City of dreams turning into nightmare for all but the tech millionaires

You know something strange is going on when the mayor of a city complains that there are too many jobs. You know something stranger still is happening when the birthplace of the tech industry is considering a downtown ban on big companies that engage in coding. It may sound like satire, but this is reality in Palo Alto.

The sunny, tree-lined city with a population of 66,000 is the jewel in the crown of Silicon Valley. It is where Bill Hewlett and Dave Packard started their company from a garage in 1939 ushering in the tech revolution that has changed the world.

Home to Stanford University, Palo Alto is flanked to the north by Facebook in Menlo Park and to the south by Google in Mountain View. It is also home to many of the biggest names in tech – Mark Zuckerberg, Larry Page and Marissa Mayer, to name a few.

Palo Alto is the epitome of idyllic US suburbia – low-lying, detached houses line wide, sun-dappled streets, where kids cycle to schools listed among the best in the US.

Education and employment are exceptionally high among residents, with 51 per cent having a master’s degree and a median household income of $122,000 (€108,000). The streets are clean, the roads well maintained and crime is low.

Severe shortage

Palo Alto encapsulates the American Dream, but for many, it has become too good to be true. A severe housing shortage and soaring demand fuelled by the tech boom have doubled the median house price in the past 10 years to $2.5 million. This makes it next to impossible for middle-income families – teachers, firefighters, nurses – or well-paid professionals to be able to afford to live here. The housing shortage and jobs boom in Palo Alto are symptomatic of a wider trend throughout the Bay Area, but with Palo Alto one of the most desirable places to live in the Valley, the problem is more acute.

As a result, Palo Alto is fast becoming an enclave for the tech millionaires and billionaires of Silicon Valley. Teslas cruise the streets; modest 1950s houses are being torn down and replaced with ostentatious new-builds; expensive restaurants and exclusive boutiques dot the tree-lined shopping areas.

Palo Alto mayor Patrick Burt told property website Curbed SF recently that "Palo Alto's greatest problem right now is the Bay Area's massive job growth". A possible solution would be to increase the availability of higher-density, lower-cost housing, but Burt is focusing on decreasing the jobs growth instead.

Despite Palo Alto residents advocating for changes to policies on housing development, restrictive laws persist that focus on low-density housing and limited construction. In the meantime, Burt has his sights set on big tech companies such as Amazon and Palantir, which are taking up increasing proportions of downtown office space.

His plan, he told the New York Times recently, is to enforce a ban on big tech companies in the downtown area whose main business is research and development. And coding falls into this category.

An explosive letter of resignation by attorney Kate Vershov Downing from the Palo Alto planning and transportation commission last month brought the housing dilemma into the spotlight.

“My family has decided to move to Santa Cruz. After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here,” she wrote.

“We rent our current home with another couple for $6,200 a month; if we wanted to buy the same home and share it with children and not roommates, it would cost $2.7 million and our monthly payment would be $12,177 . . . in mortgage, taxes and insurance. That’s $146,127 per year – an entire professional’s income before taxes. This is unaffordable even for an attorney and a software engineer.”

Household income

There was a proposal earlier this year for housing subsidies for middle-income workers with a household income of up to $250,000. In effect, this means people with a salary of $250,000, who are in the top 2 per cent of earners in the US, may be struggling to get by in Palo Alto.

But some locals argue against such so-called affordable housing, suggesting the increased population would change the quiet, suburban character of the city while putting a strain on infrastructure and increasing traffic.

“Of course we know that the community is going to evolve,. but we don’t want it to be a radical departure,” Burt, who is also the chief executive of a medical tech firm, told Curbed SF.

Underlying the reluctance to build more affordable, higher-density housing is, it seems, a desire to protect the exclusive status of this wealthy enclave.

As Vershov Downing wrote: “I struggle to think what Palo Alto will become and what it will represent when young families have no hope of ever putting down roots here, and meanwhile the community is engulfed with middle-aged jet-setting executives and investors.”

She added: “If things keep going as they are .. . a once- thriving city will turn into a hollowed-out museum.”