An Unlikely Alliance: Big Tech and Affordable Housing
By Nooh Palizi & Dylan Panahy
California in Crisis
From 2007 to 2016, 5 million people left California. You might think that they’re leaving in search of work, but in fact California has a comparatively high rate of job growth compared to other states. Despite that, in 2018 alone, 691,000 California residents left the state due to high rents and housing costs despite consistent job growth.
These are unprecedented numbers; but why are people leaving? And can anything be done to retain them?
People are flocking away from the state to places as varied as Texas, Arizona, Nevada and Oregon. It seems like we are constantly going in a circle regarding what we need to do in order to drive housing costs down and keep longtime California residents in their homes.
Without a doubt, housing is a huge issue throughout the state, but where it is most relevant is within the coastal urban cores, particularly the Bay Area. Some of the most expensive counties are within the Bay Area, Marin included, but particularly counties containing huge tech companies such as Santa Clara or San Francisco. In these job-rich housing-poor regions, we are increasingly seeing an interesting phenomenon.
The Bottom Line
Tech giants like Facebook, Apple, and even JP Morgan are increasingly making contributions for additional affordable housing in the Bay Area. JP Morgan alone has made $22 million in donations for affordable housing with a five-year $75 million commitment. Apple is donating $2.5 billion to the state of California to create affordable housing. Facebook has already given $1 billion to the state as well. We’ll break down where these funds are going later.
But why do they care about affordable housing, you might ask? Simple.
It is in these companies economic interest to have cheaper labor, and ever-increasing unaffordability has continuously driven up cost of living and therefore wages. This hurts big tech companies pockets, so much so that they’d rather spend billions to alleviate the housing glut than continue at the status quo. As corporations, they’ve examined each option and determined the former to be most profitable in the long term.
But what are they actually doing to increase housing supply?
Here’s where it gets technical.
The areas where this JP Morgan investment is projected to impact most are San Francisco and Oakland. What JP Morgan expects with that $22 million is the preservation of existing housing and the creation of more than 2,250 units. $15 million will go towards Housing for Health Fund in the form of low costing, long term loans. Another $6 million will go to preserve the affordability of small site properties in the City and County of San Francisco.
Apple’s Tim Cook who worked alongside California Governor Gavin Newsom is taking a huge step together for affordable housing. Apple plans on donating $2.5 billion for affordable housing in the Bay. The breakdown of Apple's $2.5 billion donation is as follows.
Approximately $1 billion will go to the state of California in a first-of-its-kind affordable housing fund that will provide the state with an open line of credit to develop and build additional new, very low- to moderate-income housing faster and at a lower cost. Another $1 billion will help first-time home-buyers with mortgage assistance. This first-time home-buyer fund will provide aspiring homebuyers with financing and down payment assistance. Apple and the state will explore strategies to increase access to first-time home-ownership opportunities for essential service personnel, school employees, and veterans.
Apple also intends to make available land it owns in San Jose worth approximately $300 million for the development of new affordable housing.
The list continues, with Facebook’s donation of $1 billion. Facebook intends on working with the state by using $250 million to develop mixed income housing on state-owned land in under-supplied communities. Another $150 million will go to the Bays Future Fund for construction of affordable housing in San Francisco. Another $225 million in previously purchased land in Menlo Park was also donated to produce more than 1,500 units of mixed income housing. $25 million will go toward the construction of housing on county-owned land for teachers and other “essential workers” in partnership with Santa Clara County. The remaining $350 million will be dispersed as “additional commitments based on the roll-out and effectiveness of the initiatives described above.”
This will all be initiated in the span of over 10 years.
Can Big Tech solve the ongoing housing crisis that the Bay Area faces today? Almost certainly not alone. I believe it's going to take the local politics and companies cooperating to really bring the necessary affordable housing people need.