SAN JOSE HAS BEEN RANKED NO. 1 for the least affordable city in the world for first-time homebuyers in a new global study, underscoring how far housing costs have outpaced wages in the heart of Silicon Valley.
The study — conducted by financial services company Remitly — analyzed housing affordability in more than 150 cities worldwide by comparing average local incomes with typical home prices and applying standard mortgage criteria. California dominated the rankings, with six cities in the top 20. After San Jose, Los Angeles ranked second, Long Beach ranked third, San Diego ranked fourth and Vancouver, Canada, rounded out the top five as the least affordable cities globally. San Francisco came in 10th and Oakland scored 19th.
In San Jose, where the average home price is about $1.37 million, a worker earning the city’s average salary of $86,605 could afford about 27.3% of a typical home, according to the study. For two average earners making a combined $173,210, it would only buy them about 54.6% of a property.
The findings come as San Jose leaders continue to debate how to address a housing crisis that has increasingly priced out not only low-income residents, but also middle-class workers who keep the city running.
During the Jan. 27 City Council meeting, several residents spoke during public comment on a proposal to expand the city’s downtown residential incentive program to encourage the conversion of vacant commercial buildings into housing. The expansion, approved in a unanimous vote, will waive or reduce certain development taxes and fees and allow eligible conversion projects to include no deed-restricted affordable homes, a tradeoff city officials said is necessary to make conversions financially feasible.
Building more won’t solve affordability
Several speakers said the proposal, while increasing housing supply, will do little to address affordability if new homes are priced beyond the reach of most residents.
“The city needs to ensure that affordable housing is included,” Katherine Hedges, one of several residents who urged the council to prioritize affordability alongside new development, said at the meeting.
Others warned that rising housing costs are already affecting the city’s ability to deliver basic services. John Tucker, a city employee, urged councilmembers to pause the proposal, citing low employee satisfaction, staffing shortages and a hiring freeze that has left departments stretched thin.
“We understand the goal of encouraging downtown housing and conversions, but incentives should come with clear public benefit and guardrails, especially when city services are slipping and budgets are tight,” Tucker said at the meeting.
Residents also questioned whether housing labeled as “affordable” — typically aimed at households earning up to 80% of the area median income which in Santa Clara County is $111,700 for an individual and $159,550 for a family of four — actually meets the needs of San Jose’s lowest-income residents.
“If you allow the market to dictate, rents get extreme. Once rent is set at $6,000, no one’s going to lower it.”
Regina Celestin Williams, SV@Home
Housing advocates said the city’s current approach has contributed to widening economic and racial disparities.
Regina Celestin Williams, executive director of SV@Home, said San Jose has been intentional about building housing in recent years, but much of it has been geared toward residents who can afford high rents or buy a home.
Williams said while the city has invested in shelter and services for people experiencing homelessness, it has largely failed to address the needs of middle-class residents, particularly families.
“Traditionally when you think of middle class, you think of a family,” she told San José Spotlight.
She added that families are being displaced along with communities of color, especially Black and Indigenous residents.
“If you allow the market to dictate, rents get extreme,” Williams said. “Once rent is set at $6,000, no one’s going to lower it.”
What you need to afford the average rent
Data shows the income needed to afford the average asking rent in Santa Clara County is about $10,767 a month, or roughly $62 an hour.
San Jose’s minimum wage is $16.90 an hour, or about $70,000 a year for a full-time worker — far below what is needed to afford a median-priced home in the city.
Real estate experts have previously estimated that households may need incomes approaching $300,000 to qualify for a mortgage in San Jose, a figure that has risen sharply in recent years as prices and interest rates have increased.
A 2022 analysis by San Jose Spotlight found that monthly mortgage payments of roughly $9,000 were being described as “reasonable” in the city’s housing market. Housing advocates said conditions have worsened since then.
Despite its booming tech economy, San Jose’s cost of living now rivals or exceeds that of other major U.S. cities, according to the Remitly study.
Mayor Matt Mahan’s office did not respond to a request for comment.
The mayor has previously promoted San Jose as the best place to live and work, while pledging to accelerate housing construction and streamline development.
Housing advocates said the latest ranking highlights the growing disconnect between that vision and the reality facing residents.
“As a big city, you would think it would be affordable for everybody to live here,” Williams said. “But it’s not.”
Contact Maryanne Casas-Perez at maryannecasasperez@gmail.com.
This story originally appeared in San Jose Spotlight.