Amazon HQ2 could push 800 people into homelessness, economist says

Amazon’s HQ2 is slated to bring 25,000 well-paying jobs to both New York City and Crystal City, but it’s also expected to push rents and home prices upward. That side effect has advocates for the homeless and hungry worried.

“If people making decisions at the local level don’t have some sense of making sure that they have housing available to accommodate that growth, the natural effect of that is going to be that rents are going to go up and people at the bottom of the rental market, people with the lowest incomes, are going to be pushed out the bottom,” Steve Berg, vice president of programs and policy for the Washington, D.C. organization the National Alliance to End Homelessness told MarketWatch.

HQ2 could lead to more homelessness, one estimate found

Amazon’s

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 new headquarters are expected to lead to 0.1-0.2% in additional annual rent growth in the D.C. metro area and a less than a 0.1% increase in rent growth in New York City, according to an analysis from rental firm ApartmentList. That works out renter households paying an additional $1,391 – $2,182 over 10 years in New York City and $3,750 – $5,757 over 10 years in Washington, D.C., a January analysis by ApartmentList found. Homelessness increases at a rate of 15% for every $100 per month median rent goes up, a 2014 study published by the Journal of Urban Affairs found.

Due to rising rent costs in the two HQ2 cities, Amazon’s new headquarters could contribute to 14 additional people in homelessness annually in D.C. and 830 additional people in New York, Aaron Terrazas, senior economist at real estate data site Zillow

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  calculated, though Zillow noted that these numbers are subject to change.

“This isn’t a firm look into the future,” Matt Kreamer, Zillow’s data public relations manager said. “It’s is all based on current projections and we don’t know how each region will respond to the influx of workers, how accelerated building might be, etc. In a perfect world, there is enough lead time and planning and building to mean nobody becomes homeless.”

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A homeless person holds a sign while panhandling during freezing temperatures in New York in February 2018. NYC and DC may be better positioned to absorb HQ2’s impacts

New York City and the Washington, D.C. areas may be better-equipped to absorb the changes the new headquarters will bring than other locations, Igor Popov, chief economist at real estate site Apartment List said. The availability of subsidized housing has the largest effect on homelessness, he noted, and HQ2 is not expected to directly affect the supply of subsidized housing, he said. The New York City Housing Authority and Virginia Housing Authority did not respond to requests for comment.

“We found that the DC and NYC metros would experience some of the smallest rent impacts from HQ2, and splitting the facilities across two locations will dampen that effect even further,” Popov said.

“Nobody — including Amazon — knew they would grow so much. We had a huge influx of people moving here as a result, and it just wasn’t planned for.”

— Heather Redman, partner at Seattle venture capital firm Flying Fish Partners

The two cities are also much better positioned to prepare for significant economic growth than Seattle was before the arrival of Amazon, said Heather Redman, former chair of the Greater Seattle Chamber of Commerce and current partner at Seattle venture capital firm Flying Fish Partners. “Nobody — including Amazon — knew they would grow so much,” she said. “We had a huge influx of people moving here as a result, and it just wasn’t planned for.”

Amazon’s Seattle legacy

In Seattle, where Amazon was founded, rents have risen 39.8% over the past five years and median incomes jumped $10,000 in a single year in 2015.

The rate of homelessness in the city surpasses that of other major cities including New York and Los Angeles, a Seattle Times analysis found, with 54 homeless people per 10,000 residents.

But the issue of homelessness in Seattle is of course complex, Alison Eisinger, executive director of non-profit the Seattle/King County Coalition on Homelessness, said. While Amazon’s fast expansion in the area had a significant effect on homelessness, it was not the sole cause.

“There is not a straight line between Amazon coming and homelessness,” she said. “But what I want to be clear about is that Amazon certainly contributed to the affordable housing crisis in Seattle, and the affordable housing shortage in turn absolutely contributed to the homelessness crisis in our community.”

Because they can plan in advance, the cities Amazon’s headquarters will move to should take measures to prevent negative effects, she said. Amazon itself can also address the issue head on: in Seattle, it made a number of moves meant to address homelessness, including allowing homeless shelter Mary’s Place to move into one of its buildings and employing people from FareStart, a program that trains people from low-income backgrounds to work in the food industry in its office buildings.

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A kids playroom inside a former Travel Lodge motel that Amazon owns and offered to nonprofit Mary’s Place as a temporary shelter for women and their families in Seattle, Washington. It houses up to 60 people a night. An Amazon spokeswoman told MarketWatch the company is committed to the communities where its employees live and work. It has awarded grants of up to $7,500 to 100 schools across the U.S. to feed kids in need of breakfast through the program No Kid Hungry and has donated more than $40 million to homelessness causes in its home city of Seattle. These moves were not enough to offset the negative effects Amazon has had on the housing market, Eisinger said — more concrete measures should be taken.

“Their work has been charitable but not transformative in nature,” she said. “The question is, how much are they willing to be good corporate citizens and contribute in advance to maintaining existing housing stock, hiring locally, and being a tide that lifts all boats instead of swamping working people.”

How DC and NYC are preparing

In Northern Virginia officials are already laying the groundwork to handle the changes HQ2 will bring, Katie Cristol, chair of the Arlington County Board said. The city will contribute $7 million per year over the next 10 years to affordable housing units targeting people who make 40-60% of the median income as part of a package pulled together for Amazon’s arrival.

“The challenge of tackling housing affordability in the region was with us on Monday, and it is still with us after the new headquarters was announced,” she said. “We believe these revenues will help fund a safety net for our neighbors in need.”

Also see: As more Americans become rent-burdened, homelessness rises in the costliest areas

Other cities that competed to host HQ2 had their own plans for preventing homelessness if Amazon had selected them. Dallas would have required Amazon to commit $100 million toward addressing public education and homelessness. Boston offered to devote $75 million in funding over 10 years to maintain home prices in the proposed HQ2 area.

As part of its agreement with the city of New York to build HQ2, Amazon has agreed to donate space on its campus for a tech startup incubator and for use by artists and industrial businesses, and will donate a site for one new primary or intermediate public school. The NYC Economic Development Corporation did not respond to a request for comment. In Northern Virginia, Amazon will contribute a pedestrian bridge to be built over the next 10 years.

Only 3 out of 10 homes are affordable to low-income families

New York politicians are calling for more measures to counteract rising housing prices as Amazon moves its headquarters into the industrial Long Island City neighborhood. Alexandria Ocasio-Cortez, the recently-elected Democrat Congresswoman representing Queens, said Amazon and other corporations should “[pay] their fair share” to maintain affordable rent and living wages in New York.

“Without quick action to increase the availability of affordable rental homes targeted to people with the lowest incomes, Amazon’s decision to open headquarters in New York City and northern Virginia will exacerbate the severe housing shortage that exists in those communities”

— National Low Income Housing Coalition President and CEO Diane Yentel

In both NYC and Northern Virginia, there are just three affordable rental homes for every 10 of the lowest-income families and three out of every four of the lowest income people in these communities pay more than half of their income on rent, National Low Income Housing Coalition President and CEO Diane Yentel said.

“Without quick action to increase the availability of affordable rental homes targeted to people with the lowest incomes, Amazon’s decision to open headquarters in New York City and northern Virginia will exacerbate the severe housing shortage that exists in those communities,” she said. “Opening new Amazon offices in these high-cost cities without addressing the severe shortage of affordable rental homes will result in further increased rents, more frequent evictions and displacement and, in worst cases, homelessness.”

Unique challenges in HQ2 cities

More than 63,000 people in New York City were homeless as of December 2017, a record number that marks an 82% increase in the past decade, according to the Coalition for the Homeless. The number of homeless people in Washington, D.C. has been on the decline for the past two years, and as of December 2017 there were 6,904 homeless people in the district.

Homelessness in New York has been exacerbated by a lack of affordable housing, Giselle Routhier, policy director at New York City-based advocacy organization Coalition for the Homeless. The group called on New York City Mayor Bill de Blasio and New York Governor Andrew Cuomo to invest in “deeply subsidized housing” for New York’s record homeless population to offset the effects of Amazon’s arrival.”

“At a time when affordable housing is scarce, our trains are broken, and homelessness is at record levels, the last thing we should be doing is throwing money at one of the richest companies in the world,” Routhier said. “Amazon’s expansion will certainly boost our economy, and that’s great — but we shouldn’t be paying the rent for trillion-dollar corporations when so many families can’t pay theirs.”

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