Being an east coaster, maybe I'm just not clear on this, but in proximity to the big tech companies, how far out are we talking for the examples discussed in this article?
Put another way: How far out does one have to live to house a family of 3 or 4 affordably with respect to a 160k salary? Lets say, hypothetically, 2000 sq ft dwelling of some kind (house, condo, rowhome), good school district, for ~$2500-3500/mo - rent or mortgage? Or if that's a ridiculous question for the Bay Area, let's say 35-40% DTI and call it $5000/mo.
Speaking anecdotally, when I lived in the DC area, it ran me ~2400/mo for my 900 sq ft rowhouse in a good zip code walkable to the metro. The problem being that a 3rd bedroom would put me north of 600k (closer to 750k today) for a home if I wanted to be in the same zip code, or move outside the beltway and commute 90 minutes. I moved... to northern new england.
I have about 2400 sq ft in Southern New Hampshire for a mortgage+taxes of about $1800/month. If you were willing to commute 30-60 minutes into Mass, there are jobs that would pay that kind of salary, although the local job market isn't quite that inflated right in New Hampshire.
Of course, if you can find work in northern New England, things are much cheaper. I was visiting the folks this weekend, and my mom was showing me listings in the paper for four-bedroom houses with acres of back yard for $800/month, with heat and utilities included...
I interviewed a few years ago at a Start up in San Francisco; I live and work in Atlanta. One of the things that worried my girlfriend to death was how we would afford to live there.
One of the guys I interviewed with said he spent $1,800 a month to rent a single room in a house with a few other people. He didn't even have his own bathroom. My friend that tried to get me the job out there was paying over $3,000 a month for a small 1 bed room apartment across the street from Twitter.
In Atlanta I was renting a 2,600 sq ft warehouse loft for $1425 a month.
The weirdest part was they offered me the job of a Lead Android Developer for $135k. I make almost $160k here in Atlanta as an Application Architect, and it costs way less to live here. Glad I turned that down.
I used to live right next to the Beltine near PCM in a 1 bedroom, 1 bath, 900 sqft, all upgraded unit for less than $1200 a month. Now the prices are ridiculous (for ATL) - $1800+ for a one bedroom.
But it's still a hell of a lot cheaper than our most expensive cities. You would think the salaries would be adjusted accordingly, but from my experience job hunting, they aren't to any appreciable degree.
What is the ATL market like for entry-level developers? Is it that salary isn't adjusting accordingly or that rent costs are catching up to the increased wealth?
For people curious about maybe checking out Atlanta - what are the good parts to live for 30 something's who like to walk to groceries, cafes, parks, etc?
The places that match your criteria would be Decatur, Oakhurst, Kirkwood, Candler Park, East Atlanta, Inman Park, Virginia Highlands and Midtown. All of these are pretty walk-able areas and most are within walking distance of MARTA, our public transportation.
I looked and the 40% federal rate kicks in at $500k, I thought it was lower. So you're more correct than I am.
45-50% is a better total estimate for a total tax rate.
The last dollar made is taxed at 53% (40% federal, 13% CA), so that's why the 60% number didn't sound horribly off. This is also ignoring FICA and SS taxes, which it's far too late to do the math on :)
"I don't care where you live, you're terrible at managing money."
Not necessarily. Everything in SF/Bay Area will require a compromise. Want to save on real-estate? You will pay in time traveled. Want to save on travel, you pay for somewhere to live. Either way you loose.
For all the hi-tech in these companies the question should be asked, "Why do you have to come to work to do your job?" Is it necessary every day?
So true. And the notion that you must own a home is stupid anyway and oversold.
I currently pay $4500/mo to rent a home in California. Because of it's location, the home would cost $2M+ for me to buy. So the debt service / maintenance / taxes is way more than the rental income. You're either renting the house or renting the money (mortgage). The idea that you're throwing money away on rent never considers the gap between rental income and expenses, vaporized down payments and going underwater from falling prices, tax hikes, etc.
I'll probably move into a smaller house soon because I don't need as much space and I've been buying investment homes instead of worrying about my primary residence. My first investment property pays the mortgage and makes money. It's increased in value too but I don't bank on that.
Why buy a home you cannot rent out for more than the debt service? Also - why buy a starter home in California for $1M+. That's fundamentally messed up to spend that much on a home that you know for a fact is not your forever home. The only way to know if it's a good deal is if you can rent it out for more than it costs, or about the same and you're going to be there for ~7 yrs+.
Yeah it's in a family trust and they haven't done any major renovations. Taxes are lower than they should be. But even if taxes were zero, it still wouldn't make sense to buy this place for 2M+ when rent is only 4500. For 4500 rent you need to be around 900k max purchase price. If it's an investment it should be way less, like 450k.
I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.
I don't think mine is losing money since it's been in a family trust forever. But most landlords aren't making any money. Everyone has owned properties forever and taxes are really low for them. If you're in that position it doesn't matter but it doesn't apply to a rent or own debate for current renters or potential homebuyers.
But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.
Journalists love writing this same article over and over again. Find some humble bragging buffoon willing to get quoted as talking about how hard it is to get by on some large amount of money, then farm the sputtering outrage of the readership for clicks.
I've never seen it done with a seven-figure income though.
Complaining about the struggles of making ends meet while earning $160k is plenty absurd. Complaining about the same while earning $700k is maddening. The median household income in SF is $88k (as of 2015). When you earn 2x that and complain about being unable to make ends meet, I think it's time to admit you just suck at money.
Keep in mind that it's not just how much money one makes, but it's also when one moved to San Francisco and whether they bought when home prices were much lower than today or whether they secured rent-controlled housing at lower rents than today's market levels that makes a dramatic difference in affordability. There are some people making less than the median income yet have very low living expenses because they were able to secure a mortgage or rent-controlled housing back when housing was much cheaper.
Let's say this person making $160k takes home ~$90k after 401k and taxes and such. And let's say their rent is 50% of their take home ($45k/year or $3750/month).
1. That's ~$300/mo more than the average 1 BR apartment [1], so seems reasonable.
2. That leaves another $3750/month for non-rent spending money, which itself, more than most Americans earn in salary. (note: this leaves a LOT of room to spend more in rent if you need a 2br, 3br, etc)
So yes. San Francisco is expensive. But if you feel like it's a struggle while earning $160k, you probably have a lot of fat you need to cut in your budget.
You're pretty much making the same point as the people mentioned in the article, just framed positively. Single renters can get by if they're willing to spend a large portion of their take-home, but a family on the same salary cannot.
35 year old me could not live like 25 year old me.
DC native, former SF resident: not really, any more. You can swing it, but it won't be fun. It's more comparable to SF than it is to someplace like portland. At least DC/DMV proper. Once you get into the "baltimore" parts I imagine the costs plummet.
Seattle is a lesser example. I say lesser because, relative to the other "second tier" cities, it's still pretty expensive.
Regardless, my take home pay stayed the same, and my rent went way down for a house instead of an apartment. My only regret is that I stayed in SF as long as I did.
It's not just COL, it's bang for your buck. I sold my car, moved to NYC, and found a nicer apartment in metro Brooklyn for the same price I was paying in SF.
I miss very few things about SF besides the weather, and if I missed it that much I would move to SoCal. The quality of life does not match the price.
I agree, generally, with the article. I worked as a contractor at Google for four months in 2013. Great experience but my wife and I burned through about $6000/month in living expenses. I returned home (mountains in Arizona) to earn much less writing books and remote consulting, but better off financially.
“We make over $1m between us, but we can’t afford a house,” - lying hypocrites. They probably cannot afford $20M house, but there are plenty $2M houses around even in relatively expensive areas.
Yes. You don't pay less, but you get more/bigger. So many people just tough it out and optimise for a short commute, instead of a big place. The cost savings is also offset by paying for parking, since public transportation is very limited.
"The cost of housing is a common complaint among Bay Area techies. Engineers can expect, according to one analysis, to pay between 40% and 50% of their salary renting an apartment near work."
A 20-30 min. bart ride from East Bay to SF is not only reasonable but decreases your rent by half. The people in the article don't have a solid grip on reality.
I'll be the first to admit that money doesn't go far in San Francisco, and that developers actually aren't especially well paid given the cost of living and the constant claims of a "critical" shortage talent.
I live in an unfashionable neighborhood south of 280, but even here, you'd be lucky to get a decent 3br for less than a million. So assuming you have a down payment together, you're probably looking at 4k a month in mortgage. You get a tax break, yeah, but you also get property taxes, maintenance, and insurance, so it's a wash.
Child care is the real killer. Standard 8am-6pm child care runs north of $2,500 a month. Same for preschool. If you have two kids, oh man. So now you're looking at
6,500 a month with one kid
8,000 a month with two kids
Keep in mind, if you can afford the child care in SF, odds are you're too high income to qualify for the child care tax break. So all in all, it really is true that it isn't easy to make it on two incomes totaling 200k a year.
Beyond that, though? If you're north of 350k, I'd say this is about expectations. You should be able to make it fine.
There is one strategy - remain a one income family! $120k a year for a family of 4 qualifies for government housing assistance in SF. Developers must set aside a number of units for "middle". It's hard to get, but if you can pull it off, you're guaranteed a lower rent (I think it's about $2500 a month at that income level) and it's intensely rent controlled.
So Silicon Valley employers, take note. Hire a middle aged person with a family for $120k a year, and you can get that highly skilled worker in critical shortage that you've told congress you can't hire at any price, and you can get the taxpayer to cover the gap between the salary you pay and the housing costs in the Bay Area! Seriously, consider the benefits of hiring older people with families.
I could generally understand some struggle for people with a family, even with a higher salary (due to the extreme housing costs) until I got to this:
> "He said he won’t miss some of the more mundane day-to-day costs, like spending $8 on a bagel and coffee or $12 on freshly pressed juice."
What. The. Hell. There are so many ways to save money that people just flat out ignore or pretend don't exist. This is much more about expectations of how they should be able to live rather than actual struggles. This article isn't going to go over well.
I have this sense that home prices all over the US are being artificially inflated. That said, if you figure 4% interest on $1 million, that works out to about $3333 per month. Q: Are there enough people in the Bay Area who are willing to spend ~$3333/month to live in a home currently priced at $1M in order to support that price level? A: Yes, I think so. (Granted, $1M would be quite low for a house near where I live in Mountain View, but maybe the numbers don't seem so crazy?)
I think "home price appreciation" is one of the more interesting factors here. If home prices grow at 4% and wages don't keep up, it seems like that's not likely to be a sustainable over the long term.
That is why housing costs have generally risen with inflation on average.
Appreciation in the Bay Area and other denser areas have seen prices grow at more than inflation, which is probably attributable to restrictive zoning limiting supply over the long term. I agree that's not sustainable economically, socially, and hopefully politically.
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[ 4.1 ms ] story [ 163 ms ] threadPut another way: How far out does one have to live to house a family of 3 or 4 affordably with respect to a 160k salary? Lets say, hypothetically, 2000 sq ft dwelling of some kind (house, condo, rowhome), good school district, for ~$2500-3500/mo - rent or mortgage? Or if that's a ridiculous question for the Bay Area, let's say 35-40% DTI and call it $5000/mo.
Speaking anecdotally, when I lived in the DC area, it ran me ~2400/mo for my 900 sq ft rowhouse in a good zip code walkable to the metro. The problem being that a 3rd bedroom would put me north of 600k (closer to 750k today) for a home if I wanted to be in the same zip code, or move outside the beltway and commute 90 minutes. I moved... to northern new england.
Of course, if you can find work in northern New England, things are much cheaper. I was visiting the folks this weekend, and my mom was showing me listings in the paper for four-bedroom houses with acres of back yard for $800/month, with heat and utilities included...
Notice the peninsula (where a lot of the good school districts are) is pretty empty. Also most houses go for a large percent above asking.
One of the guys I interviewed with said he spent $1,800 a month to rent a single room in a house with a few other people. He didn't even have his own bathroom. My friend that tried to get me the job out there was paying over $3,000 a month for a small 1 bed room apartment across the street from Twitter.
In Atlanta I was renting a 2,600 sq ft warehouse loft for $1425 a month.
The weirdest part was they offered me the job of a Lead Android Developer for $135k. I make almost $160k here in Atlanta as an Application Architect, and it costs way less to live here. Glad I turned that down.
I used to live right next to the Beltine near PCM in a 1 bedroom, 1 bath, 900 sqft, all upgraded unit for less than $1200 a month. Now the prices are ridiculous (for ATL) - $1800+ for a one bedroom.
But it's still a hell of a lot cheaper than our most expensive cities. You would think the salaries would be adjusted accordingly, but from my experience job hunting, they aren't to any appreciable degree.
If you make $1m/yr and are scraping by, I don't care where you live, you're terrible at managing money.
Tricks like buying out of the super expensive area, meaning paying in time.
Plus they probably want a house in San Francisco itself, which has hyperinflated housing prices.
She didn't say it was their net income either.
It's about $33k. My only friends that make that much money work in tech. $33k is a comfy yearly salary in Montana.
High W2 income earners are heavily taxed in the US.
45-50% is a better total estimate for a total tax rate.
The last dollar made is taxed at 53% (40% federal, 13% CA), so that's why the 60% number didn't sound horribly off. This is also ignoring FICA and SS taxes, which it's far too late to do the math on :)
Someone earning £1,000,000 in the UK would pay 46% tax.
https://listentotaxman.com/1000000
Not necessarily. Everything in SF/Bay Area will require a compromise. Want to save on real-estate? You will pay in time traveled. Want to save on travel, you pay for somewhere to live. Either way you loose.
For all the hi-tech in these companies the question should be asked, "Why do you have to come to work to do your job?" Is it necessary every day?
I'm pretty sure you'd be able to live in most large cities like a king for USD1M. What is the traffic and parking like?
I currently pay $4500/mo to rent a home in California. Because of it's location, the home would cost $2M+ for me to buy. So the debt service / maintenance / taxes is way more than the rental income. You're either renting the house or renting the money (mortgage). The idea that you're throwing money away on rent never considers the gap between rental income and expenses, vaporized down payments and going underwater from falling prices, tax hikes, etc.
I'll probably move into a smaller house soon because I don't need as much space and I've been buying investment homes instead of worrying about my primary residence. My first investment property pays the mortgage and makes money. It's increased in value too but I don't bank on that.
Why buy a home you cannot rent out for more than the debt service? Also - why buy a starter home in California for $1M+. That's fundamentally messed up to spend that much on a home that you know for a fact is not your forever home. The only way to know if it's a good deal is if you can rent it out for more than it costs, or about the same and you're going to be there for ~7 yrs+.
I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.
But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.
I've never seen it done with a seven-figure income though.
Yeah, I don't get that. Just pretend you "only" make $160k, save the rest, and you can still buy a house outright after several years.
No idea how they thought moving to LA for a $350k paycut was worth it...
1. That's ~$300/mo more than the average 1 BR apartment [1], so seems reasonable.
2. That leaves another $3750/month for non-rent spending money, which itself, more than most Americans earn in salary. (note: this leaves a LOT of room to spend more in rent if you need a 2br, 3br, etc)
So yes. San Francisco is expensive. But if you feel like it's a struggle while earning $160k, you probably have a lot of fat you need to cut in your budget.
[1] https://www.rentjungle.com/average-rent-in-san-francisco-ren...
Having a family is expensive, so be sure to cut that fat too.
35 year old me could not live like 25 year old me.
There are plenty of great software developer jobs in major cities paying 130K+ where the cost of living is a lot lower.
Regardless, my take home pay stayed the same, and my rent went way down for a house instead of an apartment. My only regret is that I stayed in SF as long as I did.
I miss very few things about SF besides the weather, and if I missed it that much I would move to SoCal. The quality of life does not match the price.
This is the core problem.
A 20-30 min. bart ride from East Bay to SF is not only reasonable but decreases your rent by half. The people in the article don't have a solid grip on reality.
I live in an unfashionable neighborhood south of 280, but even here, you'd be lucky to get a decent 3br for less than a million. So assuming you have a down payment together, you're probably looking at 4k a month in mortgage. You get a tax break, yeah, but you also get property taxes, maintenance, and insurance, so it's a wash.
Child care is the real killer. Standard 8am-6pm child care runs north of $2,500 a month. Same for preschool. If you have two kids, oh man. So now you're looking at
6,500 a month with one kid 8,000 a month with two kids
Keep in mind, if you can afford the child care in SF, odds are you're too high income to qualify for the child care tax break. So all in all, it really is true that it isn't easy to make it on two incomes totaling 200k a year.
Beyond that, though? If you're north of 350k, I'd say this is about expectations. You should be able to make it fine.
There is one strategy - remain a one income family! $120k a year for a family of 4 qualifies for government housing assistance in SF. Developers must set aside a number of units for "middle". It's hard to get, but if you can pull it off, you're guaranteed a lower rent (I think it's about $2500 a month at that income level) and it's intensely rent controlled.
So Silicon Valley employers, take note. Hire a middle aged person with a family for $120k a year, and you can get that highly skilled worker in critical shortage that you've told congress you can't hire at any price, and you can get the taxpayer to cover the gap between the salary you pay and the housing costs in the Bay Area! Seriously, consider the benefits of hiring older people with families.
But seriously, fly me over from EU and I'll sleep in your basement and teach your kids computers, for 2000 per month.
> "He said he won’t miss some of the more mundane day-to-day costs, like spending $8 on a bagel and coffee or $12 on freshly pressed juice."
What. The. Hell. There are so many ways to save money that people just flat out ignore or pretend don't exist. This is much more about expectations of how they should be able to live rather than actual struggles. This article isn't going to go over well.
http://www.nytimes.com/interactive/business/buy-rent-calcula...
Appreciation in the Bay Area and other denser areas have seen prices grow at more than inflation, which is probably attributable to restrictive zoning limiting supply over the long term. I agree that's not sustainable economically, socially, and hopefully politically.