How California chased the tech giants out

 Joel Kotkin:

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Rather than seeing a new crop of rivals, we’re seeing changes driven by the dispersion of tech work away from places like Silicon Valley and toward emerging locales in Ohio and Texas. In large part, this reflects the extraordinary costs for housing, which makes homeownership a pipe dream for most millennials. A just-published report by Knock.com estimates that, at current prices, the median income household could require between 115 and 167 years to save for a down payment on the median-priced new home in San Jose, San Francisco, or Los Angeles.

Housing is one of the reasons, as my colleague and I show in a new report from Chapman University, that California now underperforms its main competitors (notably Arizona, Texas, Washington, and Utah) in many sectors of the economy—manufacturing, professional business services, construction, and energy. These competitors have begun to easily outpace California in economic growth related to innovation. Silicon Valley’s share of venture capital has also eroded considerably over the past decade.

Playing on those preexisting trends, the COVID-19 pandemic appears to have driven tech workers out of California to smaller cities, less expensive places, and even rural areas. San Francisco, although not particularly hard hit by the pandemic in terms of total deaths from COVID-19, has suffered among the most severe population and office-space losses in the country. It’s no longer clear why anyone would want to pay the housing premium to stay in San Francisco as crime shoots up and quality of life deteriorates. After all, most startups now see their future as dispersed and largely virtual. A new white paper from economists at the University of Chicago estimates that roughly 50% of Silicon Valley jobs can be done remotely.
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There is much more and the problems are not limited to housing.  But the housing problem is easy to identify.  

California made the same mistake with housing that Biden has made with oil and gas.  They reduced the supply of housing by not allowing buildings to expand and kept people in old housing stock rather than allowing developers to replace it.  Houston is a good example of a city that is growing because it allows developers to buy up old neighborhoods and create new modern developments.  It also allows developers to build new neighborhoods to meet the demand for housing.  That is one of the reasons housing is much more affordable in Texas cities.

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