Amazon’s Housing Fund Sends a Political Message

Sea Cow, CC BY-SA 4.0, via Wikimedia Commons

By Katie Wilson

At a press conference last month, Mayor Bruce Harrell stood at a podium and thanked Amazon for funding affordable housing in Seattle. With him stood the director of Amazon’s Housing Equity Fund and representatives of three housing development organizations led by people of color that are receiving loans or grants from Amazon totaling about $23 million: Mount Baker Housing, El Centro de la Raza, and Gardner Global, a Black-owned developer working on a mixed-use apartment project at the former site of Mount Calvary Christian Center in the Central District.

This is Amazon’s most recent disbursement from the $2 billion Amazon pledged last January for affordable housing in three of its employment hubs. Three of the projects, including the Mount Baker Village preservation project, are affordable to people earning up to 60 percent of the Seattle area median income, currently about $54,000 for a single person; Gardner Global’s development in the Central District will include units for households up to 80% of area median income.

Amazon is by far Seattle’s—and now Washington state’s—largest employer. Over the past six years, Amazon’s relationship with the city and its politics has been fraught, with dramatic tussles over taxes, heavy-handed bids to sway local elections, and tech worker protests over the company’s role in the climate crisis. Given this history, it’s worth looking more closely at Amazon’s investment in affordable housing: its scale, what it means for the recipients and the company, and its political significance.

To begin with the obvious, $23 million is not a great sacrifice for Amazon, especially considering that $15 million comes in the form of low-interest loans that will be repaid.

JumpStart brought in an impressive $248 million last year. If Amazon’s tax bill really is on the order of $124 million, then these grants amount to about one-fifteenth of that.

It’s instructive to compare the $8 million Amazon will spend on two of the projects in grants to what the company may be forking over to the city this year thanks to JumpStart Seattle, a payroll-based tax paid by the city’s largest employers that passed in 2020.

Neither Amazon nor the city will disclose that number. But back-of-the-napkin math suggests that the company could easily be responsible for over half the total revenue from the tax, given the size of its Seattle workforce and the graduated structure of the tax, whose rate rises based on company size and worker compensation. JumpStart brought in an impressive $248 million last year. If Amazon’s tax bill really is on the order of $124 million, then these grants amount to about one-fifteenth of that.

According to Seattle Councilmember Teresa Mosqueda, “$97 million from JumpStart went to the Office of Housing to be disbursed in the 2022 calendar year” to support affordable housing projects and services. Given that another large chunk of the first year’s revenue went to plug pandemic-related budget holes, she said, “we should be able to do even more next year.”

Those city funds are already enabling property acquisition and affordable housing development at least 16 sites around the city. I wish those projects and the progressive tax revenue supporting them got as many press conferences and as much media fanfare as Amazon’s housing fund has inspired.

All this is not to say that Amazon’s voluntary grants and loans are unimportant to their recipients. Cobbling together funds to build and operate affordable housing is extremely challenging. Estela Ortega, executive director of El Centro de la Raza, which received $3.5 million for an 87-unit project in Columbia City for families earning between 30 and 60 percent of area median income, says the grant is helping to close a gap caused by rapidly rising costs.

“We had a $54 million budget at the first of the year, then our contractor did a new estimate and it went up to $58 million,” Ortega said. “Amazon’s money is critical. If we had to raise another few million, we would not be breaking ground on January of 2023, which is our plan.”

This also illustrates that Amazon’s contributions, though they may be crucial, are one small part of the funding for these projects: That $3.5 million almost covers the sales tax costs for El Centro Columbia City. The project is also receiving $5 million from the state Housing Trust Fund and over $11 million from the city of Seattle, among other sources. (Interestingly, Seattle’s contribution includes over $7 million from JumpStart. If my speculative math is correct, that means Amazon may be paying as much into the project through taxes as through the grant.)

You can’t really blame Amazon’s public relations team for titling its press release—“Amazon to fund construction of 568 affordable homes in Seattle”—to the company’s best advantage, subtly implying that Amazon might be footing the entire bill. It’s less forgivable for the Seattle Times to begin its coverage the same way—“Amazon committed Thursday to providing $23 million to create and preserve nearly 600 affordable homes in Seattle”—and then make no mention at all in the rest of the piece of other funding sources or the total costs involved. The average member of the public, no expert on housing development and finance, could easily walk away with the impression that Amazon is singlehandedly gifting us 600 affordable homes.

None of this might matter, and might be considered nitpicking, if there was no larger political meaning to Amazon’s actions. But the tenor of the June press conference, with Amazon in the role of good corporate citizen, contrasted sharply enough with the fights of recent years to make one wonder. When Amazon’s housing fund and an initial round of recipients were first announced in 2021, the absence of projects in Seattle was conspicuous. Instead, $185.5 million (mostly in loans) went to projects in Bellevue, every pundit’s favorite foil to Seattle when it comes to Amazon-politics. So what does it mean that Amazon is suddenly playing so nice with its hometown?

One possibility: Taxes. Seattle is staring at a significant budget shortfall for 2023—at least tens of millions, and potentially much more. City departments have already been asked to game out potential budget cuts of 3 to 6 percent. The city’s projections improve in future years, but nevertheless, this fall, elected officials will face a choice: To cut, or to seek new revenue? A task force will soon convene to examine the city’s progressive tax options, and one obvious choice is turning the dials on JumpStart. Will Amazon’s one-time housing contributions serve as leverage against raising the company’s tax rates in the future? It’s not a far-fetched notion.

“We need to continue to expand our progressive revenue base so that those companies that are doing very well, even during a global pandemic, are contributing to the fabric of the city. We need this year over year, not just at the whim of corporations’ decision-making.”—City Councilmember Teresa Mosqueda

Given that Amazon could benefit politically from these loans and grants, how should we feel about the company’s actions? That’s a question the recipients of the funds and local elected officials have to grapple with directly.

“In working with numerous powerful corporations in the area, we are keenly aware they have had policies at the upper echelon that have not always been in the best interest of community,” Ortega said. “We have never hesitated to stand with and raise our voice for community. Therefore, our position has been to accept funds from these entities because we have come to know good people at a local level, on the ground, who want to help community.”

“Every time there’s a philanthropic contribution or corporate donation, of course we need that money, we need it desperately and it’s appreciated,” said Councilmember Mosqueda. But splashy one-time infusions can’t substitute for stable, progressive revenue, which allows leaders accountable to the public to make investments with the whole city in mind.

“We need to continue to expand our progressive revenue base so that those companies that are doing very well, even during a global pandemic, are contributing to the fabric of the city,” Mosqueda said. “We need this year over year, not just at the whim of corporations’ decision-making.”

10 thoughts on “Amazon’s Housing Fund Sends a Political Message”

  1. Underneath all of this is Amazon’s inadvertent role in creating the problem…the wages it and other companies pay is what pushes housing prices up. There is as reason why the older homeowners and big real estate companies oppose housing policy changes: they are sitting on scarce assets they don’t want to see devalued. Of course, studies have shown that density doesn’t reduce home values but housing (more precisely land) isn’t a marketplace of interchangeable commodities. Location matters as does proximity to other locations. Land is finite but the need for it rises, year on year, as does the asking price.

    It would really be something to see Amazon and these large tenants push the city to get control of rents, not through rent control, but by taxing the value of land as was offered in the winning RFP for the Mercer Megablock. Our hapless former mayor’s office sold that land for $150M when it was offered $1.2B over 99 years…annualized to $12M/year meaning the sale piece was met in 13 or so years with another 86 to run on the lease. Speculative rents hurt businesses on the commercial space they need (especially in the hybrid/WFH times we are in) and the higher wages they have to pay. You’d think some of these big brain MBA types would catch on.

    There is no affordable housing without affordable land and taxing the value of land is the best way to do that. Rent control won’t do it. Paying market rates won’t do it. Putting surplus land out for ground rents is a start, and the Mercer project has helped us put a value on it — $1M per acre per year.

  2. Why do we not waive sales taxes for these “affordable” projects? That would assist in funding them and likely be a net wash since government contributes money to many of them anyway. Just waive the sales tax instead of collecting it and then re-distributing it. A larger and unrelated issue is why we Washingtonians pay sales tax on public projects. Why are we paying ourselves when we could just waive sales taxes for public projects thereby lowering their costs significantly. And back to the subject at hand: there is no real budget shortfall–it’s all in the way the city is characterizing the money it has, and 3 guesses why–tax increases? Oh yes, that’s what that nonsense is about.

  3. Very nice. But to really make a meaningful difference, zoning needs to be reformed so that everyone can have more affordable housing rather than few who will be lucky enough get a spot in these buildings. And, with new housing cheaper and more land available, these kinds of projects can be built less expensively and thus more of them can be built.

    1. Actually there’s a much easier way to find affordable housing…. move out of Seattle. In America, winners own their homes, losers pay rent. It’s been that way for 500 years. Most young folks I know who cry about Seattle rent need to pack up and leave. There’s a big country out there full of opportunity. Seattle kicked your ass… deal with it. Move on.

      Even if zoning was changed (if the *winners* who own million dollar homes in Seattle ever let that happen), the only reason to build more housing is…. profit. Why not build lux units for tech workers to make the most cash? Affordable housing is not what the building industry is there for. It’s to make as much money as possible.

      Many Left Coast cities currently building low income housing are paying near 800k a unit for it. That’s a lot of money! But the land speculators need to be paid, the construction company owners need to be paid, the hundreds of City bureaucrats in control of everything from parking to tree canopy need to get paid…. everybody involved needs to get paid. So suddenly a one bed room apartment for seniors costs a cool million.

      There is no “Seattle Privilege”. People have no right to live there if they can’t afford it. Besides tech supercharging the economy, another big reason housing costs are so @%$#^& high in Seattle is California housing prices are even higher and huge numbers of people sold in Cali and moved North. But this is America…. people are free to move wherever they want.

      1. You are so right! We are being sold a bill of goods with this pious whining about “affordable housing.” Ain’t happening with all those people who need to get paid and who cycle the money through their group to make sure the circus continues. Another thing I don’t see that I think is important is that the Boomers are dying off, and they are leaving behind their properties, which then enter the current vortex rather than being passed along to continue to provide reasonable housing for all kinds of people. How can it be that with so many dying we still don’t have enough housing? I think it’s because we allow it to be sold to and razed by developers who put 4 or 6 pieces of garbage up priced at $600K and up (or more) and in the process pricing out anyone who can’t afford that or don’t want to live in some shoddily constructed closet.

      2. >> Even if zoning was changed .. the only reason to build more housing is…. profit.

        Yep. That’s the way supply and demand works. It is why gas is so expensive. Lots of demand, not that much supply.

        Unfortunately, the housing supply is artificially constrained in Seattle. It is less constrained in Tokyo. Way more people want to live in Tokyo, but way more places are built each year. They allow it. We don’t.

        In an unregulated market, eventually the cost of housing matches the cost of construction. No one is suggesting a fully unregulated market, but we are one extreme here (Tokyo is towards the other).

        It is easy to imagine what would happen if other products were regulated this way. Say, smart phones. Imagine that they allowed only a handful to be built each year. Prices for existing smart phones would skyrocket. New smart phones would be extremely expensive, and designed solely for the rich. That is what has happened to much of the housing in Seattle.

        It all has to do with zoning, which is an artificial constraint on the supply of new housing. It wouldn’t matter if there was less demand, but unfortunately, because of companies like Amazon, there is.

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