News

Income inequality reaches a 'historic high' in Silicon Valley, new report shows

Insufficient housing stock affects employment, traffic, out-migration rates

Despite a hot economy and a slight dip in home prices, 2019 was a year of reckoning for Silicon Valley's high-tech giants, with a growing number of residents and city leaders demanding greater contributions to combat the area's deep housing shortage, according to a new report from Joint Venture Silicon Valley.

The Silicon Valley Index, an annual overview of the region's economic and demographic indicators, highlights some of the region's most notable trends of 2019, including the continued expansion of commercial development and a slight decline in home sale prices after seven years of rapid gains. While the report celebrates the region's "upward spiral," as evidenced by a $17 billion increase in the regional gross domestic product, a slate of new hotels popping up around the region and 30,000 new jobs, it also details the dark side of the surging economy, including traffic gridlock and housing prices that continue to drive people away.

"Against a flourishing economic backdrop, conditions are harsh for the broad peripheries of the population as inequality reaches new dimensions and wage gains are lost to the rising costs of living," the report's introduction states. "Despite recent progress, the region still has the nation's highest housing prices and our transportation challenges continue to mount."

Russell Hancock, president and CEO of Joint Venture Silicon Valley, reflected on this dichotomy in his introductory letter for the report, which noted that the Bay Area has added 821,000 jobs since the recession of 2008. This, he noted, is the equivalent of dropping another city the size of San Francisco into the region.

While he celebrated the area's engineering savvy, strong universities and deep pools of capital, Hancock also asked: "So why does it feel so tenuous?"

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The answer, he says, is insufficient housing stock. The region has only added about 173,000 housing units since 2008, a jobs-housing mismatch of nearly 5 to 1.

"The result is the nation's highest housing prices, an unsettled workforce and a transportation system sagging under the weight of 100,000 megacommuters," Hancock wrote. "Add to this the nation's most sharply pronounced income gaps and you have a formula for despair."

It doesn't help, he added, that the region's driving industries are "facing a backlash the likes of which we've never seen."

"As technology plays a deeper and more pervasive role in nearly every aspect of our lives, that role has come under question and the region feels like it's under siege," Hancock wrote.

Despite the recent years of prosperity, income inequality in Silicon Valley is now at a "historic high," according to the report, with 13% of the households holding more than 75% of the region's wealth. Furthermore, while 13% of the region's households have more than $1 million in net assets, 37% have less than $25,000 in savings.

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Even though Silicon Valley and San Francisco remain the two most expensive metro regions in the nation when it comes to housing costs, Silicon Valley's median home sale prices actually declined by 6%, or about $75,000, in 2019. The report posits that this may reflect "a cooling overall market" and possibly a shift of activity away from higher-end homes.

Despite widespread recognition of the region's housing shortage and efforts by state and local legislators to address the housing affordability crisis, building permit activity for residential construction actually slowed in 2019, according to the Index. Most of the permits were issued to homes that are only affordable to high-income individuals.

Apartment rents, meanwhile, remain sky-high compared to the rest of the nation. According to the Index, the median apartment rental rate per square foot in 2019 was $3.76 in San Francisco and $3.32 in San Jose. This is well above the median of $2.67 in California and roughly double the rate of $1.73 in the United States.

The report notes that 23% of Silicon Valley households who rented were "severely burdened" by housing costs, which means they had spent more than 50% of their gross income on housing.

Yet the report also notes that there is a relatively large amount of affordable housing in the region's development pipeline. There were 3,258 "affordable housing" units (those deemed affordable for residents earning up to 80% of the area median income) approved in fiscal year 2018-2019 — more than in any other year of the past two decades. By contrast, there were just 699 units of affordable housing approved in 2017 and 614 in 2018.

And while the affordable housing units made up just 17% of the total number of newly approved units, that is the highest percentage since 2010, when 23% of the new units were deemed affordable (in 2017 and 2018, the share was 7% and 8%, respectively).

The report points out that the shares of multigenerational and multifamily households remain high and that more than a third of all young adults live with a parent.

"Homelessness and housing insecurity remain critical issues," the report states. "Further compounding the issue is the reality that many of Silicon Valley's residential units are vacant, underutilized, inadequate or otherwise deficient."

While residential development is rolling out slowly, commercial growth boomed in 2019, with 8.5 million square feet of commercial space completed in Silicon Valley in 2019 — an 18-year high. And more commercial construction is on the way, with LinkedIn, Google, Microsoft, Adobe and Nvidia all moving forward with constructing office space as 2019 came to an end.

"Although asking rents in Silicon Valley are relatively high compared to other growing tech regions across the nation, the region's major tech companies have continued to expand their presence with an increasing real estate footprint," the Index states.

The link between growing tech campuses and the region's housing and transportation problems has become a major theme for local governments throughout the region. Several cities, including Mountain View and East Palo Alto, have recently instituted business taxes to help address these issues. Palo Alto is preparing to place a business tax on its November ballot, with revenues targeting transportation improvements.

Several candidates for Senate District 13, which includes large portions of San Mateo and Santa Clara counties, also have called for policies that would require tech companies to do more to address the region's housing crisis. Josh Becker has proposed requiring tech firms to build a housing unit for every job they create, while Michael Brownrigg suggested creating a "credit" market for new housing, with residential builders selling credits for new units to commercial developers.

The Index also highlighted the changes in Silicon Valley's population, which is becoming increasingly diverse. Growth has slowed, with more residents migrating out of the region than coming in for the third straight year. According to the Index, Santa Clara County ranked fourth among California's 58 counties for net domestic out-migration between July 2018 and July 2019, trailing only Los Angeles, Butte and Orange counties.

Silicon Valley's share of foreign-born residents has continued to slowly rise, reaching 38% in 2018, according to the Index. This is fueled by employed residents and those working in technical occupations. According to the Index, more of the region's tech talent in 2018 was from India and China than from California and the rest of the United States combined.

The region's housing shortage also has compounded its traffic problems. Despite efforts by municipalities to discourage driving, the Index notes that the average number of miles driven by Silicon Valley commuters has remained steady over the past three years at about 22 miles per day. Solo commuting remains the most common way to get to work, with 73% of employees driving alone, and public transit use per capita has been on the decline since 2015 on almost all systems (Caltrain's ridership declined in 2019 for the first time since 2010).

According to the report, 6.6% of Silicon Valley employees (more than 101,000 people) had spent more than three hours commuting to and from work on a daily basis. "The number of vehicle hours wasted due to traffic congestion: in Silicon Valley and the Bay Area has tripled between 2009 and 2019," the report states.

"Increases in the number of commuters and the utilization of certain commute paths have led to an unprecedented level of traffic delays in Silicon Valley, with 81,000 hours lost to congestion every day — amounting to an estimated loss in regional productivity of as much as $3.4 billion annually," the report states.

View multiple charts illustrating the report's findings here.

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Income inequality reaches a 'historic high' in Silicon Valley, new report shows

Insufficient housing stock affects employment, traffic, out-migration rates

by / Palo Alto Weekly

Uploaded: Wed, Feb 12, 2020, 3:41 pm

Despite a hot economy and a slight dip in home prices, 2019 was a year of reckoning for Silicon Valley's high-tech giants, with a growing number of residents and city leaders demanding greater contributions to combat the area's deep housing shortage, according to a new report from Joint Venture Silicon Valley.

The Silicon Valley Index, an annual overview of the region's economic and demographic indicators, highlights some of the region's most notable trends of 2019, including the continued expansion of commercial development and a slight decline in home sale prices after seven years of rapid gains. While the report celebrates the region's "upward spiral," as evidenced by a $17 billion increase in the regional gross domestic product, a slate of new hotels popping up around the region and 30,000 new jobs, it also details the dark side of the surging economy, including traffic gridlock and housing prices that continue to drive people away.

"Against a flourishing economic backdrop, conditions are harsh for the broad peripheries of the population as inequality reaches new dimensions and wage gains are lost to the rising costs of living," the report's introduction states. "Despite recent progress, the region still has the nation's highest housing prices and our transportation challenges continue to mount."

Russell Hancock, president and CEO of Joint Venture Silicon Valley, reflected on this dichotomy in his introductory letter for the report, which noted that the Bay Area has added 821,000 jobs since the recession of 2008. This, he noted, is the equivalent of dropping another city the size of San Francisco into the region.

While he celebrated the area's engineering savvy, strong universities and deep pools of capital, Hancock also asked: "So why does it feel so tenuous?"

The answer, he says, is insufficient housing stock. The region has only added about 173,000 housing units since 2008, a jobs-housing mismatch of nearly 5 to 1.

"The result is the nation's highest housing prices, an unsettled workforce and a transportation system sagging under the weight of 100,000 megacommuters," Hancock wrote. "Add to this the nation's most sharply pronounced income gaps and you have a formula for despair."

It doesn't help, he added, that the region's driving industries are "facing a backlash the likes of which we've never seen."

"As technology plays a deeper and more pervasive role in nearly every aspect of our lives, that role has come under question and the region feels like it's under siege," Hancock wrote.

Despite the recent years of prosperity, income inequality in Silicon Valley is now at a "historic high," according to the report, with 13% of the households holding more than 75% of the region's wealth. Furthermore, while 13% of the region's households have more than $1 million in net assets, 37% have less than $25,000 in savings.

Even though Silicon Valley and San Francisco remain the two most expensive metro regions in the nation when it comes to housing costs, Silicon Valley's median home sale prices actually declined by 6%, or about $75,000, in 2019. The report posits that this may reflect "a cooling overall market" and possibly a shift of activity away from higher-end homes.

Despite widespread recognition of the region's housing shortage and efforts by state and local legislators to address the housing affordability crisis, building permit activity for residential construction actually slowed in 2019, according to the Index. Most of the permits were issued to homes that are only affordable to high-income individuals.

Apartment rents, meanwhile, remain sky-high compared to the rest of the nation. According to the Index, the median apartment rental rate per square foot in 2019 was $3.76 in San Francisco and $3.32 in San Jose. This is well above the median of $2.67 in California and roughly double the rate of $1.73 in the United States.

The report notes that 23% of Silicon Valley households who rented were "severely burdened" by housing costs, which means they had spent more than 50% of their gross income on housing.

Yet the report also notes that there is a relatively large amount of affordable housing in the region's development pipeline. There were 3,258 "affordable housing" units (those deemed affordable for residents earning up to 80% of the area median income) approved in fiscal year 2018-2019 — more than in any other year of the past two decades. By contrast, there were just 699 units of affordable housing approved in 2017 and 614 in 2018.

And while the affordable housing units made up just 17% of the total number of newly approved units, that is the highest percentage since 2010, when 23% of the new units were deemed affordable (in 2017 and 2018, the share was 7% and 8%, respectively).

The report points out that the shares of multigenerational and multifamily households remain high and that more than a third of all young adults live with a parent.

"Homelessness and housing insecurity remain critical issues," the report states. "Further compounding the issue is the reality that many of Silicon Valley's residential units are vacant, underutilized, inadequate or otherwise deficient."

While residential development is rolling out slowly, commercial growth boomed in 2019, with 8.5 million square feet of commercial space completed in Silicon Valley in 2019 — an 18-year high. And more commercial construction is on the way, with LinkedIn, Google, Microsoft, Adobe and Nvidia all moving forward with constructing office space as 2019 came to an end.

"Although asking rents in Silicon Valley are relatively high compared to other growing tech regions across the nation, the region's major tech companies have continued to expand their presence with an increasing real estate footprint," the Index states.

The link between growing tech campuses and the region's housing and transportation problems has become a major theme for local governments throughout the region. Several cities, including Mountain View and East Palo Alto, have recently instituted business taxes to help address these issues. Palo Alto is preparing to place a business tax on its November ballot, with revenues targeting transportation improvements.

Several candidates for Senate District 13, which includes large portions of San Mateo and Santa Clara counties, also have called for policies that would require tech companies to do more to address the region's housing crisis. Josh Becker has proposed requiring tech firms to build a housing unit for every job they create, while Michael Brownrigg suggested creating a "credit" market for new housing, with residential builders selling credits for new units to commercial developers.

The Index also highlighted the changes in Silicon Valley's population, which is becoming increasingly diverse. Growth has slowed, with more residents migrating out of the region than coming in for the third straight year. According to the Index, Santa Clara County ranked fourth among California's 58 counties for net domestic out-migration between July 2018 and July 2019, trailing only Los Angeles, Butte and Orange counties.

Silicon Valley's share of foreign-born residents has continued to slowly rise, reaching 38% in 2018, according to the Index. This is fueled by employed residents and those working in technical occupations. According to the Index, more of the region's tech talent in 2018 was from India and China than from California and the rest of the United States combined.

The region's housing shortage also has compounded its traffic problems. Despite efforts by municipalities to discourage driving, the Index notes that the average number of miles driven by Silicon Valley commuters has remained steady over the past three years at about 22 miles per day. Solo commuting remains the most common way to get to work, with 73% of employees driving alone, and public transit use per capita has been on the decline since 2015 on almost all systems (Caltrain's ridership declined in 2019 for the first time since 2010).

According to the report, 6.6% of Silicon Valley employees (more than 101,000 people) had spent more than three hours commuting to and from work on a daily basis. "The number of vehicle hours wasted due to traffic congestion: in Silicon Valley and the Bay Area has tripled between 2009 and 2019," the report states.

"Increases in the number of commuters and the utilization of certain commute paths have led to an unprecedented level of traffic delays in Silicon Valley, with 81,000 hours lost to congestion every day — amounting to an estimated loss in regional productivity of as much as $3.4 billion annually," the report states.

View multiple charts illustrating the report's findings here.

Comments

Ride bikes
Stanford
on Feb 13, 2020 at 9:47 am
Ride bikes, Stanford
on Feb 13, 2020 at 9:47 am
12 people like this

Lived in Palo Alto/Menlo Park +15yrs started a tech job 4yrs ago to survive. Make “to much” income to get housing subsidies and unable to save for a down payment and housing monthly mortgage, taxes, maintenance, other don’t seem possible.

Any thoughts?


Anon
Another Palo Alto neighborhood
on Feb 13, 2020 at 10:12 am
Anon, Another Palo Alto neighborhood
on Feb 13, 2020 at 10:12 am
54 people like this

>> Joint Venture Silicon Valley

The irony. Apparently JVSV staff are lacking in the ability to reflect upon themselves and the role they played in creating the current "housing crisis".

>> "The result is the nation's highest housing prices, an unsettled workforce and a transportation system sagging under the weight of 100,000 megacommuters," Hancock wrote. "Add to this the nation's most sharply pronounced income gaps and you have a formula for despair."

I don't despair. Sooner or later, the geniuses who run these companies will stop overlooking the obvious, and start relocating and locating new growth in other areas. Honestly, they don't have to locate every single tech job in the world right here. They really don't.

>> It doesn't help, he added, that the region's driving industries are "facing a backlash the likes of which we've never seen."

The fastest way to address this is to move 100,000 jobs to where the megacommuters actually live. e.g. near Tracy.

==

Posted by Ride bikes, a resident of Stanford

>> Any thoughts?

Yes. Do what several of my relatives have done. Learn as much as you can as fast as you can to enhance your value on the job market, and then, move elsewhere. There are a number of places where tech jobs are growing and the cost of living is far lower than here.


What Will They Do Next
Old Palo Alto
on Feb 13, 2020 at 11:55 am
What Will They Do Next, Old Palo Alto
on Feb 13, 2020 at 11:55 am
15 people like this

@ anon.....great post.


Old and in the way
Downtown North
on Feb 13, 2020 at 12:05 pm
Old and in the way, Downtown North
on Feb 13, 2020 at 12:05 pm
43 people like this

Why don't we stop allowing all the commercial construction if we need housing so badly? We already have plenty of jobs. Let's concentrate on housing instead of continuing to turn our town into an office park. If Palo Alto only allows affordable housing (apartments and condos that actually are affordable and not a developer's idea of at least a mil per tiny space) on developable areas like the Fry's site and the Ventura site, maybe we could do something to deal with our large share of the problem. And yes, tech companies, why don't you move campuses to the central valley? Or Arkansas or Missouri (home of a great engineering school, Missouri Science and Technology) or other places with a need for revitalization? We're so vitalized we're dying of it!


george drysdale
Professorville
on Feb 13, 2020 at 12:06 pm
george drysdale, Professorville
on Feb 13, 2020 at 12:06 pm
13 people like this

Supply and demand. It's obvious Silicon Valley is the target city for first rate techies. Rent go up a market signal to move to some place else if you want less expensive housing. If you can't hit or field in the major league go to a farm club like Texas. Enter the price fixers. Everybody can live here: Super Tuesday will California turn Bernie crat? Coming up at our doorstep: Super Tuesday in Mountain View.

George Drysdale land economist and historian of the de-control


conservativism at work
Midtown
on Feb 13, 2020 at 12:39 pm
conservativism at work, Midtown
on Feb 13, 2020 at 12:39 pm
19 people like this

On super Tuesday, California will....





Stay Blue. Every signal from the primary will show that Ca will continue it's slide AWAY from so-called "conservativism".

Maybe someday, so-called conservatives will actually go back to conservative values. Until then, Blue CA.


Family Friendly
Old Palo Alto
on Feb 13, 2020 at 1:42 pm
Family Friendly, Old Palo Alto
on Feb 13, 2020 at 1:42 pm
27 people like this

Another week, along lobbyist-funded "study" calling for more dorms for more H1Bs.


Inequality vs Diversity
Stanford
on Feb 13, 2020 at 2:12 pm
Inequality vs Diversity, Stanford
on Feb 13, 2020 at 2:12 pm
10 people like this

This is really about diversity. Inequality suggests different pay for the same work. We want economic diversity. We don’t want economic inequality.


Just Hire American
Barron Park
on Feb 13, 2020 at 2:57 pm
Just Hire American, Barron Park
on Feb 13, 2020 at 2:57 pm
20 people like this

> Another week, along lobbyist-funded "study" calling for more dorms for more H1Bs.

^^^ Blame Google (along with others) for the proliferation of imported H1-B labor from India.


MD Mom
College Terrace
on Feb 13, 2020 at 2:59 pm
MD Mom, College Terrace
on Feb 13, 2020 at 2:59 pm
30 people like this

@ Old and in the Way:
"Why don't we stop allowing all the commercial construction if we need housing so badly? "

Good question. Ask the city council.


Resident
Another Palo Alto neighborhood
on Feb 13, 2020 at 3:28 pm
Resident, Another Palo Alto neighborhood
on Feb 13, 2020 at 3:28 pm
9 people like this

This is home to one of the most innovative workforces in the world. High tech companies are two a penny. It is incredible to think that some of the best engineers in the world should not earn more than someone who drives a bus or teaches yoga. The fact is that we need all types of people to do all types of jobs. We need service workers and we need higher paid people who can buy the services.

This is reality.


George
Midtown
on Feb 13, 2020 at 4:39 pm
George, Midtown
on Feb 13, 2020 at 4:39 pm
15 people like this

> Posted by Anon
> a resident of Another Palo Alto neighborhood
> Yes. Do what several of my relatives have done. Learn as much as you can as fast as you can to enhance your value on the job market, and then, move elsewhere. There are a number of places where tech jobs are growing and the cost of living is far lower than here.

Classy. Telling people to just get out, now? I didn't think the Palo Alto Online comments section on a housing article could get much lower, but here we are.


Anon
Another Palo Alto neighborhood
on Feb 13, 2020 at 5:04 pm
Anon, Another Palo Alto neighborhood
on Feb 13, 2020 at 5:04 pm
32 people like this

Posted by George, a resident of Midtown

>> Classy. Telling people to just get out, now? I didn't think the Palo Alto Online comments section on a housing article could get much lower, but here we are.

You have it backwards. I'm not going to lie to someone and say stay here, it'll be great, you'll get rich when some startup goes public. That would be lying. Realistically, this is a great place to start a tech career, but, the odds are that you will prosper more in another location where the cost of living is lower. It is very difficult to get ahead here; why lie about it?


eenee
another community
on Feb 13, 2020 at 5:35 pm
eenee, another community
on Feb 13, 2020 at 5:35 pm
27 people like this

Pressure needs to be put on Facebook and Google to not just build housing but to do something about the traffic. They’re the ones that made this mess and they’re the ones that should fix it


13% own 75%
Greenmeadow
on Feb 13, 2020 at 5:41 pm
13% own 75%, Greenmeadow
on Feb 13, 2020 at 5:41 pm
7 people like this

"This is really about diversity."

Did the above posters even bother to read the article?!?

"...with 13% of the households holding more than 75% of the region's wealth."


Old Palo,Alto
Old Palo Alto
on Feb 13, 2020 at 5:56 pm
Old Palo,Alto, Old Palo Alto
on Feb 13, 2020 at 5:56 pm
7 people like this

Income inequality growing is a GOOD sign of all getting wealthier, normally.


Eg. Botton 20% 30,000 / year top 20%. Say 90,000 / year Difference: 60,000

NOW all double!


Bottom 20% 60,000 / year top 20%. Now 180,000 per year. Difference 120,000

SO why h is better for bottom twenty?

30,000 or 60,000 .? DUH! Real growth is MORE important, Pareto Optimality ? Check

Makes no the poor better off as central goal? Check

Not so relevant the ratio! Absolute value increase to poorest segment most moral metric ( not harm or limit to others)


Q.E.D.



I”wow ! Inequality up f


13% own 75%
Greenmeadow
on Feb 13, 2020 at 8:24 pm
13% own 75%, Greenmeadow
on Feb 13, 2020 at 8:24 pm
11 people like this

Nice math. So many flaws with logic, however. Who says the poor are getting "Absolute value increase "?

Do all the silly math you want, with fantasy assumptions, but you still are not addressing the article:

"...with 13% of the households holding more than 75% of the region's wealth."


Barry
Professorville
on Feb 13, 2020 at 8:28 pm
Barry, Professorville
on Feb 13, 2020 at 8:28 pm
18 people like this

The lack of housing has nothing to do with the lack of resources or money it has everything to do with bad public policy. Whose controlled the housing policies for the state the last 30 years? Democrats; progressives. They created a malfunctioning housing market and they refuse to try anything other than what has not worked because they recalcitrant ideologues.

Those 821,000 jobs could have been relocated to the barren area on the east side of the Diablo Range along with 200,000 homes over the last 12 years which would have decreased traffic in and out of the Bay Area by 30% while taking a huge bite out housing costs across the region and therefore a reduction of homelessness as a byproduct.

But your extremist environmentalists and dictatorial democrats like Scott Weiner refuse to develop this area which would actually make everyone whom the housing crisis is negatively affecting happy.

You all want a solution, here it is:
Web Link


But the pathetic leaders driving the state into the ground will not employ it. Instead they are arguing over what middlemen are going to take home the biggest junk of Gov. Newsom's Homeless money.
Web Link

Another fraud on Californians; a big give away to do nothing bureaucrats.


George
Midtown
on Feb 13, 2020 at 8:38 pm
George, Midtown
on Feb 13, 2020 at 8:38 pm
12 people like this

> Posted by Anon
> a resident of Another Palo Alto neighborhood
> You have it backwards. I'm not going to lie to someone and say stay here, it'll be great, you'll get rich when some startup goes public. That would be lying. Realistically, this is a great place to start a tech career, but, the odds are that you will prosper more in another location where the cost of living is lower. It is very difficult to get ahead here; why lie about it?

Because the answer should instead be, "let's build more housing so that people CAN come, enjoy our wonderful city, and settle in to build a life." Instead, you're taking the easy way out and just telling people to go away.


Gale Johnson
Adobe-Meadow
on Feb 13, 2020 at 10:06 pm
Gale Johnson, Adobe-Meadow
on Feb 13, 2020 at 10:06 pm
20 people like this

Trying times for the poor and middle income citizens in our communities. I didn't use the term middle class because I know many of them and they are high class people.

I now know the deceit of CC candidates campaigning on the affordable housing issue. They are either lying or simply uninformed or maybe just plain dumb and don't have any idea or viable plan to create affordable housing for the very low income, low income, and middle income people, a part of the population that is spelled out in the ABAG housing mandate, and a large number of people who serve us every day in our homes, yards, and in restaurants and other business establishments. Challenge them during the next campaign season before the election...affordable for whom? All the efforts to build affordable housing in PA for people in those categories has failed. Actually, there has been no effort in that regard. The candidates will throw numbers at us but they will be based on median incomes for our area. Those at the bottom income levels don't come close to meeting those income levels.

Consider the ominous task of providing housing for everyone who works in PA. It would do away with the commuter traffic and parking problems. It will never happen because forces are against it happening.

I know the impacts of homelessness based on my volunteer service at Wesley United Methodist Church to feed and house, overnight, 20 homeless guests.

I've made meals for them, sat with them, ate with them, and heard their stories. Come join me any night during the rest of February to have that same experience. It will change your thinking about the members of our homeless population.


Sense
Another Palo Alto neighborhood
on Feb 14, 2020 at 2:34 am
Sense, Another Palo Alto neighborhood
on Feb 14, 2020 at 2:34 am
20 people like this

The article states: "Even though Silicon Valley and San Francisco remain the two most expensive metro regions in the nation when it comes to housing costs, Silicon Valley's median home sale prices actually declined by 6%, or about $75,000, in 2019. The report posits that this may reflect "a cooling overall market" and possibly a shift of activity away from higher-end homes." Then it turns around and says: "Most of the permits were issued to homes that are only affordable to high-income individuals."

Hello! Can you say 2017 ginormous tax increase on Silicon Valley house poor? The tax landscape between $109,000, which is low income for this area, and three times that has been made absolutely brutal to those who spent all their lives apart from work trying to get into something stable for decades, suddenly the rug was pulled out. The more you earn in that range, the more disproportionately your tax burden shoots up (because of deductibility limits related to income, for example, and every last boobytrap in the code that increases taxes falling on this sector). The code was remade to favor real estate investors and hurt homeowners.

It couldn't have been more clear that this was going to slow the housing market, because anyone on the bottom rungs of homeownership is hanging on by their fingernails. The investor class (look up what S Mnuchin did after the housing crisis) looking for what to them are bargains in high-demand real estate areas, without putting things into the same freefall as 2008.

Why is this not being reported on? Given the numbers of people who took SALT deductions in higher cost-of-living states on both coasts before the tax change, if you conservatively consider 24 million people seeing an average increase of $10,000 in their taxes each, that's around a quarter of a trillion dollars to the federal treasury.

Why isn't there a cost-of-living adjustment for anything like that in the tax code? It ends up resulting in unequal treatment under the law. If you use a cost-of-living calculator, $150,000 here is the same as about $22,000 in many middle states, i.e., about the same standard of living. Losing another $10,000-$15,000 suddenly like that without even a phaseout is devastating. But only people in high-cost-of-living places are hit. Again, unequal treatment under the law.

It's sickening how deaf lawmakers in blue states are to the pain of their constituents, and how they just accept the twisted argument that the situation is aimed at lowering CA taxes. If California charged me nothing in taxes, it wouldn't reverse the federal increase, which has funneled even more money from blue states to red states, and from those less well off to the richest. But they shouldn't have to -- this is a high cost-of-living state, and that person making $150,000, living the same as the person making $22,000 in a lot of the rest of the country, is already paying tons more to the federal government, even when they deduct their state taxes (which, like everything else, are higher because of COST OF LIVING (you would think people on the right would understand actual supply and demand).

But because the media never talk about the cost-of-living differences and how hard it is to be Silicon Valley house poor, people are not complaining even while their children's college plans are suddenly ruined and they must suddenly face leaving after sacrificing for decades to put down roots here.

I really wish some of my fellow residents would start a referendum to make companies give any new workers coming in a contract that THEY will be the ones reducing their water usage up to 90% the next drought (which we are technically in) before existing residents who are already having their time with their families, their health because of the stress and pollution, their quality of lives destroyed by the tech companies playing king of the hill with Silicon Valley. And now their futures because of the tax law. Which has never even been reported on.

Actually, I'd rather see all the lawmakers first have to reduce THEIR water usage by 95% during the next big drought. Then the tech company workers who took the jobs the companies really should be looking to move to where the housing is. There are water usage, fire and earthquake safety dangers, pollution, noise, loss of quality of life, etc etc issues being cause by this tech hiring overcrowding. The solution is NOT more housing, the solution is less office development. Most of that office space should be converted to housing.

Good article that looks at the actual housing justice situation:
Web Link

Scroll down through this list to get a better idea of where tech hubs should be growing:
Web Link


Resident
Another Palo Alto neighborhood
on Feb 14, 2020 at 5:05 am
Resident, Another Palo Alto neighborhood
on Feb 14, 2020 at 5:05 am
12 people like this

As a child I moved into a new neighborhood, a new development of nicer homes. From memory, our neighbors were a gardener, an insurance agent, a doctor, a salesman, a teacher, a tv set designer, a pilot, a factory manager. My Dad was one of those, all the houses appeared to me to be about the same, some had nicer cars, some of the wives worked, some had house cleaners and others didn't, most did various remodels over the years.

Income variations are a fact of life. The house and the street where we live used to be "blue collar" but most are now high tech. When we bought our house, we struggled like most to be able to afford it - Palo Alto has always been more expensive than neighboring cities, but at the same time, there was very little available and our only other option would have been to buy in Fremont or Union City where we could have afforded a bigger and nicer home, but had a dreadful commute. Our 50s condition home has slowly been upgraded and remodeled and now is worth a great deal more than we paid for it. But, it is only book value as it has been a bit of a money pit. We can still afford to live in Palo Alto and we have the advantages of reasonably short commute which is worth a great deal to us.

Income inequality happens, it is what and how you choose to live within your income. I know that many teachers, police, firefighters, etc. prefer to work somewhere other than where they live. There are cheaper places to live on the Peninsula than Palo Alto. Some of these cheaper places are not much farther away from jobs that we are from ours. Living within your means is a value we have been taught by our parents and a value we have tried to teach our children. However, buying $5 coffees daily and $100 sneakers is a choice and when people say they can't afford to live somewhere nice, they should start looking at their spending habits before they ask themselves why.

Our first home was a struggle. We shared one old car for several years before being able to replace it and only became a two car family after our eldest child started kindergarten. Vacations were either camping or visiting family. Our children survived on hand me downs and eating out was rare. Babysitters were expensive, so date nights were romantic desserts after the children went to bed.

As a couple and as a family, I think we are stronger because of this. There have been times that it has not been easy from both the practical and the emotional issues. We were never promised or expected an easy life. Hopefully our values are the same as others as there will always be the haves and the have nots.


13% own 75%
Greenmeadow
on Feb 14, 2020 at 6:17 am
13% own 75%, Greenmeadow
on Feb 14, 2020 at 6:17 am
22 people like this

Huh. Did I click back into the wrong thread - isn't this the "Income inequality reaches a 'historic high'" thread?


"...with 13% of the households holding more than 75% of the region's wealth."


Chris Zaharias
another community
on Feb 14, 2020 at 6:59 am
Chris Zaharias, another community
on Feb 14, 2020 at 6:59 am
9 people like this

[Post removed.]


Online Name
Embarcadero Oaks/Leland
on Feb 14, 2020 at 7:19 am
Online Name, Embarcadero Oaks/Leland
on Feb 14, 2020 at 7:19 am
9 people like this

Re income inequality, look at what type of start-ups are being funding and think about the massive NEW unemployment that will result from some of the AI and the autonomous vehicle companies. Remind me how many millions of truck drivers there are in this country.


Anon
Another Palo Alto neighborhood
on Feb 14, 2020 at 8:47 am
Anon, Another Palo Alto neighborhood
on Feb 14, 2020 at 8:47 am
11 people like this

Posted by Online Name, a resident of Embarcadero Oaks/Leland

>> Re income inequality, look at what type of start-ups are being funding and think about the massive NEW unemployment that will result from some of the AI and the autonomous vehicle companies. Remind me how many millions of truck drivers there are in this country.

Don't worry. They will all retrain themselves as Python coders.


Oleg
another community
on Feb 14, 2020 at 9:45 am
Oleg, another community
on Feb 14, 2020 at 9:45 am
8 people like this

I tink it is berry difficult to have true income equalitee in Palo Alto today.

The city is now for rich people or those who have lived here for dekades.

I work in Palo Alto and see many people from udder countries living here.

Since houses cost many millions of dollars, how did dey get so rich?

Many are from China.


Liz Gardner
Mayfield
on Feb 14, 2020 at 11:04 am
Liz Gardner, Mayfield
on Feb 14, 2020 at 11:04 am
6 people like this

To Gennady Sheyner. Great start for more to come, I hope. Pinpoint Palo Alto's affordable housing. Yes. You have the picture of Mayfield Place, but who exactly in PA is this inequity affecting? What would be good to see is a historic overview -- has there ever been affordable housing in Santa Clara County/Bay Area and where. Population growth and the unlucky Pro 13 contributed to the crisis. Finally. Some quotes from real residents/families of the area who are struggling to survive thrive or go else where could add much depth to your journalism.


Inequality vs Diversity
Stanford
on Feb 14, 2020 at 11:45 am
Inequality vs Diversity, Stanford
on Feb 14, 2020 at 11:45 am
11 people like this

“13% of the households holding more than 75% of the region's wealth.“

This doesn’t seem that far from the 80/20 rule, and isn’t remarkable or concerning.

More concerning would be everyone holding equal wealth, given the vast differences in productivity, savings, investments, spending, judgement, lifestyle, temperament and responsibility.


Jerry99
Barron Park
on Feb 15, 2020 at 5:51 pm
Jerry99, Barron Park
on Feb 15, 2020 at 5:51 pm
10 people like this

It is too difficult to move to another area. I have lived here for 30 years in the same place but moving to a new area South of Palo Alto would cost approx 40% of the sales price would be CA income tax and Federal Capital Gains Tax. There would not be enough money left to but the same house/townhouse in another city. It is the taxes in CA that are strangling the residents.
The answer is that the tech behemoths should move to Phoenix, Salt Lake City, Tracy, Fresno, etc. to have a lower cost of living and their employees could afford to buy homes.


Born in PS
Midtown
on Feb 15, 2020 at 9:58 pm
Born in PS, Midtown
on Feb 15, 2020 at 9:58 pm
4 people like this

Usually a good recession will fix this instead of artificial growth restraints such as taxes, etc. Or tax for better mass transit like everywhere else in the world.


Huey Long
College Terrace
on Feb 15, 2020 at 10:13 pm
Huey Long, College Terrace
on Feb 15, 2020 at 10:13 pm
7 people like this

@Jerry99
You get !500k of your profits tax exempt. So (sales price - cost basis - improvements and sales costs - 500k) = Your taxable cap gain.


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