A week after Amazon said it will pause construction on a new office tower in Seattle and reconsider whether it will move into another while the City Council considers taxing the top-grossing businesses in the city, Zillow Group is looking at whether future expansion should happen elsewhere.
During a first-quarter earnings call on Monday, CEO Spencer Rascoff was asked about the so-called “head tax,” which would charge businesses with more than $20 million in annual revenue 26 cents per employee for every hour worked. The funds would go toward affordable housing and homeless services.
In his comments, transcribed below, Rascoff called the head tax a “misguided” solution as he touched on the company’s own efforts to address homelessness and housing affordability. He also indicated what financial impact the tax could have on Zillow, noting that it could cost the company anywhere from $1 million to $4 million annually.
Zillow, which employs more than 1,400 people in Seattle, posted $299 million in Q1 revenue, up 22 percent year over year. In 2017, the Seattle-based real estate media company hit $1 billion in annual revenue for the first time.
“This is a tricky one for us, obviously. Homelessness and housing affordability is something that we understand deeply at this company and care deeply about. In fact, it’s been the focus of our philanthropic efforts — something called The Home Project is our philanthropic initiative to address homelessness and housing insecurity.
That having been said, the proposed Seattle head tax, we think, is misguided and too blunt of an instrument. The impact on us, as currently proposed, would be somewhere between $1 million and maybe up to $4 million a year a couple of years from now. And we are actively trying to decide where to put the next couple hundred heads, and this is the type of thing that causes us to consider looking at putting that expansion in other cities where we have large presences. Cities like Phoenix, Denver, Irvine, Cincinnati, Lincoln, Neb., and others.
We’ll see. Hopefully the City Council, the Mayor’s Office and the Seattle business community can work together to find other solutions to address housing affordability and homelessness, which are real issues obviously in Seattle and most major cities.”
The Home Project was announced last fall, when Zillow pledged $5 million in cash and in-kind contributions over the next five years while relying on its people, platform and products to help find solutions to the housing crisis.
The Seattle City Council has estimated that the proposed tax will generate about $75 million per year, with the majority of revenue going toward “deeply affordable” housing units.
The volume on rhetoric from both sides in the debate was decidedly ramped up last week when Amazon announced its move on construction projects. The tech giant, which would be on the hook for about $20 million a year under the tax, signaled — even while looking for a second headquarters elsewhere — that growth in Seattle could be curtailed significantly.
Seattle City Councilmember Kshama Sawant faced off with angry ironworkers in front of the Amazon Spheres at the company’s downtown headquarters as she tried to hold a rally encouraging passage of the head tax.
