Silicon Valley's robust economy has added jobs for the last eight years in a row, but the region's rising wages have failed to keep pace with skyrocketing home prices, a new economic study revealed Wednesday.
A population surge is underway in Silicon Valley, with a net gain of one person every 46 minutes – 32 people a day – but the huge housing and living costs are making life difficult for many, according to the Silicon Valley Index, released by Joint Venture Silicon Valley's Institute for Regional Studies.
In 2017, Silicon Valley's per capita personal income was $93,707, far higher than the California median of $56,374. But the 4.4 percent increase in the region's incomes last year failed to keep pace with home prices, which soared 7.4 percent during 2017, the report stated.
Home prices have continued to rise even though multiple economic reports document that employment growth is slowing in Silicon Valley.
Never miss a local story.
"Our spectacular success has somehow created a harsh environment," Russell Hancock, president of Joint Venture Silicon Valley. "Housing is out of reach for all but a very few. Those who can't afford it are living challenging lives, or commuting in from far-flung places. Most people don't find transit options compelling, so we spend ghastly amounts of time in traffic."
The Valley's median sale prices for homes are 2.1 times higher than they are statewide; apartment and home rental rates are 1.3 times higher; and child-care costs are 1.2 times higher, the report stated.
"Fewer than 34 percent of first-time homebuyers can afford a median-priced home in Silicon Valley, compared to 49 percent statewide," the report stated.
Combined, Santa Clara and San Mateo counties added about 47,000 jobs in 2017. But that employment boom occurred as those two regions together launched 12,000 residential units, the report stated.
"We are falling further behind," Hancock said in an interview. "Wages are not keeping pace with the growth in home prices. We are not building enough homes to keep pace with the jobs we are creating."
Still, the pace of housing construction is picking up. The 12,000 residential units initiated in 2017 doubled the 6,000 that were launched in 2016, Hancock said.
"We are at the beginning of addressing the housing challenge," said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. "A year ago, you couldn't have said we were making this much progress. When you see all of the plans for more housing in downtown San Jose and north Mountain View and Santa Clara, I'm optimistic we are starting to get serious about the housing problems."
As for commutes, Bay Area voters this year will determine the fate of a variety of transportation funding measures, which could help address the area's traffic woes.
Meanwhile, the cost of doing business in the Bay Area hasn't chased away the vast majority of tech companies in the region, including the industry's leaders such as Google, Apple and Facebook, the report noted.
"Our well-established, iconic companies are choosing to stay, adding armies of talented people, investing in impressive facilities and remaking our landscape," Hancock stated. "Unemployment is at a historic low. Median household income continues to grow, and it is outpacing inflation. Without question, Silicon Valley is still a hotbed."
The Institute for Regional Studies defines Silicon Valley as Santa Clara County; San Mateo County; the Alameda County cities of Fremont, Newark and Union City; and the Santa Cruz County city of Scotts Valley.
Venture capital spending soared in Silicon Valley, but shrank in San Francisco, the report determined.
VC financing totaled $14 billion in Silicon Valley during 2017, up 50.5 percent from 2016.
In San Francisco, VC funding in 2017 totaled $10.9 billion, down 21 percent from 2016.
Unemployment levels in Silicon Valley improved to an average level of 2 percent, the lowest since 2000, according to the index report.
"Silicon Valley continues to grow jobs at a rate anybody would envy," Hancock wrote in an introduction to the report. "The tech sector is fueling our growth, and venture capitalists continue to invest in local innovators who in turn are generating patents at a dizzying pace."