By Brad Smith, President, and Amy Hood, Chief Financial Officer
In 1979, Microsoft made the Puget Sound region our home when the company’s first 30 employees moved into an office building next to The Burgermaster in Bellevue. Over the decades, we’ve grown from a small start-up to become one of the world’s leading technology companies. And along the way, the entire region’s economy has diversified and expanded, bringing new jobs, people and prosperity. It’s an amazing place to call home and it’s a community that has always helped nurture Microsoft’s success.
But the Puget Sound area’s growth has also created new challenges. In recent years, our region hasn’t built enough housing for the people who live here. Since 2011, jobs in the region have grown 21 percent, while growth in housing construction has lagged at 13 percent. This gap in available housing has caused housing prices to surge 96 percent in the past eight years, making the Greater Seattle area the sixth most expensive region in the United States.
Median income in the region hasn’t kept pace with rising housing costs, increasingly making it impossible for lower- and middle-income workers to afford to live close to where they work. Teachers, nurses, first responders and many in key roles at nonprofits, businesses and tech companies now begin and end their workdays with long commutes. And people who are homeless face problems that are even more daunting.
We’ve been working the past eight months to learn more about how best to help address this problem. We’ve put one of our world-class data science teams to work, and it has partnered with Zillow to access more data on the region. We’ve also worked with the Boston Consulting Group and Challenge Seattle to learn more about best practices – not just across the country, but around the world.
You can take a look at our data here. As you can see, the gap between job growth and housing growth has been even greater in the suburban cities around Seattle than in Seattle itself.
This is a big problem. And it’s a problem that is continuing to get worse.
It requires a multifaceted and sustained effort by the entire region to solve. At Microsoft, we’re committed to doing our part to help kick-start new solutions to this crisis.
Today, we are committing $500 million as a company to advance affordable housing solutions. We’ll put this money to work with loans and grants to accelerate the construction of more affordable housing across the region. We will invest:
- $225 million at lower than market rate returns to inject capital to subsidize the preservation and construction of middle-income housing. These investments initially will be made in six cities east of Seattle and Lake Washington: Bellevue, Kirkland, Redmond, Issaquah, Renton and Sammamish.
- $250 million at market rate returns to support low-income housing across the entire King County region. We believe that additional capital at market lending rates can help accelerate the construction of low-income housing across the region.
- $25 million in philanthropic grants to address homelessness in the greater Seattle region. We are announcing today the first $10 million of these grants. This will include a $5 million philanthropic grant to the newly announced Home Base program created by the Seattle Mariners, the United Way of King County and the King County Bar Association. This program helps keep people facing eviction in their homes through legal aid, access to flexible funds and case management. We are also committing $5 million to support a new joint agency on homelessness being formed by the city of Seattle and King County.
Our goal is to move as quickly as possible with targeted investments that will have an outsized impact. For example, we’ve learned from efforts we’ve studied elsewhere that one effective approach is to provide short-term loans to enable those who want to build affordable housing the time needed to navigate the process of acquiring land from the public sector and raise longer-term construction financing. With these and similar investments, it’s possible to lend money, accelerate progress, be repaid and then lend this money again. While this is just one of the many ways that we’ll seek to put money to good use, it illustrates our financial commitment can have a multiplier effect.
At the same time, it will take much more to solve the problem. Even more capital will be required. And more critical still is the need for public policy changes to make it easier and more attractive to build affordable housing.
The mayors of nine of the largest suburban cities outside Seattle – Bellevue, Kirkland, Redmond, Issaquah, Renton, Sammamish, Auburn, Kent and Federal Way – are pledging to take vital and concrete steps to address the issue. This is every bit as important as Microsoft’s financial commitment. These steps include changes in zoning to increase the pipeline of housing in selected areas, providing desirable public land near transit locations, addressing permitting processes and fees and creating new tax incentives for construction.
We believe the state government has an important role to play as well. In the state legislative session that began this week, we’ll encourage the legislature to support the private sector by making additional housing investments and through policy changes to preserve and develop affordable housing. These recommendations include a $200 million appropriation to the Housing Trust Fund to expand support for very-low-income individuals and families, which would almost double the investment from the last budget cycle. In addition, we will support condominium liability reforms, extending the Multifamily Tax Exemption (MFTE), and new incentives for local communities to enact more efficient land use polices.
If we’re going to make progress, we’ll all need to work together as a community. We recognize that Microsoft is in a unique position to put the size of its balance sheet behind this effort. But we believe that every individual and every business, large and small, has a responsibility to contribute. This includes new initiatives to share data on where jobs are being created and the home locations and commuting distances for employees. It also includes new work to develop the detailed public policy changes that will be needed to provide more affordable housing.
Ultimately, a healthy business needs to be part of a healthy community. And a healthy community must have housing that is within the economic reach of every part of the community, including the many dedicated people that provide the vital services on which we all rely.
Our announcement today is an important start, but it’s just the beginning. It will take years of dedicated work for the region to put this problem behind it. We’ll all need to learn and work together to ensure that everyone in our community has not just a roof over their head, but a place they can call their home.