Big Tech's decision to invest in affordable housing and donate for homeless charity in West Coast metros.
Seattle is facing a housing affordability crisis and has the dubious distinction of having the third largest homeless population in the US behind Los Angeles and New York. The gap only keeps widening between the high-income tech professionals and those who can’t afford to have a roof above their head. It’s a stark and unfortunate sight each morning to see the new digital breed of people bustling down the streets of Seattle’s South Lake Union neighborhood waving $5 nitro brews in their hands while walking past the now omnipresent homeless population.
It is in this environment that West Coast big tech companies have each pledged to address the worsening and now unmistakably visible affordability crisis in their backyard. Since much of the problem is stemming from the tech boom in these cities, one might say it is only fair that they take up responsibility and chip in to help alleviate the situation. Seattle, San Francisco and Los Angeles are all facing an unnatural housing shortage based on more or less the same combination of things. The tech boom has resulted in more jobs being added to the market much faster than new housing units being built (only 58,000 new housing units vs 373,000 new jobs created between 2012 and 2016 in the Bay Area). Buying up large swaths of land to convert them into giant tech campuses, and the fact that office spaces could be rented out at more lucrative rates have all tilted the balance towards developing commercial property, driving up construction costs and real estate prices in general. It didn’t help the situation either that single family homes are the predominant residential units, with the few available rental places not being able to absorb the inflow of workers.
Last September, Amazon CEO Jeff Bezos launched a $2 billion fund (the Bezos Day One Fund) to offer services to homeless families and to create a network of non-profit preschools in low-income communities. Bezos has long been criticized for not diverting anything significant from his $160 billion personal fortune to philanthropic causes. Following a Twitter survey on what would the most pressing problems be that he could create a fund for, Bezos decided to focus on Seattle’s growing homelessness problem.
In January, Microsoft announced to put aside $500 million for improving housing affordability in Seattle. The software manufacturer intends to offer $475 million in loans to spur affordable housing construction, and spend the remaining $25 million on philanthropic services helping the homeless.
$225 million is to be allocated as below-market rate loans to developers to build and preserve workforce housing units on the Eastside for those with income levels between $62–124,000 a year. Microsoft currently has 50,000 workers living in the area and the company plans to hire even more, but finding a home at affordable rates is near-impossible.
Another $250 million is being offered as market-rate loans for the construction of affordable housing units targeted at 60% AMI income tenants (earning around $48,000 a year) in the Puget Sound area.
Following Microsoft’s announcement, Facebook CEO Mark Zuckerberg also pledged to pool together $500 million to fund affordable housing projects in the Bay Area. Established through the Chan Zuckerberg Initiative, the Partnership for the Bay’s Future is essentially a group of businesses, non-profits, and philanthropists who will allocate the proposed sum in loans to affordable housing developers over the next five-to-ten years. 8,000 new affordable units are expected to be built with the help of the fund, and a further 175,000 existing units are to be preserved.
A policy fund with a targeted worth of $40 million was also created to support legislation that preserves housing and eases the way for building new affordable units, as well as strengthens low-income tenant protections.
In June, Google announced a 10-year plan to allocate over $1 billion to address the Bay Area’s chronic housing shortage. The bulk of that investment will come from repurposing some of Google’s own Mountain View commercial real estate properties worth at least $750 million for residential purposes. Google is working together with local governments to allow for denser residential constructs through rezoning. A minimum of 15,000 new housing units are estimated to be built, targeted at ‘all income levels’, but it's unclear that means how many affordable units exactly. To create affordable housing units, $250 million will be specifically allocated as investment fund. A total of 5,000 new units are expected. A further $50 million will be granted to non-profits focusing on the homeless population.
Salesforce, Airbnb and others...
AT&T, Salesforce, Airbnb and Twilio are all pledging funds to address the deepening housing affordability crisis in their respective backyards. Salesforce CEO Marc Benioff last year has donated $30 million to help the San Francisco homeless find housing, put $2 million into the pro-taxation campaign, and created a $30 million research fund to come up with solutions for the homelessness crisis. AT&T is donating a total of $1.1 million to Seattle-area nonprofits, while in San Francisco Airbnb is allocating $5 million in grants and Twilio CEO, Jeff Lawson has announced a $1 million donation to similar causes.
The real question: who should be taking care of housing affordability?
It’s all great to see tech companies lining up to invest in their own neighborhoods. But there is criticism around the sudden philanthropic tendencies of the tech world and the lingering doubt remains, will they stay in a generous mood later, too, or was it just a whim. Being charitable is good, but the fact is, having to rely on occasional charity does not replace a stable inflow of resources to address pressing social issues. Looking at the numbers further point it out that adding a few thousand affordable units is just a drop in the ocean when the state of California has a deficit of 3.5 million housing units in total, out of which 1.4 million would need to be reserved for affordable housing.
Last year’s policy proposal to tax large corporations (those with over $50 million in registered yearly income) in order to tackle the homelessness and affordability crises of West Coast tech hubs have failed entirely in Seattle, and pitched San Francisco tech companies against each other in a heated campaign war that preceded the vote. Salesforce CEO, Marc Benioff and Twilio CEO, Jeff Lawson were in the forefront of the pro-campaign, pushing for fellow tech companies to swallow the proposition as it is and take up responsibility for their city’s future, while Twitter CEO, Jack Dorsey as well as CEOs of Zynga and Stripe were vehemently against the proposal. The new tax eventually got passed, and while it is supposed to rake in $300 million a year for alleviating the housing crisis, with the City of San Francisco currently being tied down by a series of lawsuits by said companies, the future effectiveness of the new tax remains uncertain.