The data comes from the Housing and Urban Development's FY 2018 Income Limits Documentation System, and is for a family of four.[1] The HUD explains their reasoning here[2]. Basically, it's all about housing costs.
As a side note: I really wish news articles would link to the data instead of forcing me to go on an expedition.
If you read through the documentation, you'll see that they actually have a value of 145k as a calculation of the low income limit, but they are only allowed to grow the cap by 11.5% from last year, which was at 105k.
This doesn't really tell you much about family incomes or the state of poverty in SF, it just tells you that housing prices are really high in SF (which we all know).
Funny enough though, the median family income is at 118k and the income limit is at 117k, which means that roughly 50% of families living in SF qualifies for the low income limit for HUD.
One thing that seems strange to me is that the cost of living is high, but so many things we buy are priced the same. No matter how high cost of living is, a MacBook Pro starts at the same price whether you’re making a measly 100k in the Bay or 25k in Podunk, Alabama. Out of state college tuition is the same price no matter which state you come from.
Even if you have “low income” locally, there’s still so much more opportunity to be captured than others outside city bubbles.
The bulk of the vast majority of people’s expenses are the “fixed” living costs: utilities and rent/mortgage. So if the average property increases the average cost of living also increases.
The cost of food, and utilities is tied to usage so those costs don’t really change (fungible) based on where you live; but your accommodation does. That’s basically because for non-luxury goods the price is a function of actual cost to produce and market supply. For accommodation it isn’t possible to just buy an additional house at a shop and live there - you are fundamentally constrained by what Is already available.
Your example of a macbook isn’t actually super good as while you are right: a given MacBook model costs the same, but someone can always get a cheaper model, or just a cheaper laptop in general. But if your job is in place A, then you need to have a home that is close enough for that to be reachable, so your options are limited so you can’t reduce the cost of your job.
Interestingly/depressingly this has the effect of further reducing the effective hourly wage of minimum wage workers, as they have to spend more time traveling to their place of employment.
Your example of 25k in pdunk Alabama needs to account for the similarly reduced cost of housing. Take Merced, ca for example (a place I know)- that’s 2-3hours from San Francisco but house price there is like 200k. Before you say “why not commute from there”, that’s time without traffic. At commute times I would guess your looking at more than 4 hours each way. For an 8 hour shift you’re commuting another 8 hours, so functionally you’re getting paid half the minimum
Wage (from your POV, I’m not saying your employer owes you for that)
[edit typing on a phone is apparently hard. I corrected a bunch of awful and incoherent sentences]
>The cost of food, and utilities is tied to usage so those costs don’t really change (fungible) based on where you live; but your accommodation does.
It depends on the utility. A larger home can mean increased costs for some utilities, such as those associated with heat and cooling. As an example, now that I am in a house, my electric bill is twice what it was when I was in a two-bedroom apartment, largely due to cooling costs. (The house is larger than the apartment.)
Water and trash? About the same. Natural gas is slightly lower. (An actual meter versus a "formula" applied to all the apartments in the building.)
That’s one major advantage of living in an area with high cost of living. National products are priced the same everywhere, making them much cheaper when measuring the price as a percentage of total income. Take your MacBook example and apply it to big ticket items like cars and vacations and you can really see how living in these areas makes a lot of things more affordable.
This may be true if you are tied to the average income of an area. But good software engineers generally are not. I am able to enjoy a SV level of income in a much lower cost of living area.
Real estate, education, and health care have become much more expensive, while most other products and services (clothes, electronics, travel, entertainment, etc.) have remained flat or become less expensive.
Certain goods are similarly priced, the goods/rents most important for life are expensive. Also, there is a cost regarding loss of job opportunities outside of city centers.
if it's being sold in a store, that store has real estate, and presumably the real estate costs for business locations may be somewhat tied to other real estate-related pricing (individual housing, primarily). Those prices would affect the bottom line of the retailer. $21/sqft vs $80/sqft would probably have an impact on the margins many businesses would have.
Well, clearly stores couldn’t charge much of a premium for items that aren’t impulse purchases and can be shipped from elsewhere in the country, because people would just have them shipped. Relatively small expensive items like phones and laptops would definitely fall into that category.
Amount of traffic in a store in a popular location usually makes up for the increased price. Plus a lot of companies run some retail stores at a loss just for the advertising.
I wish this didn't bother me so much, but ever since the Silicon Valley Episode where Big Head says: " Jesus! Why is it so expensive here? Look at this place, it's a shithole.", I can't seem to find a good answer to this question...
I certainly count myself fortunate to be able to afford to live here with my family. But I can't see the value of moving people to the area (as I was contemplating moving team members from out of state here). Even at six figure salaries they'd have to share an apartment to be able to save anything at all.
- Better weather, but LA is arguably nicer & less expensive.
- Better community of techies who somehow inspire you to do better? After being here for a year and attending meetups and community event, I know for a fact that's not true. Despite the density of people here, people are surprisingly disconnected, chance encounters are rare at best. Most of the interactions seem shallow at best and conversations often seem transactional.
- Better job prospects for devs? I guess for a software engineer it'd come down to better job prospects, but to be honest, it's not like the rest of America sucks for software jobs.
- Better social life? This may be availability bias as I am not single and live in the 'burbs with my family, but every single person I know seems pretty miserable & isolated. A couple of them actually moved out of the area because of the poor quality of human interaction/dating. It seems everyone works all the time. (Which works great for me as I'm on the employing side).
+ If you run a tech company & have enough money to move here and hire from the local talent pool, it's a decent proposition.
+ Relative to other places in the country it's pretty diverse and progressive
Some might say access to VCs and funding etc, but that seems to take some pretty serious effort and it might be a better idea to make the hike up from Gilroy or Hollister and not spend a 6 figures in rent for the privilege.
I think the area is beginning to emulate the inequalities that I saw growing up in a 3rd world country. The amount of homeless working people in the area is mind boggling. It seems like most people in the area are just too busy/too successful to do much about it (I include myself in this group unfortunately). California has been having an exodus of residents, but mainly middle class down. I don't see how this is sustainable long term.
> it's not like the rest of America sucks for software jobs.
Yes, it does suck. Outside of major population centers where software/technology startups have been on the rise software work is terrible. It's not poorly compensated, but it's still on par with any other typical office job: mostly dead-end, shabby benefits, terrible work/life balance, and management who are euphemistically described best as marginally competent.
I will note that the stereotypical perks of software in the Bay Area seem to be declining: wages certainly aren't rising as much as they were even a few years ago, if at all.
Laugable claim. Here in DMV all job inquiries I get brag about 3 or more wfh. I grill or fry something up for dinner regularly. Only the SV bubble tries to get you to eat all meals with them and never leave the office because "passion" or similar hand wavy bullshit.
As someone who used to work in tech in DC who relocated to the Bay Area, pay in the DMV is really bad for a tech hub. I got a near 100% raise just by leaving for the Valley, and at all but one of the companies I've worked for here, almost everyone is out the office before 6, if not before 5 (or even earlier - I'll sometimes leave the office between 2:30 and 3:30 & nobody blinks an eye). One of my own teammates works from home anywhere from 2 days a week to the whole week from home.
There's this myth that all companies here are 12+ hour a day grinders, but while there are some startups like that, there are a lot of companies here that advertise work-life balance being an important thing.
I understand why it may appear so, but not everybody in the Bay Area works at Facebook, Google or for a startup. Some of us work for companies where the compensation is decent and the work/life balance is fantastic, and where the people in charge don't try to substitute "passion" for compensation.
Likely DC, Maryland, Virginia. There is a lot of defense and government contracting in hardware and software in that area. As another person indicated pay is really not that great. I'd add the diversity of opportunity is constrained as well: if you aren't interested in helping the military blow shit up, three-letter agencies probe into private lives, or a handful of NIH- or DOE-funded research projects then you're mainly competing for jobs at much smaller companies, poorly paying jobs at larger companies or pharma labs, or desperately trying to get out.
The "Better job prospects for devs" thing is always funny for me to see as a midwesterner. I know everybody has a different definition for "Better," but even in a flyover state, someone with marketable skills can have a new job tomorrow if they want pretty much in any city here. I guess the flare of working at a big name means a lot more to people than it should?
You can save a lot more money, in absolute dollar terms.
20% of 200k is more than 40% of 80k.
People talk about "cost-of-living" like it's some non-negotiable tax that you have to pay to the world. It's true you can't get the same lifestyle at the same price as a low CoL area - no humongous 5 bedroom house with a massive backyard. But it doesn't mean your life has to necessarily suck.
You can get the 5 bedroom house 15 minutes away from a decent city, 15 minutes away from work, in most states, and not miss out on much from the SV "lifestyle".
I think the only thing I miss out on by not working in SV is working with true world-class talent.
Who said anything about the SV lifestyle? I was only talking about the high salaries in SV and the financial opportunities resulting from them.
What I meant was you can't have the same lifestyle in SV as you would in a low CoL area - no humongous house etc. You'd have to adapt and especially downsize on living space. But if you're OK doing that the financial rewards are large.
Interesting that you mention Lehi. I’m going exploring this summer to see if I can open a satellite office there for customer service, sales & maybe some engineering too. At a 2 hour flight, it’s a pretty awesome place. I’ve hung out with a YC startup there and there’s good energy & drive with a reasonable cost of living.
However, I know things look good on paper and don’t always pan out that way once you’re actually there.
One of the things about SV is that I don’t fee quite so out of place and weird for wanting to work all the time.
The surrounding areas have houses for much less. Lehi used to be a big farm town, and now there's a huge dichotomy between the old and the new. Traffic is getting worse (Utah standards of "worse", of course). A 20 minute commute, however, provides much more affordable housing.
For what it's worth, I moved here (in part) because of the large talent pool, but found it just as hard to hire here in the Bay Area as elsewhere. And maybe harder... Even though the talent pool is much larger, there is also much more venture capital fueling employment.
I'd be interested in an analysis of job seekers vs. job openings from someone like Hired - is the Bay Area better for developers or employers?
I worked for a company that has their office in SF. I got hired as their first Portland hire and built up a small office here. Turn over in SF was much higher and hiring was faster in Portland. So over time the center of gravity for engineering moved to Portland. Pretty small company though and everyone we hired in Portland were referrals, so take this with a grain of salt.
Edit: as an employee the SF job market can hardly be beat though.
SF is beautiful. LA is a Hodge podge of gaudy attempts at class. In SF, the buildings are similarly architected and colored wonderfully.
Palo Alto? Now that place is gross
And here I am earning $1200/mo (3 year dev xp) and considered one of the highest paid! Also living a pretty comfortable life (own house/car/heated water/AC).
It's pretty strange how geography affects living standard!
EDIT: the below is a stream of consciousness invoked by the parent comment, not an attempt to comment on said parent's specific situation.
If I asked every person I know, "What is a comfortable life?" I don't think a single person would cite "heated water". In my circles that's as given as the air I breathe.
Comments like this startle me to the reality of the insulated life I live. Similar to the 30 minutes I spent on GiveWell the other day realizing how much I take for granted things like, say, the fact that I am not at risk of dying from malaria. And yet I still struggle between the idea of buying an even bigger house vs saving the lives of hundreds of children.
Whenever I recognize this mismatch between the stark reality of life on earth and my own uncaring attitude about others, I wish there was a YouTube channel I could watch that was designed to evoke sympathy in me for those less fortunate. Like maybe just documentaries about the challenges of regular life outside my bubble?
You can find affordable food, gas, insurance, etc. in the Bay Area. Sure, there are $20 burgers and $10 beers, but you don't need to consume them as the food in grocery stores is within a few % of most other areas of the country.
As far as I can tell, the main driver of family expenses in mortgage/rent and keeping up with the Jones' (but I don't know if the last is a uniquely Bay Area problem). Unfortunately, many families reach for the max mortgage someone will lend them, which keeps expenses and housing prices going up. If you pay $50k/year ($4k/month) on a $850k mortgage and $30k/year in taxes, it's easy to see how $120k/year is low-income. The remaining $40k divided by 4 people = $833/month per person for food, clothes, transportation, insurance, etc. Not poverty, but not high living either.
I know many families in the area that complain about the high cost of living yet frequently carry debt for that new car, or a credit card balance they can't afford. It's a self-generated problem that keeps going.
Keeping up with the Jonses? Maybe others parts of the country but not so much in the Bay Area. More like NIMBY's protecting the insane value of their dilapidated 2bed/1bath fixer uppers offered at $1M+ and selling to all cash buyers offering 20% over asking and 7 day close. [0]
The price of housing is a product of too many people wanting to live in too small an area. The huge salaries, probably driven in part by venture capital mardi gras, also certainly work to keep driving up prices. If somebody's willing to pay $4k a month for a modest place, then there will certainly be people willing to charge $4k a month for a modest place!
It's not that it's too small an area yet, it's that higher density building is being hamstrung, which prevents housing from meeting demand. If I recall correctly, for every new housing unit that's been created over the last (I think 10) years, 9 jobs were added. It's incredibly low density for such a high priced area, with many tiny, single story ranch-style houses, but a sizable contingent of very noisy residents fight tooth and nail against increasing the density.
In San Mateo, for example, there's a law on the books that prevents any new buildings above 55 feet, as well as any building with a floor area greater than 3x the land it sits in, which condemns the area to an average density of 3 stories or less, even in downtown, where there are some existing 150 foot+ buildings. That law is sunsetting in 2020, but there are already citizen groups agitating vigorously to get a renewal on the ballot, even as the current council was elected on a platform of more building. This would tie the hands of the council and prevent them from doing what they were elected to do.
In the case of the Bay Area, it's the case of building commercially zoned areas without residential units which can bear the capacity of the available jobs. Palo Alto is the poster child for having many more jobs than residential units.
The cost of homes keeps going up because of supply vs demand. There just aren't enough homes in the Bay Area to handle the population. That's why people pay ridiculous sums for homes that really aren't worth what they pay.
It's basically a situation where the rich can outbid the poor. Building "affordable" housing won't solve the problem, because the rich will just come in and outbid everyone anyway.
Costco, dollar stores, buying on sale items only... you can save a ton by not going for fast food, dining out or convenience. I used to spend over $25k/yr dining out around 2007 and $18k on housing. Housing is now zero and food under $200.
What is the median income for a Sr Front End Developer and or a Sr UI/UX Designer/Developer in the Bay Area now. Someone with 7 or more years of experience... is it 250k?
It's hard to say exactly and varies widely but I'd guess something like $120-160k range for a senior person even at most places that aren't the top 5. Stats I found say median pay is closer to $105k though (in 2017). Front-end/UI/UX seems to be in pretty high demand, so there aren't as many senior people to be found and most places that I've seen have been happy to hire junior people.
Median pay at Facebook is $240k. Median pay at Twitter is $160k. That would be all-in with stock etc.
Only if they're working for one of the big tech companies - they almost certainly won't be making that much at a startup out of college unless they happen to be uncommonly good at negotiating/have good experience from internships.
$160k is low for a true senior though. I have been making $160k base at a startup since 2.5 years into my career, and basically negotiations have been name-your-price for me.
I can confirm first hand that the big tech companies pay a lot for senior engineers though - if you're any good, you can hit $250k+ pretty fast (disclaimer: I work in a FAANG currently).
Bit Off-topic: shouldn't it be FAAMG? Or did we collectively kick Microsoft, the global OS and Office software supplier, out of the cool kids club and replace it with Netflix, a video website?
Microsoft doesn’t have much impact in the SF area. It has been around a long time before the current rent/wage inflation bubble and is based in the Seattle area which is much cheaper... Netflix is legendary for paying some of the highest salaries in the bay areas.
I’ll tack this on since I didn’t think of mentioning it earlier and it’s relevant to the original post... on the low end of that range assume 10k/month in gross wages, subtract 40% in tax and another 3k in rent for a 1br apt and another 1k for car + insurance + parking + Internet + phone etc. Now you’re at about 2k left over in net income monthly.
This is an expensive area. Don’t just look at the gross salary, I’m not surprised that 117k is about the minimum you would want today. I don’t know how any non tech people can afford to move here and I understand the squeeze on people who are making much less. It doesn’t seem sustainable.
I would take responses here with a grain of salt. I’ve seen folks here regularly claim absurdities like “400k is average for a developer”. Actual salary data available online is pretty sparse and self-reported, but it’s better than anecdotes. You’ll see figures like $110-$130k + stock cited as median for the Bay Area anywhere you look, outside of the HN comments section.
Yeah it’s crazy. That qualifies you for housing assistance... too bad house prices are basically above the max assistance thresholds. At a minimum you need down payment assistance. You really need two professional incomes to make any headway.
I recently fled San Francisco (was downtown) to Nashville Tennessee and could not be happier. I will try to stay neutral politically, but I also think it is somewhat ironic the most liberal city in the US also has the highest income "inequality", homelessness, drug, and petty crime problem in the US. It all wreaks of hypocrisy and downright poor fiscal judgement to me. I have friends that are making $160,000 a year (single no families) and not saving anything. That is absurd. Not to mention being a single self-employed LLC company in California the taxes are anti-business and constraining. California dream'in... Ehh no thanks for me anymore.
> It all wreaks of hypocrisy and downright poor fiscal judgement to me.
I'm curious how much of it is hypocrisy and poor fiscal judgement vs. simple naïveté. Has anyone studied where San Francisco's homeless population comes from? Is it mostly long-time residents who are down on their luck (whether due to economic hardship, drug addiction, or mental illness), or does San Francisco's extreme liberalness (tolerance for tent encampments, open drug usage, petty theft) attract people from elsewhere?
San Francisco has caught Nevada and New York sending people on buses to get rid of them. This is supposed to only be legal if the person has family in California they are meeting, but they just dump mentally ill people on Market Street and hope for the best. Nevada paid a large fine for this recently. Many of the people needed urgent help within hours of arriving. Truly horrific.
I don't know what San Francisco caught Nevada doing, but lurid stories aside, organizations do actual surveys and censuses of the San Francisco homeless, and they're overwhelmingly locals.
> Partin's bus ticket cost $261.50. The receipt, dated February 2, 2015, is stamped with the name of a Nashville agency called Homeward Bound. Investigators at Team 10's sister station in Nashville, WTVF, learned the agency that has oversight of the Homeward Bound program is the Nashville Downtown Partnership (NDP), a group dedicated to making the city a great place to do business.
To be fair, the also essentially non-existent enforcement of rules and laws and the fact that SF is a mecca for international tourist and panhandlers can make decent money (i.e. Union Square) plays a role. Let's not factor out the economics and lack of consequences for bad behavior.
However attractive the weather might be, we don't have to use the axiomatic method to figure out where the SF homeless come from; the population is regularly surveyed, and is overwhelmingly local.
Winters? It's 56 in SF right now. As to the 'come from all over the country for the excellent social services', there are lots of studies and surveys on this a google away. Statistically, nobody does that.
IMO the most insane part about SF is that something like 70% of SF rentals are rent-controlled. I've met plenty of young techies/finance types who pay well below market prices for nice apartments while making well above average salaries.
My upstairs neighbor with a nicer floor plan pays $900 a month, gets 2 parking spaces in the back lot AND a garage. I get no parking spaces, let alone a garage and pay $1900 a month. They have been in the apartment for a long time and I moved in 6 months ago.
It takes mental effort to not think about the imbalance. It wears you down. It is the most likely reason I would leave the Bay Area even though I can afford the rent.
It’s insane that some people only pay $2000-3000 for a small apartment? Most of the rent controlled prices aren’t cheap but compared to the rest of the country unless you’ve been in the same place for a looong time.
My friend who works at Google pays $900/mo for a large room in a 3 bedroom apartment in Lower Haight. Yes, not the same as having your own place at $900 but still shocking to see someone pay that little for a place in SF.
It’s correlation vs causation. The presence of income inequality makes the city more and more liberal. Politics is a dial between fairness and freedom. There are downsides to both, so elections tune the setting depending on your current conditions. CA is the state where the pursuit of happiness is most fruitful. There are 124 Billionaires in CA (only 400 something in the entire united states). Of those 70+ are in the Bay Area (most are locally grown in this tiny region of 7million people). All of Germany has 48 or something. Thus in the land of opportunity, you are either a billionaire, or act like you want to be in the future, or you push on the dial for fairness.
In Tennessee for example you can achieve the American Dream, a beautiful house by working hard in the middle class. In fact some of the most beautiful houses I have ever seen are here in Tennessee and I've lived in Santa Barbara, San Diego, and San Francisco. This is just not possible in the bay area.
And sometimes you get neither. SF building restrictions are both unfair in that you have to have a very high income or win the rent control lottery to afford anything, and unfree in that they prohibit voluntary transactions between landowners and would-be buyers.
SF to St. Louis here. I miss a lot of things about SF (weather, certain kinds of food, urban density) but I definitely would not move back. It's a very silly place in a lot of ways.
At that income, the tax rate is 28% federal, 9.3% California, 6.2% fica, plus some other stuff. For back of the napkin budgeting I assume about 40%, which is more like 95k net. Then subtract 3k for an average 1br, 1k for a new car (payment + insurance + parking). So now you’ve got 4K left over, before any other kind of savings or expenses. I’m almost being generous, it’s necessary to pay more for rent in some areas. And a startup isn’t giving you a 401k either... sure, it’s possible to save but the top line is a far distance from the reality.
This is not an accurate price. A smart renter with a little patience would pay more like $2000-3000 unless they needed a brand new condo with a gym and a doorman.
Brand new apartments actually often offer low rents to fill all the vacancies. E.g. the artsy new apartment in the Dogpatch was going for well under 3k for studios.
Even assuming you pony up that much for a fancy apartment in a safe part of town, you should still be able to save substantial amounts of money on a $160k salary.
Typically I don't like calling out HN, but my original post has 28 upvote points (it was at the top for a long time), then all the sudden sunk to the bottom immediately. It's funny how even though the majority of interesting comments and discussion get silenced because my political views are not palatable to a small minority of users or mods.
Californias government is almost as corrupt as Illinois and it affects everything. But the huge number of rich benefit from it too much to want any change
I survive in the Valley on under $15k, all in. Now they want to take away the pittance that is SNAP Sept 1 declaring me ABAWD without any process, and I’ve never been ABAWD.
As a side note: I really wish news articles would link to the data instead of forcing me to go on an expedition.
1. https://www.huduser.gov/portal/datasets/il/il2018/2018summar...
2. https://www.huduser.gov/portal/datasets/il/il2018/2018ILCalc...