Texit: Why are some tech companies leaving for Texas?

While Brexit dominated the headlines here, perhaps you missed hearing about Brexit’s distant American cousin, Texit.

Texit may sound like some whacky gig economy startup, maybe a text message-based delivery service. But Texit is shorthand for the much-discussed departure (in the media, anyway) of tech companies and workers from California to Texas, in search of A Better Quality of Life.

Because what says improved living better than moving to a state that has just proposed a Bill to allow people's "God-given" right to open-carry handguns, obtained without anything as unaccommodating to an impulse buy, as a permit? Even some Texas republicans oppose this one.

Then again, a Bloomberg story last month mentioned a relocated Californian venture capitalist and co-founder of what it calls "controversial data-mining company Palantir", who moved to Austin (the Texan city full of ex-Californians) and quickly settled in by buying a cowboy hat and boots and obtaining a concealed-gun permit. I kid you not.

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He said he'd moved to Austin in part due to San Francisco's "misguided politics." Meanwhile, Elon Musk (but of course) has moved to Texas, too, claiming "California takes innovators for granted". The temperamental billionaire also said California seemed to think it was "entitled".

If your finger is furiously punching the eyeroll emoji, join the crowd.

Some big tech companies such as Oracle and Hewlett-Packard Enterprise announced their move to Texas in recent months, while various tech startup founders and workers have already fled there, popping up in Texit feature stories.

‘Too many tech people’

Reasons they give for fleeing the Bay Area, and San Francisco in particular, generally foreground the withering cost of renting or buying an apartment or house, and the presence of too many tech people. On the latter point, “too many” seems to mean all the other tech people, but not their personal contribution to being part of the many.

There’s evidence that perhaps Texit is, if not exactly all hat and no cattle, then of a smaller herd size than the slew of articles might have you think. Especially the Austin part of Texit.

Bloomberg noted that the Austin Chamber says about half of newcomers in 2014-2018 came from states that weren’t California, with Californians making up about 8 per cent. And postal service data indicated that most new arrivals to Austin during the pandemic came from other parts of Texas, not from California. Of the transposed Californians, not all work in tech, either.

All of this is not to argue that Texas isn’t a phenomenal, fast-growing technology industry powerhouse. Plenty of data shows that it is one of the top tech regions in the US and the world. And whatever about “quality of life”, the state’s personal and corporate tax rates of just 1 per cent must be a notable draw.

But facts are decidedly one-sided in some of the exodus stories. Yes, California, and especially San Francisco, are very expensive places to live. And yes, San Francisco vacancy rates rose during the pandemic, and rents dropped.

But guess what? During the pandemic, rents also dropped, and vacancies increased, in New York and many other cities — including, awkwardly, Austin, where rents declined at more than double the Texas average in 2020.

Housing supply issues

Meanwhile, Austin residents there before the tech influx are complaining about the same effects that lots of well-paid tech workers have had in San Francisco and its surrounding regions, as well as Dublin. Nearly everything is getting more expensive, especially, the cost of buying a house, and houses are in short supply.

One paradox is that housing narratives clash, just as they do in Ireland. If — as many of the California-to-Texas tech interviewees claim — a shortage of California housing is the cause of high rents and high house prices, then why did rent and house prices decrease not just during the pandemic, but also during the recent recession, and at the time of the dotcom crash, in California, Texas, New York, and of course, Ireland? If so many were moving to Austin during the pandemic, then surely rents should have risen and vacancies decreased?

This suggests a more complex economic cause and effect, complicated further by the fact that when tech leaders say there’s a housing shortage, they want it addressed with a type of urban housing that, in Austin, Dallas or Dublin, tends to exclude the people who lived in the cities before being squeezed out by tech money. More high-rises and industrial conversions for tech workers will not address what others mean by a housing shortage. These are big problems, ones the industry needs to be far more active in understanding and solving.

As for Texit, I’m not sure why the growth of the tech industry in other regions of the US or the world should mean California is in decline. Anyone with any knowledge of tech history will know California has never been the only home of tech innovation and growth. And the industry would be worryingly stagnant if it weren’t expanding and on the move, geographically, intellectually and culturally.