Silicon Valley is least affordable for tech workers
Big salaries don’t make up for area’s high home prices, research shows
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 $200,000 in the San Jose metro — can afford just 12% of the homes for sale in the Bay 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 U.S. 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 U.S. 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 U.S. 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 $200,000, giving a couple a $600,000 budget, AEI researchers estimate. The median home price in the county is $1.3 million.
Even if home prices declined 5% over the next five years, Pinto noted, San Jose would still be the most expensive metropolitan area in the U.S.
In the East Bay and San Francisco, the typical household with at least one tech worker has an estimated income of about $187,000, producing a $561,000 home-shopping budget, according to the analysis.
In mid-20th century manufacturing and tech hubs like Dayton, Ohio, and Rochester, N.Y., 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 U.S. 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.