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Tech Giants Like Facebook, Google Are Building Homes To Assuage Housing Concerns. Will Amazon Do The Same?

Residents across the country are grappling with a lack of housing stock and spikes in costs of living spurred by high-paying tech giants like Amazon and Facebook dominating their markets. 

To help assuage concerns regarding a lack of affordable and workforce housing, major tech players like Facebook, Google and LinkedIn are venturing into real estate to provide their talent with an affordable place to live.

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As Seattle continues to watch its housing market surge with the Amazon effect, questions abound about what may happen to the housing market in its future HQ2 location and what steps — if any — Amazon may take to accommodate its 50,000 new employees.

“I have to imagine they would be thinking about providing housing in some way. If you look at cities such as New York or Los Angeles where they have an established multifamily base and have already seen high rent across the past decade or so, in those cases Amazon will be a lot more pressured to act regarding its workforce and affordability,” KIG CRE Data Analytics Associate Jacob Albers said.

A Rapid Rise In Housing Costs

In tech regions like San Francisco, rental costs have increased nearly 50% in less than a decade while home prices have increased 98%, CNBC reports. In Silicon Valley, the cost of living is so high that even people making more than $150K annually can qualify as low-income in some cases.

Seattle witnessed a similar trend after Amazon moved into the area, and while the e-commerce giant has been credited with pumping nearly $40B into Seattle’s economy since 2010, it has also been pinpointed as one of the causes of the housing market's lack of affordability. In the last five years, Seattle home prices have jumped 78%, The Seattle Times reports.

This jump could be faster and even more significant in the city that wins Amazon's second headquarters due to the unprecedented number of employees it hopes to hire. 

“It took 20 years of development to get where we are now with Amazon having sent housing and rental prices surging in Seattle, but I think with HQ2 it’ll be a lot faster because Amazon is a known quantity now so that timeline could be cut in half or even a third,” Albers said.

Creating Affordable Housing In Unaffordable Markets

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To assuage housing cost concerns, Alphabet, Google’s parent company, is creating modular housing for 300 of its employees at a cost of approximately $30M. Using prefab housing limits construction costs, which means rent can be significantly cheaper than existing housing. Factory OS — the company from which Alphabet will order homes — estimated tenants can save as much as $700/month on rent by living in a prefab home rather than a unit currently on the market, CNBC reports.

In addition to offices, retail and parks, Google's 3.6M SF Mountain View development will include affordable housing. Approximately 20% of those built on the campus will be priced at below-market rates. The homes will range from studio apartments to three-bedroom units, according to Business Insider.

Facebook has taken a similar stance and recently pledged to develop 1,500 units in Silicon Valley’s Menlo Park area — home to the Facebook campus. Approximately 15% of those units will be designated for affordable housing.

LinkedIn has taken a slightly different approach, but has invested $10M in a project led by Bay Area nonprofit Housing Trust Silicon Valley. The project has since been coined TECH Fund and will work to provide short-term loans to affordable housing developers to incentivize them to quickly purchase property and compete with other developments, according to Business Insider.

Will Amazon Build Housing For Its HQ2 Employees?

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Amazon's Seattle campus

The South Lake Union area of Seattle, home to Amazon’s headquarters, was transformed from a post-industrial district to an amenity-rich area ripe with high-rise developments within a decade — a trend that Sharestates CEO and co-founder Allen Shayanfekr said is common when it comes to burgeoning tech areas.

But much like Silicon Valley and San Francisco, with the development and job boom came annual rental increases of approximately $5 more a month for a 650 SF one-bedroom apartment between 2011 and 2015, according to Zillow.

Despite this increase, there has been no move on the part of Amazon to create affordable housing for its staff or residents in the vicinity. Sources told Bisnow the situation could vary for the region that wins HQ2, depending on the size of the city.

“With smaller cities, their infrastructure will really be put to the test. But with larger cities, particularly the ones that are already rent-burdened, it’s just going to exacerbate the income and affordable housing crisis already present in those areas. Those two ends of the spectrum are probably going to be the hardest for local people to be able to cope [with] in terms of the burden they’ll feel on their lives,” Albers said.

This means that whether Amazon ultimately decides to build affordable housing or not, the cities best equipped to deal with the economic change spurred by HQ2 will be the midsize markets. 

"Those midsize cities like Chicago and Dallas have a balance between good infrastructure, but don’t necessarily have the rent-burdened issues that larger cities do,” Albers said. 

Wherever Amazon chooses, city officials will need to be strategic in their efforts to support residents, Shayanfekr said.

“The city will have to adjust quickly in order to accommodate growing housing needs and support the required infrastructure,” he said.