Silicon Valley tech housing bubble

Housing Tech Bubble

31st March, 2017 by

For many, living in Silicon Valley and working in tech sounds like the ideal combination. There are coders, entrepreneurs, and dreamers all over the world who would give anything for a chance to live and work where some of tech’s most influential companies were born.

However, what many don’t fully realize is that the exponential growth of industry that this area of California has seen in tech has had disastrous effects on the housing industry—and subsequently a dark side for many tech workers. According  to TechCrunch, San Francisco is experiencing nothing short of a 21st-century housing crisis fuelled by this unsustainable growth: “One reason for the housing shortage is that, on average, only 1,500 units per year have been added, while the U.S. Census estimates the city’s population grew by 32,000 people from 2010 to 2013 alone. Homeowners have a strong economic incentive to restrict supply because it supports price appreciation of their own homes. The crisis has been exacerbated by the migration of the tech industry from the suburbs to the city.”

As TechCrunch says, it’s not just housing in the city itself that’s been crippled, but also the surrounding suburbs like San Jose, Mountain View, Menlo Park, Palo Alto—all of which are in the region of the southern San Francisco Bay area that makes up so-called “Silicon Valley”. Once sleepy suburbs where middle class families raised their kids in areas with good schools, these areas have been taken over by big tech company headquarters including Facebook and Google. The influx of high earners working at these companies and wanting to live in this area has pushed up housing prices and pushed out ordinary residents.  

So, what do the effects of this housing crisis look like in terms of living situations? In San Francisco, we’ve seen the rise of communal living spaces where as much as 40 people live together paying nearly $2,000 per month to sleep in bunk beds. As VentureBeat reported: “While some say communal housing provides a solution for many first-time workers fresh out of college, such housing also has created its share of controversy. Housing advocates have complained that this new dorm-like style of living has pushed up rents and forced long-time residents to move out.” It’s easy to see the negative effect that 40 people willing to live in a space meant for 5 to 10 residents would have on the housing market. What’s less clear is the psychological toll of such intense living conditions for tech workers.

While one may argue that living in cramped quarters is simply what’s required when you’re getting started in a competitive industry, even those at the top of Silicon Valley’s tech pyramid are feeling the burn too. In a Guardian exposé entitled “Scraping by on six figures? Tech workers feel poor in Silicon Valley’s wealth bubble” one tech worker at a large firm complained of both the guilt and shame they feel at struggling to make ends meet on such a high salary. “You are caught in this really uncomfortable position. You feel very guilty seeing such poverty and helplessness,” added Michelle, the 28-year-old on a six-figure wage. “But what are you supposed to do? Not make a lot of money? Not advocate for yourself and then not afford to live here?”

While we’ve seen similar effects on the housing market like this before in the first dot com boom, it’s unclear if this current bubble will ever burst. Policy decisions at both the local and state level need to change and address its growing problems, while companies need to be more aware of the effect their growth has on the surrounding communities they live in.

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