Please someone explain something to me regarding the tech sector and housing. Why is it that the most location independent sector, tech workers, are huddling around certain urban areas? It makes absolutely no sense.
Shouldn't tech workers or even just simply technology savvy people be able to work anywhere that has fast internet? So why is that community not living in the countryside or in small spread out concentrations, instead of everyone having to pile into certain cities?
Sure, if I could get gigabit fiber in the middle of South Dakota, I could work just as easily as anywhere else. Unfortunately, there wouldn't be anything for me to do outside of work.
I live in NYC right now and it's fantastic (and fantastically expensive). I can walk to any number of world class restaurants and museums, take the train to see even more amazing things, and generally feel like I have the world at my fingertips. Is that pricey? Yes. But I work so that I can make enough money to do things I find fun, some of which are things outside of work.
Please someone explain something to me regarding the tech sector and housing
Edward Glaeser wrote a book that answers your question: Triumph of the City. Cities promote knowledge transfer and idea generation because of all the random interactions that happen among people. It's useful to be among people who are doing things like what you're doing. Cities offer great ways for cooperation and competition.
If you're doing routine tasks over and over again that can be done remotely maybe you don't need to live in a city. But the rest of us do, and the reasons make a lot of sense!
As someone once described to me, if you have a lot of money, the world's great cities, London, NYC, LA, Hong Kong are your playgrounds. Living, working, and playing within a walking distance or transit-friendly distance is strongly becoming an aspiration for those who have the skills or money to afford it.
If you make $300-400K/year in New York City, you can afford to live a little. Midtown or Chelsea apartment. Nice restaurants. Drinks in bars. $7 lattes.
This is exactly it for me. I don't live to work, I work to live and I want to have interesting, dense, urban things as near to me as I can manage. My salary isn't as high as some around here but I still pulled off buying a cute, compact house smack in the middle of Seattle near 24-hour transit service and minutes to everything I want to do. That's after moving from the suburbs of Texas where anything besides a 7-11 or a Cici's Pizza were at least a 15-minute drive (and you could forget going via transit).
Humans are social creatures and we want to be around other people. That's a generalization that usually holds true. Some people do want to live in a rural setting, with acres of land separating them from their neighbors. A coworker of mine does that and is quite happy with it. There just happen to be more of us, apparently, who want the urban environment.
Personally, I've decided to leave the rat race of Silicon Valley / SF and take my family somewhere more quiet where we could settle down. I've had one hell of a time finding a job that would be okay with a remote employee, though. I had a couple companies who at the start said they would but when the day of the real interviews came they would suddenly get cold feet.
For all the complaining about a lack of talent, the people making the hiring decisions sure don't seem to want to compromise on this point. That sort of "perk" is huge for me -- it's the sort of thing that would make me interested in your company in the first place.
There's still a large value IMO of working physically next to those you work with. The ideas flow easier, meetings can happen organically, there are no timezone issues, etc.
Yes, this sector can work remotely less painfully than others, but that doesn't mean its optimal.
Because the vast majority of people that are young and ambitious prefer to live urban areas with all the advantages that come with it.
And with the high level of gentrification in many successful cities, unlike 25 years ago those urban centers are now also attractive for older people and people with families, people who used to move to the suburbs.
People want to be there, and contrary to what a very vocal minority suggests, most people don't want to work remotely, at least not full-time, and those that do don't necessarily want to do it from the middle of f-ing nowhere.
I'm sure there are a lot of tech workers who live in the countryside, it's just that we don't hear about them very often. We read mainly about the people in the tech centers, because that's where all the networking happens, and that's where all the journalists are.
I make a database client, and when I look at the billing addresses of my customers, I do see a lot of companies based in San Francisco; but the majority of customers are from pretty random locations all over the world.
"[Almost any city with a real tech presence]'s Home Shortage Could Stifle Startups"
Sama's tweet from about a month ago really resonated with me: "it's so unbelievably frustrating how hard it is to get lots of new housing built in the bay area. this one thing would solve so many probs."
There are so many factors at play here, but it mostly boils down to politics.
As more entrepreneurs start tacking big problems with lots of red tape (i.e. banking, brokerage, medicine, insurance, etc.), I wish more people would look to housing and how to keep costs sane.
PS - email me if you're in the space or have ideas. Real estate entrepreneur here. Would love to hear ideas, give my opinion, or chat about possible solutions.
The barrier to new development in SF isn't red tape per se, but democracy. The existing residents don't want to alter their neighborhoods through a massive increase in population, demographic shift, blocked views, etc. They vote in policies that artificially restrict the housing stock (40ft height limit, endless community generated red tape, low income housing requirements in new buildings, restrictions on evicting rent controlled tenants). This leads to dated, unmaintained buildings, higher rent, and decreased labor mobility, ultimately shooting everyone of the in the foot.
To 'disrupt' this you would need to eminent domain a good chunk of the city a la the Western Addition in the '50s.
True, all good points. Sama's second part of the tweet referenced above was, "homeowners don't want too see their home values decrease, and non-homeowners don't vote enough."
Yeah, I like Opendoor a lot. They have the potential to build a huge company because there's a lot of pain in selling homes.
However, this doesn't do much/anything in terms of 1.) creating more supply to meet the current demand of areas like Palo Alto, SF, Manhattan, Stockholm, London, etc. or 2.) making housing more affordable.
Are there historical parallels to the current situation? Has there been another time or place where a young population all of a sudden became rich in the span of only a few decades and wanted to live in urban areas, which were currently occupied by less rich communities?
1.) Mid-1940s - thousands of single soldiers came home to places like Detroit and Chicago after the war and wanted to buy homes and start families. Because housing development had slowed or been stopped for years, these soldiers came home to housing shortages. You can read online about this, but mostly these folks moved back home for a bit, and by the late-40s, early 50s, several massively successful homebuilders were either started or hit their stride (i.e. Levitt and Sons).
2.) Today - in parts of North Dakota and Texas - similar problems to the bay area. Lots of overnight fortunes being made from oil and gas (pipelines, drilling, transportation), and a big lack of housing stock.
The first was solved with plenty of cheap, vacant land; and the creation of suburban sprawl / planned communities. My sense is the second issue will be solved similarly (if the boom continues).
One obvious difference is that the bay area doesn't have much land left to develop, and what is left is mostly too expensive, or protected from development.
FYI, I talked with my friend, and apparently a similar situation happened after the Black Death in the middle ages. Since basic communication and transportation systems broke down, the rich were better off moving from country estates to living in urban areas so they could talk with each other easily. This centralization of intellectuals started giving momentum to the renaissance.
However, the situation was a bit different back then since much of the urban population had died and didn't need to be displaced.
I have no idea if similar situations happened in ancient Middle East or Asia.
It's easy to blame politics, but those politics are based in social reality.
"Keeping the costs sane" for tech workers would mean putting the housing out of reach of many ordinary people.
There is a finite amount of space, and the reason why housing scarce in many cities in Europe is because a large portion is reserved for rent controlled social housing (which unlike the US isn't just the extreme low end).
Not doing that clearly doesn't work either (see SF), and has so many negative social side-effects that are unacceptable in Europe, so you don't even have to bother trying to suggest it.
It simply comes down to too many people wanting to live where there's not enough space. To solve that, you have to look at social factors, not bureaucracy and real estate.
Personally I would suggest looking at the people who actually wouldn't mind getting out of those cities but currently can't for various social and economic reasons. Ironically, those are not the tech workers who could at least theoretically work remotely.
"It simply comes down to too many people wanting to live where there's not enough space"
No, I really don't think that is what it comes down to in Europe (maybe ex UK). More often than not, the reason why local authorities are planning for say 15,000 new homes instead of 30,000 new homes per year is funding not space. Not just funding for housing, but also for public transport, etc.
People in continental Europe will happily live in large appartment blocks if rents are affordable. You can easily buy a couple of single family homes in a sparsely populated area next to a big city and build 10 storeys high, or revitalize some brown field estate that is already owned by the government.
But as you correctly point out, housing in (contintental) Europe is typically subsidized, even for medium income folks. If a city is growing fast, building new homes has to be subsidized now but tax revenues are only going to come in later.
So we have three options: Raise taxes, increase government debt or deregulate to attract private investment. If you have a choice of public or private investment, which one do you choose? I think the answer depends on whether or not you know exactly how much demand there is for what type of supply and on how transparent and competent the local government is.
The demand for housing is pretty well known. We don't need much innovation in that sector. There is not a lot of uncertainty about what is required. All we need is money to build build build.
In my opinion, if national governments that can borrow for 1% they should take the opportunity to raise debt, tons of it, and fund housing and other infrastructures now. Or even better, introduce European infrastructure bonds to raise that money, so it can be spent in countries with higher interest rates as well.
Not to discard your comment, but wrt Stockholm: Build higher! Urbanize areas outside of the core inner city. Lots to do in planning and building to not create artificial social policy.
Has been done in many European cities in the 60's and 70's. Those are now places nobody wants to live anymore, and many of them have been torn down.
The only people who want to live "higher" are the people who want high end apartments in the inner city. And those are the places where height restrictions are there to protect the historical nature of the inner city.
I think it's a mistake to compare Le Corbusier-style "areas for living" with modern urbanised zones. The big issue there is that – sure – there's highrises, but no urbanisation. Usually because they are either lacking commercial space on ground floors or the density is too low, on aggregate, or the areas are too spaced out to support vibrant commercial centers. Look at stockholm, you have city, greenery, suburb, greenery, suburb. No urban connection, not enough density.
I've lived in areas like this myself, and I agree they're not nice. However, I have to think it's not only locality to city center that makes central areas good, it's also that they are self sustaining burrows. There's ample housing, parks, jobs, retail, restaurants, bars, etc.
This has been discussed at length on HN and elsewhere, but there definitely is a real estate problem in SF. Average height of buildings in the downtown area and the like are _much_ lower than they could be (earthquake arguments are bunk, see Tokyo).
The politics behind this is absolutely terrible zoning regulations in the US that make mixed-use zoning difficult, and the fact that people own their houses, and don't want to see the value go down. So basically rent seekers.
Lived in Stockholm for ~1½ years, ending in the spring of 2013.
Was lucky enough to have the company I was recruited for help me by having their name on the rental agreement, covering any expenses the owner might have if I thrashed the place, didn't pay rent, etc. Ended up finding a place for 13.000SEK/month on the outskirts of Stockholm, at the very last subway stop.
For most of the employees starting at the same time as me, most of their rental agreements were only valid for a year or so (and the owner could kick renters out pretty much at any time), forcing people to go and find other apartments, which is not easy when the employer no longer offers support with the contract.
One colleague of mine found that his response rate was extremely low on his bot that automatically applied for an apartment, which matched his criteria, as soon as it came up online. He suspected his non Swedish sounding name was a factor, so he changed the name in the message to something Swedish-y ("Sven Karlsson" or smth. like that) and instantly the response rate rose dramatically. As a foreigner, not having anyting on your Swedish credit report doesn't help either.
Yikes, I'm sorry for your experience. I think highly skilled foreigners coming to Sweden to work is such a recent that society is lagging behind. I've heard many stories of people changing their last names to their husband/wife's in order to get job interviews etc. I hope as time goes on people will be more accepting.
It's basic supply & demand that rent control causes housing shortages. If rent control was replaced with adequate rent subsidies for landlords (for the lower/mid class tenants) and some of the more draconian regs were eased, this problem would be solved overnight. Politically however, this is probably impossible and/or extremely controversial, but I believe this arrangement would be better for all tenants.
Yup. Simply disassociating the benefits of rent control from the housing unit it is attached to would go a long way to permitting development. The way things are today, rent control basically serves as an almost permanent mutex on the development of the underlying real estate.
I'd be more useful if cities made it a policy that the amount of housing subsidy you receive is proportional to the year you moved to the city. That would achieve the same goal as rent control (i.e. affordable housing), but alleviates the mutex on many structures that could be torn down to make way for structures that permit great density.
Affordable housing programs are fine. Tying up the underlying asset indefinitely is counterproductive.
An average 80 sqm 3 rooms apartment in Stockholm rents about 6800 kr/month (a bit less than 1000$ approximately). But you can only get this if you are in rental queue.
This is the money that any working person (doesn't matter a software developer or electrician, plumber or car mechanic) can pay easily.
The rental queue works like first-comes first serve basis. And the first-come means whoever registered first on the rental queue site. The main queue is maintained by Stockholm State. There is no way for anyone to pay more money and get ahead in queue.
Apart from that, there are always new buildings which have no queue but rent is more (40 or 50% more than usual. Anyone who is willing to pay that amount can get an apartment within 2 months time frame.
Then there is a 3rd black market. A lot of people sublet there for shorter and some for longer terms.
Having said that all, I've thought about this problem but couldn't come to the prefect solution. When state controls the rents & the process renting, it gives guarantee to low-income families that they can also live in nice neighborhoods.
This is the biggest problem. There really is no rental market to speak of, so talking about rental queues being 10 years long is not really relevant. If you want to live in Stockholm for a longer time you need to buy. This also means it takes months and months getting your loan approved, finding an apartment and waiting to move in. Only the waiting to move in part can take more than 3 months.
The flip side is, once you've bought a place, it can be really really cheap to live in with the current interest rates. We pay less than $1000 for a two bedroom in central Stockholm for instance, all included (interest, fees, electricity, water, heating, tv, broadband). This also means absolute prices are insanely high, and will probably continue to rise since there's still room for it to grow.
Months of getting your loan approved?
At _MOST_ its takes a week. This is also been the subject of many issues connected to the rising prices. Low interest rate == easy loans dishing out.
It takes more time to actually find a decent place you like than to secure the loan. That took a month for us. We saw
30 apartments.
Btw bids on two apartments.
One was a low ball and they didn't want it.
The second one the price rose 200k (SEK) before I won.
No, I didn't mean it takes months to get your loan approved for most people. It did for us though, since we moved from abroad, having no work history in Sweden and no jobs at that point. That means you have to get two job offers first (for a couple) and that takes time. During this time you are looking at apartments but can't bid since you haven't secured a loan. Then comes the looking part, which for us took maybe 2 months. There was a lull in availability (and extreme competition between bidders), and we were outbid for everything. When we finally found one, and outbid another couple (price rose 700SEK btw), we had to wait another 3 months to move in.
Everybody's experience is different, but I think we can agree this is madness and not good for our economy. I rarely have much positive to say about the US, but one thing is that you can literally go to almost any city (except maybe SF and NYC), live in a hotel, and within a week you have found some place to live. Might not be the highest standard of living, but you can always trade up.
I had the same experience as you in terms of previous work history. I just moved back to Sweden and had approx 1 month job history (and not even full-time but a trial). Got my loan approved in a single day. Called back a week later to expand the amount I wanted to loan.
I got the "lånelöfte" (guarantee to loan) from the bank in a single phone call which allowed me to bid.
May I ask what bank you went to? I can add that I had the necessary 15% but outside the country.
They never asked about it, nor previous work history.
Also, I don't have a Swedish name if you were wondering :-)
Same housing problems in Copenhagen. I'm a student who just lives back in my home country and flies over to Copenhagen for exams because I couldn't find housing. If I want to get something, I have to be there so I can hunt down people in person. There's really no sort of easy way to just get an apartment room, and I've found that willing to pay more doesn't really help (though maybe if you're willing to rent out something for 3-4k USD a month + drop 12,000 on a deposit you might have better luck).
Where are you from? And are you studying something that you can get SU from? There are special student housing (called "Kollegium" rooms) in Denmark, where only students are allowed to live. And the rent is considerably lower than normal rental apartments.
It's been a while since I've studied, so my information might be outdated, but feel free to send me an email if I can help in any way. I live in Copenhagen.
I'm from the US. I've signed up for kollegiums and I'm waiting on the list. It's taking a while as all the first year students have priority first, but that's wearing off soon. Hopefully that'll come through soon, but it's going to pose another challenge as I'll be going on exchange in half a year.
Shameless plug, but my current tenant might eventually move out soon and I am looking for someone else to take over once he leaves (might be 1-3 months from now)
Let me know if interested.
It's in central Södermalm. I genuinely despise it, but many people (including my partner) like it so I'd suggest looking it up first.
Yeah, unfortunately most European cities are built to the max density allowed with old buildings that cost a lot to maintain and that offer an inferior experience to modern ones.
Rent controls and policies made for a negative populational growth only make things worse
Not really, part of the reason people want to live centrally in the first place is the density and the high quality turn-of-the-century housing. Tall ceilings, nice wooden floors, large windows. It sounds like you've never actually been inside one.
> It sounds like you've never actually been inside one.
No, I've actually seen several ones (not Swedish though)
Most of them are cramped (especially in Ireland/UK)
I've saw the tall ceilings (not really an advantage to me), wooden floors are nice as well as the large windows, seems like this is more common in Continental Europe (France/Germany)
But: no elevators until they managed to fit one somehow, the old doors/windows may be a liability (maintenance also they are not very good heat insulators)
I'm talking about continental Europe and Scandinavia (including Stockholm where I live). UK is very different in terms of apartment condition. I've seen many carpeted floors, and even carpeted bathrooms of all things, really not acceptable here. Older buildings are very well renovated, and are generally better built than most new buildings.
As for the rest of Europe, the demand speaks for itself, even if you don't personally like the style and high ceilings, most people do.
Modern housing on the continent is far superior to that in the UK (and I like carpets!).
There were standards on house building which assured a minimum floor area which were later abandoned. The UK now has the smallest homes in Europe. The windows are tiny, and the materials are cheap.
I agree turn-of-the-century housing was generally generously proportioned, and well built, and stand the test of time. And the housing that followed up to 1940s, even the austere housing that followed in the 50s wasn't bad either. But from the 60s onwards the quality took a nose dive (there are some good quality social housing complexes), and the puny mock victorian 80s and 90s houses are the worst examples.
I'd be interested to hear why the UK took a turn for the worse, and other places didn't (or perhaps they did to a lesser degree). Belgium is similarly cramped but seems to continue to build good proportioned housing.
Shouldn't tech workers or even just simply technology savvy people be able to work anywhere that has fast internet? So why is that community not living in the countryside or in small spread out concentrations, instead of everyone having to pile into certain cities?