Google recently announced its $1 billion+ commitment to increase housing in the Bay Area.
The promised money won’t be in the form of straight cash. Of this $1 billion promise, $750 million will come from land Google currently owns, to be repurposed for housing. Google estimates the amount of land it’s devoting to the project will house roughly 15,000 new units, to be built over the next ten years. They propose these units will be available to “all income levels” of Bay Area residents, though the final number of affordable housing units built will be up to the private developers who bid on the projects.
Google is also promising to establish a $250 million investment fund to help developers finance 5,000 affordable housing units across the region. Finally, they will give $50 million in grants to nonprofits focused on assisting the Bay Area’s homeless population.
However, rest assured that Google’s move is not quite as generous it seems, as land it gifts for the construction of housing may be used as a tax write-off. Further, the broad promises and lack of detailed plans have many questioning how Google is going to spend its money and whether it will actually make a mark on the region’s housing crisis.
Still, Google’s announcement is in sharp contrast with Amazon’s behavior over the past year, as it forced dozens of U.S. cities to compete for the location of their next headquarters. In return for the promise of more jobs, Amazon sought tax breaks and other incentives. Instead of asking for more, Google is now trying to do its part to alleviate a housing crisis it helped create.
More jobs, more housing
Since Google started in the Bay Area, it has created 45,000 jobs in the region. Not all of these jobs have gone to current residents, so where do these new workers live?
When more jobs come to a region, one can expect more people will want to move there. The Bay Area already has some of the longest commutes in the country, especially for lower-income workers like those who work in the service and retail industries, and even essential employees like first responders and teachers.
But over the past two decades, housing growth has fallen far behind the pace of job additions in the Bay Area, and pretty much everywhere else in California. For every four new residents moving to California between 2010 and 2016, just one new housing unit was constructed, according to Redfin. Worse, most of this construction is located in the mid- and high-price tiers, meaning very few units affordable to low-income households have been constructed.
As a result, home prices and rents have increased more quickly than incomes, meaning residents are forced to spend a significantly higher portion of their paycheck on housing each month. The other option — one that more households are increasingly forced to take — is to move further away from jobs, into the suburbs. For example, just 2% of San Jose homes for sale and 1% of San Francisco homes are affordable on a teacher’s salary. For comparison, 17% of homes are affordable to the average teacher’s salary statewide.
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Why hasn’t housing been able to keep up with new jobs across California, and especially in the Bay Area?
The culprit is a lack of residential construction, due to a variety of factors, including:
- tight zoning restrictions in job-heavy areas;
- a lack of builder incentives to build low-tier housing; and
- long and costly building permits and environment review processes.
This begs the question — if new residential construction is lagging behind job creation and business growth, do the private businesses involved have any obligations to get involved like Google is doing?
Housing: Public or private issue?
Some might claim that businesses are already doing their part. For example, the taxes that businesses — and their employees — pay contribute to government-funded housing efforts. But is this enough?
As traditional as the separation of church and state, housing has long been the issue of governments, while the business of businesses are profits and investors. However, as the CEO of San Francisco-based Salesforce acknowledges in a 2018 editorial, businesses like his “are part of our community and our community is in crisis.”
In this editorial, he describes how the increasing homeless crisis is scaring away tourists and other visitors. He says businesses are less likely to consider San Francisco as a home base when the crisis makes it so that there are no safe places to live. As a solution, the author encourages voters to pass Proposition C, which charges a 0.5% tax on the city’s biggest businesses (charged on any money generated over $50 million in annual revenue in the city).
In November 2018, voters did just that, and the city began collecting money from San Francisco’s largest businesses. However, due to legal challenges, the city has held off on spending the funds to help the homeless. Even when a judge dismissed a major lawsuit by the Howard Jarvis Association (the same folks who champion the controversial tax initiative, Proposition 13) in June 2019, the city is still afraid to spend the money due to threats of future legal action by the organization.
Meanwhile, the city’s homeless crisis continues to worsen, and residents’ quality of life remains in decline.
Glancing further up the income spectrum, high housing costs themselves are enough to deter businesses from investing jobs in California’s high-cost areas. They realize that in order to do business in the state, they will need to pay their employees enormous salaries so they can afford a decent standard of living. This suggests that more housing is needed not just to make this a more livable state, but to give jobs and the economy a boost.
The easiest solution that encompasses the most issues plaguing California’s housing market is to ensure more residential construction. Ideally, the government would take care of everything, including allocating funds, amending zoning regulations and encouraging building by removing barriers to construction.
But government efforts have fallen short, bullied into submission by lawsuits and vocal not-in-my-backyard (NIMBY) advocates. It’s time for businesses big and small to step up, or else watch their communities continue down an unsustainable path.
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This article oversimplifies the entire issue of jobs-housing imbalance, and makes it seem like building more “supply” will bring down housing prices and increase affordability (it doesn’t). One question that should be asked is whether companies should be looking to “housing rich” areas to expand instead of trying to cram more jobs into the same area. Continuing to do so also squeezes out other businesses, making the local economy less diverse and more precarious – think what would happen if Google was to fail, however unlikely, to Mountain View, or if Apple was to take a dive, to Cupertino.
It also missed one of the biggest issues in the Bay Area – HIGH CONSTRUCTION COSTS (separate from permitting fees, which really should NOT be reduced because developers must bear some of the cost to improve infrastructure, rather than placing the burden on residents). Local cities have approved permits for projects yet they are not being built, so zoning and NIMBY’s is NOT the issue. It’s because there is so much construction going on now, construction workers are in tight supply and can charge a premium, making a project not pencil out for now.
While providing housing to the public at large is not a private-sector issue, there is a long history of companies building homes for the use of their workers. We had it here in the states and I’ve seen an entire city built up around a factory in Scotland.