind this. The county becomes very concerned about what is happening here. There's this massive information vacuum and people start to fill it. We're talking about Solano County, where the single largest landowner is now an LLC based in Delaware. The group Flannery Associates has acquired tens of thousands of acres of dry farmland equivalent to nearly double the size of San Francisco, and no one knows why. So whatever they are, I know what they are. They aren't buying carbon credits. You know, they have intentions that are outside of our usual land use ideas. That's what makes it scary, I guess, is that we know nothing about them.

Now, there's an important detail here that I've sort of left out, which is... A mysterious purchase of dry farmland near Travis Air Force Base, one of the most critical military bases in the Western U.S., has raised serious questions. All of this land is near and surrounds Travis Air Force Base, which is a very important strategic Air Force Base, sometimes called the gateway to the Pacific. And the concern is that a foreign actor of some kind, spies basically, is buying up a bunch of land around an Air Force base. That it may very well be Chinese money.

With the goal of surveilling it or something like that. For an enemy to be able to be right next to the base, to monitor, to listen in to the communications, it would certainly be possible to do that if you owned the land adjacent to the fence line of Travis Air Force Base. There's never any evidence of all this, but because of where the land is situated around this base, it's a somewhat reasonable suspicion. Yes. So by 2023, members of Congress,

all sorts of people are flipping out. The Defense Department starts investigating this. The FBI starts investigating this. The Defense Department starts investigating this. The FBI starts investigating this. The State Department starts investigating this. All of these agencies are investigating who is behind this company. You know, just anything you can come up with, people have thrown the idea out, except for what it turns out to be. Except for what it turns out to be. So I cover housing here, and this was a little off my beat, but I was very interested. So I started looking into it a little bit and made a couple calls, but I didn't turn up much.

Then one day, pretty much out of the blue, I get a message. And I can't exactly say where or how or from whom, but someone tells me, I know what this is. Tantalizing. This isn't some group of rich families trying to park their cash in farmland, like the Flannery Associates lawyer implied. And this is, at least according to this tip, some of the most powerful people in technology, venture capitalists, executives from Silicon Valley, buying this land. And they're trying to round up other investors to join them. Huh. So now you have a theory about who is buying this land. It's a bunch of really rich venture capital types from Silicon Valley. But at this point, you don't really know if that's actually true. Totally. And as you know, you get a lot of tips as a reporter. Some of them sound quite extraordinary and turn out to be nothing. But for various reasons that I can't get into,

I sort of knew this had to be worth checking out. So I call basically everyone I've ever met. I mean, I'm kidding, but I start just blitzing the phones, right? I am sitting there texting, calling, just trying to find anybody who might know anything about this in this kind of nexus. I think the technical term is dog with a bone. Yes. So then I started working with my colleague, Aaron Griffith, who covers venture capital. And eventually, through a ton of reporting, we were able to confirm that yes, in fact, the money behind Flannery Associates was a who's who of Silicon Valley. Lorene Powell Jobs, the widow of Apple co-founder Steve Jobs. Mark Andreessen, very famous venture capitalist from Andreessen Horowitz.

Right. Michael Moritz, billionaire venture capitalist from a company called Sequoia Capital. Reid Hoffman, co-founder of LinkedIn. Some of the richest people on earth are actually the ones buying all this farmland. And the craziest thing is what I learned their plan

was. To take all this land, an area about twice the size of San Francisco, on this farmland, building totally from scratch, a brand new city that they hoped would help solve California's housing crisis. And beyond that, create an entirely new model for building communities in this country. We'll be right back. So what do you end up learning, Connor, about the specific plan that all these rich folks have for this model city that they want to build on this farmland?

So this whole thing, I learned, is the plan of a guy named Jan Sremek. And who's that? Jan Sremek is an interesting guy. He's originally from the Czech Republic. And in his telling, he grew up in this tiny town of a thousand people. But he's this very precocious, entrepreneurial young guy. According to him, he brought internet to his town and actually cut a side deal for

himself to get money for this. He's always looking for an angle. And with the help of different scholarships, he studied at Cambridge, goes to the London School of Economics, and becomes a star trader at Goldman Sachs. He leaves Goldman Sachs and eventually makes his way to California where he does several startups that have a pretty mixed record of success. And one thing to know about Jan is that he's really enamored with the culture of Silicon Valley. He loves the startup thing. He loves the feeling of the way people in Silicon Valley try to blend this kind of philanthropic message with capitalism that we're saving the world and we're going to make a bundle doing it.

Like this whole sort of spirit of Silicon Valley, all of this appeals to him. But there's one thing he really doesn't like, especially being a European, he hates the place. He likes the culture, but he hates the physical. Hates the physical place. Now, if you've ever spent time in Silicon Valley, it's really not a very remarkable place. It's very sprawled out. You go to like Sand Hill Road,

which is where all the biggest venture capitalists are. And it's like this kind of crappy office complex. There are, of course, some very beautiful, wealthy neighborhoods, but a lot of the housing stock is these kind of cul-de-sac-y, whatever you would sort of stereotype as the kind of American suburb. It just feels like that. So not only is he sort of uninspired by this very low-density landscape, there's a huge housing crisis in California at this time. And not only is there a huge housing crisis, there's just a ton

of conflict over whether or not the state should build more, how it housing crisis, there's just a ton of conflict over whether or not the state should build more, how it should build. It's just a big fight over basically whether to even solve it. So he is coming to this all very fresh. And the idea that there's this place where people start big companies and investors give young guys millions of dollars to chase their crazy idea. I mean, this just seems like paradise to him. And allowing more people to move here, you know, building tons more housing, building great buildings, that's what he thinks should be

happening. Got it. So his argument basically is that a place as magnetic and energetic and influential as the Bay Area, as Silicon Valley, deserves a physical community worthy of all those qualities that does not exist. In fact, it's the opposite. Yes. 100%. Now, that feeling that Jan's expressing, that Silicon Valley and San Francisco can do better, that it's become too hard to build in California, that this vibrant place has gotten stuck. That feeling is shared by a lot of very rich and powerful people, in particular in the venture capital and tech community. There is this very deep frustration in that world that as much influence as they've had on the digital world, they've had very little influence on the physical world. I mean, these are people who grew up

dreaming of flying cars and, you know, monorails through SimCity landscapes, that sort of thing. And yet they live in this strip mall office complex complex, cul-de-sac suburb. And because of the politics of the state, it's almost impossible for them to change that. People talk constantly about this. And Jan, at this point, is extremely well-connected. He is friends with billionaires. He's in a book club with some pretty high-powered venture capitalists. So he puts together a plan for a new community in eastern Solano County, one that lives up to his vision and one that he brings to these people.

And eventually, he's got almost a billion dollars to pursue this idea of building an entirely new city from scratch out in this rural area. entirely new city from scratch out in this rural area. So Connor, what happens once you and The Times break the story and tell the world what's really going on? Because it's been so secretive and mysterious until that point. So within an hour or two of us breaking the story, Jan's LinkedIn page re-identifies him as CEO of California Forever. California Forever. Flannery Associates is dead, of California Forever. California Forever. Flannery Associates is dead

and California Forever has taken its place. It's a whole new company with a whole new name and a very friendly face. And not only that, it's as public as you can be. It goes from black box that nobody can get in to a company that has opened four offices around Solano County so that you can walk in and go, hey, how are you doing? What's this project?

And learn about it and see maps and talk to people about it. Wow. A company that has put billboards all over the 80 freeway on the way up to Sacramento saying, California forever. So they've gone from nothing to you can't stop hearing about them. Nothing to, you can't stop hearing about them. Well, what exactly are they saying once they decide to acknowledge what they are, rebrand themselves, and start having what sounds like the beginning of a conversation with the people in this county? So because of county law, they cannot build this city unless they get a vote of the people.

Ah, right. California is, among other things, land of the ballot initiative. Exactly. Solano County has a rule that says you can't build in the rural areas. And that's because they want to preserve these farms just as they've been for generations. So at the start of this year, California Forever filed a proposed ballot initiative that would undo that and pave the way for them to eventually build this city. And the hope is that this initiative would go before Solano County voters in November. Good evening. Good evening, everyone. Thank you for being here. How's everyone doing tonight?

So they have to go on this massive charm offensive because not only do they have to go on this massive charm offensive because not only do they have to eventually convince elected officials and all these people to give them permission to build. Thank you for coming out and learning about this California Forever project. You've been hearing a lot about it in the media, and we're here to get your questions answered. We know everybody's got a lot of questions. They have to get the whole county to vote affirmatively for this project.

So Jan, take it away. So Jan goes from nobody has heard of Jan to he's everywhere in the county. He's meeting with elected officials. He's meeting with union leaders. Good evening, everyone. Thank you for coming. To introduce myself, you might be asking yourself, why is this guy with a funny accent here?

And then he starts having a series of public town hall meetings in all these different cities across Solano County. This acceleration in home prices and pushing of particularly working class families out of California has been building up since the 80s. And he just begins pitching people. Every five years, it gets worse and it gets worse and it gets worse and it gets worse. And the pitch really begins with all the huge problems California is facing right now. And so where our project ties in together with this is that

we do think that we need to revisit some of these ideas. And we need to look into if our kids are going to be able to live in California, if California is going to be a state that does something about homelessness. And he really says, I have an answer to what is ailing us. We need to build again. We need to think big again, that this is what California needs to essentially shock itself out of its current malaise. itself out of its current malaise. New community, homes in safe, walkable neighborhoods, good paying local jobs, locally owned shops and businesses, big employers, make it big enough to be an economic engine for everyone,

make it big enough. He says we're going to build row houses with bike lanes and a dense city with a bus running around the perimeter of it where you can walk to shops. Basically describes Brooklyn for where you of it where you can walk to shops. It basically describes Brooklyn for where you live or where you're sitting. And we went out and we found a group of investors who wanted to double down on California and who believed that if you could purchase enough property

that you could design a project that was designed in a way that it made everyone around better. And eventually, this city, they hope, will have 400,000 people living there. A from-scratch, fully-envisioned, densely-constructed community where you go to work, you go to the theater, you do your grocery shopping,

all within walking distance of your row house, which is attached to another house, which is exactly the kind of dense style of living that urban planners say we should be having in this country. More of it, not less of it. Exactly. Connor, all of this sounds eminently reasonable, that I wonder why Jan approached it from the beginning with so

much secrecy and mystery, because that doesn't feel in keeping with the spirit of what he is talking about here. Yes, well, pretty simple answer there. Money. What Jan will tell you is that they were worried that people would jack up the prices of the land. If they were public. Yes. That if people out there realized that the richest people in the world had a plan to buy all this land, they would start raising the prices. Got it.

But at the same time, it created a ton of suspicion in this community. And on top of that, it's possible some of these farmers might not have sold if they would have known what the plans were. Many of these people have a very deep connection to the idea of this as an agricultural place. Well, to that point, what happens once the public and all the farmers who have sold their land learn precisely what the plan is and what they have sold their land off to become. So people are incredibly unhappy about it. So I go to the town hall and right off the bat, My question is, where are you making your money?

Because it comes across like you're doing a big favor for all of us to build this. But I know you're looking for a bottom line, so I'm curious. People contend that this is just a plan to get rich. If you get your way, you will get to build this giant city and the land you bought for not very much money will suddenly be worth an astronomical amount more. And these people who are already billionaires are just going to get richer. I am one of the 43 individuals that has been named in the lawsuit because I own 200 acres of land. As they acquired the land, they also used some pretty significant strong-arm tactics, such as suing farmers, many of whom were in a lawsuit with them during the town hall.

Will you commit to dropping the lawsuit against the local farmers who are not aligned with your vision in a goodwill attempt to change the way that you are interacting with our community, which is right now unacceptable. At one point, this family rose up and one after the other started saying, you're suing my family. Flannery slash California Forever's divisiveness and deception are very well documented. Then there's the more obvious thing people say, which is, how do you expect anyone in this room or the county to believe what you're saying? How do you expect us to trust you after you've been basically

lying to us for seven years? I would like you to explain further why you look at farmers whose than your money, why we are a problem. This is a rural area and does not want to be a city. They have remained here because they like being farmers and they like being in a small town where everyone knows each other. And that is the way of life to which they are accustomed. And many of these people will tell you, I know California has a housing problem. They are aware that there are big cities

not too far from them and that they have significant troubles. But what they're saying is this is farmland. If you want to sort of solve San Francisco housing problems, like maybe you start in San Francisco. Right. No one there seemed particularly happy about it. Right, which does not seem like a great sign

if, as you said earlier, Connor, what California Forever needs most is to hear from this community that it's willing to vote to let this city get built. Yes, people are very skeptical of them. And I've even heard people who are, you know, sort of more kind of seasoned political people saying it's very hard to trust them right now. And if I'm going to give them all

this affirmation in the form of a vote, I need to be pretty confident that they're going to do what they say they're going to do. I mean, there's a real irony here, which is that California Forever thought that the best way to circumvent all of the normal screaming and yelling and community opposition and bureaucracy and nimbyism of big city California was to escape to rural California and try to build a brand new model of housing and urban living there. And they ended up unleashing a different, but it sounds like no less fierce version of all those same forces just a couple hours outside the city. Exactly. And I think they probably knew that would happen. And I think in a weird way, this is what they want. What do you mean? What do you mean they want it? I think in their mind, What do you mean? What do you mean they want it?

I think in their mind, it's almost easier to build a city than it is to build a duplex. I think they would rather have one big, gigantic, knock-down, drag-out, expensive fight. And then if they get approval, just build the city. You know, if you think about it,

the problem in San Francisco is that they fight over every little duplex. They fight over every little apartment building. And I think they're sort of like, okay, let's do this once. Let's have it be as furious and expensive as it can be. And if we get over that hump, then we can build a city that they hope one day we'll have 400,000 people in it. And I think they've calculated if we do this on this scale, it'll be too big to fail. This is fascinating. This project is almost ideological for Jan.

He knows that there's a huge distrust of Silicon Valley and billionaires and that many see his approach as hubris. He's totally aware of all of this. But this is a state that built the Golden Gate Bridge and went from a little frontier town to the fifth largest economy in the entire world. And I think there's a feeling that it's forgotten how to do those big things. forgotten how to do those big things. And I think what Jan would tell you, his argument, is somebody needs to revive this spirit.

Somehow, we need to get Californians excited about big things again. And if it's not this, then what is it? And if it's not them, then who? Well, Connor, thank you very much. We appreciate it. Thank you, Michael.

We'll be right back. Here's what else you need to know today. The Justice Department has begun a criminal investigation into the midair blowout of a panel on an Alaska Airlines flight that forced the plane to make an emergency landing in January. in January. Federal investigators have suggested that Boeing may have delivered the plane to Alaska Airlines without installing the bolts necessary to hold the panel in place. And in an interview over the weekend with MSNBC, President Biden delivered some of his harshest words to date about Israel's deadly military strategy in Gaza and about the man leading it, Prime Minister Benjamin Netanyahu. He's hurting, in my view, he's hurting Israel more than helping Israel by making the rest of

the world, it's contrary to what Israel stands for. And I think it's a big mistake. So I want to see a ceasefire. In the interview, Biden was asked if there was a point at which Netanyahu's actions would compel the U.S. to cut off military aid to Israel. There's red lines that if it crosses, it cannot have 30,000 more Palestinians dead. is dead. Today's episode was produced by Ricky Novetsky, Michael Simon-Johnson, Eric Krupke,

and Will Reed. It was edited by Mark George. Fact-checked by Susan Lee. Contains original music by Chelsea Daniel, Mary Lozano, Diane Wong, and Rowan Emisto. And was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Lansford of Wonderly.

That's it for The Daily. I'm Michael Barbaro. See you tomorrow.