What Amazon’s new headquarters could mean for rents

“I definitely think it has the possibility of pushing us over the tipping point,” said Felicia Griffin, executive director of United for a New Economy, a Colorado nonprofit that has opposed the Amazon project.

Some potential locations would be less severely affected. Atlanta and Chicago, big cities that have made it relatively easy to build new housing in recent decades, would see only a small rent increase if they won the Amazon project.

And Indianapolis, where population growth has been slow and housing is plentiful, would see no effect on its rents at all, according to Zillow’s model. Even in those cities, however, neighborhoods near the Amazon campus would most likely see significant rent increases. (The study did not look at the effect on prices of owner-occupied homes.)

Amazon has provided few details about what it plans for the new campus, known as HQ2, other than that it could eventually be a base for up to 50,000 employees earning an average of about $100,000. The company hasn’t said whether it prefers to build downtown, as it has at its current headquarters in Seattle, or will opt instead for a suburban office park — a decision that could have significant implications for the project’s effect on local housing costs. Though it mentioned the issue only in passing in its request for proposals last fall, Amazon says it will take such costs into account, and has met with affordable-housing groups in several of the finalist cities.

Zillow cautions that its estimates are rough, based on a simple model that looks at how rents in each city have responded to past influxes of workers. If the cities respond differently to Amazon’s arrival — for example, by building more housing — the impact on rents could be smaller than Zillow’s model estimates.

But there are also reasons to think Zillow’s analysis could understate Amazon’s potential impact. The model looks only at the effect of the jobs that the new campus is expected to create directly. If Amazon’s presence draws other businesses to the area, rents could rise even faster.

That’s what has happened in Seattle, where a mini-Silicon Valley has sprung up around Amazon’s downtown campus. Facebook, Google and other internet giants have opened satellite offices nearby, and start-ups — including Zillow itself — have their headquarters there.

The boom has been good for Seattle’s economy, which has experienced years of steady job growth, low unemployment and, unlike much of the country, strong wage gains. But it has also become a far less affordable place to live. Rents in Seattle now rival those in Boston and New York, and home prices are rising faster there than in any other big city. Amazon says it has contributed more than $40 million to affordable-housing projects in the city, as part of obtaining approval for its plans.

Whichever city wins the HQ2 sweepstakes will enjoy one big advantage over Seattle: advance warning. Aaron Terrazas, a Zillow economist who led the rent analysis, said Amazon’s growth caught Seattle by surprise, and the city struggled to build enough housing to accommodate the influx of young, affluent tech workers. Whichever city is chosen, Mr. Terrazas said, needs to move quickly to build.

“What’s so important is once a city is selected that they start to get ahead of the curve,” Mr. Terrazas said.

So far, however, cities have been focused mostly on attracting Amazon in the first place. City and state governments have rolled out the red carpet for the company, offering tax incentives and other inducements. But the public response has been more lukewarm, particularly in cities where rising housing costs have already led to concerns about affordability and gentrification.

A recent Elon University poll of residents in the finalist cities found that while relatively few residents outright oppose Amazon moving to their city, only 43 percent strongly supported such a move. Residents in many cities said they were concerned that Amazon’s arrival would increase the cost of living and opposed offering special incentives to attract the company.

In Nashville, the debate over HQ2 has gotten caught up in a broader discussion of gentrification, race and the consequences of growth. Residents long described Nashville as a small town disguised as a big city. But over the last decade, the city’s tourism industry has taken off, and some of those tourists liked Nashville enough to stay. For years, the Nashville metropolitan area grew by more than 100 residents per day, with many of them moving into newly built downtown apartment complexes.

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