Frank Chiachieri tweeted this morning "[s]aw Star Trek yesterday and now awaiting @mattyglesias post on how Federation $$ convinced SF NIMBYs to accept massive density increases."
I don't think Federation money is the real issue here. It's simple logic. Memory Alpha, the Web's leading Star Trek wiki states:
San Francisco benefited enormously from the radical changes that came after First Contact with the Vulcans. It soon became home to important United Earth institutions, including the precursor to Starfleet. The skyline was also altered significantly, with a host of new skyscrapers eclipsing both the Transamerica Building and Golden Gate Bridge.
Clearly the key factor here is the influx of Vulcan logic. NIMBYism in prosperous urban areas is essentially an insider-outsider conflict. Incumbents view it as contrary to their interests to upzone and allow for increased development. But relatively few people are comfortable with a politics of naked selfishness, and that's especially true for the kind of ostensible left-wingers who populated coastal cities such as San Francisco. But human beings are extremely good at rationalizing, and so Bay Area NIMBYs have a lot of pseudo-progressive pseudo-reasons for taking anti-density stands. That kind of politics of rationalization goes entirely out the window once Vulcans arrive on the scene. With their cool logic, Vulcans swiftly persuade the people of earth that severe land-use restrictions are a deeply negative-sum form of public policy. The slogan that the needs of the many outweigh the needs of the few further punctures the insider-outsider politics of anti-density zoning.
With logic-based land use reform sweeping all across earth, it turns out that the San Francisco Bay Area has a combination of high average incomes, pleasant climate, and a longstanding spirit of diversity and assimilation that's difficult to match. Construction booms also occur in London, New York, and other major cities but ultimately San Francisco outpaces them. Eventually San Francisco/San Jose comes to surpass Tokyo/Yokohama and Seoul/Incheon in scale and that, combined with its lack of historical service as a political center for a nation-state, make it the logical headquarters for the United Earth government and, later, the Federation Council.