Two weeks ago, the Palo Alto Daily Post ran a piece provocatively titled, “Who needs Facebook?”, referencing the article’s claim that the tech economy is humming along despite Facebook’s stock tanking.
Most interesting to me were two issues addressed by the author that I would posit are intimately related:
- Rents in San Francisco have soared beyond the lofty levels of the original internet boom — apartments rented for an average of $2,734 per month in June 2012.
- Programmers still command top dollar because there aren’t enough of them to meet demand — the average salary for software engineers in the Bay Area is about 17% higher than the national average for the same occupation.
So what’s going on?
If there are plenty of job openings for engineers in the Bay Area and the pay is higher than anywhere else in the country, why aren’t more of them moving to the Bay Area from other tech hubs such as Raleigh, NC and Austin, TX? Surely, it can’t be an aversion to the California sunshine…
I think the clear answer can be found in the author’s first point about rents: with sky-high housing prices, the Bay Area suddenly becomes less appealing, even for well-paid programmers. The supply of homes in desirable Bay Area locations falls well short of demand, which leads to those rising rents.
Why should we care?
It’s no secret that the Bay Area’s economy is driven by the tech sector. If tech businesses can’t hire the workers they need here, they may be forced to move or expand elsewhere. And that would sour the economy and jobs outlook for everybody.
Silicon Valley cities have gotten a bit complacent about our thriving tech industry. Exhibit A: the blithe dismissal of Facebook in newspaper headlines. As a region, we cannot afford to be carefree, or careless, when it comes to economic success. The truth is simple — the reluctance of local communities, collectively, to say yes to new homes is casting an ominous shadow over the Bay Area’s bright economic outlook.