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A wider wealth gap troubles Silicon Valley

Published: Saturday, May. 4, 2013 - 12:00 am | Page 3A
Last Modified: Sunday, May. 5, 2013 - 1:50 pm

SAN JOSE – The approval of a new corporate jet center at this city's struggling airport might have been just another losing skirmish in the battle between Silicon Valley billionaires and middle-class neighborhoods worried about noise pollution. Instead, it is becoming the latest symbol for the rapidly growing gap between the region's haves, with their private jets and untold wealth, and the have-nots, clinging to more modest lives in the dwindling number of communities they can afford.

Google, which is responsible for many of the jets that will use the new $82 million center, is helping bring badly needed cash to Mineta San Jose International Airport just as the tech industry is creating jobs and wealth in Silicon Valley. But the tech boom is also sharpening income inequality and fueling a housing boom that is squeezing families out of many Silicon Valley communities.

Whether it is the possibility of private jets' disturbing the sleep of San Jose homeowners, or the transformation of Palo Alto's last mobile home park into luxury apartments, local developments throughout Silicon Valley highlight how the tech boom is leaving many behind.

Local officials worry about the trend, which experts say will only accelerate, and its effects on the valley's workforce and diversity.

"We're very focused on being a progressive and fair community in terms of those issues," Gregory Scharff, the mayor of Palo Alto, said of his city's efforts to provide affordable housing while recognizing the "national treasure" that is Silicon Valley. "We actually innovate and create huge wealth for the United States. If you look at the companies that have just come out of Palo Alto, I would make you a bet that it would be one of the largest GNPs – it could be a country."

In the past, the tech industry created middle-class jobs and lifted the overall economy of Silicon Valley.

But as tech companies have shifted manufacturing and midlevel jobs overseas over the years, highly paid workers have increasingly clustered here. Per-capita incomes have been rising even as median incomes have decreased for five years in a row, according to Joint Venture Silicon Valley, a private organization that publishes an annual report on the region.

"We're getting more high earners, and they're skewing the averages completely off," said Russell Hancock, chief executive of Joint Venture. "We are becoming a community where our teachers, our police, our firefighters, our nurses, they can't live with us. They have to come in from other places. Healthy communities have all these people living together."

Sales figures for single-family homes in Santa Clara and San Mateo, the two main counties in Silicon Valley, show median prices have risen about 30 percent in the past year while the inventory of available homes has fallen by roughly half, according to an analysis of local multiple listing service data by the Silicon Valley Association of Realtors.

The median prices for March – $735,000 in Santa Clara and $925,000 in San Mateo – only hint at the current market's frenzy.

Each property now typically attracts between 10 and 30 offers, eventually selling from 5 to 25 percent above the asking price, said Moise Nahouraii, the owner of Referral Realty in Cupertino.

Jeff Barnett, a former president of the association and a regional vice president at Alain Pinel Realtors, said 30 to 40 percent of sales were paid in cash.

"Last year, the market came up," Barnett said. "This year, it's on fire; it's just unreal."

In Palo Alto, one of the hottest markets, the longtime owner of the Buena Vista Mobile Home Park has moved to sell the property to a developer planning to build a complex with amenities that include a pool, a spa, a business center, a chef's demonstration kitchen and a pet grooming station. A local ordinance would guarantee the park's 400 residents – more than a quarter of whom are children and 85 percent are Latino – some compensation and possible relocation within Palo Alto.

But the Law Foundation of Silicon Valley, a private group that provides free legal services on housing and other issues, is pressing the city to reject the conversion. With the waiting lists for affordable housing getting longer by the day, the group argues, the park's residents will be forced to leave Palo Alto, away from jobs and schools.

One resident, Mary Kear, 55, grew up in Mountain View, where her father owned a hardware store and was a farmer, and where Google has its headquarters. Kear, who worked in sales for more than three decades and is now a part-time school custodian, said she had to move a dozen times over the years because of rising rents, eventually gravitating to the park eight years ago. She hoped the city would reject the conversion.

"But I'm also going to try to talk to the guy at Facebook," she said in the living room of her tidy two-room trailer, adding that she had read that the company's chief executive, Mark Zuckerberg, had recently established a political action committee for immigration reform. "He's trying to help immigrants, and immigrants are here."

In San Jose, many residents worry that the new corporate jet center will lead to a spike in overnight flights. Because of the airport's proximity to the downtown area and neighborhoods, aircraft generating more than 89 decibels, like commercial jets, are restricted from flying between 11:30 p.m. and 6:30 a.m.; most corporate jets, though, are exempt from this curfew.

Signature Flight Support, the company that will build the center, said its main tenant would be Blue City Holdings, which manages airplanes belonging to Google's founders, Larry Page and Sergey Brin, and its executive chairman, Eric Schmidt. Maria Sastre, Signature's president, said her tenants would abide by the curfew and use a "wide range of aircraft."

Ed Hodges, co-chairman of Citizens Against Airport Pollution and a retired junior high school science teacher, said that behind the corporate jet center's approval, he saw the ascendancy of the tech elite at the expense of the middle class in Silicon Valley.

He and his wife, a retired nurse, bought their home here 38 years ago. "We have a funny saying in our family: We could not afford to buy our own house today," he said. "This is an example of what's happened to the middle class in Silicon Valley."

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Read more articles by Norimitsu Onishi





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