This is great and all, but part of me is really cynical about corporate philanthropy like this.
First off, all but $25 of the $500M will be loaned out to developers at below-market interest rates and the other $25 will be donated to related services. Good on Microsoft for committing capital that could be put to other uses, but this isn't a donation; it's philanthropic lending. Depending on the interest rates of these loans, they'll wind up keeping much of that principle. Yes, people will surely benefit from this, but this looks really conservative for such a headline.
Corporate taxation is a hot-button issue these days, but one can't help but notice how easy it is to shun government for being wasteful in providing housing services while private industry is being applauded to essentially buy the process of welfare. And while there are heated debates about what major companies should contribute (or avoid contributing) in taxes, can we even agree that affordable housing sponsored by private money is a little contradictory here?
It's potentially an interesting demonstration of how keeping an area capable of housing low-skill workers can be beneficial to keeping their own high-skill workers' neighborhoods staffed with those low-skill jobs.
Something I always find really interesting, as a San Francisco resident, is that people seem to think that the market is incapable of resolving the problem of the purported loss of low-skilled workers to act as the baristas, servers, deliveries, etc, because rising cost of living drives those people out. But there are many obvious avenues in which this resolves itself, the most obvious of which is that the prices of those services simply rise until it becomes worthwhile for those people to commute further, or that they can start to move back into the city. Now, maybe this is yet an alternative to the more straightforward equilibrium, wherein some of the employers in the city begin to provide lower-skilled workers with housing for the benefit of their own workforce.
I have no idea what Microsoft's motivation for doing this is, but it would be an interesting possibility.
Also, providing tax-funded low cost housing as a community to make sure you don't lose your regional baristas and cooks is basically a tax payer subsidy to keep eating out affordable.
if eating out becomes unafforadble, many jobs and countless hours of leisure will be lost. No one complains about making flying affordable with billions of dollar in aviation subsidies, from R&D, Airport and related infrastructure maintenance, to straight-out bailouts.
I am not making a case against affordable aviation, but rather giving an example of the fact that many aspects of society is simply not directly-profitable but necessary for a healthy economy and community.
The correct solution in that case would be to give people cash, so that the subsidy is properly accounted for, otherwise it will be lost to corruption via various accounting tricks and games that politicians and vendors can play, and taxpayers will never get a true picture of their government (as is the situation now). See defined benefit pension benefits in lieu of cash pay.
> But there are many obvious avenues in which this resolves itself, the most obvious of which is that the prices of those services simply rise until it becomes worthwhile for those people to commute further, or that they can start to move back into the city.
In an economic fairy tale, sure.
In reality, what happens is that people working low-income jobs end up with a two and a half hour commute from half-the-state-away, or, alternatively, living in a slumlord's idea of a barracks. Or, sometimes, both.
It's a 'solution' much in the same way that in the Soviet Union, people would 'solve' the problem of toilet paper shortages by joining the Communist party, which would entitle them a subscription to Pravda.
The wealthiest country in the world can, and should do better.
It does NOT take an economic fairy tale to determine precisely how the situation plays itself out.
For example, it's not as though the occupants of SF are going to be satisfied living in a city without access to bars and restaurants, no matter how wealthy they are. There are bars and restaurants in SF as it stands, are their staffs all living in subsidized affordable housing? No. For one, they simply get paid more than outside of the city, because things cost more. They get larger tips because people make more money, and have larger bills to tip on. While some might be subsidized with rent control, others live with roommates, or they live outside of the city. There are any number of circumstances they find themselves in, but the point is that it is worth it to them to be able to work in the city. If it was not, they would not work here. And if they did not work here, their wages would go up in order to fill the demand. And let's take this even further. What if their wages go up so high that the drinks and food begin to cost a very undesirably high amount to the residents? Well then, that begins to affect the desirability of living in the city. Suddenly less people want to live here, because the cost of living is so high. And when less people are competing to live here, rent starts to go down, and so do wages, and prices. The entirety of the system is in stabilizing flux as a consequence of this.
If we're actually arriving at situations where people are making a two and half hour commute as a consequence of them having no alternative options (which is not the same as them making the commute because of better opportunities), then we agree that we're no longer dealing with a viable model. I used to do a 1.5 hour commute each way, every day, for over a year, because it was worth it to me to live in that particular area rather than being closer to my work. If what you're suggesting is that their only options are effectively capable of exploiting them due to no alternatives, you're effectively describing an overall employment crisis. Given a system-wide lack of employment opportunities, which is certainly not the reality we currently find ourselves in, then we surely agree that there is an appropriate role for the state to fulfill in mitigating the situation. But that still doesn't mean that we agree that affordable housing is the correct mechanism for addressing this problem, which we surely do not.
I agree with this but I think it underestimates how far the central bank's printing of money can push us out of equilibrium. Also, the ability to create real value is harmed by regulations like labor, zoning, and health codes.
One thing that I haven’t really seen explored much is how much influence real estate investment from foreign companies influences housing costs in places like this. I don’t foresee it being an overwhelming influence, but I can’t help but wonder if there’s a crowding out effect going on where a decent percentage of housing sits idle, or not in use by people who actually work in the area.
Edit: meant to say “foreign countries”, but the point is the same.
" the most obvious of which is that the prices of those services simply rise until it becomes worthwhile for those people to commute further, or that they can start to move back into the city." - This is what should happen in a true free market. But the real world has zoning laws, building restrictions, slow and unreliable public transport and NIMBYs who will oppose any housing projects. That can make it impossible for new workers to meet the demand.
Here's another take: possibly the loans are not just below market rate but loans that traditional lenders wouldn't make at all. "Affordable housing" is high risk housing because the buyers/tenants are lower income. If this fund will make possible projects that could not get financed otherwise, then it's a good deal for everyone.
If it brings the price of housing down, then it’s good. If it gets a bunch of people into loans they can’t afford at the top of a record bull market, then it’s bad
They aren't giving out mortgages for single family homes...
> The loans could go to private or nonprofit developers, or to governmental groups like the King County Housing Authority. As the loans are repaid, Mr. Smith said, Microsoft plans to lend the money out again to support additional projects.
Yes, but to be affordable at least at first there has to be a subsidy for those middle income people to be able to afford it. Either you directly pay developers their profit that they don’t get by charging market rates (a subsidy), or they allow earners to get loans. Median price is 900k on the east side, and even at the top of middle income (124k, family of four) you can’t afford a house anywhere near that median. How do you fill that gap?
Because they're not building single family homes in Medina? Multi family housing in various parts of the metro (including Snohomish county). The Seattle Times has more information including a bit more about geography:
The key is zoning and it sounds like they have some local buy-in from politicians (see the attached statement of mayors in that article). I'm skeptical that happens, NIMBYs have a way of stalling up zoning, but it's a still a step in the right direction.
These are almost the opposite of sub-prime mortgages.
A sub-prime mortgage is made at market rate--at an unaffordably high rate as a result of the risk. These are below-market rate loans -- loans at affordable rates for the borrower in spite of the risk. The in-spite part is what makes this philanthropic.
FWIW, I completely agree. It is super frustrating that our local governments here, outside of Seattle and a handful of efforts elsewhere in the region, won't make the investments that are needed.
But we need those investments, somehow, and I'm willing to let private businesses make them while we also have the public debate over getting our governments to get moving.
Absolutely. This isolated charitable act does not undo the concentration of power arising from structural advantages benefiting corporations. It is merely a corporation granting a largesse.
When a politician pushes for affordable housing, what is their motivation? We'd like to imagine it's altruistic and ideally in some cases it is. But in practice, there is near invariably a major political motivation. The 'job' of politicians is to accumulate votes, which lets them stay in office. And so the outcome of spending directed towards housing is, from their perspective, going to be measured in terms of the accumulation of votes. For one of the most clear examples of this, the Civil Rights Act was championed by LBJ. LBJ was for his part an overt and outspoken racist [1]. I mean a real and genuine racist, not somebody making politically incorrect comments here and there. But he felt that passing the Civil Rights Act would work to his, and his party's, political benefit.
The reason I mention this is because I think you need to consider motivations when determining which system is more desirable. What is Microsoft's motivation? It's not the short term gain of capital, since they could earn more elsewhere. And it's also unlikely to be an extremely long term purpose, since those aren't the sort of ideas shareholders often look too kindly upon. I think it's probably similar to what somebody else mentioned. They want to ensure there is a stable supply of low-skill low-earning employees that can provide affordable labor for local companies (including Microsoft) and for their employees. And they're looking at achieving this in the not so distant future.
I find this motivation much more desirable, since sustainability and progress is key. In politics there are many people will keep voting for parties that they perceive as giving them things, even when there is no tangible progress being made decade after decade. Because of this, progress becomes secondary to the act of being perceived as giving ostensibly towards achieving progress, especially as politicians are giving people things with other peoples' money. But for a company, success is going to be quantified in ways where progress is all that matters. If this affordable housing is ineffective, worsens the social situation in the city, or whatever else - then they will have effectively wasted half a billion dollars of their own money. They have a major incentive to make sure this works.
The short version of this is that I definitely don't see affordable housing being sponsored by private interests as being contradictory. On the contrary I'd expect to see far better outcomes from the private than public sector on issues like this when there is a significant private industry benefit to be had from affordable housing.
The quote of LBJ talking to his chauffeur is taken out of context. The chauffeur was complaining about a note LBJ had written to prevent local authorities from waylaying him driving through the South alone on errands “This n————— drives for me.”
Because when the corporate company does it, it goes out of the pocket of the executives that make the decision. When the state does it, it goes out from the pocket of somewhere else and into their own.
It's only money "belonging" to those corporate executives because we have arbitrarily decided to apportion absurd wealth to those individuals. What's more unjustifiable: taxation, or granting all the rewards of capitalism to a minuscule minority of the population?
Yes, asymptotically. Wealth is ever more concentrated with each passing year -- and the pro-inequality ideology that underpins that ever-increasing concentration of economic power (and therefore political power) in the hands of the few admits no limits.
It is even more evil than that. Those below-market interest rates will be deducted from MS's tax bill. In a few years, MS will be earning profits from these loans AND the government will be chipping in via the reduction in their corporate income tax.
Frankly, given the amount of money each of the big tech companies are sitting upon, they should all be branching out into banking. Maybe charitable loans are a way of doing this without actually going through the hoops of becoming a bank.
> Those below-market interest rates will be deducted from MS's tax bill
This is true of all charitable giving. They still make less money than if they invested their money at market rates. I don’t see why every good act requires a negative knee-jerk reaction.
Because saying that they are "pledging" 500m is disingenuous. The article should make clear exactly how much of a hit MS is taking ... if they are taking a hit. This is not the same as me pledging money to a charity and should not be described in such terms.
so complain that the nytimes journalists can't math. it isn't microsoft's job to explain their charitable giving in the least charitable possible terms.
it isn't as though you go on dates and enumerate your moral failings.
First off, all but $25 of the $500M will be loaned out to developers at below-market interest rates and the other $25 will be donated to related services. Good on Microsoft for committing capital that could be put to other uses, but this isn't a donation; it's philanthropic lending. Depending on the interest rates of these loans, they'll wind up keeping much of that principle. Yes, people will surely benefit from this, but this looks really conservative for such a headline.
Corporate taxation is a hot-button issue these days, but one can't help but notice how easy it is to shun government for being wasteful in providing housing services while private industry is being applauded to essentially buy the process of welfare. And while there are heated debates about what major companies should contribute (or avoid contributing) in taxes, can we even agree that affordable housing sponsored by private money is a little contradictory here?