June 11, Amazon declare it will contribute Another $1.4 billion was earmarked for its housing equity fund. Amazon created the fund Back to 2021The company’s initial donation of $2.2 billion “commits to build or preserve 20,000 affordable units in the Puget Sound, the nation’s capital and the Nashville area, the three communities Amazon calls home,” according to a report from the company. house”.
All three regions are where Amazon has major corporate hubs. The new commitment focuses on Arlington, Virginia, home to Amazon’s second headquarters. Amazon said it exceeded its goal, delivering 21,000 affordable homes instead of the 20,000 promised. The internet giant said the new funding will provide an additional 14,000 units of affordable housing for low- and moderate-income people in targeted areas.
Unsurprisingly, Amazon’s foray into affordable housing has drawn as much criticism as praise. Critics say they’re not dismissing Amazon’s efforts, though they’re better than nothing fact The retailer creates problems for the communities it claims to serve.
As is often the case with corporate philanthropy, the truth is somewhere in the middle. Amazon cannot solve all of the systemic problems affecting the U.S. housing market. But is this part of the problem? Can it adapt its strategy to achieve more impactful change?
let us Learn more about what Amazon does Affordable Housing So far – and what could be improved.
What results has the Amazon Housing Fund achieved so far?
First, the good. As previously mentioned, since the launch of the housing fund in 2021, Amazon has delivered 21,000 affordable homes in its target areas.
One of the real achievements of Amazon’s approach is that it’s not just about building new units. According to its Home Equity Fund Impact ReportSo far, 59% of Amazon’s funding has been used to support the preservation of existing affordable housing and “converting existing housing into purpose-built affordable housing.” This provides support for “tenants at risk of displacement” rent increase“.
Amazon is on the right track here. The main criticism of affordable housing from local groups and independent researchers is that it actually not special affordable. according to urban institute“There’s a huge gap between what it costs to build and maintain these buildings and what most people can afford to rent.” From a developer’s perspective, affordable housing often simply yes Not worth it, so usually affordable housing projects final need Government subsidies make it feasible.
Even so, “affordable housing” often ends up being unaffordable to an area’s lowest-income residents, because the metrics used to determine what constitutes affordable housing are There is a problem in itself. this U.S. Department of Housing and Urban Development (HUD) Housing is defined as affordable if a household spends no more than 30% of its income on housing-related expenses.
obviously, This is A a bit casual digitespecially in areas with huge local income differences,explain, $40,000 to over $100,000 per year. The definition of “low income” also varies widely, as low income can be any income below 80% of the Area Median Income (AMI). affordable housing often ultimately benefit Someone at the higher end of the spectrum.
all of these Means converting existing housing into affordable housing, or keep what has been built, More sustainable for local communities. Amazon is taking another step forward in ensuring affordability, guaranteeing that 95% of its affordable homes will be affordable for 99 years. This is unusual: most affordable Homes can only remain affordable for 15 to 30 years before returning to market value.
Another thing Amazon got right was that it correctly recognized its strengths in being able to make an immediate difference to small, local affordable housing projects that needed extra capital to succeed.
The Crystal House Apartments in Arlington, Virginia, is a high-profile example. This iconic apartment building came on the market in 2020, providing a unique opportunity for the Washington Housing Conservancy (WHC) to transform existing quality housing into affordable housing.
The problem is WHC not enough Buy property. Amazon stepped in and provided a $378 million loan, and WHC closed on the property within two months. By 2026, Crystal House apartments will be affordable to residents below AMI.
WHC Director Kimberly Drargings recently reiterated her support for Amazon’s housing efforts Bloomberg: “us actually The corporate sector needs to intervene…we depend on government so Addressing housing affordability, we will never solve the problem by focusing solely on this one area.
In fact, Amazon’s fast strategy works. Connector Together Financing an affordable housing project can take months or even years. There are many restrictions on some forms of funding. local housing advocacy groups simply Without Amazon’s help, they would have missed out on these items.
Finally, there’s one other thing Amazon has done right in its housing efforts so far: The company hires local employees who understand the housing markets they operate in, particularly at its Washington state branch, and “avoids the use of services provided by outside entities.” managed fund; instead, its leaders deal directly with local developers. An article in protector.
limitations and controversies
This is where things get more controversial. Despite Amazon’s considerable efforts to become part of the local housing landscape, critics Debating Part of the reason it does this is as a damage control tactic.
There is an important fact that is positive The assessment of Amazon’s affordable housing plans did not indicate that. Amazon gets into affordable housing only after complaints Local Residents believe its centers have brought in too many corporate workers, who have driven up local housing prices and fueled gentrification.
The “Amazon effect” is real. according to real estate agent networkFrom 2018, when Amazon announced its second headquarters, to the first quarter of 2020, home prices in Arlington, Virginia soared 17%.
Another little-known fact about Amazon’s involvement in its three main areas is that they were never purely altruistic. The corporate giant gets huge amount is Tax breaks and incentives in these areas. according to Good job firstAmazon received nearly $1 billion from Virginia, about $609 million from Washington state and $166 million from Tennessee. US$2 billion committed to housing fund really Starting to look a bit It doesn’t make that much sense when offset by those numbers.
Actually, Some of the company’s harsher critics say the housing fund is little more than good PR for an organization have resources to do a lot of more if it real want to. as Pat Garofalo points out: “The next time a company comes asking for tax breaks or other benefits, elected officials can point to positive news. Any narrative that portrays these companies as giving back partners in the community rather than purely extractive entities will set the stage for the next round of Be prepared for alms.
So this is a case for advocacy and legitimation in favor of a real long-term vision. Let us also not forget most Amazon’s funding comes in the form of loans rather than grants, meaning it gets a substantial return on its participation in affordable housing.
In the end, the question is what’s the price? yes The issue of “affordable housing” has not been truly solved. Critics continue to point out that despite Amazon’s efforts to fill the missing middlemane—worc Who is not eligible for government subsidies, But their AMI ranges from 30% to 80%—people at the lower end of that range are often excluded.
For example, a Nashville Stand Up Impact Analysis Report It concluded that “if Amazon’s past approach to affordability continues in Nashville, nearly 90 percent of the units will be affordable only to a family of four making between $42,150 and $67,450. Many workers at Amazon warehouses do I can’t Afford these houses.
bottom line
So, here yes: Here’s the good, the bad, and a little bit ugly about Amazon’s affordable housing campaign so far.
Could an additional $1.4 billion solve the housing affordability crisis in the company’s target areas? Not even the remote end. as Daniel Herrigs pointed out profoundlyeven though Amazon’s investment looks like a “huge amount of money… when you actually Start doing the math and the most surprising thing is how far they have come No go.
Give an idea, this total value The value of all homes in Seattle in 2019 was $776 billion. It really makes one stop and think.
The fundamental problem Amazon cannot solve is not affordable housing, but housing affordability. The United States is in a housing affordability crisis, and cannot be addressed on any meaningful scale by injecting a little money into a handful of housing projects, valuable as they are. “We need to stop price increases that are disproportionate to people’s ability to pay,” Herrigs said. This can be achieved in part by restoring housing supply All over the country reach a sustainable level. But Amazon has never said it could or would do so.
Are you ready to succeed in real estate investing? Set up a free BiggerPockets account to learn about investing strategies; ask questions and get answers to our community of over 2 million members; connect with investor-friendly agents; and more.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
