Flanked by screens filled with charts detailing the alarming disconnect between housing costs and incomes in the Puget Sound region, Microsoft president Brad Smith spoke in a suburban Seattle theater about the company’s largest ever philanthropic pledge: $500 million, mostly in loans, to support affordable housing.
The announcement by the Redmond, Washington-based tech giant is a major salvo in an ongoing battle to ensure housing availability keeps pace with job growth in booming U.S. cities. In Microsoft’s case, the call to arms came from a realization as a result of a comparison between Seattle and San Francisco.
“Business leaders started talking about how we needed to think about the future of this region,” Smith said, referring to the Challenge Seattle roundtable convened by former Washington governor Christine Gregoire in summer 2018 after Seattle City Council passed, then repealed, a big business tax to fund affordable housing. “We concluded that greater Seattle had become ‘San Francisco North.'”
Since 2011, housing prices in the area have risen 96% while median household income has risen only 31%, according to data crunched by Microsoft and Seattle-based Zillow with help from Boston Consulting Group.
“All of us in this room are acutely aware of what we’ve been seeing changing in this region over the last decade, and especially over the last five years,” Smith said.
While Smith acknowledged the issue’s complexity, he boiled the problem down to a simple calculation: “Jobs came to our region, but the region did not build houses or any housing units for all the people who would fill them.”
Fueled by Amazon, which has not offered a pledge similar to Microsoft’s, Seattle became the fastest-growing big U.S. city of the decade. Microsoft recently announced a substantial renovation and expansion of its campus, which will add more jobs and residents.
“We’ve all seen this enormous growth, and we’ve all in so many ways benefited from it,” Smith said.
Even with nearly 85,000 new units built in King County since 2010, the result has seen teachers, nurses, and police officers move to cheaper suburbs and endure long commutes. In 2011, Redmond had more low- and middle-income households than high-income households. By last year, high-income households had become a majority.
“Many of the people who play vital roles in our communities can no longer afford to live in them,” Smith said.
That conclusion prompted Microsoft to make affordable housing a new philanthropic priority alongside education and transportation, part of the company’s “healthy community” vision. In other words, Smith said, the company realized that both its own lower-income workforce like shuttle bus drivers and cafeteria workers and the middle-income jobs in its neighborhood–the schoolteachers educating software engineers’ children–were being priced out, which hurts everyone’s quality of life.
Microsoft’s philanthropic gift will create a revolving $225 million loan fund offering below-market rates to affordable housing developers for investment in middle-income housing in six King County cities, and a $225 million injection to the federal Low-Income Housing Tax Credit market across King County, including Seattle. The latter will lower the market price of federal tax credits, which are essential for subsidized apartments to pencil out. The remaining $50 million will be granted to homelessness efforts. Simultaneously, the company is calling on local governments to ease land-use restrictions, and for the state to increase its housing trust fund from $100 million to $200 million.
The move earned praise. “Even more impressive than the unprecedented size of Microsoft’s commitment is the effort they made to research and understand root causes and meaningful solutions,” said James Madden of Enterprise Community Partners, a nonprofit affordable housing developer who consulted on the plan.
Microsoft cited the Housing Trust Silicon Valley as an inspiration. Some Bay Area tech executives have made recent forays into housing issues, like Salesforce’s Mark Benioff’s support for a San Francisco tax for homelessness modeled on Seattle’s failed effort. The Chan-Zuckerberg Initiative has also taken up the affordable housing mantle. This week, Kaiser Permanente announced its first housing investment in Oakland.
Rick Jacobus, an Oakland-based affordable housing consultant, expects more announcements in 2019. “The level of public awareness of this problem has grown to the point where it can’t be ignored, even by these large institutions that have no formal role in the problem,” he told Fast Company. “But the uptick has been painfully slow because tech comps have been busy racing to stay up on tech.”
When asked if Microsoft was the white knight coming to Seattle and King County’s rescue after several years of local government not succeeding in pushing through a major plan to fund affordable housing, he offered a different metaphor.
“Microsoft is not the white knight, but we are riding a white horse,” Smith said. “There are a lot of white horses in this region; now we need to start a stampede.”
Gregory Scruggs is an award-winning Seattle-based journalist and a coordinator of the Puget Sound chapter of the Solutions Journalism Network. His writing on cities, land, culture, and place have appeared in the New York Times, Washington Post, the Guardian, Thomson Reuters Foundation, and VICE.