I've been in Silicon Valley for close to 20 years, and I have been concerned about this for a long time. I want to say it was somewhere around 2010 that I began noticing a sudden increase in the number RVs I see in non-RV places, such as large parking lots and along industrial area roads. Now it seems like I hardly go anywhere and not see several RVs that are clearly out of place - they used to only be found in sideyards, RV parks, or driving down the highway.
Next, the homeless situation has truly grown to epic proportions. Take a peak into any of the inbetween areas, and you'll find a small encampment. How many of these exist, I can't say, but once I began to understand where the homeless go, I started to venture and take small peaks - they're everywhere.
Next, the homeless started showing up, en masse, in large public places. The most obvious is the parks near San Pedro square in San Jose. Yes, this area has always had an "element" to it, but that element used to live in the nearby housing. Now, the element is in the park.
I was talking with a friend who lives in a very expensive and beautiful home near this park, and this friend was really annoyed at how the homeless population around this house has really exploded. At the same time, this friend had not identified any link to the homeless population and crazy median home prices, now approaching $1 million for San Jose. I asked this friend to please consider the statistic of a $1 million median home price in a city with a population of 1 million, and what does that really mean for its residents?
My feeling is that, in time, this is going to be incredibly bad. The first problem is an increase in property crime. When people are forced out of their shelter, they will become desperate. Some percentage of any population is going to be pre-disposed to considering crime, so increasing the number of people who are desperate will increase the absolute number of people who will turn to crime.
Police forces do not exist to protect - they are really just for cleanup, and currently there is a new trend that will eventually get reported of how the nature of burglaries, especially in the San Jose area, have changed. It used to be that perps would case and then burglarize when owners were out for a weekend or vacation. Now, the owners are out for only a few hours and return home to find they have been burgled. Obviously they are using some more sophisticated surveillance or network tech of some sort. In at least one precinct, the police have yet to catch anyone performing burglaries in this manner.
With this new trend, a group of, say, five clever people can do 10s of millions in property damage annually. As these small groups are increased, the dollars in damage become very real, plus the emotional impact of feeling insecure in your own property will often push people over the edge to sell their homes or at least move away, converting their residence into a rental unit.
The second trend that I fear will begin to occur is the less clever criminals who simply mug, loot, and smash-and-grab.
Finally, there will simply be violence against the property owners. People are not dumb, as we can see by this article that even the politicians and bureaucrats are beginning to get concerned for their jobs. In San Francisco, there was the violent demonstrations against the Google buses. I don't know in exactly which way the violence comes out or is directed, but when you force enough people in to desperate circumstances, you will eventually have enough of those who are pre-disposed to violent "solutions" that they will find a target.
In all of this, people will begin selling and moving out. The property values will drop, not because of increased supply of housing, but because of an exodus of existing buyers coupled with a sharp reduction in new buyers. Eventually, companies start moving jobs or entire companies to other areas (owners, executives, and managers don't want to live in all of that), and demand for residential housing falls yet further.
As the prices drop, people will consider selling to get equity, so the prices drop further (selling encourages selling). Getting things to go up from here will be a serious problem. All of the governments are maxed out, credit-wise, and their revenues will tank.
At this moment, today, it seems like increasing housing is a bad idea for cities and property owners because they will lose at least some of the current equity in their homes, but depending on the property owner's time-horizon, they may well lose all of their equity.