Yes, Rent Is Rising Much Faster in America's Tech Hubs
In the bitter debate over rising rents amid San Francisco's second tech boom, it's difficult to separate the one from the other. Does the presence of Google necessarily drive up rent? Are tech hubs and affordable housing mutually exclusive? If so, what does that mean not just for San Francisco, but also for Austin, and Raleigh, and Seattle?
Looking across the country at the housing markets in America's 10 largest tech hubs, the answer is mixed. Asking prices for for-sale homes are rising faster than they are in the rest of America's 100 largest metros, according to an analysis released today by Trulia. But these tech centers – defined as the metros where Internet industries make up the largest share of the local economy – are also rebounding from steeper price declines, and they have fewer foreclosed homes on the market. Factor in those variables, and housing prices in these 10 metros that have bet heavily on the digital economy are actually rising on par with national trends.
Admittedly, for-sale housing in these cities is considerably more expensive to start with. But that was true back in 1990, well before the current explosion of companies like Google and Facebook and Twitter. Trulia's definition of "tech" here is a narrow one, focused not on all high-tech firms, but on industries like software publishing and data processing. No one seems to be accusing the guys who build solar panels of driving out the working class, so Trulia focused here on the fields that employ computer programmers, web developers and their ilk.
The resulting data, based on asking prices (not sales prices) for housing through January, suggests that, at the very least, we can't accuse these people of driving runaway housing prices.
The rental picture, however, looks quite different. Year over year, rents are rising almost twice as fast in these tech hubs as in the other 90 metros. In most of America's large markets, rent is rising about 3 percent a year. In Trulia's 10 tech hubs (ranked below by the scale of their tech industries), it's 5.7 percent. In metropolitan San Francisco, it's 12.3 percent.
Middlesex County, Massachusetts, by he way, is home to Harvard and MIT.
All that said, housing affordability is significantly worse in these 10 metros than in the rest of the country, whether you look at rental rates or housing prices. But it's also true that companies like Google and Facebook settled in places that were expensive long before they got there.
There's also an additional factor at play here that partially explains why Raleigh is so much more affordable than San Francisco within this group. Both metros are teeming with programmers and developers. But Raleigh has been doing a lot more to construct new housing to ease that pressure, as this scatterplot shows comparing new construction permits and median house prices per square foot:
San Francisco's problem, as many have pointed out, is not simply the arrival of new tech workers, but the lack of new housing to accommodate them.