Even tech workers can’t afford to buy homes in San Francisco

Everyone knows living in the San Francisco Bay Area isn’t cheap, especially for people like teachers, firefighters, and service-industry workers whose wages haven’t kept up with the skyrocketing cost of housing in one of the nation’s most expensive places to live.

But increasingly, even tech workers — some of the Bay Area’s highest-paid residents — are having a hard time achieving the bedrock of the American Dream: home ownership. These workers average six-figure salaries but increasingly can’t afford to buy a house in San Francisco, where the average home value is around $1.34 million and the median down payment needed was around $250,000 last year. And although there’s been a bit of a slowdown in recent sales, that’s expected to change quickly. A new class of freshly minted tech IPO millionaires are set to “eat San Francisco alive,” as described in a headline of a recent New York Times story.

When Joshua Davis, 28, a software engineer at a machine learning startup who said he makes upward of $100,000 a year, was looking to buy a one-bedroom condo in Oakland, he knew most places would be far above his budget of $500,000. So he considered fixer uppers. He was hoping he could find somewhere that, with a little bit of work, could be a place to settle down — somewhere he could paint the walls any color he wanted.

But he quickly realized that was an unrealistic goal. One place he saw had a rotted mud sill, the structure that provides separation between the house and its foundation. Someone showing the house offered do a “Mickey Mouse job” to repair it for $20,000, but Davis knew that would only be a temporary fix. The house was seriously structurally flawed.

“These were the kinds of places that were affordable,” said Davis, who gave up on the idea of buying a home for now. He’s hoping the market will eventually calm down. In the meantime, he’s paying around $2,300 a month for a one-bedroom apartment in Downtown Oakland.

Davis isn’t alone. Around 70 percent of tech workers for top tech companies living in the Bay Area say they can’t afford to buy a house near where they work, according to a recent study from the workplace chat app Blind, which polled around 3,000 tech workers. Many of the employees surveyed are high-skilled talent — engineers, product managers, and data scientists — who may be able to make rent but can’t afford to buy a home.

The fact that these relatively highly compensated employees like Davis are having problems is a sign that the housing situation in the Bay Area has become an untenable and unsustainable situation for tech’s workforce. And while tech giants like Facebook can afford to pay their employees a median salary of $240,000, other smaller players in the industry are wondering how much higher salaries can go to keep up with the cost of housing, and how much longer tech workers will live in an area they can’t afford.

Companies like Facebook and Google have already started to build housing specifically for their own employees next to their sprawling mega-campuses. At one point, Facebook offered a $10,000 bonuses to employees who lived near the office to alleviate the strain of housing costs and reduce commute time. Almost every major tech company provides private, free shuttle buses that transport workers from Silicon Valley — where tech campuses like Google and Facebook are located — to relatively more densely populated areas like San Francisco and Oakland.

Last month, Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, helped back a philanthropic fund that seeks to raise $500 million toward preserving affordable housing in the San Francisco Bay Area. So far, the Chan Zuckerberg Initiative has committed $40 million toward the fund. While half a billion dollars is a lot, it won’t be enough to single-handedly change the market dynamics of housing in the Bay Area, where for every 4.5 jobs created, only one new home is added, according to the Building Industry Association of the Bay Area. But it’s a sign that tech companies are taking the issue of rising housing costs in their headquarters seriously.

“I do think the large corporations want to work with cities to address the housing issue because they want to expand and they want their employees to have a place to live,” said Lisa Matichak, the mayor of Google’s hometown of Mountain View.

Matichak and other members of the city council are in the process of reviewing competing plans from Google and another company to build more offices on a coveted 30-acre plot of land in the city. One of their chief concerns is making sure the development includes not just office space, but new housing units. In Silicon Valley’s Mountain View, the median home is priced around $1.6 million dollars and the average one-bedroom rents for $2,800, according to online real estate platform Trulia.

And with a new wave of San Francisco tech companies an hour to the north like Uber, Lyft, Slack, and Airbnb expected to go public soon, there will be thousands of new millionaires who may further crowd the housing market, further driving up prices. While there will be a cohort of freshly minted IPO techies, there will be many more who don’t win in the startup lottery.

“I’m guessing with all these IPOs from Lyft and Airbnb and stuff, these prices are only going to go up,” said Davis. “If these prices get crazier and crazier, I don’t know if I’ll able to afford to live out here.”

Housing prices in the San Francisco Bay Area have skyrocketed at such an extreme rate that the housing shortage and homelessness in the city has been deemed a “human rights violation” by a UN official. In the past seven years, the percentage of households that can afford to purchase a median-priced home in the San Francisco Bay Area has decreased by over 50 percent, according to the California Association of Realtors.

Of course, the people this hits the hardest are people working in sectors that aren’t as high paid as tech — like the service industry, teaching, and law enforcement. A recent study found that a whopping 90 percent of workers in Silicon Valley have seen their real wages, meaning their annual salaries adjusted for inflation and rising cost of living expenses, decline over the past 20 years.

That means economic inequality is getting worse in tech’s capital during the same time period that companies like Facebook, Twitter, and Uber have popped up and created billions in value for those lucky enough to be early investors or employee shareholders living in the area.

Some labor advocates have blamed tech for contributing to this economic disparity. A few years ago, protesters hurled rocks at tech worker commuter buses that have become symbols of new money and gentrification. Tech is changing the face of what were once working-class, immigrant neighborhoods in San Francisco like the Mission, where Facebook CEO Mark Zuckerberg owns a home he bought for $10 million in 2013. But now, even many of those tech workers sitting in the shiny charter buses also can’t afford to live in the Mission, or any of the equally expensive Peninsula suburbs along the way to Facebook’s Menlo Park headquarters.

“If the engineers and programmers of the world can’t afford to keep up with rising costs, how in the world are other people ever going to afford to live comfortably here?” said Jeffrey Buchanan, director of public policy at Bay Area-based labor-backed nonprofit, Working Partnerships USA.

When it comes to purchasing power to buy property, not all tech workers are created equal.

At major tech companies like Google and Facebook, over 50 percent of workers are contract workers — many of whom make less than their full-time salaried counterparts. There are reports of Google employees who sleep in their vans in the parking lot — taking their showers in the office gym and eating meals in the company kitchen. The engineers doing this are extreme cases; most programmers making six figures may not be able to afford a home, but they can afford a place to rent.

The options are more limited for many others, like the unionized Google janitors who make around $26 an hour including benefits, according to numbers labor union SEIU shared with Bloomberg last July. If those workers are working 40 hours a week, that would put them at an annual income of around $50,000 a year — a little more than half of what the federal Department of Housing and Urban Development considers to be “low income” for a family of four in Google’s home county of Santa Clara.

Because it’s harder for lower-salaried employees to get by in the Bay Area, some tech companies have outsourced large portions of their workforce in functions like content moderation and customer support to places where salaries — and rent — are cheaper, like Phoenix, Arizona.

But these companies can’t outsource everyone they need to keep their San Francisco operations running. They still need facilities workers to keep the lights on, cooks to keep the programmers fed, and janitors to keep the buildings clean at their sprawling campuses.

And aside from the service workers, temps, and contractors at tech companies, the housing crisis is also hard on entrepreneurs and startups.

Davis said the machine learning-backed visual search startup he works for, Zorroa, used to staff most of its programmers remotely, outside California, where their salaries went further. Now that the company has raised a round of VC funding, it can afford to pay more of its workforce enough to live in the Bay Area, Davis said.

By some metrics, California’s entrepreneurship scene is slowing down relative to other startup locales. The Kauffman Foundation, a nonprofit that measures entrepreneurship in the US, found that places like Maine and Washington, DC, had higher indicators of startup activity than California in their latest report. This makes sense given that more people are moving out of the Bay Area than moving in, according to a 2018 report last year from two leading Silicon Valley community organizations. And a survey from the Bay Area City Council in 2018 found that 46 percent of Bay Area residents want to move.

The struggle that these smaller startups go through represents an existential crisis within tech’s core: If Silicon Valley and San Francisco are valuable because they’re a hub for scrappy engineers, what will happen when only the elite of the elite, the post-IPO techies, can afford to buy homes in the city? Sure, younger programmers can squeeze into tinier and more strained living situations, but that becomes harder for people who want to start families.

“The people who move into the San Francisco Bay Area tend to be younger than the people who move out,” said Issi Romem, chief economist at online real estate company Trulia. “By the time people want to settle down, that’s when they hit this wall of affordability.”

There’s also an interesting split in the housing economy. While the prices of homes have gone up astronomically in areas like San Jose in the past several years, rent has been rising at a much slower pace. “It’s a bit of a mystery to economists,” said Jeff Tucker, an analyst on the economic research team at online realty company Zillow.

What this means is that 20- and 30-something tech workers who are relatively well-compensated may be able to keep up with rising rents, but buying a home will remain perpetually out of reach.

These workers are in a much more fortunate position than many of their neighbors, who may be struggling to keep a roof over their heads. But they’re also stuck. For the programmers and product managers who want to own a home but also want to keep pursuing their promising careers in San Francisco, there’s no immediate solution except to wait around in the hope that the housing market will crash.

Some tech leaders are trying to help solve the housing problem.

“I think there’s been this question of, ‘Oh, tech money, is that going to solve our housing crisis?’ And I think it’s taken quite a long time for companies to get serious about what they’re doing,” said Kristy Wang, community planning policy director at a nonprofit research, education, and advocacy organization focused on issues of planning.

While donations like the money from the Chan Zuckerberg Initiative might help, some housing advocates view them as only scratching the surface of a much bigger issue. Matthew Lewis, director of communications at California YIMBY, a pro-development housing advocacy organization, said that while philanthropy efforts help, they ultimately make a “tiny dent” in a housing market that’s as crowded as San Francisco. The YIMBY acronym plays on the well-known NIMBY — for “not in my backyard” — by giving it a “yes” instead.

The solution, as Lewis sees it, is pretty straightforward: “Just build more damn housing.”

In order to do that, developers need city approval, which can be difficult to get based on strict zoning laws that limit density in San Francisco and even more so in Silicon Valley’s suburbs. While some locals argue that these policies preserve neighborhood character, critics argue they are classist: benefitting those who already own property at the expense of others, especially minorities and lower-income residents.

History reveals a dark past to the intentions of many zoning laws in the Bay Area. One of San Francisco’s oldest housing density laws, the Cubic Air Ordinance of 1870, was largely used to criminalize Chinese residents living in boarding houses. Across the bay, similar laws were used in Berkeley to separate more affluent white residents from their black neighbors.

Fast-forward to today and the Bay Area is still revealing deep societal divides in local debates over housing density.

In a city council hearing this past September in Apple’s hometown of Cupertino, one local teenager said he was against high-density affordable housing because it “would mean that we would have uneducated people living in Cupertino.” He and his fellow neighbors were concerned that it would make current residents “uncomfortable.” The city’s mayor dismissed the comments as being made by a “kid” who didn’t know better — but to many, they revealed a candid unveiling of the true feelings of older residents who are anti-development.

But there’s another strain of critique against changing zoning laws. In a city like San Francisco, increased density laws could allow rapid development of multimillion dollar luxury condos that mostly benefit the wealthy, and at least in the short term, displace rent-controlled apartments or other cheaper housing.

In the past, YIMBYs in San Francisco have been accused by some local anti-gentrification activists of being pro-development without enough caution for those locals who could get displaced. Now, Lewis says, YIMBY is working with these groups to advocate for other measures like rent control and affordable housing quotas. The group is also pushing for an amended version of a statewide bill, SB50, that would reform zoning laws to allow for denser construction of housing in areas near major public transit hubs and job centers. It has the support of the Bay Area Rapid Transit’s board of directors but faces opposition from some local leaders such as the executive director of the LA County Democratic Party.

While there are certainly many minds — and opinions — debating solutions to the Bay Area’s housing crisis, all this will take a time. Some tech workers say they’re losing patience.

Paul Anzel, 32, is a data scientist who dropped out of his physics PhD program to work in tech in the Bay Area. After years of struggling to save enough to buy a home in the Bay Area — and fighting for more housing development — he finally decided to give up. He, his wife, and their small child moved to San Antonio, Texas, where with the same income they were able to buy a two-bedroom home.

“The Bay Area housing problem isn’t going to be instantly fixed. It’s going to take a long while and a big political will,” said Anzel. “Once I had my kid, I realized there’s no sense in bashing my head against a wall.”

Other tech workers, many of them younger and without families, still feel the pull of the Bay Area, despite the frustrating housing situation.

“There’s a certain amount of energy when you walk around,” said Davis. “All these people who you go around and talk to who have built these great things before you and have the experience to learn from. It’s hard to leave.”

This article originally appeared on Recode.net.