In early December 2020, Delian Asparouhov, a principal at venture capital company Founders Fund, tweeted: “Ok guys hear me out, what if we move Silicon Valley to Miami?”
The tweet went viral, prompting the city of Miami mayor, Francis Suarez, to tweet back: “How can I help?”
Since then, talk of making Miami the next tech hub has circulated both formally and informally in the tech sphere. Suarez’s tweets were refashioned into a San Francisco billboard that reads: “Thinking about moving to Miami? DM me.”
Founders Fund also announced they’d be moving their offices to Brickell. Other tech companies have followed suit.
But will an influx of tech companies ultimately benefit Miami locals? History suggests otherwise, and some people are already growing concerned. Making Miami the next Silicon Valley might not be as great as it sounds.
While technology companies create employment opportunities and an initial bump in revenue for surrounding businesses, they also raise the cost of living and real estate prices, according to economists.
Miami-Dade County already faces an affordability crisis, with six in 10 residents spending between 30 to 50% of their income on housing.
According to data from the Miami Association of Realtors, real estate prices also went up in the county over the last year. The median sales price of a condo rose by 14.3%, from $245,000 in January 2020 to $280,000 in January 2021. The median price of a single-family home rose by 25.2%, from $375,000 to $469,500.
Some say a tech rush could exacerbate Miami’s pre-existing affordability challenges.
“Anything that drives people here is going to drive up prices. It’s just basic economics,” said Jennifer Wollman, president of the Miami Association of Realtors.
“I don’t think it’s just tech, I think it’s anything. But if we get a huge influx of new tech companies, is that going to drive up prices and affect affordability? Definitely,” she added.
Other cities have already seen a strain on their real estate markets because of tech company expansions.
Several big technology firms, including Google, expanded their operations to Austin in early 2019. According to a 2021 report by the Austin Business Journal, growing employment from these tech companies caused home sales and prices to surge. The steady creation of new jobs caused more people to relocate, and Austin’s supply of homes for sale remained the same, driving demand.
Forbes writer Mary Ann Azevedo called buying a home in Austin “a steal or a struggle,” depending on whether you’re a local or transplant techie.
Austin’s median home price, which currently sits at $370,000, is affordable in comparison to prices in San Francisco. But working and middle-class locals are getting priced out of their hometown.
Leslie Dreyer, a tenant organizer with Housing Rights Committee San Francisco, has seen big tech’s impact on both the Austin and San Francisco markets.
“A majority of people are getting displaced from their homes in San Francisco,” Dreyer said.
She said that landlords will often push out their tenants, and then attempt to rent out their units to higher-paying ones. The new tenants are often tech industry professionals with high salaries.
“My whole family is in Austin, so I saw the same thing happen there,” Dreyer continued. “Tech moved in, Apple built this huge campus and it gentrified faster than lots of parts of San Francisco.”
Making anywhere the next Silicon Valley, or even a little more like it, could be seen as a double-edged sword. The affordability issues that follow big tech coming to town are well documented in other cities.
Can Miami learn from what’s happened elsewhere?
Steven Pedigo, the director of research for the Creative Class Group, a data-driven advisory services firm that works with cities and brands, studied Miami’s affordability and co-authored an extensive report on the crisis. The report was published as a joint initiative between the Creative Class Group and Florida International University.
“The big issue for Miami is not necessarily just housing affordability, it also comes back to the type of jobs that are available to residents,” Pedigo said. “It’s no secret that six in ten Miami residents work in low wage service-based jobs.”
Improving Miami’s economy and creating new jobs will be necessary, according to Pedigo. In order to foster affordability long term, residents might have to deal with some “growing pains.”
“There has to be a plan and there has to be strategies around, not how we just import these jobs, but how we ensure that Miami residents can make a connection to those jobs,” he said. “That’s the only way we leverage this into a growth opportunity, and not just a growth challenge for the region, particularly for residents who are underserved.”
Suarez has said on multiple occasions he’s not worried about tech impacting the city negatively. He most recently spoke on it at a press conference for Miami Connected, a new initiative that will provide free Internet for students in need.
“The question that I receive the most is, ‘aren’t you concerned mayor about what the technology companies and technology industry can bring to your city, in terms of gentrification,” Suarez said. “And my answer to every reporter that asks me that is, ‘I’m absolutely not worried at all.”
A spokesperson for Suarez told the Biscayne Times this month, that part of the mayor’s affordable housing strategy includes building new homes.
The Miami Association of Realtors is currently working with state legislators on condo financing regulations. Federal Housing Administration, or FHA, mortgage loans are usually the most appealing to first-time homebuyers, because of their low down payment and credit requirements. However, condo purchasers cannot use these types of loans.
“If we could get the condo financing rules to be more flexible, then you’d be able to get a lot more financing options for condos, which are our affordable housing,” said Wollman.
Meanwhile, Dreyer says things could be grim for cities without rent control or rent stabilization.
“I think in places without rent control you’re going to see rents double, if not more,” she said. “Folks are going to try and capture the incoming wealth. That’s just reality.”