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The new Silicon Valley: the transformation of Texas that drove changes in the local housing market

California, the progressive land of opportunity, versus Texas, the conservative state of oil wells. The future of the United States is at stake between these two forms of life. On one side, sunny California. On the other, even sunnier Texas, whose big cities they increased their population in recent years thanks to a phenomenal exodus of workers from the technology industry.

The historic war between these two poles, the two most populous states in the country (they add up to 70 million inhabitants and a GDP of US$4.2 billion), has intensified in recent times and the old saying that made a fortune in the eighties (“If you want to know the future of the United States, go to California”), is no longer as infallible as it used to be.

The transfer of the headquarters of the electric car company Tesla, of Elon Musk, the richest man in the world, who also changed his residence in Los Angeles for Austindrew attention to an exodus that already has a name: Text.

Of the 265 companies that left behind the high taxes of highly regulated California in the past three years, almost half found a new home in Texas. The latest to jump on the bandwagon is British chef Gordon Ramsay, who has moved his North American offices to Dallas.

Some are as symbolic as Apple, which is building in Austin, the state capital, the second largest campus after the one it has in Cupertino, California. Its inauguration is scheduled for next year: it will house 5,000 employees on a 53-hectare site. And it is only the first step. Later it will grow to 15,000 workers.

Among the attractions offered by the Lone Star State is the fact that It does not charge income tax, it has a more lax regulation, cheaper labor and cheap rents. Both places are ideologically at odds. California is a laboratory for the nation’s most progressive ideas with generous welfare benefits, strict gun control and climate change policies. Texas, on the other hand, is the only state in the union with its own power grid. It uses 67% more electricity, but the rate is cheaper. It is also the state with the highest percentage of people without health insurance (18.4%).

One of the talents that Apple employs in Texas is Leonardo Angulo, a 25-year-old Mexican. Computer analyst, he studied biochemistry and molecular biology and was seduced by what he calls the “Silicon Valley of the South”. She has lived in the United States since she was four years old, but she still speaks perfect Spanish.

“The big tech They don’t stand on the reputation of the school you attended, nor do they care about big titles. They are looking for people with some experience and a lot of interest, a problem-solving mentality and the ability to expand the world, ”he says in an Austin restaurant. Many of his friends left the San Francisco Bay area, one of the most expensive places in the United States, because their companies opened offices in the Texas city or because the pandemic made them discover the benefits of remote work.

The exodus from California to Texas

The phenomenon registered one of its peaks in 2018, when some 80,000 people moved between states. The figure, which was repeated in 2019, was the highest in the last 13 years. The price of housing pushed the majority. In August, the value of a single-family home in California hit a record $827,000 median, 17% more than in 2020. 57.8% of houses cost more than US$500,000. In Texas, just 7.8%. Most sell for less than half that value. In San Francisco, cradle of technology, 72,000 people have left since the beginning of 2020, a figure eight times higher than three years ago.

With the pandemic, many realized they could get more space in states like Arizona, New Mexico and Texas for the money they were paying. “Housing prices began to rise in 2012 and migration to Texas grew by the same amount a couple of years later,” explains William Fulton, director of the urban research institute at the University of Houston.

Because of that cascade of desertions, California lost population for the first time in the last decade. So much so that it has one less seat in Congress. Texas, on the other hand, saw its census grow by 40%. So now he has two more seats on Capitol Hill.

urban transformation

The change is not just quantitative. Texas leads the growth of the Latino population in the United States. Hispanics make up more than half of the four million new Texans born between 2010 and 2020. They are more educated than their parents, as well as ethnically diverse. For every white resident Texas has welcomed over the past decade, there are three new black neighbors, three Asians and three multiracials.

40% of Houstonians, for example, are under the age of 24. Although California, which borders on 40 million inhabitants, is the most populous state; Texas, with 30 million, is growing at a rapid rate. In 2050 it will reach 50.4 million people, according to demographic projections.

Oracle, HP Enterprise or Toyota, in addition to Samsung, which is building a factory, have contributed to changing the face of its big cities. The streets of Austin reflect it. The center still smells of barbecue and the taverns continue to offer music country live, but now skyscrapers are also being built and the diet of restaurants has included sushi, poke or tofu. One of those skyscrapers is a Google tower. The design of the building simulates a sailboat, a nod to the new winds that are blowing.

Austin is the second fastest growing city in the United States
Austin is the second fastest growing city in the United StatesShutterstock

Austin is the second fastest growing city in the United States, only behind Dallas-Fort Worth, also in Texas. There, employment rates have improved 50% since 2000. In Dallas and Houston, 31%, three times more than in Los Angeles.

And if that was not enough, California was more affected by the forced stoppage of the pandemic, since its sanitary measures were among the strictest, while the Republican feud remained open for the most part and was one of the first to reactivate the economy.

North of Austin, a progressive oasis in a state that hasn’t elected a Democratic ruler for 20 years, is the Domain. Neighborhood conceived 15 years ago as an unpretentious commercial area, today it houses so many office and residential buildings that it is already known as “the second center” of the city. There are luxury shops, trendy cafes and co-working. No children or old people.

California scholar Kenneth Miller, author of “Texas vs. California: A Story of Their Fight for America’s Future,” argues that his state’s lawmakers aren’t as concerned as they should be. “What is happening is that wealthy people can afford to live here, and the state provides economic aid to the poor, but the middle class has been crushed in this economic system,” he warns in a telephone conversation. And he underlines a paradox: For every company that leaves Silicon Valley, a new one is created. “It’s impressive as a business incubator, and as long as that continues, the state will continue to be economically healthy, its GDP is growing faster than Texas.”

Hany Fam is the CEO of Markaaz, a technology company that brings together small businesses. It is one of many companies that have traded Los Angeles for Austin in the past year. “The flight of companies is very real. The quality of life, the level of talent and the availability of these thanks to the University of Austin [50.000 graduados en 2020]makes the city attractive. It is a community that supports each other, and that is not the case in California,” he told EL PAÍS at a business meeting held in November in Austin. To his criticisms he adds an excessive bureaucracy and an income tax of 13.3%, the highest in the country.

California is the most regulated state. It has 518 state agencies, boards, and commissions. A survey of executives conducted this year by Chief Executive magazine found that Texas is considered the best state of the 50 to do business. California the worst.

And the changes of the big tech they are the first piece of the domino. “With them, also come the companies with which they do business. They want to be close and continue to provide them”, she points out at the business event Stacey Saller, regional manager of Spaces, a company dedicated to office rental. “They are coming with all of their employees and not just from California. We have clients from the United States and from different parts of the world,” she adds.

Elon Musk’s arguments for moving his electric car factory to Austin were that California is “stuck” and that its employees were finding it very difficult to afford housing. They also had to weigh the $2 billion in taxes saved by moving, according to the agency. Bloomberg.

The impact on the real estate market

The wave of new tenants, however, The cost of living in Texas is rising. Angulo, for example, had to leave Domain because of the rent hike. “It is growing a lot. The constructions seem endless,” he said. The professor of urban planning and economic development at the University of Texas, Steven Pedigo, warns that If the state fails to control rising housing prices and improve transportation, it will lose its competitive advantage over California. “Do we want to turn Austin into Silicon Valley 2.0? Here there is a lot of concern about that, because it is an option”, considers the academic, skeptical about the boom of the companies that are arriving. He believes that “at some point Texas must create its own companies and not just be the recipient of expansions.” The biggest challenge, in his words, is that conservative policies remain “out of step” with the desires of the new demography.

The new profile of residents is a conflict for a hyper-republican state. “For many years, business has been in alliance with conservative states for the economy,” says author Miller. “Now that the employees of these companies are becoming progressive, it has become a problem for CEOs,” he adds. Laws such as the restriction of abortion and the right to vote, pushed by deeply Republican congresses, cause unrest among workers, who will transfer them to their bosses and these, in turn, to the legislators.

In 2017, Tim Cook, CEO of Apple, was active against the ban on bathrooms for trans people in Texas, until the state Capitol relented. If the new neighbors and the technological giants follow this path, the transformation of Texas will be faster than it already is. If anyone wants to know what America will be like in the future, let them visit California. But make a stopover in the Lone Star State first.

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