As a resident of San Francisco since 2001, and as a father to a boy and a girl, I must sadly admit that San Francisco is a difficult place to raise a family mainly due to the cost and lack of other families in the city.
If your household isn't making $300,000 or more, it's tough to feel like you're getting ahead and saving for retirement.
Only 13 percent of San Francisco's population is under 18 years old. By comparison, youth make up 21 percent of the population in New York and 23 percent in Chicago.
Here are a number of reasons why raising a family in San Francisco is quite difficult.
Why San Francisco Is Difficult For Families
1) Property taxes. At 1.24%, the property tax is a never-ending wealth tax you cannot escape. With the median home price at ~$1,700,000, we’re talking a $21,000 annual tax bill if you bought a regular house today.
2) Public school lottery system. Despite paying $21,000 /year in property taxes, you have NO GUARANTEE of getting your child into the public school system in your neighborhood. The public school lottery system asks you to list 20 schools for the hopes of getting your top choices. San Francisco does this for social engineering purposes.
3) Private schools are expensive. Given you likely won’t get into your top public school choice, you’re forced to pay $30,000+/year for elementary / middle school and $40,000+/year for many high schools on top of paying property taxes that go to public schools. The private school I coach high school tennis at charges $44,000 a year + $4,000 a year in extra fees. You have to make at least $75,000 gross to afford such tuition. Below is a sample of the private school tuition.
4) High cost of living in general. Besides high home prices and high tuition, you also have to pay state income tax that goes up to 13%. Thankfully, if you make under $100,000 a year per child, you qualify for financial aid at many private schools. Here’s a budget of a family of 6 that makes $390,000 who has a NEGATIVE $70,444 left over due to the cost of private school.
Here's a real budget of a family of six who are negative $70,000+ in cash flow each year if they want to send their kids to private school. They make a healthy $390,000 a year. Just think how absurd it is to have to make so much and not be able to get ahead. The solution for them is to live in the suburbs and send them to public school.
5) Major congestion and growing filth. When I first moved to San Francisco in 2001, it was a quiet and pleasant city where traffic and lines were manageable. Now, in 2018, the city has become like Manhattan, a nightmare to get around. It's very difficult to get a table at a good restaurant and the competition to get anything is intense.
Further, public transportation infrastructure has not kept up with population growth. The city pays massive wages to its employees, yet the city continues to break down with a growing amount of filth everywhere. Growing filth on the streets is a negative sign for raising children. This means there are more deranged adults who don't care about order and the safety of your children.
San Francisco Is A Great City For The Rich
If you want to own a home, raise a child, save for retirement, and not work forever, you really need to make at least $300,000 a year just to live a middle class lifestyle today in San Francisco. The real household income number to make where you feel you are getting ahead is more like $500,000+.
If you're making less than $300,000 a year, San Francisco feels like a grind. The grind is what made me sell my SF rental house with a 2.4% cap rate and buy real estate in the heartland of America through real estate crowdfunding platform Fundrise and CrowdStreet where rental yields are higher, valuations are lower, and people are happier.
There is no reason to be paying $3,000+/month for a crappy one bedroom or $4,500+/month for a run down two bedroom in San Francisco when technology allows you to live anywhere in the world and geo-arbitrage!
Come to San Francisco and make your money and leave once you've had enough. The country and the world has many lovely places to enjoy that don't require a super high income. I'm personally planning on moving to Hawaii.
I do believe there will be more demand for housing in the western part of the city where it's more affordable and less dense, thanks to sheltering-in-place for months in 2020.
Further, San Francisco will become more attractive if more people move out due to less congestion. I don't think you can go wrong with investing in San Francisco. Just make sure you make over $300,000 if you want to raise a family in the city!
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About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
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