Techies flock to Silicon Valley for jobs, weather, great food, art and nightlife, but for some one thing is missing: a home they can afford.
Despite high salaries and world-class amenities, San Jose is the least affordable place for tech workers to buy a home. A new analysis by the American Enterprise Institute found the typical tech worker and his or her partner – with two incomes totaling US$200,000 (RM809,100) – can afford just 12% of the homes for sale in the San Jose metro area.
The picture in San Francisco and the East Bay is nearly as bad, with just 21% of homes for sale fitting in the budget of an average tech couple. The high-hurdles to home ownership are fueling a Bay Area exodus that has contributed to the state’s sluggish population growth in recent years, researchers say.
Study author Ed Pinto, director of the AEI Housing Center, said tech workers can afford their pick of homes in almost every other US city. “But in those places like San Jose, San Francisco and Los Angeles,” he said, “that is not the case.”
The analysis gives another explanation for the Bay Area exodus. And it’s not only workers who are leaving. Tech heavyweights HPE and Oracle have announced moves of their headquarters from Silicon Valley to Texas.
Pinto believes the spread of remote work will only accelerate migration from the Bay Area. With new workplace flexibilities, tech workers have a choice between high-cost regions near their offices and low-cost regions with bigger houses and remote work. “Work from home is winning,” he said.
The AEI study found California has four of the top five cities in the US with the lowest rates of homeownership: San Jose (52% homeownership) and San Francisco metros (52.8%) fall behind only Los Angeles (48%) and Fresno (49%).
The analysis is based on 2019 US census and home sales data. AEI researchers considered the median income for tech workers in metros across the country and compared it to home prices in each market. They assumed a conservative expenditure of three times median income for purchasing a house.
In Santa Clara County, for example, the typical household income for a tech worker and their partner is around US$200,000 (RM809,100), giving a couple a US$600,000 (RM2.42mil) budget, AEI researchers estimate. The median home price in the county is US$1.3mil (RM5.25mil).
Even if home prices declined 5% over the next five years, Pinto noted, San Jose would still be the most expensive metro in the US.
In the East Bay and San Francisco, the typical household with at least one tech worker has an estimated income of about US$187,000 (RM756,508), producing a US$561,000 (RM2.26mil) home-shopping budget, according to the analysis.
In mid-20th century manufacturing and tech hubs like Dayton, Ohio, and Rochester, New York, the typical tech worker could afford more than 90% of homes on the market, according to the research.
Pinto said the California housing crisis has been brewing since the 1970s, when home prices were near the US price-to-income ratio of about three times annual income. But ever-tightening land-use restrictions, driving up costs for land and construction, have squeezed home supply even as the state economy and population has grown, he said.
The business lobby Bay Area Council has pressed state lawmakers to make it easier to develop and build new homes and apartments. But widespread efforts to overhaul zoning have failed to gain traction in Sacramento.
Matt Regan of the Bay Area Council said making housing more affordable is a key piece to keeping the region competitive. “We’ve made housing the enemy. It’s guilty before being proven innocent,” Regan said. “We need systemic change.”
The Bay Area home market has soared to record levels during the pandemic, as major tech firms announced long-term shifts to remote work and homebuyers look for more space for work and family. The median sale price in November for existing homes reached US$1.1mil (RM4.45mil) in the Bay Area, the highest for any region in the state, according to agent data from the California Association of Realtors.
Despite a steady flow of techies to cheaper communities like Sacramento and out-of-state locations, local real estate agents say demand remains strong.
Los Altos agent Joanne Fraser, president of the Silicon Valley Association of Realtors, said real estate mortgage data shows buyers have been making large down payments on homes during the pandemic. The data also shows about 40% of pandemic buyers in the Bay Area were first-time buyers, she said.
Fraser added that Bay Area homebuyers are making more than simply a financial decision. “People don’t buy just a house,” she said, “they buy a lifestyle.” – San Jose Mercury News/Tribune News Service