Microsoft wants to be a better neighbor, and it’s putting its money where its mouth is.
Big tech companies in West Coast cities have been like McMansions on modest suburban streets. As new workers and big salaries have flooded housing markets, many longtime locals have blamed the tech behemoths for “ruining” their city instead of celebrating the job creation.
Microsoft hopes to push back by devoting a half-billion dollars to develop affordable housing.
Microsoft is committing $500 million to kick-start new solutions to advance the construction of new affordable housing. While this is an important step, it’s just the beginning. We all need to work together to solve this crisis. #affordablehousing https://t.co/zeq6Sr67eL
— Brad Smith (@BradSmi) January 17, 2019
It shared its intentions in a blog post:
Today, we are committing $500 million as a company to advance affordable housing solutions. We’ll put this money to work with loans and grants to accelerate the construction of more affordable housing across the region. We will invest:
$225 million at lower than market rate returns to inject capital to subsidize the preservation and construction of middle-income housing. These investments initially will be made in six cities east of Seattle and Lake Washington: Bellevue, Kirkland, Redmond, Issaquah, Renton and Sammamish.
$250 million at market rate returns to support low-income housing across the entire King County region. We believe that additional capital at market lending rates can help accelerate the construction of low-income housing across the region.
$25 million in philanthropic grants to address homelessness in the greater Seattle region. We are announcing today the first $10 million of these grants. This will include a $5 million philanthropic grant to the newly announced Home Base program created by the Seattle Mariners, the United Way of King County and the King County Bar Association.
In its announcement, Microsoft explored why housing is such an important issue for the Seattle area:
Median income in the region hasn’t kept pace with rising housing costs, increasingly making it impossible for lower- and middle-income workers to afford to live close to where they work. Teachers, nurses, first responders and many in key roles at nonprofits, businesses and tech companies now begin and end their workdays with long commutes. And people who are homeless face problems that are even more daunting.
We’ve been working the past eight months to learn more about how best to help address this problem. We’ve put one of our world-class data science teams to work, and it has partnered with Zillow to access more data on the region. We’ve also worked with the Boston Consulting Group and Challenge Seattle to learn more about best practices – not just across the country, but around the world.
The company president explained the campaign to consumers.
“The housing situation in the Puget Sound region has reached a point where it’s appropriate to use the word ‘crisis,’ ” Microsoft President Brad Smith told NPR member station, KUOW, on Thursday.
“The lack of available housing is forcing many people — the schoolteachers, the nurses, the first responders, many others who work at companies — to endure longer and longer commutes. And we have even far worse problems for people who are homeless,” Smith added.
[…]Smith noted the long-term aim of the company, which is headquartered in the Seattle suburb of Redmond, is to ensure lower- and middle-income workers can continue to live close to where they work, instead of being priced out.
“I think when you take people who play vital roles in a community and you force them to live in another community it really saps the vitality for all of us,” Smith said.
The plan coincides with Microsoft’s growing footprint in the Seattle area, which includes adding 8,000 jobs.
The Seattle Times reported the software company is adding about 2.5 million square feet in new construction to the Redmond campus and plans to renovate another 6.7 million square feet.
According to Microsoft, it began working on the plan eight months ago, which means it preceded the Seattle City Council’s failed head-tax effort last year. The proposed tax would have required big businesses to help fund affordable housing and homeless services. But Amazon, the city’s other tech giant, was instrumental in killing that effort.
Microsoft has called on state lawmakers to play an active role in solving the problem.
It shared in its blog:
We believe the state government has an important role to play as well. In the state legislative session that began this week, we’ll encourage the legislature to support the private sector by making additional housing investments and through policy changes to preserve and develop affordable housing. These recommendations include a $200 million appropriation to the Housing Trust Fund to expand support for very-low-income individuals and families, which would almost double the investment from the last budget cycle. In addition, we will support condominium liability reforms, extending the Multifamily Tax Exemption (MFTE), and new incentives for local communities to enact more efficient land use polices.
If we’re going to make progress, we’ll all need to work together as a community. We recognize that Microsoft is in a unique position to put the size of its balance sheet behind this effort. But we believe that every individual and every business, large and small, has a responsibility to contribute. This includes new initiatives to share data on where jobs are being created and the home locations and commuting distances for employees. It also includes new work to develop the detailed public policy changes that will be needed to provide more affordable housing.
On Twitter, the move got kudos:
Congratulations @Microsoft & @satyanadella on this initiative to tackle #affordablehousing. This is a crisis we must solve and it’s great to see your leadership in ensuring our communities allow everyone to thrive! Thank you! https://t.co/5J8QiDy28X
— Chuck Robbins (@ChuckRobbins) January 17, 2019
I’ve traveled to every corner of the state to look at housing, and every time I learn something new about the need for expanded affordable housing options. I'm thrilled to see @Microsoft pledge this significant investment in our communities.https://t.co/A5C2nPUk4I
— Sen. Maria Cantwell (@SenatorCantwell) January 17, 2019
Employees also responded positively:
Hey Brad, as a long time employee, I love it when Microsoft gets involved in our communities.
I think tech companies like ours need to reassess our tendency to clump so many employees into one city. We should collaborate remotely, let new hires work from their home state.
— 👞e🐶 .o○○o. (@shueybubbles) January 17, 2019
Well done @BradSmi . More companies should show this kind of leadership in helping to address the housing issues inadvertently caused by growth of big business. Proud to be a part of the @Microsoft team!
— denaYlawrence (@denaYlawrence) January 17, 2019
Others were quick to point out that the bulk of the money isn’t a donation:
I've seen some people (and news stories) say Microsoft is "donating" $500M toward housing. No! An important distinction: It's loaning $475M and will get the money back, with interest, and make a profit (then it says it plans to re-invest the money)https://t.co/8KjIWXHdL8
— Mike Rosenberg (@ByRosenberg) January 17, 2019
However, these loans could still do a lot for Seattle developers and home-buyers.
Dan Bertolet, a housing policy researcher at the Seattle-based Sightline Institute, said the $225 million Microsoft is putting toward making loans at below-market-rate returns could have an especially big impact. His recent research suggested that having to repay loans at 2 percent interest, instead of 5 to 6 percent interest, could allow building owners to cut the rent they charge by roughly half, he said.
Microsoft will loan the rest, $250 million, at market rate to finance construction of low-income housing.
Smith and Hood wrote that Microsoft had teamed up with the Seattle-based real estate firm Zillow over the past eight months to research housing data and that it had worked with others to study best practices for affordable housing around the world. Among the lessons: that providing short-term loans can help developers quickly acquire publicly owned land while they raise longer-term financing for construction.
What do you think of Microsoft’s move, PR Daily readers?