Nearly two years into Microsoft’s Affordable Housing Initiative, it has become apparent that in order to close the affordable housing gap in our region we need fresh, innovative approaches to housing finance – in our home state of Washington and nationwide.
Despite continued rapid growth in greater Seattle, our community is not providing enough housing that is affordable for people who live here – particularly low- and middle-income households. For example, between 2011 and 2019 jobs grew 24% while housing only grew 12%, and, while median household income increased by 34% median, housing prices increased by 78%. This challenge is compounded by the deep economic crisis of Covid-19 we continue to live through, and the historical inequity faced by communities of color.
That’s why, today, Microsoft is announcing a set of investments totaling $65 million (of our overall $750 million commitment) to help support the creation of more than 1,000 new affordable housing units for greater Seattle. This includes:
- A new initiative with Urban Housing Ventures supported by Freddie Mac, Stream Real Estate, WaFd Bank and Washington Trust Bank to reduce rents in existing market-rate housing in Bellevue and Kirkland, Washington, quickly creating more affordable living options. We are contributing $40 million to Urban Housing Ventures for this effort
- Continuing our work with the Washington State Housing Finance Commission (WSHFC) to expand a land acquisition program that accelerates the development of new affordable housing. We are providing $25 million to the WSHFC for this program
Together, these investments will deliver more low- and middle-income housing units for greater Seattle by accelerating and extending how capital is leveraged and invested, and in turn attract more capital to the middle-income housing market.
Working closely with these leading regional and national housing organizations, we are pushing ourselves to think creatively and leverage our collective resources in new ways; simply put, the scale of this problem is massive, and we know money alone will not solve the problem.
Perhaps even more importantly, we are confident that these new programs can be replicated in other parts of the country that face similar housing affordability issues. Here’s a more detailed breakdown of what we’re announcing today.
Keeping rent affordable for middle-income households
Typically, affordable housing is built from the ground up, takes years to accomplish and doesn’t address the region’s immediate shortage. The problem gets worse when existing housing developments are purchased and rents are raised for existing tenants. Through this program, Urban Housing Ventures will immediately lower rent on 40% of units so they are affordable to middle-income workers, creating a model that remains attractive for investors. In an expensive city like Bellevue, Washington, this might mean that a teacher in the Bellevue School District or a nurse at Overlake Hospital has a greater opportunity to live in a home close to where they work.
Using this program, we’ve invested in the first project led by Stream Real Estate with the support of Freddie Mac, WaFd Bank and Washington Trust Bank. Microsoft is contributing $40 million to Urban Housing Ventures, which purchased three market-rate apartment buildings in Bellevue and Kirkland, Washington. The reduction in rents at one of these buildings, for example, could save a family of three up to $7,890 per year vs. a market-based rental. Through the collaboration with Freddie Mac, this project did not require any local public subsidies or financing.
Providing land acquisition loans to enable new affordable housing development
The second program Microsoft is supporting is the Expanded Land Acquisition Program (ELAP), which provides access to bridge loans for affordable housing development. This program addresses the availability and cost of land, which is another significant barrier to developing affordable housing, especially in competitive markets like Bellevue, Redmond and Kirkland in Washington state. Because of the region’s dynamic real estate market, would-be affordable housing developers often miss out on opportunities to acquire land because they are unable to compete with the speed and resources of market-rate, commercial developers.
Microsoft is initially providing $25 million to the Washington State Housing Finance Commission (WSHFC) to offer affordable housing developers financing that allows them to compete in a tough market. This partnership builds upon WSHFC’s successful Land Acquisition Program by expanding to middle-income housing development and opening it to both nonprofit and for-profit developers to enable maximum use on the greater Eastside region outside Seattle. If the projects result in applicable improvements to local land use and housing policy – such as zoning reform, permit streamlining and parking requirement reduction – the program will trigger an interest rate reduction of up to 3%. ELAP’s first pilot loan was provided to GMD Development for their 136-unit, low-income housing development in Renton.
Building an innovative future
Innovation in housing finance is only one part of the solution. We’re also seeing the creative thinking and broad collaboration needed for our region to move forward. Five of the projects we’ve announced so far as part of Microsoft’s Affordable Housing Initiative were only achieved through shared problem solving by Microsoft, the public sector and the private sector. And the housing sector is taking notice. On October 27, the WSHFC was recognized with the Management Innovation: Financial award by the National Council of State Housing Agencies for its partnership with Microsoft in creating a line of credit programs to preserve and recycle tax-exempt bond allocations, which we announced in January 2020.
More must be done, particularly with public policy reforms that encourage affordable housing development at a local and regional level. But we recognize that truly impactful change takes time, and we stand ready to accelerate progress in this area. Nationally, our work with Freddie Mac and others represents a meaningful step forward when it comes to practical strategies that can work for other communities around the country.
Microsoft launched its affordable housing initiative in January 2019 because we believe everyone in our community regardless of income level should have a place they can afford to call home. To close the housing gap, we all need to come together in new ways and act with greater urgency, creativity and shared accountability.