Tech Giants Aim to Solve West Coast Housing Shortage

New investments from Alphabet Inc.'s (GOOG) Google (GOOG) and from Apple Inc. (AAPL) offer the first detailed look at how the big technology companies are following through on their pledges to help ease the West Coast's shortage of affordable housing.

Major tech corporations have invested hundreds of millions of dollars in the past year to increase the supply of affordable housing in their backyards, after years of criticism that the booming tech sector was partly to blame for housing shortages in Silicon Valley and Seattle.

Google (GOOG) said Thursday that it has deployed the first $115 million of the $1 billion commitment it made last year to affordable housing. Its investments so far have included $100 million in low-cost funding for housing developers and an investment in a modular-housing company, Factory_OS, to help it build a second housing factory.

Mountain View, Calif.-based Google (GOOG) said it expects its investments to create about 24,000 new units of affordable housing by 2029.

Apple (AAPL) said last week that it has allocated the first $400 million of the $2.5 billion investment it made in 2019. In addition to loans to affordable-housing developments, Apple (AAPL) has worked with the California Housing Finance Agency to provide down-payment and mortgage assistance for hundreds of first-time home buyers.

Many tech giants made multiyear housing-related commitments last year. In addition to the pledges from Apple (AAPL) and Google (GOOG), Microsoft Corp. (MSFT) committed $500 million, and Facebook Inc. (FB) $1 billion. Microsoft (MSFT) upped its pledge to $750 million in January.

The commitments came after years of rising housing costs in both Silicon Valley and Seattle, as job growth outpaced new construction and longtime residents were displaced. New jobs outpaced new housing supply in all of the Bay Area's nine counties between 2011 and 2017, according to a March study by SPUR, a public-policy think tank focused on Bay Area urban planning and land use.

"We're not going to solve the entire housing affordability problem through philanthropic dollars from large tech companies," said Sarah Karlinsky, senior adviser at SPUR. State and local policy changes are also needed, she said. " It's certainly great that they're taking it seriously, but the amount of money that's needed is going to be significant."

Rents in the Bay Area have started sliding in recent months, though they remain high compared with most other parts of the country. Some tech companies have laid off workers due to the pandemic, and others have announced they will allow workers to work remotely indefinitely, which could prompt some Bay Area residents to move to lower-cost areas.

Still, the region's housing shortage is likely to persist for years. The Bay Area is undersupplied by 699,000 housing units and needs to build 2.2 million more by 2070, according to the SPUR study.

One common approach for large tech companies has been investing in low-cost loans to affordable-housing developers. While that financing is helpful, there is more need for down-payment grants for these projects to cover upfront costs, said Fernando Martí, co-director of the Council of Community Housing Organizations, a coalition of affordable- housing developers and advocates in San Francisco.

"These big investments from the corporations are great," he said, but added, "We'd like to see more of that be on the side of deep equity investment" instead of loans.

For Apple (AAPL), Google (GOOG) and Menlo Park, Calif.-based Facebook (FB), part of their commitments included the value of their own land where they plan to build developments that would include housing. All three companies said those projects were in the planning phases.

Some of Facebook's (FB) initiatives, including $25 million t o build housing for teachers and other workers in San Mateo and Santa Clara counties, have gone slower than expected due to the regulatory approval process, said Menka Sethi, the company's director of location strategy.

"We cannot approve the housing fast enough," she said.

Facebook's (FB) $250 million partnership with the California government to develop state-owned land has also gone slower than expected, she said, because the pandemic has reduced the availability of construction loans.

"Major corporations stepped up big for housing when the governor asked. Now those efforts are starting to bear fruit, even despite the pandemic, " said Jesse Melgar, spokesman for California Gov. Gavin Newsom.

Redmond, Wash.-based Microsoft (MSFT) said it has allocated $380 million of its $750 million pledge, largely through a line of credit to the Washington State Housing Finance Commission to help build new affordable housing. It has also made investments and donations to build new housing in the Seattle area.

Microsoft (MSFT) said its total commitment would create or preserve more than 6,600 housing units. When Microsoft (MSFT) introduced its housing plans last year, it said the Seattle region had a shortage of 305,000 affordable-housing units.

Amazon.com Inc. (AMZN), which is based in Seattle, has made a $100 million investment in housing by building and operating a homeless shelter on its corporate campus for Mary's Place, a local homeless-services organization. The shelter opened in March.

Amazon (AMZN) said it plans to do more partnerships with housing organizations, either in Seattle or in other cities where it has a large presence, such as Arlington, Va.

"We're not a company that just throws money at issues," said John Schoettler, Amazon's (AMZN) vice president of global real estate and facilities. "As we continue to grow in other locations and getting to know those communities, we'll be looking at their specific needs."

Write to Nicole Friedman at nicole.friedman@wsj.com


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  07-23-20 1400ET
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