Why US tech giants are putting billions into housing

Teacher Leon Sultan
High housing costs are hurting San Franciscans like Leon Sultan

History teacher Leon Sultan was raised in a San Francisco that working class families could call home. That place has, for the most part, vanished.

The city is now the centre of America’s thriving tech industry, with some of the highest housing costs in the US. Homeownership is in retreat and homelessness is surging, alongside newly-minted fortunes.

Mr Sultan currently lives in a rent-stabilised one bedroom apartment with his wife, who also works in education, and his four-year-old son. When they move to a bigger place in a few weeks, their rent will almost double.

“When I was born in the city in 1978, a two-income earning family could buy a home,” he says. “At this point, the only way to buy a home, if you’re a normal person… is to have some sort of edge.”

“I feel lucky that I haven’t been displaced yet.”

‘Unsustainable’ course

Mr Sultan, and many others, blame the changes on the Bay Area’s tech boom, which has created vast wealth divides.

The growing backlash has played out in fights over new taxes targeting tech

For Mr Sultan, homeownership is out of the question, but he says his family is lucky. There’s a woman on his street living in her car.

“I’m not feeling sorry for myself,” he says. “There are a lot of folks in this city who are struggling way harder than we are.”

The high costs are forcing companies to pay more and work harder to find staff, one reason the tech firms have taken an interest.

For the most part, their pledges aren’t philanthropy.

RVs line Bay Road in East Palo Alto, CaliforniaMore people are now living in Recreational Vehicles (RVs)

Apple is lending the state up to $1bn to help finance affordable housing projects and providing $1bn to California’s first-time homebuyer fund.

Google and Facebook also plan to invest hundreds of millions in new housing. Land owned by the tech companies that will be made available for housing construction accounts for another major part of the commitments – a full $750m worth in Google’s case.

Such large promises are “unprecedented”, but a lack of detail makes them hard to evaluate, says Carol Galante, director of the Terner Center for Housing Innovation at the University of California, Berkeley.

“It’s in their self-interest but it’s also obviously in the community’s interest.”

‘A drop in the bucket’

Facebook and Google have each said their plans should produce about 20,000 new housing units, some of which will be offered at below market rates. Apple has not provided an estimate for its total commitment, but expects to build about 3,600 new affordable units on its land.

But California State Senator Scott Wiener, whose district includes San Francisco, says the plans represent “a drop in the bucket” compared to the money and policy changes needed.

“I’m glad that Apple, Facebook, Google are doing this, but I think we also have to be crystal clear that this is not going to solve the problem.”

Homelessness has surged in San FranciscoHomelessness has surged in San Francisco

Between 2012 and 2017, San Francisco added fewer than 21,000 new housing units, while the population grew by more than 58,000 and the number of jobs jumped by 130,000.

Senator Wiener blames policies that hamper development – like rules that limit the height of buildings – for much of the growing gap between supply and demand.

“The problem is not that we have job growth,” he says. “The problem is we didn’t plan for it.”

‘Chipping around the edges’

But Peter Cohen, from the Council of Community Housing Organisations, says it’s “simplistic” to rely on increased supply to solve the crisis.

New construction is often designed for the tech industry’s upper crust, even though many of the new jobs are lower-wage ones such as cooks and drivers, he says.

He says the tech industry’s announcements seem in part like a “branding” effort to pre-empt new policies, such as higher taxes.

“We’ve got to have stable and significant sources of funding,” he says. “Otherwise we’re just chipping around the edges.”

Apple has unveiled plans for a new campus in Austin, TexasApple has unveiled plans for a new campus in Austin, Texas

Mr Sultan, the teacher, says he welcomes the plans for more housing – especially if it’s close to company campuses. Expansion in other regions such as Texas – where Apple has announced a new base – make him even more excited.

“The big issue for me is, why does the tech industry have to be housed in San Francisco,” he says. “Why can’t they disperse throughout the country?”

But the broad trends seen in his home city – rising housing costs, slow construction, and declining homeownership, especially among younger families – are happening across the US, especially in areas where tech companies are expanding.

And as people and companies leave the Bay Area, they add to housing strains in suburbs and other cities, pushing the poorest further away from the jobs they need.

“We’ve got this kind of rolling musical chairs that’s going on,” Ms Galante says. And those with the least, she warns, are “losing”.

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November 2019