Amazon will direct $2 billion in loans and grants to secure affordable housing near three American cities where the company employs thousands of workers, the tech giant announced Wednesday.
In a first step in the Puget Sound region, Amazon is promising $185.5 million, mostly in loans, to the King County Housing Authority to help buy affordable apartments in the region and keep the rents low. The Housing Authority will use an initial portion of that money to help fund its recent purchase of three Bellevue apartment buildings.
Amazon will also direct about $382 million to a nonprofit in Arlington, Virginia, and so-far unspecified amount to organizations in Nashville, Tennessee. Amazon said it selected the three areas where the company expects to have at least 5,000 employees.
In total across the three regions, the company projected the $2 billion would help preserve or create 20,000 affordable housing units over the next five years. The funding will “help local families achieve long-term stability while building strong, inclusive communities,” Amazon CEO Jeff Bezos said in a statement.
The King County Housing Authority plans to pair bond funding with a portion of the $161.5 million in loans and $24 million in grants from Amazon to pay for the three Bellevue buildings with a total of 470 apartments.
As the region gentrifies, affordable apartment buildings are often renovated and their rents are increased, worsening economic and racial segregation, said Stephen Norman, executive director of the King County Housing Authority.
Without preserving some of those more affordable buildings, “we’re dripping water into a bucket with a big hole in the bottom,” Norman said. “This is a long strategy ensuring … that this community doesn’t get hollowed out.”
The Amazon funding will cover roughly 45% of the cost of the buildings, Norman said. Amazon will charge 1.85% interest on the loans and require payments only on the interest for the first 20 years. Then, the housing authority will refinance the debt.
Most of the Bellevue apartments will be priced to be affordable for those earning 80% of area median income or less, or $95,250 for a family of four and $66,700 for an individual.
In one 36-unit building, the agency will use federal subsidies to keep the rents lower, priced for people earning less than 30% of area median income, or $35,800 for a family of four.
The buildings will remain affordable for at least 99 years, the housing authority said. The remainder of the 1,000 promised units in the Puget Sound region have not yet been identified.
As Amazon’s footprint in Seattle has grown, the company has drawn criticism from some residents and city council members for contributing to rising housing costs.
Amazon’s announcement follows a similar move by the region’s other tech behemoth, Microsoft.
In January 2019, Microsoft announced it would spend about $500 million on loans for affordable housing, some at below-market interest rates, and then reinvest profit from the loans back into the funds. A year ago, the company promised another $250 million available for affordable-housing development statewide.
Amazon argues its pledge is broader in scope because it will fund housing in three regions and allow quick purchases of affordable housing to preserve units, rather than new construction. Amazon has also provided space in a Seattle office building for the shelter Mary’s Place.
Amazon’s new pledge, while significant from a company once criticized for its lack of philanthropy, is a fraction of what the region needs, by some estimates.
To address homelessness, the consulting firm McKinsey & Company has recommended an additional $450 million to $1.1 billion more in public spending every year.
Though the consultants did not advocate for particular policies, they wrote in a January 2020 report, “It is clear that business bears some of the responsibility for the homelessness crisis. With continued success comes renewed responsibility to employees and communities.”
According to McKinsey’s estimates, King County would need 16,000 more units of affordable housing to shelter everyone who is homeless and another 37,000 new affordable units for people with very low incomes.
Over 30 years, 7,000 households could cycle through 1,000 affordable apartments in King County, Norman said. He praised Amazon’s pledge as recognizing the region’s need for affordable housing.
“We need more of this, scaled up, no question,” he said. “But we have to start somewhere.”
In Arlington, Virginia, the nonprofit Washington Housing Conservancy will use money from Amazon to buy a market-rate apartment building, lower the rents and then keep them affordable for 99 years.
The plan “disrupts a market cycle that leads to displacement,” Kimberly Driggins, executive director of the Washington Housing Conservancy said in a statement.
In addition to the loans and grants to housing providers, Amazon will award $125 million in grants to organizations focused on “a more inclusive solution to the affordable housing crisis, which disproportionately affects communities of color,” the company said in a press release.
Those funds could go to organizations led by people of color as well as transit agencies and school districts for affordable housing programs, Amazon said.