San Francisco is a place. Engineering talent is available everywhere, though perhaps most places it isn't so much fish jumping onto the line as in the Bay Area.
What about all the nerds who are Polish, Portuguese, and Peruvian and choose to remain local because their spouses, children, and other interests are? They can still code, some of them are definitely brilliant, and they can either work locally or (more likely) remotely.
Starting a "startup" with venture capital might be next to impossible in Peru, for all I know, but a hell of a lot of folks don't want to exit, don't want to dilute their ownership of their product, and frankly like the environs elsewhere.
Not that I have anything against using out of country programmers, but it's a fact that China does not strongly enforce copyright and does not go out of its way to protect foreign businesses. I don't know about Russia, India, South America, etc, I'd be curious about anybody that's done this sort of thing before. Tim Ferris always talks about it for things like running his support and returns and whatnot.
There are certain restrictions that the Bay Area places on you, like how much money you need to earn, and a particular lifestyle you want to live, in a very specific industry. This is the same as someone going to Houston for Oil, NYC for Finance/Fashion, LA for entertainment, etc. People who live in those places have a particular set of goals - e.g. building big companies (vc or not), doing well on wall street, hitting it big in the movies, etc.
If you don't have those goals, then absolutely - stay where you want to stay. Work remotely. There is a ton of arbitrage in software dev right now, you can make a killing and live in really cheap places. You can literally live like a king. if that is what you want to do.
So it all comes down to your goals, and the Bay Area as a whole is self selecting in that way. If you want to do something more chill in software, that's great. We need more people making money writing code - it's great for the world economy. But you don't need to be in the Bay Area for this (unless you want to).
If you are building a company that needs VC funding. Most companies don't.
"Venture Capital is the wrong source of capital for the vast majority of entrepreneurial ventures" http://avc.com/2005/03/dont_take_the_m/
If you aren't looking to raise VC but instead want to be part of a vibrant tech ecosystem, well, that opens up more mid tier cities. For starters: San Diego, LA, Boulder, Austin, Portland, Pittsburgh(?) in the USA.
But, as for the other 80% that's rent controlled, lots of it is pretty dilapidated, almost borderline 3rd world country in some parts. 1% (7k people) of the SF population is homeless and even more are nearly there (despite over 240 million$ a year spent fighting homelessness).
Perhaps the reason people find SF boring is due to the hollowing out of the middle class.
And if you are into oil/gas, Houston. Marijuana, Colorado or Washington. Cars, Detroit (maybe?). Commodities, Chicago. Ag, Kansas City (maybe?). Outdoor experiences, SLC. Building something for Latin America, Miami. Ets, etc.
I imagine there are many other cities that dominate in niches that I'm missing.
But if programming is what you intend to bring as a founder - if it's simply a means to get the burning ideas out of your head and into a product, then there's a much smaller number of places where that will work: San Francisco, Seattle, New York. You need to be able to have coffee with a VC, meet with multiple co-founder options, do a tech meetup and also spend a sizable chunk of the day coding.
If you live near a small city, working that way is an impossibility. You'd have to go to the nearest big city to find that type of collaboration, and the trip will burn through all your coding time, and you still won't have the kind of quality selection that you'd get in NY or SF.
As you say, hacking the rent-salary ratio, which is what the article is about, should be a much smaller factor in how you decide where to live.