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It was the potential buyer, not the real estate broker at the open house, who was the first to use the word some deploy as a pejorative to describe the “industry of disruption.” The question was who’s buying residential real estate these days when the average price is nudging $2 million.

“Tech,” the gentleman said.

“They can afford it because they’re earning $200,000 a year and two earners in the household.”

He could have been referring to his clients, who were, in fact, “tech,” but he understated the case.

The last time the Bureau of Labor Statistics put out numbers, in 2018, average annual compensation in the information technology sector within San Mateo County was $382,597, or $191.30 an hour.

Say “housing” and headaches and nosebleeds break out. No subject is more awash in numbers and statistics than housing, and no subject is less illuminated by statistics than housing.

This is not a plunge into tables and charts, no deep dive into data, as tech might put it. This is an analog, experiential wallowing in the topic that intends to shed a little light on what has happened in the Peninsula real estate market and what it might foretell.

This is the account of two almost pure free market economies, residential real estate and information technology, meeting. It’s the tale of innovative, cutting-edge, futuristic, fast-moving technology in slow-motion courtship with one of the oldest technologies on Earth, the family.

Already it has changed the Peninsula. More is on the way.

Stats and tables unquestionably help with understanding; however, they can obscure the truth. Standard-setters in government, like the Bureau of Labor Statistics, take years to produce their charts. Thousands of stat-generators do the same, from industry to government to political action committees. All the data, though powerful, don’t match up source-to-source, year-to-year, or even place-to-place. It’s almost never stated what assumptions attach to spreadsheet data cells, but their inputs always grow from assumptions. They don’t always mean what they say or say what they mean.

However, all point to one thing: Despite hundreds of programs, thousands of pieces of local and state legislation and millions of public hearing hours, not enough houses are being built. Every eight years since 1969 the nine-county region forecasts how many houses the Bay Area needs to build and publishes a progress report card. The last one — four years old and out of date the day it came out — figured that San Mateo County met about half its housing need through 2014, but there was a vital nugget of truth contained in that report. It said while the county met between 20 and 25 percent of its “affordable” housing need, it met almost 100 percent of the “above moderate” housing market demand. For every one affordable unit built or preserved, five market-rate units were built or put into play.

Break it down city-by-city and the contrast is stark.

Redwood City produced 316 percent of its above-moderate allocation, three times the goal, but only between 25 and 30 percent of its affordable target, which was already a fraction of the need.

It’s clear: Absent something as cataclysmic as a tech exodus or implosion, if the need for affordable housing is ever to be met, it won’t be in our lifetimes. Almost all “affordable” housing being built these days is in multiple-unit buildings, either rental apartment stock or condominium set-asides. Of that, the overwhelming majority is reserved for senior housing. Families don’t or can’t qualify. At the same time, new, single-family detached houses just are not being built very often.

The resulting escalation in home prices reflects not only scarce supply, but demographic shifts.

The most up-to-date information on the subject of who is buying and how — with the appropriate caveat that it has to be taken with a grain of salt — comes from the industries themselves via, where else?, the Internet, and from people in those industries.

The answer from every real estate professional in the market queried about who’s buying is “tech.”

The Peninsula is a seller’s market and most pros consider themselves primarily sellers’ agents.

All are looking for, and generally get clean sales above asking price in short order, though sales are slowing slightly compared to the torrid market of last summer, when records were set.

According to the website Zillow, median price for a home sold in Redwood City is $1.5 million, meaning half sold for less and half for more. Take that for what it’s worth. The San Mateo County Association of Realtors says it was $1.7 million in 2018.

That takes a staggering amount of cash, and all but eliminates from the buyer pool those who wish to make a lateral, in-county purchase, people who built equity in an existing home and seek to stay here.

For example, a couple who bought here 15 years ago for $500,000 and sells for $1.5 million will write a check to the government for around $300,000 for capital gains, unless they buy a new house at least as expensive as the one he sold. Next they will write a check for income tax on the sale — another $300,000 is not unreasonable. They will have to turn over another $300,000 in down payment if they buy at around the price he sold for. Out goes another $180,000 or so in commissions. With the cash they have left, they won’t have a very good chance of beating the competition, which is offering down payments up $600,000 to seal the deal. If successful, they will exchange their $6,597 annual property tax bill for one three times that.

Not a retirement scenario for a long-time homeowner desiring to move.

Fortunately for the market, as Intero Real Estate agent David Blewett of San Carlos says, “There’s been an awful lot of money in Silicon Valley.”

Sotheby International Realty agent Bobbi Decker of Burlingame is one of a handful of educators certified by the National Association of Realtors to teach the business to other agents and has represented the industry on local and national television.

“All of the Northern California area is rare air,” she said. “Our values are so high, but we have Silicon Valley seeding that particular buyer. We have first-time buyers that are going from renting a home to purchasing something in excess of a million. Last year I actually sold a home with one of my (associates). It was $11 million. They’d never owned a home before.”

The purchasers were a married couple who had worked for a video gaming company recently purchased by another company.

“That was really a one-of-a-kind,” she said, “but those kids have a lot of money now. They were bought out for hundreds of millions of dollars.

Before identifying a villain in this scenario, consider the wealth’s source. If you have ever checked the weather, looked at the time, booked a flight, driven a car, talked on the phone, owned a computer, watched television or, yes, checked your Timeline or done a million other things that define modern living, the ultimate source was you. If you have a retirement account or pension of any kind or owned stocks or bonds or have someone managing your money, it most definitely was you. You, your data and your investments are the source of much of this wealth.

The recipient was most likely an information technology company that does not do business the way your grandfather did. The industry does not set wages by tying the cost of doing business to the cost of living. That model is “of a bygone era,” said Facebook Director of Corporate Media Relations Anthony Harrison. It’s of a time “when jobs were less complicated than they are now, and the skills required to do those jobs was less complicated than it is now,” he said, stressing that he could speak for Facebook only and not the industry.

The industry does affect wages at individual companies, however. He pointed out that Facebook has been growing in the neighborhood of 40 percent per year and competing for talent with LinkedIn, Amazon, Apple, Microsoft, Google and hundreds of other tech businesses which are growing equally quickly.

“One could think an engineer is an engineer is an engineer. The reality is there are numerous types of engineers with different sets of engineering skills. The types of engineers we are looking for here at Facebook have a very particular expertise and so that is also a factor into how compensation is decided.”

A spokesman for Google in Mountain View said the company establishes “market reference points” for employee compensation. “To be competitive,” he said, “we’re targeting the top of that local market cost of labor so we can retain the top talent, which a lot of companies are doing around here.”

These companies also don’t recruit in the traditional way. Access is via their proprietary web portals, which do not disclose wages to the casual visitor.

But tech wages do get published. Just Google it.

Thousands of tech employees in diverse companies share their compensation anonymously via the levels.fyi website. Its numbers skew because only those who choose to self-report participate and charts do not break out where they work — Google alone has locations in 53 countries.

But it’s possible to get an idea about local pay because an employee location attaches to each disclosure. Tech companies hire employees at “levels” that generally start at level 3, or L3, for beginning engineers with no professional experience. Levels don’t necessarily correspond company to company. On levels.fyi, Facebook users list seven levels, Googlers eight.

There is no upper limit. Jeff Dean and Sanjay Ghemawat are among the most skilled coders in the world in Google’s system and have achieved Level 11. Microsoft has what appears to be at least 13.

Levels are called the tech ladder, and getting a promotion is called “leveling up.” A new-hire, L3 — for Level 3 — Android system engineer with zero job experience reports compensation of $163,000 at Google Mountain View: $120,000 base plus $25,000 stock plus $18,000 bonus. An L3 with 1.5 years’ experience at Mountain View is on the high end at $218,000. Things go up from there. Way up.

Apple calls its levels “ICTs,” also starting with 3. A sought-after “full stack” ICT3 software engineer at Apple reported income of $251,000. An L7 at Google posts earnings over $600,000 a year. A 12-year L8 at Google reported income of $1.6 million.

Almost all engineers receive company stock, year after year. Three years ago in September a share of Google cost $814. This September it was $1,235. Should the trend continue, in three years that L3’s portfolio will be worth over $90,000, assuming his options come at market price.

Tech homebuyers are cashing in that stock to offer down payments two and three times the 20 percent banks demand. Traditional savers without stock options face a daunting challenge to match it.

Some tech buyers may not even need wages. A 102-year-old house in Burlingame, assessed at $124,000 in 2017, was remodeled in 2018 and reassessed at $2.3 million. A tech CFO, with zero salary, bought the 3,500-square -foot, four-bedroom, four-and-a-half bath home on a 7,800 square foot lot in March for $5.1 million.

Even Ayesha Curry, wife of Golden State Warriors basketball star Steph Curry, admitted to “sticker shock” when the couple recently bought an Atherton home for $31 million.

The lower and middle classes in San Mateo County, when compared to the rest of the country, are virtually non-existent, according to data extracted from the U.S. Census’ American Community Survey. However, household income in the county starts to lap the country at $100,000, and by the time the chart gets to $200,000, the count is four times the national average. The wealth chart probably doesn’t tell the complete story: It doesn’t go beyond the $200,000 level.

That is what has driven the county’s median household income to about $110,000, twice the national figure. Though the number sounds large, it’s not. Adjusting for the cost of living — housing being a huge component — that’s about what the federal government describes as low income here, meaning the median county household almost qualifies for some federal affordable housing programs — it’s 20 percent too high for the first program step. It doesn’t mean that the median household here is not low income according to the federal government. It means that federal support cuts the cap 20 percent before the first assistance program kicks in.

But that 20 percent can be incredibly significant.

A 20-year, high-level, professional county employee, who declined to be identified, started saving for a home 15 years ago.

“Trying to gather savings together, we have what would have looked good maybe 10 years ago,” she said. “But every time I get to where I think I’m ready, everything jumps again.”

Five years ago, she gave up.

It used to be my hobby … but frankly I’ve given up at this point,” she said. “I’m not looking any longer.

“And now I’m praying for this possible on-coming recession. I just feel like I need a perfect storm and I’m not sure that’s a possibility for me.”

She is expert in all the resources government has mustered to help, those for low-income buyers and first-time homebuyers. She’s attended classes and seminars, but there is no help for her situation — a full-time professional earning a government salary in a two-earner household.

“I don’t qualify. I’m in that category where I make just a little too much to qualify. So I say, OK, that’s for the person I was back then. Now I’m looking at what can we be grateful for in our lives. This may not be my life to own a home. Maybe I just keep saving this money so that when I retire I can use it for what’s available then. And that might look very different than what it does today.”

Simple wealth in the tech sector is not the only thing driving this real estate market, so cruel to the low- and middle-income wage earner.

It’s kids.

Put more completely, highly paid tech workers, who delayed getting married, who pursued their careers and a cool lifestyle into their 30s and even 40s in the city, are finally deciding to settle down and have a family. And they want a nice house in the suburbs.

Chris Eckert of Keller Williams Luxury International in Burlingame has been selling houses on the mid-Peninsula for 15 years.

He put it this way: “I’m 53. I’m seeing more and more people coming in with kids that seem to be getting closer to my age, 40, 45, maybe eight years away. They’re older than I remember seeing when I first started in the business. And they have a kid or are going to have kids.”

Realtor Decker and her $11 million Hillsborough sale? “They wanted to have kids. Lots of kids.”

She is quite clear about who her clients are and why they’re buying.

“Millennials have taken a longer amount of time to want a first home … I don’t know if they were nervous about it. I can’t really tell you what’s in their psyche, but they have taken longer,” she said. “Now they’re marrying, they are wanting to start families, they want to get out of the city and more into the burbs because of the family. I see that across the country because I teach cross-country. They just took longer getting there.

“People,” she said, “had told me they’d never buy, that they’d be the generation that were just vagabonds, that would just go from rental place to rental place, they’d maybe go offshore but they’d come back. “Well,” she said, “now they’re starting to establish families. That changes their psyche.”

The first wave of millennials would be pushing 40 now, meaning that this is likely to be the typical scenario for at least the next 15 years, unless something drastic happens. This millennial cohort was born between 1981 and 1996. The boom is yet to be played out, both in the demographics and in tech, and neither shows signs of slowing.

There have been, and will continue to be, consequences, some predictable, like the boost in home prices, but some surprising.

To begin, they are affecting how the real estate business itself behaves.

“They are in very good financial shape,” Eckert said. “Most of these people have very good credit scores…and they’re typically putting at least 20 percent down. It’s not uncommon for me to see an offer that’s 50 to 60 percent down.

Unlike the county worker who searched for 15 years and had to give up, Eckert says these buyers find what they want within a month or two.

They don’t do contingent offers. They see it, they buy it. They will not accept imperfection.

That requires significant work before houses are even listed. Agents now have teams behind them, engineers, inspectors, designers, stagers, painters and contractors, who do a lot of work before a house shows.

“Most of the time,” Eckert said. “the people that I see don’t want to fix the property up. They have no concept of how to fix a house. Even though it’s a starter home, they want it done, move-in ready, and they just want to go back to work. That’s what they want to do.”

They don’t want to live on a hillside and don’t prize seclusion. They want to live within walking distance of public transit and downtown where they can take advantage of dining and entertainment.

Remember the kids. They must have good schools and buyers have ample tools to find them.

One of the many consequences of high prices is plainly evident to anyone who drives a car. The daily commuter crush driving to and from the bridges, in and out of the county for work is a direct result.

It’s more than an inconvenience. It can exact a horrible toll.

Only 25 of the San Mateo Police Department’s 111 officers can afford to live in the area; the rest commute, sometimes more than two hours each way.Officers work 11-hour shifts, plus mandatory overtime, four days straight to keep staffing levels up. Factor in court appearances and some officers are on the job for 16 hours before making the drive home from work. Six hours later, they’re on the road back. San Mateo is not alone. Every department on the Peninsula experiences the same.

To address potential sleep deprivation issues, San Mateo police headquarters has eight sleep-over beds between the gym and locker rooms, but of course many, like Carlos Basurto, 39, are left to take the long drive over the Altamont every day, leaving at 7 and returning at 9 or 10 at night.

Last June he fell asleep at the wheel, woke in time to avoid a collision and rolled his SUV, suffering internal injuries, a severed artery in his arm, damage to both knees and severe damage to his left foot, which had to be amputated.

Was the commute the cause?

“I don’t like putting blame on anything,” Officer Basurto said, after a long pause. “I take full responsibility for everything. But, yeah, it’s the factor that put me into the accident. As humans we can only go so far, right?”

He ticked off the stresses of job and family, long work hours and the slow slog of driving late at night.

“Coming back, we have that time when everything rests on your shoulders, and we have to travel that two hours or whatever, and it’s not a fast-paced commute, and you try your best to stay awake. It’s difficult. It’s hard when you’re doing that commute. It’s the factor. I know if I’d lived in the Bay Area it wouldn’t have happened.”

The city cited his accident when it began to look for ways to address the problem and came up with an innovation: Use a closed fire station as a barracks for those who really need the rest.

When he heard about it, Basurto, back on the job, cried. “It wasn’t even for me. I never, ever want to hear of someone going through what I went through, because it not only affects you, it affects your family and friends and coworkers.”

Some professionals don’t even try to move here. One physician, who would not be identified for publication, owns a medical practice with brand new offices next door to a new hospital, ideal for a new doc. But he’s given up recruiting doctors from Yale, Harvard and major out-of-state schools because the Peninsula’s cost of living inevitably shocks them.

“The first thing I ask them now is, ‘Do you have family in the Bay Area?'”

The Glassdoor hiring website quotes average salary for a “San Francisco, CA Area” physician with one to three years’ experience at $204,000, within tech’s Level 3 range. The medical school grad, however, comes out of 12 years of college with a $200,000 student loan debt.

Not only are new employees not coming, many are leaving.

In the four years to 2017 the county lost a net 4,100 emigrants to other California counties, the largest chunk to Alameda and Contra Costa. But it lost 916 to a handful of counties in Texas, more than 300 to Las Vegas and 200 to Boise, Idaho.

Destinations now include places like North Carolina and Nashville, Tennessee. The second-most common is Austin, Texas.

Of those who chose Austin was the 19-year CEO of the San Mateo County Convention and Visitors Bureau, Anne LeClair, who retired years early to move. Her daughter went to college in Austin and she’s due to present Anne and husband Jim with their first grandchild.

“We loved where we lived and loved the Bay Area, no question,” LeClair said. “But once your children are going to have children, if they’re not able to afford a decent home, and it’s not looking too promising that they’ll be able to move back, you start saying, well, shoot, family’s the most important thing.”

Austin prices, while still a third of the Bay Area’s, are rising fast and tech company names on the office buildings lining Austin’s 360 Interstate are the same as here. “There’s lots of Teslas going up the highway,” she said. Unlike California, there is no corporate income tax in Texas. Or Idaho. Or Nevada.

Janet Carpenter, president of the Greater Las Vegas Association of Realtors, brilliantly accommodates the brisk home-buying traffic between the Las Vegas Valley and Northern California.

“I have a number of agents in my office … who are dual license,” she said. “I have one agent who grew up in the Bay Area. Her son lives there, but she and her husband live here.

“However, she is licensed in California and she flies back and forth to the Bay Area all the time. She’s bringing a lot of her sellers, who’ve lived in their homes for a long time, have a lot of equity, and bringing them to Las Vegas, where they’re buying a fabulous house and paying cash. She is doing a booming business.”

Efforts to reduce the cost of housing and increase the affordable supply by developers, governments, nonprofits and community organizers have been valiant and even heroic, as in Officer Basurto’s case.

Google CEO Sundar Pichai has pledged $1 billion in Google land and capital to try to build or protect up to 20,000 affordable housing units in the South Bay over the next several years.

Facebook has committed $20 million as a start to help build affordable housing in the Menlo Park area, where it subsidizes 22 apartment units for teachers to help local schools.

The state has adopted legislation allowing cities to push development of auxiliary dwelling units, so-called granny flats. Redwood City got on board and now allows 1,000-square-foot ADUs, reduced setbacks and ADU exemptions from the Hillside Ordinance.

Residents, often the source of not-in-my-back-yard arguments over housing, are getting better at working with cities to permit higher residential densities, taller buildings and more affordable set-asides.

The City of Brisbane is moving along on a plan to build 2,000 housing units on Brisbane Baylands, 300 of them affordable.

The Housing Endowment and Regional Trust of San Mateo County has a new max home price for first-time buyers, $908,156, and boosted max household income to $170,000.

Partners in development abound — HIP Housing with Greystar; the Strategic Growth Council and the State of California, Enterprise Community Partners, BART, the county’s Housing Department, Millbrae, Republic Urban Properties and the Core Companies; BRIDGE Housing and Bay Meadows Affordable — it’s impossible to exhaust the list.

The region is poised to undertake its most audacious housing effort yet, AB 1487, the goal of which is to raise up to $1.5 billion a year for affordable housing tax credits, subsidies and rent support — voters and cities and counties permitting.

All those efforts and all that money, should every political subdivision buy in, will not be enough. AB1487’s sponsors calculate the annual regional need to develop affordable housing is twice the $1.5 billion it will raise.

The profound truth is that the need’s not going to be met because the numbers don’t add up. It’s the arithmetic.

New market-rate housing construction drags affordable housing with it. Even the most generous housing developments build five full-retail units for every affordable one.

No matter how hard you push, one will never equal five.

This story was originally published in the October print edition of Climate Magazine.