Recently, Amazon announced plans to build “HQ2,” a second headquarters for their growing business. Amazon is soliciting various municipal and state governments with a request for proposals outlining the strengths of their particular region (unique and valuable business intel in and of itself, but that’s a whole ‘nother post) and what kind of tax breaks Amazon can expect to receive. Through Greater MSP and the Minnesota Department of Employment and Economic Development (DEED), the Twin Cities are working on some sort of proposal to lure Amazon to the Twin Cities.
There are two schools of thought on this: any company promising significant economic growth should have the red carpet rolled out; and tax breaks and other economic incentives are paramount if we want new jobs, right?
To many others, this looks like the fairly standard “race to the bottom” scenario, which has worked well for sports franchises and other large employers. Dangle a big prize (jobs), which pits various metropolitan areas against each other, and demand large subsidies in return. But the high stakes of Amazon’s RFP (“up to 50,000 high-paying jobs”) makes this an even more interesting proposition.
Given enough tax breaks, Amazon could soon plop their geodesic domes down near the Twin Cities.
While the question of “should we subsidize large corporations” is fairly cut-and-dry for me (no thanks!), let’s focus on a what-if: what if Minneapolis, or the region, added 50,000 jobs almost overnight? Setting aside that it’s Amazon (and there are many criticisms of their business model), what would happen if some local company created this many jobs? No corporate giveaways, just 50,000 new jobs paying $70,000 per year, which is slightly above the current household median income.
Where Will They Live?
Great question! Who knows? We do know people with these new jobs could choose to live just about anywhere in the metro area, and people are increasingly choosing urban areas like Minneapolis over suburban counterparts. If these new employees don’t want to be “cost-burdened” by rent, they will spend less than 30 percent of their $70,000 salary ($1750 per month) on housing, meaning that almost every apartment in the city is within financial reach.
Obviously there’s a problem. We don’t have tens of thousands of vacant homes just waiting to be occupied. Whether those homes are older “naturally occurring affordable housing” (NOAH) apartment buildings (which were severely restricted by downzoning across the city 40 years ago) or newer upscale housing, those buildings already have tenants.
Currently, the Twin Cities metro has a vacancy rate of 2.7 percent. This is a long term problem; the rate has been under 3 percent for the last five years. This low vacancy rate means that landlords can continually raise rents, knowing that competition among tenants means they’ll surely find someone willing to pay what is asked. Now assume we’re adding 50,000 new high-paying jobs! Existing tenants will certainly be displaced, as new employees will be able to outbid existing tenants for a place to live.
This 42-story Alatus project would add roughly 200 new homes to Minneapolis. If we add 50,000 more high-paying jobs, we’ll need at least 100 more projects like this.
Under such a tight housing market, the economic power held by landlords (not bogeyman developers who seek to build “more” housing) puts more and more tenants at risk of displacement. Widening economic disparities and an overall increase in population ensure that during a housing shortage, the wealthy will always find housing.
Every high-paying job created in the region is bound to worsen our housing shortage, and will directly lead to displacement. For every high-paying job created, “new” housing must be created, whether in the form of new apartments or renovated older ones. This dynamic of apartment renovation, upscaling, and displacement plays out right now on a much smaller scale, even without 50,000 Amazon jobs; a lack of housing across the income spectrum means landlords are eager to meet the demand of those higher income tenants.
What Can We Do?
It’s worth asking whether it’s really ethical to add any new jobs considering our lack of affordable housing. How can we ethically add jobs when new jobs will lead to displacement for current residents? Ideally, we would have a large cushion of excess housing—a healthy vacancy rate—already in place to prepare for an economic boom that would bring more people to the region.
A recent New York Times opinion piece puts the problem more directly:
Today, this locomotive of prosperity has broken down. Finance and high-tech companies in cities like New York, Boston, Seattle and San Francisco find it difficult to hire because of the high cost of housing. When an unemployed worker in Detroit today finds a well-paying job in San Francisco, she often cannot afford the cost of housing there.
New housing construction in America’s most dynamic cities faces growing regulatory costs, delays and enormous opposition from neighboring homeowners. Since the 1970s, a property-rights revolution — what critics call Nimbyism, from “not in my back yard” — has significantly reduced the development of new housing stock, especially in cities where the economy is strongest.
President Obama’s White House also directly addressed the housing problem in American cities:
Over the past three decades, local barriers to housing development have intensified, particularly in the high-growth metropolitan areas increasingly fueling the national economy. The accumulation of such barriers – including zoning, other land use regulations, and lengthy development approval processes – has reduced the ability of many housing markets to respond to growing demand. The growing severity of undersupplied housing markets is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling GDP growth by driving labor migration away from the most productive regions. By modernizing their approaches to housing development regulation, states and localities can restrain unchecked housing cost growth, protect homeowners, and strengthen their economies.
Locally-constructed barriers to new housing development include beneficial environmental protections, but also laws plainly designed to exclude multifamily or affordable housing. Local policies acting as barriers to housing supply include land use restrictions that make developable land much more costly than it is inherently, zoning restrictions, off-street parking requirements, arbitrary or antiquated preservation regulations, residential conversion restrictions, and unnecessarily slow permitting processes. The accumulation of these barriers has reduced the ability of many housing markets to respond to growing demand.
We know we need to address the barriers that are preventing more and cheaper housing from being built across the city. We know there are businesses struggling to expand due to a lack of housing for their employees. We know what the problem is; the question is whether we’re willing to do anything about it.
Planning for Long-Term Growth
There are plenty of reasons to not want Amazon downtown, and plenty of reasons to oppose large subsidies for private companies. But if there’s a more practical reason to oppose Amazon, it’s that we simply aren’t prepared for equitable economic growth.
Minneapolis, and the metro region, needs to increase the available housing options if we want to compete for high-paying jobs. We can’t continue to have one of the lowest rental vacancy rates in the country and expect to create a city that is both thriving and equitable. There are a number of ways to do this (many of which don’t involve giving subsidies to Amazon or developers).
We can end the exclusionary zoning practices which are rooted in racist lending practices of the 1930s. We can upzone desirable areas to allow for more density. We can re-legalize missing-middle housing, which has been prevented by ordinances such as high mandatory parking minimums and low Floor Area Ratio maximums. We can invest in building more affordable housing. We can fund better transit.
What we can’t do is expect an economic miracle (delivered in two days with Prime!) without laying the groundwork first. Housing is quite literally the foundation of any major city. Unless we take steps to build it for future generations, whether they’re tech workers or climate refugees, any increase in population for this region will be painful for our least powerful neighbors. Any local candidate jumping at the chance to capitalize on the economic opportunity of Amazon, should be making abundant housing a top priority in the Twin Cities’ long-term planning.