Will Google, Amazon and Facebook fix the affordable housing crisis?
SAN FRANCISCO — From atop his gleaming new headquarters, Salesforce CEO Marc Benioff has an inspirational view of mountains, the bay and an endless Pacific Ocean.
But when Benioff looks down, he’s not so happy.
Some 60 floors below his Salesforce Tower offices is what he calls “an inequality train wreck,” city streets "out of control" with thousands of homeless and often infirm citizens who have rendered sidewalks a landmine of feces and drug paraphernalia.
Many have been destitute for years, but others are newly minted refugees of a housing crisis created in large part by the very technology boom that has made Benioff and other tech entrepreneurs billionaires many times over.
That’s why Benioff, along with some of his tech peers and civic leaders, say it’s time for corporations in general, and tech companies specifically, to contribute financially toward fixing a problem that looms large from Seattle to Boston.
Activists, meanwhile, warn that housing stock has lagged so severely in some cities that even huge infusions of cash will struggle to make an impact.
San Francisco's woes are particularly acute. Its housing stock is a quarter of its need, which has led to real estate prices that are among the highest in the nation. Some 15,000 tech positions were added in the city in 2016 and 2017, according to a report from brokerage firm CBRE.
Seattle, another tech hub, has experienced the same housing deficit phenomenon, all while local tech powerhouses Amazon and Microsoft helped create 33,000 new tech jobs in 2016 and 2017, the CBRE report says.
And as Amazon moves into Northern Virginia and Apple into Austin, local lawmakers and housing experts there are keeping careful watch on how an explosion of technology jobs will hit their communities.
Across the nation, the influx of high-paying jobs in areas with limited housing has sent housing prices soaring for local residents.
Since 2010, median home values in San Francisco have doubled to $1.37 million, according to Zillow. Seattle and Boston also doubled, to $730,000 and $600,000 respectively. Austin jumped from $212,000 to $364,000 in that time period.
Benioff, whose family has been in San Francisco for generations, says more foresight should have gone into managing the tech explosion.
“There’s been really poor planning in our state and our cities,” Benioff says with measured anger.
“Look at Paris, they build social housing into their city,” he says. “You can have an amazing economy with high-end residences but also accommodate everyone. You just have to plan for all income types. The government has to step in, and companies have to help.”
The housing crisis must be addressed by a careful collaboration between politicians, advocacy groups and corporate entities, says Corianne Scally, principal research associate with The Urban Institute in Washington, D.C.
“There is no magic solution,” says Scally. “Companies need to understand the pressure they are creating, particularly when taxes levied on them aren’t covering their impact when you take into account the tax incentives that they get for setting up shop.”
Some already digging deep
Many tech giants say they are already reaching into their pockets to fund affordable housing solutions.
Google has donated $3 million toward homelessness solutions being proposed by San Francisco Mayor London Breed. A spokesperson for the search giant said it had “granted over $250 million since 2014 in the areas of homelessness, economic opportunity and education.”
In mid-January, Microsoft revealed that it was going to allocate $500 million toward housing initiatives around its Seattle-area headquarters. In a blog post trumpeting the news, Microsoft president Brad Smith and CFO Amy Hood said the move was spurred by a realization that “this is a big problem, and it’s a problem that’s only going to get worse.”
Microsoft said because jobs have grown 21 percent since 2011 while housing has only expanded by 13 percent, the company would be investing $225 million toward building middle-income housing, $250 million to support low-incoming housing, and $25 million in grants to help those tackling homelessness issues.
About a week after Microsoft laid out its plan, a San Francisco corporate consortium calling itself Partnership for the Bay Area’s Future announced it was halfway toward a goal of raising $540 million.
The Partnership's investment fund is aimed at providing financial assistance toward a goal of building 8,000 new housing units across the Bay Area in the coming years. Its policy fund will support initiatives to preserve and expand housing, with a particular focus on strengthening low-income tenant protections to guard against landlords evicting low-income renters so they can charge higher rates.
Preserving affordable housing also is a mission of newly installed California Gov. Gavin Newsom, who has made housing a top priority. He recently sued the Southern California city of Huntington Beach for resisting efforts to build affordable housing.
Ultimately, civic leaders and some tech leaders warn that ignoring housing issues is bad for business. San Francisco’s homeless problem already has caused some companies to plan lucrative conventions elsewhere, and an inviting urban core also is considered a key recruiting tool.
“A place like the Bay Area is very diverse and vibrant, which is why companies want to be here and hire here,” says Caitlyn Fox, director of Justice and Opportunity for the Chan Zuckerberg Initiative, the foundation started by Facebook founder Mark Zuckerberg and his wife, Priscilla Chan.
The foundation is part of the new Partnership for the Bay Area’s Future, along with Facebook, the Ford Foundation, Genentech, Morgan Stanley and others.
“We all came to the Bay Area because of its promise, and now we have a stake to ensure that promise remains for all,” says Fox. “Because that’s being threatened.”
Will Amazon match Microsoft?
It is not uncommon for tech companies flush with cash to create programs aimed at placating communities where they operate.
Apple, which built a new billion-dollar headquarters in Cupertino, California, a few years ago, said it had contributed to $1.8 million to area bike lanes, and added that in 2018 its employees had donated more than $125 million to non-profits around the world.
Representatives at the iPhone-maker would not say whether it has plans to work with local officials on housing issues, including in Texas, where Apple’s plan to build by 2021 a new 133-acre campus in Austin would make it the largest private employer in the city.
In Seattle, Amazon said it has donated $40 million to Mary’s Place, a local homeless shelter. Working with the non-profit, Amazon has created two temporary homeless shelters on its campus, which will become permanent in 2020.
But Amazon also has come under heavy fire for contributing to rising inequality in Seattle, as well as for successfully killing a head-count tax on employees — $275 per worker on companies making more that $20 million a year — that would have raised money partly for affordable housing.
“When Microsoft announced their news, the feeling here was, ‘OK, Amazon, what are you going to do?’” says Jeff Shulman, a marketing professor at the University of Washington who has been studying Amazon’s impact on Seattle’s growth.
Shulman notes that Amazon has been good for the area not only in terms of tech jobs but also “jobs at every level, particular in terms of people moving here to serve Amazon employees.”
But, he adds, such cafeteria workers, janitors, teachers, child-care workers increasingly find themselves priced out of the areas in which they work, resulting in endless commutes along clogged roads.
“Tech companies need to lure talent, and for those employees quality of life includes where they live, how they get to work, where their kids go to school and even cultural amenities. But the housing crunch is pushing all but those paid big tech salaries far away," says Shulman.
And just recently, Amazon abruptly pulled out of plans to build part of its new headquarters in the Queens borough of New York City after politicians and activists there raised questions about the company’s financial commitment to the region while receiving $3 billion in subsidies.
Real estate agents in New York had already starting seeing evidence of an “Amazon effect” on prices just as a result of the announcement that the everything-store tech behemoth was moving to New York and Virginia.
Michelle Winters, executive director of the Alliance for Housing Solutions in Northern Virginia, says so far Amazon has not said how it plans to help beyond bringing thousands of jobs to the area. She remains optimistic, but fears the worst.
“You could have dual impacts,” says Winters. “One is the immediate local impact near campus, where there might be a large-scale displacement of residents who have been there for generations. And the other is a broader regional impact, where affordable homes are only available in outlying area, with a negative impact on traffic that creates a poorer quality of life.”
In San Francisco, Fernando Marti, co-director of the Council for Community Housing Organizations, a non-profit that crafts affordable housing public policy, says he is grateful for the newfound corporate focus on the housing crisis, but is also skeptical about whether the gestures are too little, too late.
Marti points out that, for one thing, in the Bay Area even $500 million doesn't go far. Consider that at an average home-building cost of $300 per square foot, a new 1,500-square-foot home would cost $450,000 to construct. That means $500 million would only build 1,111 new homes.
“I remain optimistic that more will be done by these companies,” says Marti. “It’s all tied together in the end, housing and education and quality of life, and all of that, if not resolved, affects their ability to do business.”
Most can't afford California
Indeed, the California Dream is proving increasingly elusive, especially for younger residents.
A recent Quinnipiac University poll indicated that 43 percent of California voters said they couldn’t afford life in the state, while 61 percent of 18 to 34 years old living in the world’s fifth largest economy said it was beyond their means.
In Silicon Valley's backyard, only high-end housing needs in San Francisco have been met over the past four years ending in 2017, according to CASA, the Committee to House the Bay Area. In contrast, over the same period, low-income and middle-income housing demand outstripped new housing supply four to one.
One solution may well be to leverage technology itself to make housing construction more affordable.
That’s the mission of Factory OS, a new company (OS stands for off-site) just north of San Francisco that takes an automotive assembly line approach to building. OS builds apartments in its factory at around a 30 percent costs savings over on-site construction.
Factory OS already has an order from 300 small apartments from Google, which is looking to add short-term housing options for employees who come to its Mountain View, California, headquarters to work on projects.
Company CEO Rick Holliday says he was forced to innovate due to the pressures he’s facing from the very housing shortage he’s hoping to alleviate.
“We’re in a mess, and part of the issue is my own labor shortage,” says Holliday, who said between unaffordable Bay Area housing and younger workers not getting into building trades, he has lost 30 percent of his workforce in recent years.
“We need to tackle hard costs and get more housing out of those dollars," he says. "Tackle those costs, get Sacramento politicians engaged and ask tech companies to engage. You do those three things, and you might make a dent.”
Tech leaders are far from reaching a consensus on how — and even whether — to pay for affordable housing.
Benioff, for example, was a huge backer of San Francisco's Proposition C, which passed in November. It stipulates that any company with revenues over $50 million would be charged 0.5 percent on income over that mark. So if you pull in $55 million one year, you’d be assessed $25,000 in Prop C taxes.
While that's a small amount for many of the roughly 400 area companies affected by the law, supporters estimate that the city will be able to collect around $300 million a year from the tax.
That money would go toward 1,000 new beds for the city's homeless and also over time allot $150 million to 4,000 new housing units dedicated to lower income families.
But the San Francisco Chamber of Commerce, along with some tech entrepreneurs, opposed the measure, arguing that the tax could drive companies away from San Francisco. Benioff and Twitter founder Jack Dorsey even got into an online feud over the matter, with Dorsey predicting that smaller companies would get disproportionately hurt by the measure.
The city has started to collect these taxes, but nothing has yet been distributed because the measure is facing a court challenge as it did not pass by a two-thirds majority.
Benioff hails Proposition C is an example of how big change can come from public-private partnerships. Ultimately, however, he said a solution can't be reached if multi-billion-dollar tech companies don't see pitching in on housing as a fundamental part of their corporate responsibility.
"Homelessness is my number one priority," says Benioff. "It's about getting San Francisco cleaned up again."