Unless you’re a millionaire, don’t plan on buying a nice home in the San Francisco area anytime soon. The high number of technology workers making million-dollar salaries is driving up the cost of real estate far beyond what most individuals and families can dream of paying.
With a median home price of over $1 million, most simply can’t afford to buy a house in the San Francisco area. (Don’t even get started on home prices in tech epicenter Palo Alto.)
The price of rent has increased, too. With more individuals and families turning to renting instead of buying, competition for a place to live has driven prices up to unprecedented levels. Average asking price for apartments in the area has recently exceeded $3,000 – much more than most can pay.
It’s not only in the Bay Area that home prices are jumping. All over the country, technology hubs such as Austin, New York, and the Pacific Northwest are driving up the cost of local real estate. This puts the dream of homeownership out of reach for all but the very-wealthy.
Just look at Joe Kelso and John Winter, a San Francisco-area couple who were in the market for a home priced around $500,000. In many markets, finding a nice home at that price would be easy. But in the Bay Area and other tech centers with many wealthy tech moguls, $500,000 is now considered “starter” home pricing.
“It’s a real challenge to long-term residents,” said Richard Morrison, a real estate agent in the Northwest Corridor. As more tech companies have made Portland, Seattle, and Vancouver their headquarters, Morrison has watched home prices steadily rise. “You’ve got these people who have worked their entire lives to save up and buy their dream home, and now it’s a bigger stretch because their city has become a popular destination for tech companies.”
Even cities like Austin – where homeownership has traditionally been much more accessible than other hubs like New York City – are experiencing rapid real estate growth. Home to many tech companies including Dell, IBM, and wearable tech maker Atlas, the influx of technology workers is raising concerns that Austin, too, could be a city where the average person cannot afford a home. Home sales in central Texas rose 8% in the last year and are expected to continue to rise as Austin’s tech industry grows.
Business Real Estate Equally Difficult To Find
It’s not just finding a place to sleep that’s becoming difficult for those living near tech neighborhoods. It’s made finding a business location difficult, too.
“Unless you’ve got someone paying your rent for you, you’re going to have a hard time finding a place for your business to set up shop in Silicon Alley,” said Gae Elika, a NYC real estate agent. Though Silicon Alley used to be a popular place for NYC-based startups to go into business, a recent 8% surge in real estate costs means it’s simply not affordable for many startups.
Of course, if a startup has millions in venture capitalist funds to spend, the cost of an office is unimportant. “Rent is not as much of a factor for a high-tech venture backed start-up,” said Brenner Group president and CEO Richard Brenner.
Unfortunately, the extra cash in the pockets of venture-backed start-ups means other businesses are almost always outspent when competing for office space. Higher prices mean bootstrap start-ups are unable to make the 5-year lease commitment required by many building owners.
Is Gentrification Inevitable?
With real estate prices near tech epicenters rising, businesses are providing shuttles and transportation for their employees who are forced to live far away from the offices. However, even this practice isn’t sitting well with long-term residents of these cities who are forced to watch their neighborhoods become priced out right around them.
Last week, protesters in San Francisco surrounded the Google Bus, transportation provided by Google to transport its employees from San Francisco to Google campus. Though Google didn’t pay the protestors’ ransom of $1 billion, and the bus was eventually let on its way, the message about gentrification was clear: tech companies may bring a lot of jobs to an area, but it also brings higher home prices, forcing many long-term residents of these areas out.
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