Microsoft Corp made a big splash last month when it announced a US$500mil (RM2.03bil) initiative to tackle Seattle’s growing housing crisis. Less noticed was a detail that’ll be critical to making it work: Nine of the city’s largest suburbs agreed to join the effort.
While Microsoft’s money will go toward constructing and preserving homes for lower- and middle-income residents, suburban mayors committed to pro-growth plans such as increasing density around transit stops, reducing parking requirements and speeding up permitting.
Such policy fixes can often seem like a snooze. Who wants to talk about zoning? But economists have long argued that these steps are crucial to taming skyrocketing rents and home prices in regions that haven’t built enough housing to meet demand. Now the tech industry, which for years has been criticized for contributing to soaring real estate costs while doing little in response, is using its money and political muscle to address often-fraught local issues.
“The private sector can’t solve” the housing shortage on its own, said Jenny Schuetz, a fellow in the Metropolitan Policy Program at the Brookings Institution. But “when the biggest and richest corporations in an area are breathing down the necks of politicians, it can make a difference”.
Just a week after Microsoft’s announcement, the philanthropy started by Facebook chief executive officer Mark Zuckerberg and his wife, Priscilla Chan, said it was backing a US$500mil (RM2.03bil) effort for affordable housing in the San Francisco Bay area. The initiative, the Partnership for the Bay’s Future, also includes a US$40mil (RM162.78mil) fund aimed at influencing policy.
These efforts, of course, are good PR at a time when the industry is taking heat. Amazon.com Inc’s highly publicized search for a second headquarters last year drew attention to the company’s role in Seattle’s declining affordability. It also raised questions about whether one of the world’s most valuable companies was deserving of public subsidies to expand. Microsoft, for its part, has tried to position itself as tech’s responsible corporate citizen, publicising its work on everything from data privacy to the ethics of artificial intelligence.
“Tech is in the crosshairs now,” said Glenn Kelman, the CEO of Redfin Corp, a real estate brokerage and data firm based in Seattle. “We created this incredible prosperity in San Francisco and Seattle, and now many folks see that as a curse rather than a blessing.”
There also may be self interest at play in trying to make housing more affordable. Recruiting has gotten to be a much bigger challenge in Seattle and the Bay Area because of the cost of living, even for highly paid tech workers. “You have engineers coming into your office and telling you that the US$150,000 (RM610,425) they make isn’t enough to buy a house,” Kelman said. But thinking that’s the only motivation is “too cynical”, he said. The people backing these efforts “genuinely care about affordable housing and liveable cities”.
While the Bay Area effort represented two years of discussion among leading philanthropists and businesses, the decision by Redmond, Washington-based Microsoft to wade into the real estate debate is more recent. The idea emerged last summer after president Brad Smith and CEO Satya Nadella attended a meeting held by Challenge Seattle, an alliance of executives from the region’s prominent businesses and philanthropies, that addressed the area’s housing troubles.
In recent years, both Facebook and Google have earmarked portions of their new campuses in Silicon Valley for housing, directly addressing the severe shortage of units in the area. Microsoft itself had studied doing something similar as it redevelops its corporate offices outside Seattle and opted against it.
“We decided that it was better to address the problem for the community as a whole,” Smith said. “It’s not to say that it doesn’t make sense from time to time for companies to focus more specifically on their own workers, but it just didn’t seem like the right step for us at this moment in time.”
As Microsoft got more serious about making a financial pledge, Challenge Seattle began approaching area mayors late last year to see if they’d be willing to contribute. Cities were making strides to provide for low-income residents but doing less for middle-income workers such as police officers, nurses and teachers.
“I went from city to city, mayor to mayor,” said Christine Gregoire, the former Washington governor who is leading Challenge Seattle. “They got it.”
What evolved from those discussions was a one-page statement in which the mayors agreed to seven specific types of policy changes that would “break down barriers and provide incentives to substantially increase the supply of quality housing.” Among them were pledges to waive impact fees and make public land available for building. Microsoft is also backing policy changes at the state level, and Challenge Seattle has since made a broader call to action for more development of middle-income housing.
There still are many hurdles to overcome. For many suburban areas, efforts to add density have historically been met with fierce community opposition. It’s also unclear how deep and extensive the policy changes will be. The towns have been at work on some of the measures but are just beginning to study others. Already, some of the mayors have expressed hesitation about aspects of what they pledged.
Nancy Backus, of Auburn, Washington, said her city “would need to look closely” at whether it could provide land to developers for free or at little cost when public budgets are increasingly tight. Still, she said that none of the items are off the table.
A more daunting challenge is the scale of the problem. The Chan Zuckerberg-backed effort estimates that its investment fund will create or preserve about 8,000 housing units over the next decade, but the Bay Area is estimated to need 35,000 a year. Microsoft has said it expects its money to go toward “tens of thousands” of affordable homes in the Seattle area – which has a shortage of around 300,000 residences.
“A lot of this will come from the multiplier effect that comes from public policy change,” said Microsoft’s Smith. “This money is not sufficient to solve this problem by itself. We need to attract more capital and change the way the market works.” – Bloomberg