All hands on deck

What role can tech giants play in affordable housing?


Over the last few years technology giants have announced major pledges to affordable housing efforts in the cities where they office. Starting in January 2019, companies like Microsoft, Facebook, and Google all pledged substantial resources to address the housing crisis—$750 million, $1 billion, and $1 billion respectively. Apple surpassed them all with a $2.5 billion pledge in November 2019, and this year Amazon almost matched it with its $2 billion Housing Equity Fund. While these pledges are welcome in major tech centers in Washington state and California’s Bay Area, the companies are simultaneously expanding in cities across the country.

Boulder is home to several large tech companies: Microsoft, Apple, and Amazon all have a presence here. Of course so do Google and Twitter, both of which often make headlines with plans for expansion. 

With its Colorado offices based in Boulder, Google has more than 1,500 employees in the state. In 2020, it grew its Pearl Place Campus and in September 2021, the company announced it purchased 125,000-square-foot of office space at the Rêve development at 30th and Pearl Street across the street, which includes luxury apartments. In November 2020, Twitter announced it is expanding its Boulder footprint by leasing a 65,000 square-foot office space in the Railyards at S’Park development in Central Boulder.

When a tech company decides to office in any area, they attract highly paid employees, who often relocate and can put extra demand on local housing supply, often driving up costs to the detriment of middle-, low-, and extremely low-income earners. Large corporations didn’t create the affordable housing crisis plaguing so many jurisdictions around the country, but they have intensified it, says Andrew Aurand, vice-president of research at the National Low Income Housing Coalition (NLIHC), which focuses primarily on housing for renters existing below the federal poverty line.

“No community has an adequate supply [of affordable housing],” he says. “That problem is exacerbated in communities that have large tech companies, or large companies in general, moving in and increasing the demand for housing.”

Citing studies from a few years ago before the pandemic, Aurand adds, regions with high income inequality have greater challenges in affordable housing, as the market tends to respond to demand at the higher end and is slower at the lower end.  

“The market on its own is not going to produce housing that is affordable to extremely low-income or low-income renters,” he says.

The presence of technology companies in a region can come with benefits, but it’s often associated with growth that’s unequally distributed. Now these tech companies are promising to help, but how exactly will they do that?

Like the rest of the country, the majority of affordable housing in Boulder is dependent on the federal low-income housing tax credit, or LIHTC, purchased by corporations and investment funds. Replacing direct government funding, the Reagan-area program is designed to incentivize the private sector to invest in affordable housing, hoping that doing so will improve public housing.

“We all use that same resource: the low-income housing tax credit is definitely the critical piece,” says Ian Swallow, project manager for the development team at Boulder Housing Partners (BHP). “Without it, there’s no way to build [affordable housing].”

Run by the IRS, (not HUD like all other housing programs in the country), the program distributes a certain amount of tax credits to each state based on population. The states then award the credits to jurisdictions, housing authorities, and private developers in a competitive process. In Colorado the program is typically oversubscribed—by about two-to-one in 2020, meaning only half of the proposed affordable housing projects in the state were funded, according to Kathryn Grosscup, housing tax credit manager for the Colorado Housing Finance Authority. The state also runs a similar program modeled after the federal one. In 2014, Colorado’s legislature reauthorized $10 million a year in state tax credits through 2024. Between the two programs, the tax credits have been used to preserve roughly 71,000 affordable units in Colorado. In Boulder County, $61.8 million in federal and state housing tax credits has been awarded to support 6,589 affordable apartments across 81 developments since the program’s inception.

Once an agency, like BHP, is awarded the credits, they can then solicit investors to benefit from them over 10 years. Often through syndicator agencies running investment funds, big banks like JP Morgan Chase and Capital One, as well as some insurance agencies, are the ones currently investing in the LIHTC program. (Banks are particularly driven to invest in affordable housing due to the Community Reinvestment Act that passed after the 2008 financial crisis, and requires banks reinvest in areas of high foreclosures, defaults, and bad lending practices.)

“It’s these big, big companies that have massive federal income tax liability,” Swallow says. “Not that Google and Twitter and those companies don’t, but we haven’t seen that [investment].”

According to the state, Google, Twitter, or tech companies in general haven’t purchased any tax credits in Colorado over the last three years. But tracking corporations investing in the program can be tricky since the state doesn’t do it regularly and even if the data is pulled, most of the corporations are one-step removed as the credits are often purchased by syndicators.

While BHP has yet to do a project where a tech company has stepped in as an investor or lender, Google was indirectly involved in a 2016 $63 million project that added to the city’s affordable housing program by renovating 238 units at Osage Apartments and Thunderbird Apartments in south Boulder and The Nest in central Boulder, all developed by the privately held Element Properties. Functioning much like a mortgage, Google invested $41.7 million in the tax-exempt bonds through Red Stone Tax Exempt Funding, capital that will be paid back with rental revenues over 40 years.

Angela K. Evans

But these investments aren’t entirely altruistic. Turning a profit is a critical piece to the entire tax credit incentive, Swallow says.

 “Google is making more doing whatever Google does than on any affordable housing deals,” he says. “So there is probably some value in that, but it’s not like they’re just giving money away either.”

While LIHTC is a necessary program in the realm of financing affordable housing across the nation, Aurand from NILHC says there are plenty of other ways large corporations could contribute. In general, LIHTC resources fund about a third of an affordable housing development, covering certain eligible expenses like construction. Another third is financed through state-issued private equity bonds that serve as a low-interest loan and are tax-exempt for the corporations that fund them. The remaining third is paid for through what is known in the industry as “soft” funds, resources from local jurisdictions, nonprofits, and granting agencies, which don’t turn a profit for anyone.

Affordable housing programs have been underfunded for decades, Aurand says, and without more resources, the problem is only going to intensify. Currently, one out of every four eligible families actually receive housing assistance across the country,

Some of these programs are funded through tax dollars, like federal housing vouchers, but others have the opportunity for more private investment, he says. Investment in production programs and soft funding sources can go a long way in trying to fill the gap between demand and supply.

Microsoft was the first of the large tech companies to announce an official affordable housing initiative in early 2019, and, since its partnership with the Washington State Housing Finance Commission, has won national awards for its multi-pronged strategy directly attempting to address gaps defined by the state.

“They haven’t tried to just reinvent the wheel or go off on their own to try to figure out where they fit in,” says Lisa Vatske, the director of Multifamily Housing & Community Facilities at the Housing Finance Commission about Microsoft. “They came to us as a statewide finance agency to say: What’s working, what’s not working. How do you do business? Where do you think the gaps are?”

Having invested in LIHTC for a while through a syndicated fund, the first thing Microsoft did as part of the partnership was directly purchase tax credits for a development in 2019, she says. But the company has also pledged upwards of $750 million in innovative ways to address affordability in the Seattle region.

By directly extending a no-fee line of credit to the Housing Commission, Microsoft helps remove a barrier for the state to recycle private activity bonds in future developments. It essentially allows the state to use current resources more strategically and effectively, Vatske says. Like Colorado, Washington’s private activity bond cap is limited and the program is oversubscribed, but the partnership with Microsoft helps. (Colorado is one of the few states that also utilizes bond recycling, albeit without a single investor like Microsoft.)

The program is rather technical and behind the scenes, making it difficult to directly attribute more affordable units to Microsoft’s investment.

“But we have been able to stretch the resource,” Vatske says. “They got us unstuck.”

Microsoft also invests in a fund with the Seattle Foundation that provides gap financing to private developers, since most of the local soft dollars go to housing authorities and nonprofits that develop affordable housing. So far, it’s been used in four affordable housing developments.  

And the company is channeling funds through the Commission to specifically bolster a land acquisition program on the East Side of King County, where most of the company’s offices are based and where land and development costs are through the roof. To date, Vatske says, they have purchased one parcel of land and are in negotiations on two more, paid for directly with Microsoft funds.

“Especially in high-cost cities, [affordable housing is] complex. It’s expensive, it’s not easy to build stock and that’s what we need,” Vatske says. “I would just say all hands on deck. It’s going to take a village. Anyone and everyone should come to the table. So [investments from large tech corporations are] one of the opportunities we have.”

Most of the other tech giants are focused on affordable housing around Silicon Valley, where many of them started out (except for Amazon, which is investing its Housing Equity Fund in its major centers of Puget Sound, Arlington, and Nashville.) For example, Google’s $1 billion pledge for affordable housing is geared toward the Bay Area, promising 20,000 homes over 10 years.

“Our goal is to be a helpful neighbor in the local communities where we operate,” a company spokesperson tells Boulder Weekly. “Solving a complex issue like the housing shortage will take collaboration across business, government, and community organizations. To help tackle this shortage in the Bay Area, our approach focuses on land, investments, and grants, areas where Google has a unique opportunity to positively impact the housing crisis.”

A large majority of Google’s investment will come in the form of land, most of which was zoned commercial when the company made its announcement in 2019.  While land is a huge barrier in affordable housing development, rezoning efforts can take years and the company received intense blowback for attempting it in Mountain View where it’s based. However, while making a large expansion into San Jose, Google successfully helped with a rezoning effort in the city’s Downtown West neighborhood allowing for mixed-use development. With offices nearby, Google could employ up to 20,000 people within the neighborhood, and has plans to develop 4,000 homes, a quarter of which will be affordable. It also recently gave the city three parcels of land for affordable housing near its proposed transit village. Combined, up to 240 affordable units could be built on the land.

Additionally, the tech giant has contributed to affordable housing in other areas in the Bay Area. Earlier this year the company announced a $30 million investment that will support construction of about 1,800 units in partnership with the Housing Trust Silicon Valley.

For now, Google’s housing pledge focuses on its presence in California. But it has the potential to inform projects in other communities where Google offices, like Boulder, according to the Google spokesperson.

“We’ll continue to work closely with local leaders and elected officials on ways we can be a helpful community partner in Boulder for many years to come,” they say.  

These investments show good faith on the part of the company to help alleviate some of the market pressures on housing, but some analysts are skeptical the money will go as far as the press releases say. Writing for Next City in 2019, architect Andrew Hudson warns that the cost of construction, rezoning, and permitting will likely reduce the impact of Google’s pledge over the years. “From my calculations, $1 billion may only lead to 6,000 homes over 15 years. Meanwhile, affordable and abundant housing in the Bay Area will become less and less probable,” he writes. Additionally, it depends on large amounts of additional capital from other sources to complete, and requires political will from local, state, and federal policymakers.  

Angela K. Evans Twitter is leasing part of the S’park development space in Boulder.

Twitter is another large player in Boulder’s tech scene, but a spokesperson confirmed with Boulder Weekly that the company is not directly involved in any affordable housing projects. (Although, more than 20 percent of the overall 11-acre S’Park development where the company is leasing office space will be affordable.) But Twitter regularly invests in the Boulder Together program through the Chamber of Commerce. Meant to retain and attract the workforce that local businesses need, the initiative works to increase the availability of diverse housing stock and the investment of mobility programs and alternative commute options, according to John Tayer, president and CEO of the Boulder Chamber. (Both Twitter and Tayer declined to comment on exact figures.) Google is also listed as an investor for Boulder Together.

“Any business that operates in Boulder—and this is technology, biotech, whatever—we all recognize that there’s a footprint of significant benefit, but also impact,” Tayer says. “But I find that the businesses that are operating here feel a responsibility and invest in it as they can to help ameliorate those impacts . . .  They also recognize that it’s a symbiotic relationship and that to the extent that Boulder continues to be an attractive place to live and work that benefits them strategically in their business operations.”

When it comes to the tech sector specifically, Tayer argues that these companies are doing their part as community members—they are involved in environmentally sustainable mobility initiatives and alternative commute options, and they develop in areas consistent with infill goals.

“I would argue that our larger tech industry businesses’ ethic is consistent with the values of our community,” Tayer says.

One could also make the argument that large corporations indirectly contribute to Boulder’s affordable housing fund through the city’s commercial linkage fee—whether that’s paid as part of developing their own property or in leasing other office space from developers who paid it. But it can be hard to directly correlate one company’s commercial linkage fee funding any particular affordable housing development, says Swallow of BHP.

“I’ve definitely seen the headlines from West Coast cities,” about large affordable housing investments, he says, “but I haven’t seen the actual implementation and it certainly has not made its way here quite yet.”

These large investments by tech companies are intended to fund affordable housing over the next decade or more and the success of their efforts may not be known for some time. Along the way, the impact of these initiatives could easily morph based on lessons learned and changing economics of development. What is clear is that the need for affordable housing, and housing in general, greatly outpaces the current stock, and the largest barrier to matching supply with the demand is financing, so investment from the federal, state, local, nonprofit, and private entities is crucial.  

As Aurand says: “There are things that have to be done by each of these actors so we can have an adequate supply of affordable housing.”  

This series was funded by the Solutions Journalism Network, which receives financial support from the Bill & Melinda Gates Foundation. Boulder Weekly maintains strict editorial independence in all reporting projects that are supported by outside funders. 

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