Big Tech’s Affordable Housing Push Doesn’t Let Them off the Hook

Putting the proper context around Microsoft announcing $475 million in loans to develop affordable housing in the Seattle region the company calls home.

Microsoft Corp. President Brad Smith, second from right, talks to reporters as Seattle Mayor Jenny Durkan, third from right, and King County Executive Dow Constantine, right, look on, Thursday, Jan. 17, 2019, following a news conference in Bellevue, Wash., to announce a $500 million pledge by Microsoft Corp. to develop affordable housing for low- and middle-income workers in response to the Seattle region's widening affordability gap and to also to address homelessness. (AP Photo/Ted S. Warren)

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For affordable housing developers who need to move federal Low-Income Housing Tax Credit projects forward, January has been frustrating. Calls and e-mails to HUD are met with the “sorry we’re furloughed” soundtrack of the government shutdown.

No one answering the phones at the Weaver Building in Washington, D.C. is a potent symbol of the depressing state of affairs for public sector responses to the U.S. affordable housing crisis. The federal lights are off, which further precludes a meaningful congressional debate about anything resembling a national housingc plan or policy. Meanwhile, local elected officials heed the NIMBY interests of current constituents to block affordable housing for future residents. The end result: government and the electorate at all levels are currently proving themselves not up to the task of providing the estimated 7.2 million homes needed for families unable to afford market-rate housing.

Enter Microsoft, which this week announced $475 million in loans for middle- and low-income affordable housing in greater Seattle. The tech giant, based in suburban Redmond, will also give $25 million in grants to support homelessness efforts like the formation of a new public agency between the City of Seattle and King County, the surrounding jurisdiction, where the homeless population is the third largest in the U.S. Finally, the company will lobby local governments to relax regulations that inhibit housing construction and lean on Washington state legislators to double the $100 million housing trust fund.

Microsoft’s move comes on the heels of Oakland-based Kaiser Permanente’s $200 million affordable housing investment, the Chan-Zuckerberg Initiative taking up the cause, and Salesforce’s CEO throwing his weight behind San Francisco’s recently passed city tax on big business to fund homelessness services.

With all of these steps in the New Gilded Age’s school of philanthropy, Big Tech is increasingly focused on housing policy. That attention is welcome news for local officials overwhelmed by the affordable housing and homelessness crises on their doorstep, for which tech companies are partly to blame.

“I’ve been very clear that for us to take on a challenge of this scale, it needs to be an all hands on deck effort,” said King County Executive Dow Constantine on Thursday at a suburban Seattle theatre where Microsoft unveiled its plan. “The significance of today is that it is a breakthrough in making that partnership real.”

Close watchers of the tech sector believe Microsoft’s unprecedented announcement will prompt others.

“This is a bold move by Microsoft and it certainly throws down a challenge for other companies — especially crosstown rivals Amazon — to up their game,” University of Washington business historian Margaret O’Mara tells Next City. (When queried, Amazon pointed to its existing plans to house a 65-unit homeless shelter in one of its new Seattle buildings, but did not indicate any financial commitment to fund affordable housing.)

“This recognition is particularly significant considering the heads-down, it’s-all-about-the-tech focus that computer hardware and software companies have had historically,” O’Mara says. “Their leaders might have become great philanthropists, but tech companies have never become players in regional affairs like we are seeing today.”

Microsoft’s $225 million in below-market-rate loans for middle-income housing will plug a much-needed gap as Washington state’s constitution prohibits loaning public dollars for all but the poor. The other $250 million will be allocated at market rates to finance low-income housing through federal Low-Income Housing Tax Credits.

Affordable housing advocates commended Microsoft for its announcement but were also careful not to overstate the significance of the contribution.

“It’s not a new dollar in the system, it’s a cheaper dollar,” says Rick Jacobus, principal of Street Level Urban Impact Advisors. “The constraint for affordable housing is subsidies.”

If the Washington legislature doubles the state housing trust fund — a source of subsidies for affordable housing — that would arguably have a bigger impact than Microsoft’s revolving loan fund. And while Microsoft’s lobbying suggests that the company understands the need for a continued public sector push to make up the 305,000-unit affordable housing deficit in the Puget Sound region, Jacobus cautions that corporate largesse could breed complacency.

“If [Microsoft’s announcement] causes us to lessen our call for public investment then it has a negative effect,” Jacobus says. “We have to be sure not to fall into a false sense that giant corporations are going to take care of this problem.”

The problem is both regulatory and fiscal. “Washington state’s lack of a state income tax and California’s Prop 13 have starved the public sector of revenue, and zoning and land use laws make it nearly impossible to build anything, especially multifamily housing,” O’Mara says. “This is how this mess began, and changing it is how it ends.”

Both Constantine and Seattle Mayor Jenny Durkan pointed to the hundreds of millions their jurisdictions are already investing in affordable housing, but neither elected official nor Microsoft President Brad Smith was willing to comment on a state income or capital gains tax. Durkan also remained mum on the city’s groundbreaking big business tax to fund affordable housing that went down in flames under pressure Amazon, local businesses, and conservative grassroots efforts.

While Smith did not acknowledge that Microsoft’s decision was a direct response to the big business tax debate that engulfed Seattle last year, he did indicate that the company’s housing plan emerged from the Challenge Seattle business roundtable chaired by a former Washington governor, which began meeting in earnest shortly after the issue led to raucous protests citywide.

That connection gives National Housing Trust president Priya Jayachandran slight pause amid an otherwise rosy announcement.

“The only risk is that business argues they don’t need to pay these taxes because they are doing it on their own,” Jayachandran says. “Let’s not let business off the hook. We still need government to be doing a whole lot more.”

That need is especially true nationally, says John Duda of the Democracy Collaborative.

“Robust publicly funded programs at the local, state, and federal level, with a clear orientation towards equity and inclusion, are a key part of making sure that every community — not just those with a munificent tech giant in their backyard — gets the resources they need to tackle challenges around housing,” Duda says. “Philanthropic investment in affordable housing can be important, but community control of land and housing needs to be the end result of those investments.”

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Gregory Scruggs is a Seattle-based independent journalist who writes about solutions for cities. He has covered major international forums on urbanization, climate change, and sustainable development where he has interviewed dozens of mayors and high-ranking officials in order to tell powerful stories about humanity’s urban future. He has reported at street level from more than two dozen countries on solutions to hot-button issues facing cities, from housing to transportation to civic engagement to social equity. In 2017, he won a United Nations Correspondents Association award for his coverage of global urbanization and the UN’s Habitat III summit on the future of cities. He is a member of the American Institute of Certified Planners.

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