Microsoft pledged $500 million for affordable housing in January. Five months later, Google said it would invest $1 billion to help the Bay Area housing crisis. Amazon and Salesforce also announced contributions of their own this year.
Major tech companies are stepping up to help mitigate affordable housing shortages, caused in part by the influx of high-income labor they have imported to the Seattle and San Francisco regions.
But can that cash truly make a dent when hundreds of thousands of units are needed?
Some experts say that while this is a welcome response, it won’t do nearly as much as some hope to generate sufficient housing.
“If there’s just someone who steps up and says, ‘Hey, I’m a really rich person, I want to give $500 million to affordable housing,’ everyone will think it’s great — until you actually do the math” said Gregg Colburn, an assistant professor of real estate at the University of Washington’s College of Built Environments.
The math shows that if each unit costs between $250,000 and $350,000, that seemingly huge investment would yield less than 2,000 housing units. Microsoft does plan to commit $475 million in loans that, once repaid, would be lent out again to support additional projects.
But these corporations simply don’t have the scale necessary to close the wide gap between affordable housing needed and that which is currently available, Colburn said. The gap is just under 185,000 units in Seattle alone, according to data Microsoft compiled from Zillow, the Census, and the Bureau of Labor Statistics. Across the entire Puget Sound region, that gap is some 305,000 units.
Another estimate from a December report by the King County Regional Affordable Housing Task Force states that the current need is 156,000 additional affordable homes today, and by 2040, the county will need 244,000 units to keep up with population trends.
“This is not a millions of dollars of problem, it’s a tens of billions of dollars of problem,” Colburn said.
The contributions have coincided with more and more pressure on these large corporations. Though they have created an economic boom, many feel as though the companies have a responsibility to help alleviate affordable housing shortages in the communities where they are based.
“I think everybody is seeing now how the housing crisis is intersected, that it matters that there’s not places to live, not just for engineers, but for teachers, and for nurses, and for people who work in retail, and for people who grew up here,” said Kevin Zwick, CEO of Housing Trust Silicon Valley, which supports affordable housing projects in the tech hub. “When there’s not enough housing for any of those people, then everybody is affected negatively.”
Microsoft partnered with Seattle real estate data company Zillow to study the housing crisis in 2018. They discovered that while housing prices soared, new housing construction and wages lagged behind.
To help address those problems, Microsoft is committing $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 pledge for a social cause in Microsoft’s history.
Microsoft will direct $225 million toward middle-income housing in six cities around its Redmond, Wash. headquarters. An additional $250 million will go toward low-income housing across the entire King County region.
Microsoft began accepting applications for its fund in May. The company will consider responses to a request for proposals process that meet the following standards:
- At least 40 percent of units will be designated for middle-income families or 80 percent of units targeting low-income families
- Projects must be within a 60-minute commute of Bellevue during peak traffic hours
- Developers must commit to keeping units affordable for a minimum of 10 years
- Each project must have at least 100 units
Microsoft hasn’t detailed how many units the fund will help erect. Brad Smith, the company’s president, said in January that he hopes it will help create “tens of thousands of units.”
Zwick said that in the Bay Area, tech giants can have a major positive impact on housing because the two keys to success are land and money, which these companies have in abundance.
Google plans to build 20,000 homes in total with its $1 billion contribution, 75 percent of which will go toward repurposing company-owned land for affordable housing. The remaining $250 million will be used to establish an investment fund aimed at building the remaining 5,000 housing units.
“That’s an exciting place to go if each tech company or employer set a goal of how many units of housing they want to help build with their efforts,” said Zwick, whose organization says it has invested $183 million to create more than 17,000 affordable housing opportunities since 2000.
Arthur Acolin, an assistant professor at the University of Washington’s College of Built Environments, said that the public sector would actually be the most effective place to turn to get the land necessary to build the hundreds of thousands of units needed across King County because restrictive zoning is holding up much-needed development.
Zillow Director of Economic Research Skylar Olsen noted that the company is keeping its eye on the effects of a recent move in Minneapolis to ban single-family zoning.
“Philanthropy is a great step but affordable housing is a big problem that needs a diverse range of solutions and there is no universal template that fits for each community,” Olsen said in a statement. “Policies focused on creating more housing in general are beneficial, as well as those focused on providing both a supply of and access to affordable housing.”
Microsoft has recognized this, calling on local governments and the state to update zoning and land use to increase density near public transit. It also wants the state to double the $100 million Washington State Housing Trust Fund.
San Francisco-based Salesforce, which recently acquired Seattle data visualization company Tableau for $15.7 billion, donated millions to a campaign last year supporting a ballot measure that would tax local businesses to fund homelessness programs.
Salesforce CEO Marc Benioff and his wife Lynne also personally donated $6.1 million last year to add 58 housing units in San Francisco. A spokeswoman for the company said it had no future Seattle-based investments to announce.
Colburn said the biggest thing Washington can do to fund housing on the scale necessary is to overhaul its tax system, which is considered the most regressive of any state. He added that it’s more important for companies to lobby for these changes than to invest millions, and pointed to public investments in Sound Transit as evidence that this level of money can be generated.
Stephen Norman, executive director of the King County Housing Authority, said that the “better route to go” is to build a more progressive tax structure.
“Clearly, government is under-resourced to step in where the market is failing to provide sufficient affordably-priced housing,” he said.
Norman, whose governmental group could receive loans to build housing from Microsoft, wasn’t sure how much the investment could build in total. “I can tell you that it’s probably a lot less than people hope,” he noted.
In contrast to Salesforce, Amazon fought a tax last year that would have raised money from the city’s top-grossing companies to fund affordable housing and homeless services.
But since then, it announced a $5 million donation to Plymouth Housing — Microsoft also gave $5 million — and in June lent support to the Building Opportunity Fund, an effort to raise $4.5 million in investments to build 750 affordable homes in the Seattle area. The company also has a partnership with Mary’s Place, a homeless shelter for women and children in Seattle, and has paid millions in fees to Seattle’s affordable housing trust fund.
Amazon CEO Jeff Bezos separately announced his own $2 billion charitable fund last year to go toward nonprofits supporting homeless families.
“Amazon has been a leader in the effort to address homelessness in Seattle. It’s a priority for us to support this issue,” an Amazon spokeswoman said.
Like King County, the Bay Area has an affordable housing shortage in the hundreds of thousands of units, but Zwick said he is optimistic about the role tech titans can play in this crisis.
“None of the efforts — it’s not enough,” Zwick said, also noting that local governments have not done their part to approve new housing. “But it’s a start, it’s a new sector coming into the space and I think if we could show that it results in real housing, then I would hope this isn’t a ceiling to the amount of funding going in, but rather technology companies and other employers will continue to try to invest in housing.”
Microsoft noted as much at the end of a blog post written by Smith and Chief Financial Officer Amy Hood at the time of its $500 million investment.
“Our announcement today is an important start, but it’s just the beginning,” they wrote. “It will take years of dedicated work for the region to put this problem behind it. We’ll all need to learn and work together to ensure that everyone in our community has not just a roof over their head, but a place they can call their home.”