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Seattle’s tech boom has driven up the cost of housing. Now tech companies are stepping in. (Flickr Photo / Harold Hollingsworth )

Big tech companies are stepping in to help solve the housing crunch in the face of mounting frustration from their communities, where big increases in home prices and homelessness are often a side effect of economic growth.

  • Microsoft is the latest tech giant to take on the issue, launching a $500 million affordable housing initiative this week, providing loans to developers and grants in an effort to reshape the housing market in its home region.
  • Amazon CEO Jeff Bezos is donating nearly $1 billion of his personal fortune to homeless service providers. Amazon has also given $40 million and space on its Seattle campus to Mary’s Place and FareStart, two non-profits that help people experiencing homelessness and poverty.
  • Airbnb is spending $5 million on homelessness in San Francisco and Twilio CEO Jeff Lawson donated $1 million to fund homeless services in the Bay Area.
  • Salesforce CEO Marc Benioff backed an initiative that would tax San Francisco’s top-grossing businesses to raise money for housing and homeless services.

This generosity is certainly worth celebrating. But it’s also worth scrutinizing. While philanthropy has a role to play in improving society, skeptics caution it’s no substitute for public revenue generating mechanisms.

What the critics say: Earlier this month, two Seattle City Councilmembers visited New York to warn officials and activists about the impact Amazon can have on a city as the tech giant plans a 25,000-person office in Queens.

“Be prepared for the debate to shift towards philanthropy,” said Councilmember Lisa Herbold. “There is no accountability for private philanthropy. We are in a modern gilded era and just like the original gilded era, charitable gifts don’t solve infrastructure issues or inequality.”

Herbold expressed frustration over Seattle’s short-lived head tax. She and her colleagues passed legislation that would have taxed Seattle’s top-grossing companies to build affordable housing but quickly repealed it after Amazon threatened to slow its growth in the city and others in the business community organized a referendum campaign. In her view, Amazon’s lobbying against the head tax casts a shadow over the company’s philanthropic efforts to address homelessness.

Corporations also don’t have the same life cycles as governments. When a company like Microsoft or Amazon is on top, it has the balance sheet to support multi-million dollar contributions. But history shows that no company stays on top forever. If the public becomes too reliant on philanthropic dollars, it could leave a vacuum when economic tides change.

It’s a concern shared by Nick Cassella, a project manager at Seattle venture capitalist Nick Hanauer’s idea lab Civic Ventures.

Yes, but: Amazon was not alone in its opposition to the head tax. Many in the business community and beyond felt that it was the wrong mechanism to deal with Seattle’s housing and homelessness crisis. And in an interview with GeekWire this week, Microsoft President Brad Smith stressed that the new $500 million fund must work in conjunction with policy changes and leadership from the public sector.

“I think it’s going to require a combination of steps to solve this kind of problem,” he said. “I sort of feel that any day there are more affordable housing units constructed that people can move into is a good day for the region. So there’s a variety of paths that can get us there.”

Seattle Mayor Jenny Durkan, Microsoft President Brad Smith, and King County Executive Dow Constantine announce Microsoft’s new $500M fund. (GeekWire Photo / Monica Nickelsburg)

The best of both worlds? Solving the housing crisis in Seattle and other tech hubs doesn’t mean choosing between corporate philanthropy and public policy. In San Francisco, Benioff championed legislation similar to the failed head tax in Seattle, pledging $2 million to the effort. Voters ultimately approved the tax, though lawsuits make its future uncertain.

There’s also an important distinction between Microsoft’s new initiative and traditional corporate philanthropy. The majority of the $500 million commitment will not come in the form of donations. Microsoft is investing $475 million into low- and middle-income housing projects at market rate returns or lower. The company says it will re-invest the returns from those initial loans so that the fund is sustainable long-term.

Microsoft is also partnering with the mayors of Seattle and surrounding cities, who have agreed to consider zoning and other policy changes to promote affordable housing development. It’s a novel approach and too early to determine whether it will be effective. But if it is, it could provide a model for smart corporate philanthropy targeting one of the most confounding issues tech hubs face.

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