I was well paid at Google, and loved working at YouTube. I also severely miss our many friends, as well as beautiful San Francisco: I used to walk up Bernal Hill one or two days a week with my toddler. Pictures of oceans and hills and everything else make me sad…
That said, we could never afford a house in San Francisco. And to get affordable, we'd have had to have gone way out, and the commute would have been terrible.
I was lucky enough to find out that Square has an Atlanta office, full of very smart people, so I was able to keep doing Silicon-Valley-style programming, which is a big win.
Yeah, 850k, and that was a steal. The mortgage alone is, what ~3k/ mo? Taxes and everything else push this up to ~4.5k to 5k/ mo, right? And this is going to go for how long? Oh yeah, 20 years.
My folks have no illusions that this sweet couple and little Benny next door are going to be there anymore than 5 years. Even all the way out in the East Bay, it is just not possible.
Get out now before this bubble pops again. Beat the rush.
While the calculation isn't quite this simple (dividends on stock versus not paying rent, and interest deductions) it highlights that real estate appreciation isn't quite as crazy as it's made to sound.
Even so, the approximate return from the S&P 500 (reinvesting dividends) over the same period would be 11.468%.
There’s a huge difference between 300% inflation the BLS claims vs. 2800% inflation you are suggesting.
On a practical level, inflation is always relative to what you're actually buying. If you're buying S&P 500 index funds, the inflation rate is the price appreciation of the S&P 500. If you're buying real-estate, the inflation rate is the rate of increase in housing prices.
(Perhaps this is a bad example because you typically wouldn't be buying stock index funds after 40 years of earning, but the point is to illustrate opportunity cost. If someone's goal is to pass wealth on to their children, for example, then the price of income-producing assets is a lot more relevant than the price of milk.)
The price of goods, services, salaries, etc. have all gone up by roughly 3–4x in the US (with some notable exceptions like housing in certain areas and college tuition). Someone who invested in the S&P 500 and has 29x as many nominal dollars as they did in 1976 can buy about 8 times as much of other people’s labor as they could before.
Some fixed percentage of the total size of the S&P 500 is a practically useless measuring stick. If we use that as a standard, 90%+ of the population in the USA is 8x poorer than they were in 1976.
I know in Chicago if you were old past a certain age you got some tax breaks (MAYBE at some point a tax freeze). Does SF have some kind of tax rate freeze?
But ya, live is too short to spend a million bucks on a 2 bedroom house.
It's almost a double whammy for someone who wants to buy a house, but can't afford the current prices or was outbid by a cash buyer going over asking price. Cheer up as we've incorporated the price increase into your rent.
Assuming we're talking free markets, then the rent should already be set at the maximum price the market will bear. (If not the landlord is leaving money on the table.) Increasing property taxes is to depress the price of real estate. A simple property tax could also discourage new investment, while a land value tax incentivizes owners to maximize the value of their holdings.
So, treat primary residences as primary residences, whether or not they are the primary residence of the property owner. For multi-unit rental properties, the total value of the property is divided among units proportionately to the rent charged for each unit to assess this.
While it's probably not a bad idea, I don't see it moving the needle much.
I'm discussing ways to achieve the goal upthread of insulating people from property tax uncertainty on their primary residence.
I would expect that the larger purpose of that is to allow full-value taxation on all other real property; of which non-primary-residence residential property is a subset (and a fairly small subset, at that.)
Remember that Prop 13 applies to all real property, not just residential property.
Prop 13 is a blatant wealth transfer between people who are new to the area (mostly the young) to the people who were originally here (mostly the old).
Taxes aren't governed by a market; the same rules don't apply. Arguments against government protectionism in markets don't also apply to protection against the actions of the government itself.
That said, proposition 13 doesn't seem like a good implementation of this. There's no good reason for a sudden increase upon sale; that breaks the ability to buy a home. There should be a hard cap on property taxes that doesn't change on sale.
Why should taxes get to increase without bound or control on existing property? Once you've paid off your home, you should not have an ever-growing expense to keep it.
(You shouldn't have an expense to keep it at all, but that's a separate argument.)
My view is that property taxes fund the very things that make a particular neighborhood desirable, like good schools, roads, parks, and other local services. Your property's value is what it is because of these things, and you shouldn't be able to reap these benefits without paying taxes proportional to the value you've captured.
In California, that's less true than it might otherwise be, given the prop 13 limits on both assessments and tax rates. Lots of those things are funded by sales tax revenue, income tax revenue (primarily state income tax funding local programs), development fees, and other revenue sources other than property tax.
I think you're arguing that richer neighborhoods should have nicer schools, roads and parks. Granted, SF is an exception here, but that's precisely how things work elsewhere in California.
And if richer neighborhoods don't get that, California made annexations pretty easy, which is why you see those tiny municipalities in the vicinity of Los Angeles, San Diego, Anaheim, etc.
One can't really arbitrage that effectively.
Municipalities can't run consistent deficits, so the new schools, roads and parks will be built after a wave of newcomers buys properties, locking in higher prices and higher tax base.
In case there are no such newcomers (i.e. everybody is maximizing their Prop 13 benefit by not selling), the municipality just sticks to the last year's budget with a 2% increase permitted by Prop 13. But in that case new schools, parks and roads that make the neighborhood better don't appear either.
That's a really good reason to stop funding those things through property taxes.
Does it apply to anything else you own? If 2004 Honda Civics suddenly got really popular and I already owned one, I wouldn't suddenly be priced out. Or if I own gold or stocks, and the price goes up, that doesn't affect me at all unless I sell.
In California, since the state has ad valorem taxation on vehicles (the vehicle license fee, which is 1.15% of the market value of the vehicle) which does not have prop. 13 style limits, you, in fact, could be priced out of your 2004 Honda Civic if the market price suddenly and radically increased.
That prevents people from being taxed out of their home, without creating a situation that makes it hard for people to buy new homes.
The Deschutes (Oregon) County Tax Assessor's office made a really good video explaining how three almost identical houses in the same location can have completely different tax bills:
In addition to what the video says, I wanted to point out that the 3% hard annual cap you mention is only on the property's Maximum Assessed Value, which is only one of the many inputs into the computation for a property's tax bill. For example, one thing that can cause taxes to go up more than 3% are general bonds approved by voter measure.
Portland Commissioner Steve Novick also wrote a really good article about all of the problems with Oregon's tax system and made some recommendations:
A lot of places I have lived capped property tax at 2% of market value. In Ohio are their taxes significantly higher than 2% of property value? I wonder if they have tax missing somewhere else, like no local income tax or something... Ohio doesn't strike me as a high tax zone.
Basically, it subsidizes keeping property and never selling it. This is because every year the owner's property taxes essentially go down, presuming any normal level of inflation. And because of follow-on propositions, you can transfer that advantage from parents to children. Yes, this does let existing residents stay somewhere indefinitely. Equivalently, we can say it strongly discourages mobility.
The crazy real estate prices you see are simply a result of the proposition-established cartel. This drives up prices for new arrivals, which California depends on to keep this going, which makes the people holding on to their property think two things: "I'm rich because my home is worth so much" and "I could never get by without Prop. 13 because my home is worth so much." This has made Prop. 13 untouchable — it would basically have to be overturned at the state Supreme Court level at the behest of broad popular opinion.
However, this is just another bubble. California as a state has done relatively quite well in the last thirty years, so it continues to inflate. However, California and local governments have also spent a huge amount of future revenue on state workers, so it has become harder to sustain. But for the huge amount of income tax receipts from the investment class of California, things would already be in rough shape.
Someday, the bubble will burst. If Prop. 13 was ruled unconstitutional tomorrow, it would cause a real estate crisis, followed by an economic crisis, that is hard to imagine. But that might be preferable to having Prop. 13 crumble in the middle of a statewide economic crisis, which is the most likely ending of this story. In the meantime, yes, it does keep grandma in her tidily-appreciating house instead of some filthy tech hipsters chasing the next gold rush.
Other forms of non-base include stocks/options/etc.
Fun calculator for relocations:
For instance, it assumes transportation costs in Manhattan are higher than most other places. This is unbelievably inaccurate in my experience. Maybe it assumes people here take taxis all over the place? I've found transportation to be cheaper in NYC than anywhere else in the USA. No car or gasoline or insurance or maintenance, etc. A car costs on average about 9k/year to own according to AAA. In a place like NYC if you take the Subway every day your cost is about 1,300/year. Throw in a few hundred for cabs and you're looking at 1,800/year. It doesn't cover the rent gap compared to most places but it helps.
In effect this calculator says a salary in Chicago goes nearly twice as far (so if you make 200k in NYC that would be 106k in Chicago. In my experience that is simply untrue. 200k in NYC would be closer to 170k in Chicago.
I think this calculator is making the assumption someone would require the same resources, like a car in all places. Or that someone who had 1600 square feet of living space would expect the same in NYC, which would be ridiculous. No reasonable person would assume they would move to NYC and get a car and garage it. That simply isn't the typical lifestyle here. Most my friends born and raised in the city don't even have licenses.
It also claims that living in San Francisco is significantly cheaper than NYC which is untrue as well.
For example, it's not exactly sound to average the price of all neighborhoods in Manhattan.
I hope it would be apparent you should reference many different sources when comparing salaries in different locations.
But re: "Silicon-Valley-style programming", I don't see any difference here than any other similar place.
Especially in Europe, most programming goes to custom software for banking and various industries. There are very few Microsoft, Square or Google style companies in Europe, where software is the product. A lot of software is a cost center for something else. For some, it doesn't give them the same feeling of accomplishment.
Software development != software development
Companies that might pay an employee $110K a year will have zero problem paying rates that end up with take-homes of +$200K a year after paying your own benefits and taking vacation time off.
I landed at one of these a few years ago and got out ASAP. They're out there, but not so much in the Bay Area because the talent war is so hot - any place like that wouldn't be able to hire or keep anyone.
I don't do "SV style programming" but we have no dress code, no death March schedules, no charts, no meetings, etc. Same thing as my last job in another city.
Though we also don't have ping pong, Foosball, stocked fridge, or many young people if that's what you are looking for. Oh, and not a lot of turnover either.
In some places of Europe it's most of the time just working for bank, insurance, industry or european institution with too old technology, long and fixed schedules and not so much excitement or feeling of making something useful. Add this to under-market salary, suits everyday, ... Developers are not killing it there, they just cost money, they don't have that aura of hype, respect, perks and all.
But it's starting to change I guess (and hope).
Also, YouTube's head office is closer to the SF airport.
Which is also not in SF.
Of course, even if the office was in SF that wouldn't be justified. It's hardly unusual for people to commute into SF from places with lower living costs.
If the bubble continues I would expect that both places will get priced out in the next 2-3 years. At that point you'll have to look at the Tri-Valley area (Dublin, Pleasanton, Livermore) for the affordable price points.
tl;dr: 1300 sq. ft. new 2 bedroom townhome for 1.3 million.
In Mikey Dickerson's talks about fixing Healthcare.gov he talks about two strains of programming: that descended from a more engineering mindset, and that descended from the IT department. (I'm paraphrasing badly: I'll try to find a better link when I have more time.) I guess I was using "Silicon Valley" as shorthand for the former.
Note how the word "computer" doesn't appear in that sentence; it's not unique to computer programming.
Work in a profit center, not in a cost center.
But I get to build RPC services and other cool infrastructure in Go.
Still get to write cool stuff in Go, Node, Elixir or whatever else takes my fancy and tinker with IoT hardware during work hours :-)
I am working for a large bank this summer in San Fran on their main website. This site has an Alexa score in the top 25 for the US, and is in the top 100 overall. They have said I would be working in NodeJS, as they are rewriting large portions of the site with node. Will this project most likely contain people of the Engineering, or IT mindsets?
End up around people that already have that strain, get their attention, and become friends so you can learn and they can teach. You unfortunately just can't teach yourself everything.
It sounds like another form of pedigree selection. Or maybe dividing the field up into "us vs. them". Pretty understandable sentiment if you get pushed into fixing Healthcare.gov like he describes in one of his talks and working with guys arguing about tickets not existing because they're on different ticket systems and people with zero motivation to build a decent product. Wastage is immense in IT from the sounds of it in this talk: https://www.youtube.com/watch?v=7Vc8sxhy2I4
Is someone making $80,000 for doing 60 hours a week of highly-skilled, highly-profit-bearing work "overpaid". In my opinion, that's underpaid.
If anything, we've seen recent evidence that SV salaries are "deflated" compared to other industries and areas of the country, due to collusion, frequent targeted hiring of very young, often naive grad, inflated time at work, etc.
I don't work in SV, for the reasons I outlined above, so this isn't some kind of self-justification.
Edit: To be clear, I don't disapprove of people working there, I know it's beautiful and a nice place to live. I'm actually defending SV engineers from accusations of "inflated" salaries. It's just not a good place to go to get rich as an engineer with a family.
When I put everything on a spreadsheet, the lower housing costs in other parts of the country didn't sufficiently make up for the drastically lower salaries. YMMV, but I encourage everyone to very carefully do the math before making these kinds of decisions.
(I do think that SF may be a special case, since it's SO expensive, but even then it's worth doing the math.)
That said, adding in those factors often makes Silicon Valley come out even worse. I've visited it quite a bit and it is not nicer enough to account for cost-of-living difference, unless you simply can not stand to live somewhere with less than perfect weather. But I think that's special to the Valley.
It's interesting that you bring this up. In the case of food, at least, lower COL areas (which are typically more rural) have access to something far better than any store - farmer's markets and actual farms.
There's a "cheap basics" grocery store in a 5 minute walk, a farmer's market in a 10 minute walk, and a Whole Foods in a 15 minute drive.
I don't really care about organic produce, but that flash pasteurized OJ at Whole Foods is really worth the extra $2.
It's a nice area for certain, but it makes me wonder about myself when I'm wearing a parka and everybody else is walking around with a scarf or light jacket.
Parking is a big difference though. You can rent an apartment in the Midwest for what it takes to park a car in some major cities. Not to mention higher gas and insurance.
I live in Cincinnati with one of the most top 10 most expensive airports in the country (CVG). I also spend a lot of time traveling and searching for flights.
One strategy I've used to avoid this is booking Kayak-style "hacker fare" for a domestic ticket to a hub like LAX/ATL/etc. with an international flight out from the hub, then a return ticket from destination to home (with connections of course).
It doesn't sound like it'd be that significant, but it made a recent trip to New Zealand & Australia about 40% cheaper, though it does take some extra effort.
Maybe I'm just not writing my queries just right but it's my major pain point with Wolfram Alpha.
I find that very hard to believe. If you make $12,000 a month in SF and spend $3,000 a month on rent (which is pretty generous for one person), you still have more leftover money per month than your entire paycheck at an $80,000 annual salary.
That is kind of true, but it's also not realistic to just compare identical housing arrangements in very different regions. It makes more sense to compare not just median costs of two regions, but also median housing size/type. But of course, if spacious housing is very important to someone, that's perfectly fine, and it's a perfectly good reason to live somewhere else.
It's expensive to live here. That doesn't mean I don't like it though :)
Glad to be proven wrong here. I'd go back and entertain offers I've had if I knew I was wrong.
The median sales price of a Santa Clara County 3 bedroom house is $820,000. This is $3,877/mo, plus $850/mo property taxes, for a housing cost of $4,727/mo
That $140,000/yr is taxed at $48,922 in the state of California, leaving $91,078, or $7,589/ mo income.
CA Income ($7,589) - CA Housing Costs ($4,727) = $2,682 leftover.
The median sales price of a Cobb County 3 bedroom house is $173,000. This is $818/mo, plus $140/mo property taxes, for a housing cost of $958/mo
That $80,000/yr is taxed at $23,600 in the state of Georgia, leaving $56,400, or $4,700/ mo income.
GA Income ($4,700) - GA Housing Costs ($958) = $3,742 leftover.
I'm not saying my numbers are valid for every person's situation, only that this is an example of a situation where the numbers work in Atlanta's favor.
L4 is ~215k. L5 (Senior) is ~265k.
Factor in free breakfast/lunch/dinner, free gym, free laundry, generous 401k matching, other perks and discounts, and the gap widens even more.
Throwing those out as typical is disingenuous.
Of course, this is just "a couple minutes of google research"--I am not a subject matter expert, as someone on HN kindly pointed out last time I posted these here. Also, they are based on self-reported surveys and don't include sellable equity, so take it with a grain of salt. I don't know where better data would be published. I'm intuitively not too surprised by these figures--I think the HN demographic is probably pretty skewed towards the higher end, judging by all those threads where people toss around $150K and $200K salaries as "normal".
On net you get an extra ~2,600/month after taxes.
Conversely, they're also being propped up by the massive amount of VC money at play there, which is driving an arms race for programming talent not seen elsewhere around the country. I'm not saying you're wrong about your point about collusion, but there are multiple factors at play there.
You're ignoring equity here, which after a couple years will be more than your base salary anyway.
With a total comp of $300k+, a lot SV workers don't mind paying $30k/year more in rent to live in the Bay Area. As many others have noted, it really is beautiful here...
What other place is like this? I mean a lively, diverse city where everyone is from everywhere, mountains nearby, and 3000 hours of sunshine a year?
Boy that's diverse.
The area basically vacuums everyone who fits the exact same mold from anywhere in the world – that does not make the area more diverse.
By the way, many here assuming I'm in Atlanta. I am not (and don't wish to be, because of the crazy traffic).
SF is too expensive though. I like Seattle just fine.
At unsexy companies, and at StackOverflow
You can't fix the lack of proximity to the ocean, but being able to get a direct flight to most airports in the Caribbean almost makes up for that.
here's a tip: don't do that. problem solved.
Passing an interview gauntlet will usually suffice. Be really good at sophomore level data structures/algorithms class materials.
Was the salary the same, or was it adjusted?