Even High-Paid Tech Workers Are Being Priced Out Of These Markets
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Priced out of homes in and around Silicon Valley, software engineers began migrating south to Silicon Beach in the Los Angeles region for its diversity of housing options.
But that may no longer be the case.
The surge in housing prices over the past few years in Silicon Beach, which includes areas such as Playa Vista, Marina Del Rey, Venice, Santa Monica and around other tech headquarters in Los Angeles, is beginning to outpace software engineers' high salaries, according to a new study by Los Angeles-based Open Listings, a tech-driven homebuying site.
Open Listings examined 14 major tech companies in Los Angeles and the Bay Area and found that tech workers in Los Angeles were spending the highest percentage of their paycheck to own a home near their workplace.
“When technology workers on six-figure salaries can no longer afford to live near their workplaces, that’s a signal there’s truly a housing crisis,” Open Listings CEO Judd Schoenholtz wrote in an email.
The study looked at median home sales prices within a 20-minute drive of tech headquarters across the state, such as Hulu in Santa Monica, Google in Mountain View, Apple in Cupertino, Netflix in Hollywood and SpaceX in Hawthorne.
Calculating the average salaries for software engineers for each company and using the 28% rule that lenders use to see if a person’s income could qualify to buy a home, Open Listings found software engineers in the Los Angeles area would need as much as 44% of their salaries to afford a home within a short driving distance of work.
For example, the average software engineer’s salary at Hulu in Santa Monica is $129K. The median home price in the Santa Monica area is $1.05M. The monthly mortgage on a home in that area would be roughly $4,700 a month, according to Open Listings.
At Apple in Cupertino, the average software engineer’s salary is $188K with the area’s average home prices at $1.16M. Tech workers would spend about 33% of their salaries on a $5,211 monthly mortgage.
The study found the median housing costs near the offices of Apple, Google, Uber and other tech giants in San Francisco was $1.2M. The average salary for software engineers in those companies was $210,500.
In Silicon Beach, the median housing cost near the offices of local technology companies like Snapchat, Tinder and Hulu was $895,625. The median salary for software engineers in Los Angeles was $157K, according to the study.
“The problem, especially in areas on the westside of Los Angeles, is that technology salaries are not keeping up with the rapid increase in housing costs,” Schoenholtz wrote.
There are exceptions. In places such as Hawthorne, where Elon Musk’s SpaceX is headquartered, a software engineer would only need to spend 15% of their salary to potentially buy a median-priced home, which runs about $450K.
Schoenholtz said this study just focuses on the high-salaried tech workers. This does not include the other workers that make up the company such as a secretary, a custodian, marketing staff and others.
“If [software engineers] can't afford to live nearby work or wouldn't get approved by a lender for a mortgage on a home nearby work, no one can,” he wrote. “The marketing staff, office workers, and certainly those working outside the technology industry will be forced to commute from much further distances if they are working within these areas.
“In San Francisco you're already seeing the worst-case scenario where schools are even starting to close as both [students'] families and teachers are being forced out of certain school districts.”
Schoenholtz said he hopes the study can bring to light the need for affordable housing. He said Open Listings is part of a tech-backed coalition that includes Salesforce, Twitter, Lyft, Yelp, Mozilla and others, that are supporting state Sen. Scott Wiener’s proposed bill to create more transit-rich and affordable housing in cities like San Francisco and Los Angeles.
“While the industry drove innovation and the economy, it also drove up housing prices as highly skilled and well-paid workers moved into urban areas,” he wrote. “More than half of venture-capital-financed startups are now based in urban cities.
"I think the importance of the study is to illustrate that the technology industry now needs to look in the mirror, accept some responsibility, and work together with everyone else in solving the crisis. We need everyone to understand we're in this together.”