It's not a waste if they get better returns. In comparison, you're not going to attract many people to the Midwest when no one wants to go there, which in turn yield lower returns.
The VCs are acting rationally but it's still an inefficiency. Theoretically if a significant number of tech people chose to gather in a low-COL Midwest city you could stretch VC dollars much further while still undercutting SF/NYC.
Charlotte NC and Houston TX have had a similar if not higher population growth rate compared to major west cost and north east cities, where their housing prices have remained below the national average.
The reason why cities where tech locates in are so expensive is the lack of low cost new housing which comes from the fact that all land prices in a reasonable commutable distance are already very high. While it's bad for the environment, greenfield sprawl is the only true success we've seen in constructing affordable housing.
> where their housing prices have remained below the national average
But are they higher than they were before the population grew? That's the important metric here, and would speak to whether home building kept up with the population growth.
Except cost of living in major tech cities is usually skewed higher because of housing in particular, things like groceries are generally only a small impact.
Net land values are absolutely higher than they once were, farm/ranching fields now have housing on them. And while prices are higher than before the population grew, the prices have remained affordable for those earning the median income the entire time since the agglomeration effects of this growth has caused wages to rise.
The problem of course being that the "brain capital" in those areas doesn't compare to Boston, which has more universities in a small area than anywhere else.
