Employers Are Helping Create Affordable Housing

In 1881, George Pullman, president of the famed Pullman Palace (railroad) Car Co. opened the eponymous village of Pullman just to the south of Chicago. Created as a “model industrial town” in reaction to the slums where many immigrant workers were living at the time, the community thrived and by 1885 had a population of 9,000 residents. Pullman figured, historians say, that by providing employees with housing at a reasonable cost — as well as a pleasant place to live, shop, worship and play — he could keep skilled talent, gain greater productivity and avoid strikes. Despite its troubled history, the city of Pullman was considered visionary at the time and today many companies are also striving to be visionary in addressing affordable housing.

Amazon headquarters in downtown Seattle, WA

Courtesy of Amazon

Today’s tech giants including Google, Apple, Amazon, Facebook and others are cribbing a page from the history books to help create affordable housing around Seattle, in the San Francisco Bay Area and elsewhere in the country. School districts are also helping teachers, while some communities are aiding firefighters and police with housing support.

In Florida, Universal has launched an effort to build affordable housing for its workers and others. Working with Wendover Housing Partners, the theme park entertainment company said it is pledging land and its creative resources to find a solution to what it describes as “one of Central Florida’s most pressing issues.”

Working on a 20-acre site Universal owns, Wendover will build a mixed-use community that will include what it said will be 1,000 high-quality apartments as well as 16,000 square feet of retail space. Construction is expected to begin in late 2022.

Ownership of the site has been transferred from Universal to a not-for-profit established by the company called Housing for Tomorrow. Its role is to oversee the initiative and make sure it remains true to the original vision. Housing for Tomorrow will retain ownership of the site and serve as master developer — entering a $10-a-year/55- year lease for the property with Wendover. Housing for Tomorrow’s charter states that its mission is: “Providing and preserving housing for low- and moderate-income people that is safe, secure and affordable in perpetuity.”    

Housing advocates generally laud the efforts by wealthy corporations, but they also note that these moves have come as giant tech companies like Google, Amazon and Microsoft face pressure to help because their huge growth has exacerbated the crisis. They also say that zoning reform is badly needed.

Woman riding bicycle in front of the Google headquarters, Sillicon Valley

Photo courtesy of Google.

According to a report from SPUR, an urban planning policy think tank, the workforce housing shortage in the Bay Area is stunningly large. It said the region should have built an additional 700,000 housing units over the last two decades and that to keep up with growth, the region will need to build 2.2 million more units by 2070.

Sarah Karlinsky, a senior adviser at SPUR, praised what she called “heroic” efforts by affordable housing developers that have yielded between 40,000 and 50,000 units over the past 20 years. “However, the shortage of affordable housing will certainly continue to grow if the Bay Area and the state don’t build more,” she said.

Even when communities zone for housing, there are often regulations and rules that can make it difficult to build, which worsens the crisis and drives up prices for all. Karlinsky argued that zoning reform is needed to promote the construction of more affordable housing and that tech and other corporations might do more to advocate for laws that would increase production. “I think that changing the hearts and minds of citizens in California is a critical task, but we need to think about who would be best to take that on,” she said.

Part of that reform effort would include pushing for permanent funding rather than donations and bond issues that provide temporary support. “It’s great that tech companies are looking to invest hundreds of millions of dollars or even billions in affordable housing. And that’s a step in the right direction,” she said. “It’s really important to have more money, but is equally critical if not more so, that we change the laws about what gets built and where.”

Karlinsky said she admires countries from Denmark to Japan that look at housing as a human right. “I know that the United States was founded on ‘rugged individualism,’” she said. “But we as a society need a system that recognizes we are interdependent and connected and if affordable housing is important to us, we need to do a better job of providing it because we are all affected by this.”

Corianne Scally, a principal research associate at the Urban Institute, said she has seen a “notable uptick in tech companies investing in affordable housing in the last couple of years. It’s always great to see new investments, particularly by employers recognizing that their employees benefit from thriving communities that offer a variety of housing options across the income spectrum.

“Happy employees and community neighbors can drive down employer costs, as well, by reducing staff turnover and improving public support for other employer initiatives. While much more is needed to address deep housing divides and supply deficits across our country, the more people contributing to a solution, the better.”

The lack of affordable housing is most acute in San Francisco, where the median price for a home hit $1.9 million this summer. In Seattle, it was a “mere” $800,000. That means that many people who work in those cities must commute long distances.
“In the Bay Area, we call that drive-until-you-qualify [to rent an apartment or house],” said Karlinsky. “It’s this region’s de facto affordable housing policy.”

Unlike impoverished company towns associated with coal mines in the eastern United States, the Pullman community earned awards for its progressive thinking and design. In addition to gas, water and sanitation services, each home had front and even back yards. Expansive parks and open lands provided larger, shared green spaces. Maintenance of the residences was included in the rental prices, as was daily garbage pickup. At the 1896 International Hygienic and Pharmaceutical Exposition, Pullman was honored as “The World’s Most Perfect Town.”

The community (really a neighborhood) was annexed into the city of Chicago 17 years after it was founded. In 2015, it was designated a National Historic Monument by President Barack Obama because of its architectural significance, its place in American labor history and the role its workers played in the civil rights movement.

More than 100 years later, Boston College economist Aleksandar Tomic said today’s dire lack of affordable housing is “particularly acute in coastal metro areas where there is not much developable land, especially where jobs are paying quite well and squeezing out the middle class and lower-income workers.

“That means companies are having a hard time recruiting people with experience if they aren’t at the top of the earning distribution,” added Tomic, who also runs the university’s applied economics masters’ degree program.

That’s caused some corporations, such as HP and Tesla, to plan moves or at least threaten to relocate from California to other, less expensive, states such as Texas or Florida. Still others have moved to less pricey regions in the same state where they are currently located. HP’s administrative headquarters are now in Houston.

In Seattle, Microsoft is investing $750 million to mitigate the region’s affordable housing crisis. In part, the commitment includes a no-cost line of credit to the Washington State Finance Commission. The money will be used for the creation or preservation of nearly 6,671 units.

Couple watching kids in playground slide

Photo courtesy of courtesy of Apple.

Apple recently made a $2.5 billion pledge to create more affordable housing in California, while Facebook has pledged $1 billion for housing.

Apple’s $2.5 billion commitment to deal with the housing crisis in California features a series of initiatives, including:

  • A first-of-its-kind $1-billion affordable housing investment fund with the state of California.
  • A $1 billion first-time-homebuyer mortgage assistance fund, with increased funding opportunities for essential services personnel, school employees, and veterans.
  • $300 million in Apple-owned land made available for affordable housing.
  • A $150-million Bay Area housing fund, in public-private partnership with Housing Trust Silicon Valley.
  • $50 million to support Destination: Home’s efforts to address homelessness in Silicon Valley.

Kristina Raspe, Apple’s vice president for Global Real Estate and Facilities, said this summer that “California’s communities have shown their resilience in the face of immense challenges this past year. As we look to a brighter future ahead, Apple is committed to continuing our work with partners across the state to support these communities and help combat the housing crisis in meaningful ways.

“As we expand our efforts and move forward with our comprehensive plan to address housing in the state, we’re proud our work has made a tangible impact on the lives of so many Californians.”

After announcing its commitment in November 2019, Apple began working with partners to allocate and disburse funds across the state — deploying more than $500 million by the end of 2020 in an effort to combat the heightened housing challenges posed by the COVID-19 pandemic.

To date, Apple has supported affordable housing efforts across 25 California counties, from Alameda and Amador to Ventura and Yolo. The company said the funding supported the development of thousands of new affordable units, aided first-time homebuyers and helped keep Bay Area families housed during the pandemic.

Google, for its part, has promised to invest $1 billion to add 20,000 affordable housing units in Silicon Valley, where the booming tech industry has helped fuel the soaring cost of living. As part of that deal, Google has said it will lease to developers $750 million worth of land it owns over the next 10 years.

The company, which was founded in 1998 by two Stanford University graduate students, now has more than 45,000 employees in the Bay Area. About half of them work at Google’s home base in Mountain View. Echoing George Pullman, Google Chief Executive Sundar Pichai wrote in a blog post: “As we work to build a more helpful Google, we know our responsibility to help starts at home. For us, that means being a good neighbor in the place where it all began over 20 years ago: the San Francisco Bay Area.”

Amazon is also working on the affordable housing crisis in its three hub areas and announced earlier this year that it had created a $2-billion Housing Equity Fund to preserve and create more than 20,000 affordable housing units near its locations: Washington’s Puget Sound region; Arlington, Va.; and Nashville, Tenn. Its first two investments include $381.9 million in below-market loans and grants to public agencies, housing partners and minority-led groups to build and preserve more than 1,300 affordable homes in Arlington, plus $185.5 million to maintain up to 1,000 affordable apartments in the Puget Sound area.

More than 5,000 new workers are expected to move to the three hubs. The company has pledged additional funds in coming years. Amazon said the money underscores its commitment to help ensure that moderate- to low-income families can afford housing in resource-rich communities with easy access to neighborhood services, amenities and jobs.

Catherine Buell, head of Community Development for Amazon and the former president and CEO of the Atlanta Housing Authority, said the housing her company is funding is not only for Amazon workers. Amazon targeted Arlington, Nashville and the Puget Sound area because of the need, but also because speculation is driving up prices.

She said Amazon’s focus is on preservation of existing workforce housing “because we saw that there were very few fund tools to do that. We wanted to make a very clear statement about the importance of preserving affordability.”

She said that is reflected in a $381-million investment in low-cost, flexible capital to help a new nonprofit called the Washington Housing Conservancy acquire two multifamily towers called Crystal House. The group’s goal is to convert that property — which is now reasonably priced — into a workforce housing apartment building, with 75 percent of the households making 80 percent of the median income for the area.

The second investment, with the King County Housing Authority (KCHA), will help it acquire 1,000 units of existing multifamily property in Bellevue. “We’re also investing in non-traditional public-private partnerships, such as with transit agencies,” she said. “Government is primarily responsible for affordable housing, but we believe that as one of the nation’s largest employers, we can do our part to help.”

Amazon has no plans at this time to develop workforce housing on its own land. “We are able to move faster and at a larger scale by working with nonprofits that are already doing this work,” she said. “That doesn’t mean our ability to do it ourselves is not off the table at some point in the future, but for now our Housing Equity Fund is aimed at supporting existing organizations.”

Dan Watson, the KCHA’s deputy director for development and asset management, said his agency has been working with Amazon and Microsoft for several years to preserve workforce housing.

“The focus of these companies is to address the shortage of median price rental housing in the greater Seattle area, though they’ve helped in other ways, too,” he said. “In our case, we’ve focused on preservation of naturally occurring affordable housing, which is older complexes in high-amenity communities that usually have good schools that give lower income working people more opportunities for their kids. One big emphasis in this preservation program is around transit-oriented development sites, the light rail stations that are being created in the Seattle area along with bus rapid transit.”

Playground area in a city park

Photo courtesy of King County Housing Authority

Apartment complex, King County, WA

Photo courtesy of King County Housing Authority

With financial aid from Microsoft and Amazon, he said his agency has preserved around 2,000 units of rental housing, primarily on the east side of King County in what is known as the tech corridor.

He said Google is planning a campus with substantial office development next to a bus rapid transit site in the city of Kirkland that will include a lot of high-density housing. The housing authority owns an older, 30-unit complex on three acres in Kirkland that could be redeveloped into 400 affordable housing units.

In addition, he said Microsoft has been working with Bellevue and other cities on their land-use plans and helped forge an agreement between the affordable housing community and developers in Bellevue.

Watson said the work his organization does isn’t necessarily for tech workers who are often paid well. In King County, market-rate apartments are fairly pricey and two-bedroom units in nicer areas can cost up to $4,000 a month. “The challenge in places like Bellevue and Seattle is for workers in all the tertiary businesses and their employees, like the barista or the wait staff at the restaurants or the folks who wash the windows or the janitors.

“In our view, the real impact that needs to be dealt with is not so much for the tech company workers. The private market will take care of most of them with often high-end lifestyle rental housing that they can afford. Rather, it’s the affordable and workforce housing for all the service and other workers that come part and parcel with the region’s 25,000 well-paid tech employees.

“When you start talking about teachers, for example, school districts are having a tremendous amount of trouble retaining them in high-cost areas because they probably want to own a home and the prices put that out of reach for them.

“Lower-paid workers often end up living 30 or more miles away and have to commute to cities like Bellevue, which nearly doubles in size every day from 122,000 to more than 200,000.

“When we are recruiting folks from outside the region — unless it’s wealthier parts of California — there is often a good deal of sticker shock over the cost of housing, particularly if they are coming from the Midwest.”

Though housing prices are less than the Bay Area, Watson said King County — in which Seattle is located — is catching up fast. “We kind of follow the Bay Area in terms of our housing challenges, so it’s not at all dissimilar. People from the Bay Area come up here and think it’s a lot more affordable with the same kind of amenities, which seems ironic in a way.

“Unless you recruit from the Bay Area, it can be hard to attract workers without affordable housing. And there are a lot of long commutes when it comes to wanting to own a home. They have to move quite a far distance from where they work unless they bought in 15 to 20 years ago.”

Watson said he does not believe enough is being done to create workforce housing in the face of the overwhelming demand. “The number of dollars required to get to levels to assure stability in the housing market for people of average or below average means is astronomical.

“It’s a good news/bad news conundrum of having a strong economy on parts of the West Coast. And the down side is it makes it hard for many to find affordable housing near their jobs. In King County, we have something like 300,000 households who are paying more than 50 percent of their income in rent, which is considerably above the correct proportion.”

Watson said in some European countries, as much as 30 percent of the apartment stock is some kind of “social housing” that is disconnected from the private market, “so it’s not investors trying to make a return. It’s usually a nonprofit or governmentally formed organization that acts more like a benevolent landlord.

“And it’s not that this country doesn’t spend a lot of money on housing because there are a lot of subsidies direct and indirect. Effectively, the biggest housing subsidy is the interest right off on a single-family home mortgage. That costs the treasury more than anything else. But we certainly need to do more in terms of workforce and affordable housing.”

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