Microsoft is dedicating $500 million to fund construction of affordable homes and homeless services in the Seattle region in an effort to alleviate a growing housing crisis driven by the city’s tech boom.
The Redmond, Wash.-based tech giant will commit $475 million for loans to affordable housing developers over three years and another $25 million to services for low-income and homeless residents. It’s the largest philanthropic pledge in Microsoft’s history.
“This is a big problem,” Microsoft President Brad Smith and Chief Financial Officer Amy Hood wrote in a blog post Wednesday. “And it’s a problem that is continuing to get worse. It requires a multifaceted and sustained effort by the entire region to solve. At Microsoft, we’re committed to doing our part to help kick-start new solutions to this crisis.”
Microsoft’s announcement comes amid growing pressure on tech companies to mitigate the consequences of growth. Over the past decade, big tech companies have drawn thousands of newcomers to the Seattle tech region with lucrative tech jobs, bidding up housing costs and often squeezing out low-income neighbors.
In September, Amazon CEO Jeff Bezos launched a $2 billion philanthropic fund to help homeless families and improve preschool education. The announcement came after Amazon and other businesses spent months embroiled in a battle with the Seattle City Council over a tax on the city’s top-grossing companies to fund affordable housing.
Homelessness was also a focus area for Paul Allen, the late Microsoft co-founder. Paul G. Allen Philanthropies donated $30 million to a new low-income housing development and homeless resource center in Seattle’s Mount Baker neighborhood. Allen passed away in October but the project is still under construction.
Microsoft partnered with another Seattle area tech company, Zillow, to study the housing crisis over the past eight months. They found that since 2011, jobs in the Seattle region have grown 21 percent while growth in housing construction has lagged behind at 13 percent. Over the same time period, median home prices in the Puget Sound region increased 96 percent while the median household income only rose 34 percent, researchers found.
They estimate that there is a gap of about 305,000 middle and low-income affordable housing units in the region.
In response to the housing shortage, Microsoft will direct $225 million toward middle-income housing in six cities: Bellevue, Kirkland, Redmond, Issaquah, Renton and Sammamish. An additional $250 million will go toward low-income housing across the entire King County region. The remaining $25 million will come in the form of grants to homeless service providers.
The software giant is well-positioned to take on a philanthropic endeavor of this magnitude. Microsoft posted $29.1 billion in revenue and $8.8 billion in net profits for the most recent quarter. It has $135.9 billion in cash, cash equivalents, and short-term investments.
“We recognize that Microsoft is in a unique position to put the size of its balance sheet behind this effort,” the blog post says.
The mayors of nine Seattle suburbs have agreed to prioritize policy changes to increase the supply of affordable housing in conjunction with Microsoft’s $500 million commitment. Microsoft is also encouraging the state of Washington to invest in affordable housing. The company is recommending a $200 million appropriation to the Housing Trust Fund and other housing policy changes.
Microsoft plans to announce its $500 million commitment at an event in Bellevue, Wash. Thursday near its headquarters.