Silicon Valley’s Skyrocketing Housing Costs Shut Teachers Out
SANTA CLARA, Calif. — Skyrocketing housing prices in Silicon Valley, the red-hot center of tech entrepreneurship and one of the most highly educated enclaves in the world, are making it hard for teachers to call the area home.
“Housing is one of the biggest reasons we lose teachers from one year to the next,” said Dave Villafana, president of the teachers’ union in Cupertino, Apple’s hometown. “They can’t afford a house and rent is prohibitive as well.”
Villafana, who has taught in Cupertino for 28 years, said that for the last 15 years district teachers have increasingly had to live elsewhere — often a 45- to 65-minute commute away on the area’s clogged freeways — in order to afford rent. Owning a home, he said, is “not even a thought.”
“The reality in Silicon Valley now — for working class or middle class working professionals — is that a single family home is just not a reality for them and it probably won’t be,” said Chris Isaacson, president of the Silicon Valley Association of Realtors.
In Cupertino, the median price of a single-family home was $1.8 million in May 2015, according to data pulled by the Silicon Valley Association of Realtors from the MLS database, the most up-to-date source of information on home prices. In nearby Mountain View, where the Googlers work, the median price was again $1.8 million. [See map for detailed information on other Santa Clara County communities.]
And these are not giant suburban homes people are buying. The average square footage of homes sold in these towns last month hovered around 2,000 square feet, meaning that the price per square foot is more than $900, a cost that rivals pricey New York City.
For many residents of the Valley, for which Santa Clara County is the closest geographical proxy, owning a house remains a possibility, despite the gargantuan price tags, because salaries here have risen too. The county ranked in the top 20 for median household income in 2012, according to data from the U.S. Census Bureau. And the bureau’s 2009–2013 five-year estimates put the median at $91,702.
Many of the young workers flocking here quickly surpass that income; the San Jose-Santa Clara-Sunnyvale metro area has the second highest concentration in the country of people earning top 5 percent salaries. A new engineer can expect to command a salary of more than $100,000 within a few years here. Add bonuses and stock options and those salaries can quickly soar towards $200,000 for an engineer in his mid-thirties or early-forties.
But teachers, like other civil servants, are paid based on available state funding, local property taxes, and political will, not the market. They are lucky to hit the regional median in a lifetime, let alone early enough to build the equity needed to buy a home in a boom market. An examination of area salary schedules shows that teachers working in the 31 school districts serving children in Santa Clara County’s 15 cities earn salaries ranging from about $45,000 to $105,000 depending on education, experience and the district in which they are employed.
Those salaries simply can’t compete with the tech companies’ offerings, let alone help teachers buy homes in the communities they serve. And there’s no clear resolution to the looming teacher housing crisis, despite the famous ingenuity of the tech entrepreneurs who live here
How the headquarters of the world’s technological innovation economy got so behind on housing is something like the case of the frog in the slowly boiling pot of water: many small factors added up to a big glaring problem before anyone noticed.
Californians have long been reluctant to build densely, so there’s a shortage of housing stock, which drives up prices. Some say earthquake safety and environmental regulations haven’t helped encourage new construction either. Between 1980 and 2010, the number of new housing units in a typical U.S. metro-area grew by 54 percent, according to a recent report on housing costs by the California Legislative Analyst’s Office. In the San Francisco metro area, the number of new housing units grew by only 20 percent.
And these days, the population in Silicon Valley is booming. New jobs are plentiful and economists are predicting continued growthbased on the stable business models of some of the area’s largest companies, so an equalizing bust is unlikely.
“We don’t have the inventory and we have so many people coming here and so much money coming here that I don’t see a significant dip in prices coming,” said Nancy Stuhr, a real estate agent with Coldwell Banker who has sold houses in the area for 25 years.
Silicon Valley also boasts some of the best public schools in the state, a feature for which residents who value the power of a great education are happy to pay top dollar. Star and letter-grade ratings tied to Academic Performance Index scores, which are based on California’s now-defunct state test of English and math skills, are routinely included in marketing materials of homes for sale, said Isaacson of the Silicon Valley Realtors Association.
“Many people have decided which school they want before they start looking” to buy a house, Isaacson said.
Mai Nguyen, a stay-at-home mother of two with a husband who works as a physician,* said her family moved to a small house within the Cupertino Union School District in order to send their children to a Mandarin-immersion program.
“That was the reason why we got the house, because of the school district,” Nguyen said. “It’s a really old house and the price is higher than other places, but because of the school district, we decided to get it. I do wish they would retain good teachers.”
But the state’s school financing policy could work against Nguyen and other parents like her. A state law from the late 1970s limits property taxes, a main source of school funding, placing California at the bottom of the national education spending list and making large raises for teachers unfeasible. It should be noted that 14 of the 31 Santa Clara County school districts have local property taxes that are high enough to qualify as “basic aid” districts, which receive only minimal funding from the state and are therefore solely responsible for their teachers’ salaries. Cupertino is not a basic aid district.
There are a few reasons to hope that things might get better in the future. In June, the California Supreme Court upheld a City of San Jose law requiring that developers price 15 percent of new units affordably for people earning 110 percent of the neighborhood’s median income. Similar laws, as well as fees for building new housing, which are then used to support affordable housing are on the books in nearby towns as well, though teachers often make too much to qualify for official affordable housing benefits. And on July 5, SV@Home, a new advocacy organization with backing from Google and LinkedIn, opened its doors calling itself the voice of affordable housing in Silicon Valley.
But housing for teachers has not been the focus of these latest developments; teachers, for the most part, must find living solutions on their own.
Some older teachers, like Villafana, of the Cupertino teachers’ union, have stable rentals with landlords who are not out to make a large profit. Younger teachers who rent in the towns in which they teach often live with multiple roommates, a situation that can get old as the teachers reach their thirties and look to start a family or simply gain some more personal space.
Those who want to own but didn’t buy into the market at least 15 years ago are left to buy condos on the edges of the Bay Area or in Santa Cruz on the coast, which is actually a less expensive place to live. Still other teachers end up marrying a partner with a job in tech that makes up for the teacher’s smaller salary.
Some teacher-specific solutions do exist. The San Francisco Teacher Next Door program provides loans of up to $20,000 towards a down payment to qualified teachers employed by the San Francisco Unified School District. That’s about 10 percent of the amount needed for a down payment in San Francisco. The federal Good Neighbor program offers 50 percent discounts to teachers, police and firefighters on homes it owns. But there is not a single house in Silicon Valley on California’s Good Neighbor list of discounted homes.
Perhaps one of the most straightforward solutions to the lack of affordable housing for teachers is the “Casa del Maestro,” or “House of the Teacher” apartment complex in the city of Santa Clara. Over the past 15 years, 70 one- and two-bedroom units were built on district-owned land and are rented only to new district teachers at reduced prices ranging from $1,110 to $1,805 a month for a maximum period of seven years.
Second grade teacher Megan Winslow, 33, said she benefitted from that program. In her years living in Santa Clara’s teacher housing she was able to put money away for retirement, build a savings account and travel a bit in the summer. Now that she’s moved into the real-life rental market, she’s had to stop putting money into retirement entirely. Money for savings and travel have become limited too, although she still finds cash to put into her classroom or to help her students. (She once covered a few nights in a motel for a student’s family whose homeless shelter was temporarily shut down.)
Winslow now pays half of the $2,515 monthly rent, plus utilities, on a two-bedroom apartment she shares with a roommate.
“Buying a house — I’ve just been kind of OK with the fact that that might never happen,” Winslow said.
Kevin Zwick, CEO of the Housing Trust Silicon Valley, a non-profit that provides training and loan assistance to qualified applicants, said buying a house shouldn’t be entirely out of reach for teachers. His organization has helped 440 teachers into homes in the last 14 years by offering down payment loans to teachers with a family income of under $102,050 annually.
“Those teachers, like Mark Stolan, who teaches eighth grade math in San Jose, are grateful for the help. In 2013, with a down payment loan in hand, Stolan and his wife were able to buy a two-bedroom condo in Campbell, one of the last communities in the county that is still somewhat affordable to middle-income earners. But the purchase means the couple is tied to a home on which they were only able to pay 3 percent of the purchase price out of pocket. If prices continue to soar, this potentially risky investment will pay dividends. But if the market settles into a more normal growth rate, the Stolans will have to wait a long time before the amount they’ll “make” by selling will be enough to buy a bigger or nicer house.
“We’re going to have to wait 10 years before we can even think about moving,” Stolan said. “The area is growing so much faster than the income is going up. In teaching, the income only goes up so fast.”
But, if they hadn’t bought when they did, the Stolans might not have been able to buy at all. Paying rent from their salaries would have made it almost impossible to save up for the down payment that would qualify them for a loan on their own. And now, two years later, their joint income hovers just above the maximum allowed to qualify for assistance from the trust. The Stolans have joined the ranks of seemingly well-paid professionals in the area who make too much to qualify for assistance, but too little to buy into the market.
This no man’s land for “community workers” like teachers, police and nurses eventually becomes a problem for everybody, said Maya Brennan, vice president of the Terwilliger Center for Housing at the Urban Land Institute, which researches housing trends throughout the country. Such professionals, she said, should be considered “their own class of workers” because their jobs can’t be outsourced.
If a Bay Area tech company needs to set up a server farm, say, they could open it in a less expensive mid-sized city, like Bend, Oregon. But a Bay Area school has no such luxury. Advances in computer-based learning aside, Stolan’s eighth graders are unlikely to teach themselves algebra while he monitors their work from Oregon via video conference call.
“You can’t really have teachers just living in the Pacific Ocean,” Brennan said. “We need to make sure these workers can afford to be in our communities.”
Increasingly though, they can’t. And unless something changes drastically or an as-yet-unknown app is invented to solve the problem, Silicon Valley risks losing the very people it’s counting on to educate its future stars.
*Correction: The article has been corrected to reflect that Mai Nguyen’s husband works as a physician.