Affordable housing was an issue before 2020, but the pandemic exacerbated a growing problem. One area that has been a source of concern is the San Francisco Bay Area and Silicon Valley. In the last several years, San Francisco and San Jose have routinely topped the lists of most expensive places to live.
This year has had a dramatic impact on rents in the Bay Area. The November data from Realtor.com showed that San Francisco was at the top of the list of rent drops as it has been for several months, with studio rents down by over 35% year over year. However, with rent for a one-bedroom apartment at a median of $2,716 a month, San Francisco has a long way to go to be considered affordable for most residents.
Tech to the rescue?
Because of this situation, many of the companies that started in the area have made a commitment to changing the situation. Facebook (NASDAQ: FB) previously announced a $1 billion commitment to affordable housing in the Bay Area. It has now officially designated $150 million to create at least 2,000 affordable homes in the area for families making less than 30% of the area’s median income. The median household income in the area is higher than in other communities and is currently around $112,376. Facebook anticipates spending all $150 million by 2026.
This work is separate from Mark Zuckerberg’s Chan Zuckerberg Initiative, the foundation he created with his wife, Priscilla Chan. That group announced $4 million in grants for 2021 to 56 organizations in the Bay Area through its Community Fund. Many of the groups chosen have housing as a key focus. The Chan Zuckerberg Initiative and Facebook are also part of the Partnership for the Bay’s Future, a group that also includes other foundations and organizations that have pledged to pull together over $500 million to build over 8,000 homes within the next decade.
Facebook isn’t the only tech company working on the housing problem in San Francisco. Salesforce (NYSE: CRM) has also made a commitment to issues of homelessness and housing affordability. In 2019, Salesforce CEO Marc Benioff donated $30 million to create a program at the University of California San Francisco to study homelessness solutions.
In 2019, Google (NASDAQ: GOOG) announced a major effort to help solve the housing problem in the Bay Area. As of July 2020, it had given out $115 million of a planned $250 million investment fund to create as many 24,000 affordable housing units by 2029. Google.org has given $7.75 million to nonprofits that help homeless individuals. Google in particular is investing in modular housing to speed up housing production and has worked with Factory_OS on modular housing options. Also in 2019, Apple (NASDAQ: AAPL) announced a $2.5 billion commitment that included $1 billion for first-time homebuyer mortgage assistance.
Solving Seattle’s housing crisis
The Bay Area isn’t the only place where a proliferation of wealthy tech companies has strained housing affordability. Seattle rents have fallen in recent months, but Seattle has been one of the places where prices have risen the most in recent years. Microsoft (NASDAQ: MSFT) created the Affordable Housing Initiative, a $750 million commitment to create affordable housing. In November 2020, it reported it had invested $65 million to build 1,000 new affordable housing units in Seattle.
Amazon (NASDAQ: AMZN) has donated to housing initiatives in Seattle and in Arlington, Virginia, the home of its HQ2 project, but has been criticized for not doing enough. Zillow (NASDAQ: ZG) (NASDAQ: Z) has donated over $7 million to nonprofits that provide community assistance.
Private, public, or both?
When it comes to affordable housing, where does responsibility lie? Are tech companies responsible for housing problems if an influx of high-paid workers in a city ends up raising prices and driving existing residents out? California’s government has included over $5 billion in the state budget to help solve this crisis, but private companies may be able to move more quickly. In December 2020, Seattle announced another $55.8 million for 840 affordable housing units.
For investors in these areas, it may make sense to pay attention to what these large companies are doing. While much of their work is with nonprofits, they are also partnering with a wide variety of architects, builders, and anyone who has a vision for how to produce affordable housing at scale. The amount of money being allocated for these solutions may seem large, but given the potential crisis looming in 2021, it may not be enough to fulfill the vision of safe and affordable housing for all.