"Silicon Valley is a perfect example of the long-term problem. According to the Bureau of Economic Analysis, four counties in northern California—Marin, San Francisco, San Mateo and Santa Clara—have per capita incomes over $100,000. Given that extraordinary prosperity, you might think that people would be flooding into the region, as they did after gold was discovered at Sutter’s Mill in 1848. Yet they are not. Taken together, those counties’ population grew by only 6.5% between 2010 and 2020, below the average growth rate for large counties. For comparison, Harris County, Texas, where Houston is located, has 35% less land than the four California counties, but in the 2010s its population grew 175% faster.
The reason for this is not hard to find. House prices in Silicon Valley make living there prohibitive for all but the very wealthy. Data from the National Association of Realtors show that in the second quarter of 2021, the median sales price for a new home was $1.7 million in San Jose and $1.4 million in San Francisco. In Houston, the median sales price was $307,000. Given the ease of building in greater Houston, house prices there may actually decline once we get through the pandemic. There is little chance that prices will fall in Silicon Valley.
Harris County is growing so rapidly because it is a place where housing and entrepreneurship are still largely unfettered. In contrast, coastal California is the capital of insider privilege. In 1982, the economist Mancur Olson published “The Rise and Decline of Nations,” in which he argued that in every society, cliques and special interest groups pass laws that limit competition and prevent change."