7 ms·
50% of all this money is being captured by Bay Area landowners.
by fipple 8y ago
50% of all this money is being captured by Bay Area landowners.
- dmitrygr 8y agoDo you have any citation that claims that startups spend 50% of their money on real estate?
- skndr 8y agoI think the implication is that it's captured via salaries paying high rent.
- vincentmarle 8y agoIt's actually pretty easy to calculate. Labor costs can account for up to 70% of total business costs so, out of $100, roughly $70mm is spent on salaries. The "one-third rule" for landlords to determine eligibility for rent means you can spend up to roughly 33% of your income on rent. So 33% out of $70mm is $23 million. You can say that 23% of every VC dollar goes towards landlords.
- Retric 8y agoThat's only the employee portion, you also spend money on office space.
- TheCoelacanth 8y agoAlso some of the employee's non-rent spending will go to local businesses which will spend some of that money on rent and some of that money on salaries and so on with the new set of employees.
- goobynight 8y agoThis assumes people spend at the 33% level on housing. You'd have to actually know what people are spending on housing, after accounting for spouses/roommates. It could end more being more or less than 23 million, easily. e.g. I spend ~22% Also, some people will own their home or live at a family owned home.
- manquer 8y agoIn SV owning your home or living in family owned one for the avg tech employee is unlikely, and 33% is probably less in SV not more
- socketnaut 8y agoYou're applying the "one-third rule" to pre-tax salary, but it's generally applied to take-home pay.
- godzillabrennus 8y agoPeter Thiel https://finance.yahoo.com/news/peter-thiel-vast-majority-capital-give-companies-just-going-landlords-134709786.html https://finance.yahoo.com/news/peter-thiel-vast-majority-cap...
- godzillabrennus 8y agoIs that all? One could save money by living in Manhattan and flying to San Francisco for work. If time zones and transit were unrealistically fast and permitted such an exercise.
- gnulinux 8y agoIs this really true? I used to live in Berkeley (for college) and my rent was $600. I lived with 4 other people, but it was very livable and comfortable overall, for college at least. This is only a few months ago. I'm not saying housing prices aren't batshit crazy in the Bay Area but it doesn't seem likely to be able to live in Manhattan and fly SF everyday cheaper. I currently live in Boston with a relatively more comfortable housing situation and my rent is $950. I would imagine similar rooms in Berkeley like this would be ~$1200 or something.
- madcaptenor 8y agoThis actually does pencil out for living in Barcelona and working in London: - here's the back-of-the-envelope calculation some guy did as a joke: https://bestburgerinnorthwestlondon.wordpress.com/2013/10/24/cheaper-to-rent-in-barcelona-and-commute-to-london/ https://bestburgerinnorthwestlondon.wordpress.com/2013/10/24... - and then he actually starting doing it (although only once a week or so, working from Barcelona the rest of the time): https://www.theguardian.com/cities/2015/aug/11/commuting-from-barcelona-a-london-worker-who-makes-it-pay https://www.theguardian.com/cities/2015/aug/11/commuting-fro... But that's a much shorter flight. It wouldn't surprise me if it worked for, say, Las Vegas to San Francisco.
- gnulinux 8y agoI think it might work from cheaper big cities in the West Coast e.g. Portland to SF.
- esonderegger 8y agoI tried doing something very similar to this. It ended up being so draining I couldn't do it long-term. Specifically, I was in Washington DC and the startup I wanted to work for was in San Jose. My then-girlfriend (now fiancé) has the kind of job that can only be done in DC. I agreed to fly out for a week every month or so and work remotely the rest of the time. I did it for a little over a year but the travel wore me out and I struggled to find a healthy routine working from home. I see threads like this and think that the solution to this problem has to be more remote work. I just wish I could be one of the people for whom it works as well in practice as it does in theory.
- user5994461 8y agoMore than that. Companies spend the the majority of their costs on office space, then employees spend the majority of their salaries on a home.
- brownkonas 8y agoI disagree. Office space is relatively cheap compared to employee salaries. For a 25 person startup in SF, office space pencils out to the cost of 1-2 employees depending on the quality of the office. We have capacity to cram in up to 35.
- chrischen 8y agoBut then the employees have to dedicate a good chunk of salary to rent.
- cbhl 8y agoMarket rate rent in SF is something like $3k for a studio, which is like 50-75% of those employees' take-home pay if they're making low six figures.
- ouid 8y agoisn't mid 6 figures 550k?
- cbhl 8y agoOops, you're right. I was thinking 100k-200k for some reason :/
- logfromblammo 8y agoOn a logarithmic scale, mid-6-figures is 10^5.5 = $316228 . Maybe your brain prefers to deal with larger numbers in terms of orders of magnitude?
- goobynight 8y ago
- WJW 8y agoWell, when in a goldrush you should sell pickaxes...
- rb808 8y agoA huge chunk of Bay Area landowners are tech workers so maybe that isn't as bad as it sounds.
- iamgopal 8y agoThis is true for any business and any area in the world. Like for example, a thriving diamond polishing industry caused increase in land price tenfold or more in Surat city in India.