On the Edge of Affordability: Rents Set to Outpace Wages in Top Emerging Tech Hubs

While there are clear advantages to living in or near tech hubs, more people relocating to these cities can put a certain pressure on the rental market, leading to rising rents. Admittedly, tech jobs provide high salaries, but are they high enough to cover the cost of renting in such areas?

Let’s take San Francisco as an example, with the recent news that giant tech startups like Lyft, Uber, Pinterest, and Airbnb are planning to go public. As I.P.O.s, they will inject large amounts of cash in the area and the high demand in housing will cause not only home prices to go up, but also rent prices. We’ve already seen this in the past when both Google and Facebook decided to go public. The only difference was that these two companies were spread over the Bay Area, and were not clustered in a single city. With this scenario, the already sky-rocketing rent prices in San Francisco will only rise faster and quite possibly force many renters to relocate.

We might have an idea of which metros could qualify as the largest IT and tech hubs and we might also be aware of the ever-increasing cost of renting an apartment there, but which are the emerging tech hub metros and what can we expect to see there in terms of wages and rents?

To look deeper into the changes that tech jobs bring along, we used data from the U.S. Bureau of Labor Statistics in combination with our own data and put together a top of the largest tech hubs in the country as well as bringing forward the emerging ones that we should keep an eye on.

Wages in the country’s largest tech hub are virtually stagnating

Silicon Valley’s pride, San Jose is the metro with the largest share of tech hubs in the U.S. Home to companies such as eBay and PayPal, over 12% of the jobs in the metro are in IT, followed by Washington metro‘s 7.3% and Seattle metro‘s 6.8%.

San Jose metro boasts a total number of 132,140 jobs in IT, with the area being a top choice for the many multinational companies, startups, and developers looking for affordable prices but wanting to stay within the Bay Area. But as the tech industry bloomed, the metro’s rent affordability decreased considerably. The average rent in the San Jose metro reached $2,871 this year, after witnessing a 6.9% increase between 2016 and 2019.

What’s interesting to highlight is that, although San Jose metro has the highest average wage in our top – of $126,200, it saw a wage decrease of 0.8%. This might be due to the fact that as the metro’s share of IT jobs gets larger, more companies are starting to attract employees not necessarily with higher salaries, but with incentives such as flexible working hours, more vacation, training, or the possibility to work remotely.

Washington metro has the second largest share of IT jobs, a possible reason being the presence of tech icons that are hiring in the area, such as IBM, Oracle, or HP. Despite being second in terms of job shares, the metro boasts the highest net number of IT jobs in our top – 228,060. Renters living here saw one of the weakest rent increases in the top, of 5.8%, while the wages of IT workers went up by 6.8%. This tech hub is one of the few in our top to have witnessed its wages outpacing rents.

Third in our top is Seattle, where the presence of both Microsoft and Amazon has certainly helped the metro reach the high 6.8% share of IT jobs. Salaries in the metro remain considerably high at $115,500, but so are the rents which increased by 11.7% in a 3-year period, reaching an average of $1,825 in 2019.

A big surprise is Madison metro, which places fourth in the nation, with a considerable share of 6.2% of IT jobs. The metro also has the lowest average wage in the top, although it went up by 10.7% during the 3-year period. Employees working in IT here earn about $80,800, while the average rent is $1,167 per month. Boston metro, home to MIT and a big tech hub has an IT job share of 5.3%, but despite the high salaries of IT employees, rents have gone up by 6.8% while wages have not kept up, witnessing a 0.4% decrease.

IT employees living in Denver metro earn an average of $99,600, comparable to those living in metros like San Francisco or San Jose. However, the $1,525 average monthly rent they pay here is considerably lower than in the previously mentioned metros. iHeartMedia, Home Depot, and Western Union are just some of the companies that helped Denver metro take the 9th spot in our top.

The largest metros like San Francisco, San Jose, and Boston continue to have some of the highest rents in the country, despite having slowed down over the past 3 years. On the other hand, rents in Atlanta, Minneapolis, and Seattle metro are rising fast, by 14.4%, 13.4%, and 11.7%, respectively, while IT salaries fail to keep up.

Other metros of note on our list are Raleigh, Baltimore, Columbus, Kansas City and Omaha.

Charlotte metro is the star of emerging tech hubs, but its affordable rents are rising faster than wages

Charlotte metro has been the epicenter of new IT jobs between 2014 and 2017 (based on the most recent data from BLS). The emerging tech hub metro upped its number of IT jobs by 37.5%, outpacing San Francisco metro which posted an increase of only 19.5%.

Following Charlotte, the up-and-coming tech hubs that saw the highest increases in the number of IT jobs are Madison (by 26.7%), Nashville (by 22.7%), Salt Lake City (by 21.5%), and Miami (by 20.1%). Check out the list of metros with the highest 3-year increase in IT jobs, including the likes of Austin and Portland.

Although the share of jobs in IT in Charlotte metro of only 4% doesn’t place it in the top 15 largest, it’s certainly heading that way. The area saw a staggering 37.5% increase in IT employees in just 3 years, the highest growth in the field. Home to companies like Wells Fargo and Accenture, the metro is expected to continue seeing a major influx of tech jobs with industrial conglomerates like Honeywell International Inc. planning to relocate there soon. Attracted by affordable rent prices and a good quality of life, renters relocating to Charlotte metro should expect to spend an average of $1,138 on their monthly rents.

With a number of IT jobs of about 24,030 and a strong tech job growth of 26.7%, Madison metro unexpectedly ranks 2nd in our top. Companies like TeamSoft or Stratagem are responsible for the high number of jobs added there while the area also offers an extensive pool of talent as home to the University of Wisconsin.

Nashville metro, although mostly associated with banks, is third in the top with a 22.7% increase in tech jobs. It has one of the lowest wages in our top – $80,000, but they increased by 10% in the 3-year period while rents went up by 7.8%, reaching $1,240 this year. The metro is getting recognized as a viable tech hub with a considerable pool of healthcare, artificial intelligence, and defense-related tech jobs available.

Even though San Jose has the biggest share of IT jobs, the metro still maintains a healthy rate of increase in jobs – of 16.6%, ranking 13th in our top.

San Antonio metro, ranking 14th with a 15.7% increase in IT jobs, witnessed the highest wage increase of 16.2%. While rents have also gone up by 5.4% between 2016 and 2019, renting an apartment in the area will cost an average of $1,021 per month, one of the most affordable prices in our top.

Although the top emerging tech hubs have some of the most affordable rents, ranging from $918 to $1,660, that’s not to say that they will continue to remain as low in the future. With more tech jobs flooding the area, rental supply might prove insufficient. Also, in 5 of the 10 up-and-coming metros, rents have already gone up considerably faster than IT salaries in the 3-year period, which begs the question: how will those who don’t work in IT be able to afford the rent in the upcoming years?

Another metro included in our ranking is Pittsburgh.

Methodology

• This report was compiled by RentCafe.com, a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States.
• For the IT Jobs-related data, we used the ‘Computer and Mathematical Occupations’ from The Bureau of Labor Statistic database. We took into consideration the 2014 and the 2017 data at metro level (most recent BLS data).
• Initially, we looked at the first 100 largest metros by population but to ensure a relevant sample size, we only included the metros where the number of IT jobs exceeded 20,000.
• The average wages in IT jobs were calculated based on the most current wage data from The Bureau of Labor Statistics (2017) adjusted for inflation to 2019 dollars and rounded to the nearest hundreds.
• Wage increase percentages represent an increase in IT wages over a period of 3 years, from 2014 to 2017.
• The rent data were provided by Yardi Matrix, a RentCafe sister company specialized in apartment market intelligence, providing up-to-date information on large-scale multi-family properties of 50 units or more in over 130 U.S. markets.
• For the jobs increase, we used the 3-year increase in IT jobs (2014 to 2017).
• For the average rent increase, we used data from Yardi Matrix (2016 and 2019).