The above salary range seems accurate. I know newly minted PhDs in computer science may “only” get in the low $100,000 range at Google. So a salary in the mid six-figure range is totally reasonable with a few years of experience.
Recently a friend who is an engineer at Google in Mountain View got a transfer to Boulder, where they bought a house. He’d been trying to buy in Mountain View for a while…but that just wasn’t happening. Boulder isn’t cheap, with 178% the national average in cost of living. But it’s nothing compared to Mountain View, where the average housing cost is 7.5 times the national average.
What’s striking to me is the high variation in cost of living in American urban areas:
| Overall cost of living | |
| San Francisco | 272 |
| New York City | 180 |
| Seattle | 177 |
| Boston | 170 |
| Los Angeles | 166 |
| San Diego | 166 |
| Portland | 140 |
| Denver | 128 |
| Miami | 123 |
| Austin | 117 |
| Chicago | 111 |
| Minneapolis | 109 |
| Houston | 102 |
| Atlanta | 102 |
| Raleigh | 102 |
| Philadelphia | 100 |
| Phoenix | 99 |
| New Orleans | 96 |
| Dallas | 95 |
| Baltimore | 90 |
| Pittsburgh | 88 |
| Cincinnati | 86 |
| St. Louis | 85 |
| Des Moines | 83 |
| Memphis | 74 |
| Detroit | 73 |
Almost all (but not 100%) of the regional variation in cost of living is a product of real estate prices. A lot of the non-real estate sourced regional variation is really just indirect real estate cost impacts in consumption components where real estate costs are an important factor of production.
It’s not just real estate prices, it’s what drives those prices.
San Francisco is basically an island, so that it can not expand outwards. At the same time, it is also a high-paying job and business hotspot and a top international tourist destination.
Most of the lower paid workers have to commute, because they can’t afford rent, and the public transportation and roads are terrible.
I can’t understand at all why new businesses choose to open there.
My first house in Pittsburgh cost only $53,000 in 2007. It was a small 19th century brick rowhouse in what at the time was a working-class white neighborhood. We ended up hitting the gentrification jackpot however, and selling the house for over three times what we paid for it seven years later. Of course, we also put a lot into the home (new roof, kitchen, bathroom, etc) but we still made out like bandits, which along with lower interest rates, allowed us to buy a house which was almost five times the market value of our first one with a monthly mortgage payment only about twice as big.
As ohwilleke notes, high cost of living is mostly due to housing. High housing costs, in turn, are mostly due to cartels which artificially restrict the supply of housing units – otherwise known as zoning.
The U.S. obsession with strict zoning seems really weird to a lot of non-Americans I talk to, because it runs so counter to the stereotypes about individual freedom and property rights that people hold about us.
Some like to claim that high housing costs a failure of “the left” because housing costs are so much higher in liberal areas. I think this is confusing correlation and co-variation. Housing costs tend to be higher in liberal areas because older established metros have lots of independently incorporated suburbs, which gives a handful of busybodies (no matter their political stripe) a lot more power to block any one project. In contrast, in the sunbelt there are few incorporated suburbs, with most land being either in the central city or unincorporated county land, meaning local residents have limited pull to block projects that they deem as “too dense for the local character.”
Most of this list seems to “make sense” but I am a bit surprised that Minneapolis and Baltimore are where they are. I would have thought both would be lower on the list.
It’d be interesting to see a Canadian comparison as well (though likely too apples-and-oranges to make it really work). Average detached house price in Vancouver is above CDN$2M on a median family income of about CDN$78k. Average detached house price in Toronto is above CDN$1M on a median family income of about $80k. Both markets are distorted heavily by foreign investment and speculation. Those who bought into the housing market in the distant past, and who have the capacity to retire to lower-cost centres, are making out like bandits.
Dense cities can have relatively low real estate prices. Tokyo, for example, isn’t seeing significant price appreciation. Despite what you might think, Tokyo is still growing – although Japan’s population is shrinking, it’s becoming more concentrated in the major cities. But the growth in real estate prices and population are roughly the same.
The Japanese secret seems to be they don’t think that buildings have any value above that of the land they are built on. Houses depreciate and lose essentially all of their market value within a few decades, which means new buyers bulldoze the old homes (which were often built quite well) and build something more modern.
Japan also has very loose zoning laws – not just compared to America, but compared to Europe. Zoning is set at the national level, so local residents have no say in projects. There are only 12 zoning types across the entire country. Zoning effectively sets maximum use, which means for example, you can always build apartment buildings in industrial zones. Zoning also doesn’t distinguish at all between residential uses. There are still height and FAR limits – you can’t build a 10-story tower in a low-rise residential neighborhood. But the subdivision of a residential structure isn’t even subject to zoning laws, meaning you can (and people do) knock down single family houses and replace them with small apartment buildings of roughly the same size.
Check out @kimmaicutler on Twitter for insights about the man-made disaster that is SF Bay area housing.
Of course ‘zoning’ is the direct problem on the west coast. But in more inland areas, the same zoning only results in more spralling suburbs.
San Francisco thinks it must maintain trolly cars and victorian houses to be appealing to tourists. And the super-rich don’t want some new apartment building cutting off their view of alcatraz. And any major construction project screws up the already terrible driving situation.
And #1. There is no place to park your car. Rates are higher than $1 a minute at prime locations and times.
I don’t think disaster is the right word.
If San Francisco were cut off from the rest of the US, with it’s own currency and laws, it could do much much better.
But, that is the current situation for of all of the major cities in that country today. Their votes are worth less for The House and for The Presidency.
Basically, it is a situation where if you own land and give out jobs in many less populated areas, you can control political issues for the entire country.
There should be a huge market from for providing remote jobs to people live in these areas, yet Google and Apple and most others want people to live nearby.
That is what causes political problems.
If remote jobs can be given to people from rural US locations, encourage them to live in those locations.